Applicant v Respondents

1 In this matter Bow Ye Investments Pty Ltd (In Liquidation) ("Bow Ye"), seeks to set aside restraining orders made pursuant to s.18 of the Confiscation Act 1997 (Vic). Such orders relate primarily to dividends the liquidator has determined to be due to certain creditors. The effect of payment of the sums in issue will be to remove the assets from the jurisdiction, in circumstances where it is likely they will be difficult to follow.

2 The respondents to the restraining order are Tat Sang Loo, whom the plaintiff ("DPP") contends is beneficially entitled to and/or controls such dividends and any surplus on the liquidation, Bow Ye, and the persons to whom the dividends in issue may otherwise be payable.

3 The basis of the application is a constitutional one founded on the proposition that the operation of the relevant provisions of the Confiscation Act "alters, impairs and detracts from the operation of the Corporations Act 2000 (Cth) and brings the former into direct inconsistency with the latter."[1]

4 The background to this matter is summarised by Warren CJ in a ruling given on 16 June 2006,[2] with respect to an application pursuant to s.98 of the Confiscation Act for the examination of the liquidator of Bow Ye.

On 17 March 1999, in the Magistrates' Court of Victoria at Dandenong, Tat Sang Loo pleaded guilty to 14 charges relating to his illegal operation of an abalone poaching and processing network in contravention of the Fisheries Act 1995. All but one of the offences to which Loo pleaded guilty were forfeiture offences for the purposes of the Confiscation Act 1997. The presiding magistrate sentenced Loo to a term of 18 months' imprisonment, with a non-parole period of 12 months and ordered that certain property that was seized be forfeited.

Loo appealed his sentence to the County Court of Victoria. On 14 December 1999, a judge of that Court varied parts of the magistrate's order, but did not disturb Loo's conviction and imposed the same term of imprisonment.

At all material times of his offending, Loo was the sole director and shareholder of Bow Ye. Loo was also the guardian and appointer named in the Loo Family Trust of which Bow Ye was the trustee. The major assets of Bow Ye were two properties, one at 26 Calambeena Avenue, Oakleigh ("the Oakleigh property"), and the second at 181 Exhibition Street, Melbourne ("the City property"). On 19 November 1998, in the County Court of Victoria, the DPP successfully obtained a restraining order in respect of these two properties.

Following Loo's conviction in the Magistrates' Court in March 1999, the DPP applied to this Court, on 21 April 1999, for a forfeiture order under s.32 of the Confiscation Act, and for a pecuniary penalty order pursuant to s.58 of the Act. Section 32 of the Act permits the DPP to apply for a forfeiture order in respect of "tainted property", while s.58 of the Act allows the DPP to apply to the court for a pecuniary penalty order.

Section 59 of the Act provides for the determination of such an application, stating, in subsection (1), that:

"(1) On an application under section 58(1) or (2), the court may-

(a) assess the value of the benefits derived by the defendant in relation to the offence; and

(b) order the defendant to pay to the State a pecuniary penalty equal to the value as so assessed less, if the court thinks it desirable to take it into account, any amount paid or payable by way of restitution or compensation in relation to the same conviction . . . "

The DPP's application on 21 April 1999 also sought a declaration, pursuant to s.70 of the Act, that the property owned by Bow Ye be made available to satisfy any pecuniary penalty order that was made. Section 70 of the Confiscation Act provides as follows:

"70. Declaration that property available to satisfy order

(1) On application by the DPP, a prescribed person or a person belonging to a prescribed class of persons or an appropriate officer, a court may, if in its opinion particular property in respect of which a restraining order has been made-

(a) was, on the date when the order was made, subject to the effective control of the defendant; or

(b) was the subject of a gift from the defendant to another person -

make an order declaring that the whole, or a specified part, of that property is available to satisfy a pecuniary penalty order.

(2) If a court declares that property is available to satisfy a pecuniary penalty order, the order may be enforced as if the property were property of the defendant.

(3) An applicant under sub-section (1) must give written notice of the application -

(a) to the person against whom the order is sought; and

(c) to any other person to whom the court directs that notice be given; and

(d) to any other person whom the applicant has reason to believe has an interest in the property.

(4) Any person notified under sub-section (3) and any other person who claims an interest in the property are entitled to appear and to give evidence at the hearing of the application but the absence of a person does not prevent the court from making an order under this section."

On 11 October 2000, Hedigan J ordered that Loo pay a pecuniary penalty in the sum of $978,275, pursuant to s.59 of the Confiscation Act. His Honour also made orders that certain property, other than the Oakleigh and City properties, be forfeited, pursuant to s.33 of the Act. However, noting that an administrator had been appointed to Bow Ye on 14 September 2000, his Honour did not make a declaration under s.70 as sought by the DPP. Instead, the application for a declaration under s.70 was adjourned, with his Honour observing that an application for leave to proceed may be necessary under the corporations legislation, given that an administrator had been appointed to Bow Ye.

Subsequent to his Honour's order, and before an application made by the DPP under s.440F of the then Corporations Law for the s.70 declaration to proceed could be heard,[3] on or about 24 November 2000, the creditors of Bow Ye met and resolved that the company be placed in liquidation. Ashley J was to later observe that no creditors seemed to have appeared in person at this meeting.[4] His Honour noted that:

"Mr McDermott held the proxy for one of them; and the first respondent's [Loo's] son, Zachary - who had by then replaced his father as sole director of Bow Ye - held proxies for the others".[5]

An administrator, the respondent to the present application,[6] namely McDermott, was appointed to Bow Ye on 14 September 2000 and therefore, consistent with Corporations Law, this is the date at which the company is deemed to have been wound up.[7] The major assets of Bow Ye at the time of time of winding-up were the two aforementioned properties which together were valued at approximately $500,000.[8] The alleged creditors of Bow Ye, whose assertions have been judicially observed as "dubious",[9] and claimed to be owed sums "somewhere in the vicinity of $350,000".[10]

On 1 December 2000, a master of this Court granted leave to the DPP to proceed against Bow Ye. Subsequently, on 6 March 2001, the DPP duly filed an application under s.70 of the Confiscation Act seeking a declaration that the Oakleigh and City properties be made available to satisfy the pecuniary penalty ordered by Hedigan J. Later, on 20 November 2001, a judge of the County Court of Victoria varied the restraining order[11] to permit the sale of the properties, with the proceeds to be held by the liquidator of Bow Ye.

The hearing of the DPP's application for a declaration under s.70 came before Ashley J on 14 November 2001. His Honour adjourned the matter to 25 February 2002 and ordered that the DPP give notice of its application to various parties related to Bow Ye, including the creditors of Bow Ye and the beneficiaries of the Loo Family Trust.

On 20 February 2002, just prior to the resumption of the hearing of the matter, Loo gave "Notice of a Constitutional Matter", stating that the proceeding involved a matter under the Constitution or involved its interpretation within the meaning of s.78B of the Judiciary Act 1903. Paragraph three of Loo's notice stated as follows:

"3. This proceeding involves a matter arising under the Constitution or involving its interpretation, in that -

(a) the relevant sections of the Confiscation Act 1997, may be inconsistent with the law of the Commonwealth, namely the Corporations Act 2001 and, in particular, with Chapter 5 of that Act, within the meaning of s.109 of the Constitution, and may therefore be invalid, and

(b) in the event that there is direct inconsistency between the state law in the form of the Confiscation Act 1997 and the Corporations Act 2001, the application of Part 1.1A of the Corporations Act 2001 may involve a matter arising under s.109 of the Constitution or involving the interpretation of that provision."

Ashley J determined[12] that the Oakleigh and City properties were available to satisfy the pecuniary penalty order made by Hedigan J on 11 October 2000 and that the proceeds of the sale (but excepting the expenses incurred in its sale and the reasonable remuneration and expenses of the liquidator) should be paid to the Asset Confiscation Office, Victoria. Significantly, Ashley J did not find that any constitutional invalidity arose in the operation of the Confiscation Act.

However, on appeal, Loo was able to successfully argue that ss 70 and 72(2) of the Confiscation Act had not met the conditions provided in s.5G(3) of the Corporations Act 2001.[13] Consequently, the Court of Appeal held that there was an inconsistency between the statutory charge under the Confiscation Act and the rights of creditors in the winding up of Bow Ye under the Corporations Act 2001. As a result, Ashley J's decision that the Oakleigh and City properties were available to satisfy the pecuniary penalty order was reversed.

On 18 July 2005, the matter again came before this Court before Gillard J. On this occasion, the DPP sought to have the restraining orders made against Loo and Bow Ye in 1998 set aside and, without notice to any party, have new restraining orders made to include, aside from Loo and Bow Ye, five alleged creditors, some or all of whom were out of the country.

The background to the DPP's application was explained by Gillard J as follows:

"Now what has brought everybody back to court today in a bit of a rush is because an investigative accountant attached to the ASIC Confiscation Office of Enforcement Management in the Department of Justice, Paul Dimitros, swore an affidavit on 28 November 2001 in which he expressed the view, in relation to a number of proofs of debt lodged in the liquidation of the company, that the proofs of debt were not genuine. The liquidator does not agree with those observations and evidently he is proposing to pay in satisfaction some of the proofs of debt ...

What is proposed is that I should make restraining orders so that the creditors, if they were to receive the money in answer to their proof of debt, be restrained from in any way dealing with it because some if not all of the creditors are out of the country. It is suggested that an order be made under s 14(3) of the Act that the moneys in the hands of the liquidator which he proposes to pay out be paid to State Trustees Limited pending the hearing and determination of any application hereafter by any of the creditors or the Director of Public Prosecutions."

Despite a reluctance to make orders affecting parties in their absence and the fact that one of the orders sought was that, in addition to the named creditors being restrained from disposing or in any other way dealing with dividends that may be declared and made payable to them,[14] a blanket order was sought freezing any dividends being paid by the liquidator to any other creditors. Gillard J agreed to the orders proposed by the DPP. The only payments excepted were those to be made to the Commissioner of State Revenue and to Monash City Council. Other than that, any dividend or surplus declared and made payable to the creditors named in the order, or to any other creditor by the liquidator of Bow Ye pursuant to its liquidation, was to be paid to State Trustees Limited, being a "trustee" within the meaning of the Confiscation Act. However, his Honour amended the DPP's proposed order so that, while freezing the relevant funds, interested parties could still make application to the Court so that their claims could be properly considered and determined if they were so advised.

5 The orders made by Gillard J on 18 July 2005, upon the giving of an undertaking as to damages, were as follows:

1. THE COURT ORDERS pursuant to section 27(4) of the Confiscation Act 1997 that:

(A) paragraph 2 of the Restraining Order made by His Honour Judge Lewis on 19 November 1998 (as varied by His Honour Judge Lewis on 2 December 1999 and by His Honour Judge Holt on 20 November 2001) be set aside; and

(B) paragraph 3 of the Restraining Order made by His Honour Judge Lewis on 19 November 1998 (as varied by His Honour Judge Lewis on 2 December 1999 and by His Honour Judge Holt on 20 November 2001) be set aside.

1. THE COURT ORDERS pursuant to section 18 of the Confiscation Act that the respondents, whether by themselves or by their servants, agents or any other person otherwise be restrained from disposing of or in any other way dealing with:

(A) The dividend to be declared, if any, and to be payable to Leong Mei FONG/Benteng Kiarra SDN BHD by the Liquidator of Bow Ye Investments Pty Ltd (in liquidation) (Bow Ye Investments Pty Ltd) pursuant to the liquidation of Bow Ye Investments Pty Ltd; and

(B) The dividend to be declared, if any, and to be payable to Leong Jeet Yui by the liquidator of Bow Ye Investments Pty Ltd pursuant to the liquidation of Bow Ye Investments Pty Ltd; and

(C) The dividend to be declared, if any, and to be payable to William TANG (aka Tang Kok SONG) by the liquidator of Bow Ye Investments Pty Ltd pursuant to the liquidation of Bow Ye Investments Pty Ltd; and

(D) The dividend to be declared, if any, and to be payable to Robert LOH by the liquidator of Bow Ye Investments Pty Ltd pursuant to the liquidation of Bow Ye Investments Pty Ltd; and

(E) The dividend to be declared, if any, and to be payable to any other creditor by the liquidator of Bow Ye Investments Pty Ltd pursuant to the liquidation of Bow Ye Investments Pty Ltd other than The Commissioner of State Revenue and Monash City Council; and

(F) Any surplus of the liquidation of Bow Ye Investments Pty Ltd.

and the court DECLARES pursuant to section 15(3) of the Confiscation Act that the property referred to in this paragraph is restrained for the purpose of satisfying any pecuniary penalty order that may be made under Part 8 of the Confiscation Act.

1. THE COURT DIRECTS pursuant to section 14(3) of the Confiscation Act that any dividend or surplus referred to in paragraph 2 of the orders hereof (other than any dividend to be declared and to be payable to The Commissioner of State Revenue or Monash City Council) be paid to State Trustees Limited ACN 064 593 148 being a "trustee" within the meaning of the Confiscation Act, pending the hearing and determination of any application in respect of the funds or further order.
2. That the Applicant's solicitor draw up this order and it be signed by a Justice of the Supreme Court.
   1. Liberty to apply generally.

6 On 16 June 2006 Warren CJ made an order for the examination of the liquidator of Bow Ye concerning "the affairs of ... any creditor of Bow Ye Investments Pty Ltd (in liquidation) (collectively the relevant persons), including the nature and location of any property in which any of the relevant persons has an interest, including property restrained by paragraph 2 of the restraining order made by the Honourable Justice Gillard on 18 July 2005."

7 In so ordering her Honour observed:[15]

However, the ambit of s.98 is wide and deliberately draconian in view of the purpose of the legislation. It is so wide that it encompasses a liquidator who cannot enjoy any exemption or special treatment under the section. The words of the section apply to "any person" concerning the affairs "of any person", in this case Bow Ye. The expression "affairs" is not defined but is sufficiently wide to encompass the affairs of a corporation in process of liquidation and its creditors. The liquidator, at this stage, could only be examined as to "creditors" as recognised at law. Hence, in view of the broad approach as to who constitutes a creditor, there is a prospect that the liquidator has information presently withheld about persons to whom debts are owed by Bow Ye but which persons are yet to lodge a proof of debt. On that basis, I would be satisfied that it is appropriate to make the orders sought. I would order accordingly.

The term "creditor" is not defined in the Confiscation Act, nor in the Corporations Act. In Pyramid Building Society (in liq) v Terry & anor., Gaudron and Gummow JJ, in the context of considering various sections of the Bankruptcy Act 1966 (Cth), observed that the term creditor "takes it colour from the particular context".[17] In the Appeal Divison of this Court, in Brash Holdings Ltd (Administrator Appointed) & ors v Katile Pty Ltd & anor.,[18] which was an appeal concerning the claims of creditors under a deed of arrangement pursuant to s.444D(1) of the Corporations Act, the appellants suggested that the term "creditors" should be given a broad meaning. The appellants relied in their submissions on s.553(1) of the Corporations Act which provides that:

"553 Debts or claims that are provable in winding up

(1) Subject to this Division, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company."

The Court, on that occasion, agreed with the appellants' submission, observing that there was nothing to suggest that the term "creditor" should be given a narrow meaning.[19] Therefore, as the authors in Ford's Principles of Corporations Law explain, the term creditors may be said to refer:

" ... not only to persons to whom debts are owed but also claimants for unliquidated damages or compensation whether in tort, contract or other cause of action."[20]

8 The purposes of the Confiscation Act are set out by s.1. They relevantly include:

(a) to provide for the forfeiture of the proceeds of certain offences, whatever the form into which they have been converted;

(b) to provide for the automatic forfeiture of restrained property of persons convicted of certain offences in certain circumstances;

(c) to provide for the forfeiture by the Supreme Court or the County Court of property restrained on suspicion that it is tainted property in relation to a Schedule 2 offence;

(d) to provide for the forfeiture of property used in connection with the commission of certain offences;

(f) to provide for the destruction or disposal of certain illegal goods;

(g) to provide for the effective enforcement of this Act and the management of seized and restrained assets;

(h) to preserve assets for the purpose of restitution or compensation to victims of crime; ...

9 It is the provisions of the Act providing for the restraining of property of persons convicted of certain offences in certain circumstances, which are critically in issue in the present case.

10 Section 14 of the Confiscation Act provides for restraining orders and relevantly states:

(1) A restraining order is an order that no property or interest in property, that is property or an interest to which the order applies, is to be disposed of, or otherwise dealt with by any person except in the manner and circumstances (if any) specified in the order.

(3) If the court making a restraining order considers that the circumstances so require, the order may direct a trustee specified in the order to take control of some or all of the property specified in the order.

11 Section 15(1) of the Confiscation Act in turn states the purposes for which a restraining order may be made, including to satisfy any pecuniary penalty order which may be made under Part 8 of the Confiscation Act. Such an order was made by Hedigan J in the present case.

12 Section 16 provides for the application for a restraining order and s.17 makes consequential procedural provisions. Section 16(2)(d) provides the DPP may apply without notice, to the Supreme Court for a restraining order in respect of property if:

(d) a person has been convicted of a Schedule 2 offence and that person has an interest in the property or the property is tainted property in relation to that offence.

13 Section 18 provides for the determination of the application and relevantly states:

(1) On an application under section 16(1) or (2)(b), (c) or (d), the court must make a restraining order if it is satisfied that the defendant -

(a) has been, or within the next 48 hours will be, charged with; or

a Schedule 1 offence or a Schedule 2 offence (as the case may be) and -

(c) it considers that, having regard to the matters contained in the affidavit supporting the application and to any other sworn evidence before it, there are reasonable grounds for making the restraining order; ...

14 Section 20(1) provides:

1. Application for exclusion from restraining order

(1) If a court makes a restraining order against property under section 18, any person claiming an interest in the property (including the defendant) may apply to that court for an order under section 21, 22 or 24.

1"> 15 Section 27(4) provides for the variation of restraining orders.

16 Sections 58 and 59 referred to and quoted in part in the judgment of Warren CJ above, provide for a pecuniary penalty order.

17 Sections 75 and 76 state the powers of a trustee appointed pursuant to the Act.

18 There is an underlying factual dispute between the DPP and the respondents as to whether the creditors have genuine claims in respect of debts payable by the company.

19 The position of the DPP is that the alleged debts arise out of sham transactions and are not payable to the creditors.

20 The background to this position was summarised by Winneke P in the Court of Appeal as follows:

At material times - particularly 1997 and 1998 - the appellant Loo ("Loo" or "the appellant") was a trader in illegally acquired abalone. In February 1997, Loo procured the incorporation of a company Bow Ye Investments Pty. Ltd. ("Bow Ye") of which he was, between the date of its incorporation and its winding-up, the sole director, shareholder and secretary. Also, from the time of its incorporation, Bow Ye was the trustee of the Loo Family Trust, the trust having been established by deed dated 29 January 1997. Loo was the guardian and appointor named in the trust deed. Bow Ye was the registered proprietor of two properties which were at the centre of the dispute in the proceedings below. The first such property was 26 Calambeena Avenue, Oakleigh[21]; and the second was at 181 Exhibition Street, Melbourne[22]. The property at Calambeena Avenue had been acquired by Loo and his wife in February 1990, and appears to have been their matrimonial home, although the judge found that it had also been used by Loo in 1997/8 for the processing of abalone. In any event, that property was sold by Loo and his wife to Bow Ye in 1997 for the sum of $249,000; and in May 1997, Bow Ye acquired the property at 181 Exhibition Street for $275,000. It would appear, and the primary judge so found, that in March 1997 Loo had set up three bank accounts in names of persons he knew well or to whom he was related. Loo operated those accounts under notice of authority; and from March 1997 until June 1998, large sums of money passed through each account. The judge concluded, from the evidence before him, that the deposits into the accounts represented likely proceeds of sale of abalone. The judge also concluded, on the material before him, that funds on a large scale were available to Loo throughout 1997; a period during which "on the face of it, substantial unsecured loans were made to Bow Ye by off-shore individuals and a company with whom and which respectively [Loo] had links". His Honour identified three, or possibly four, unsecured creditors from Malaysia and Singapore who, at the time when Bow Ye went into liquidation (deemed to have commenced on 14 September 2000) claimed to be owed somewhere in the vicinity of $350,000. These creditors did not appear in the proceedings before the judge, despite being given notice in accordance with s.70 of the Act. The judge described the debts which they claimed as "dubious". The major assets of Bow Ye at the commencement of liquidation were the two properties which I have described. The value ascribed to them was approximately $500,000.[23]

21 The basis of the DPP's position is further evidenced by the affidavit of Paul Dimitros referred to by Gillard J in the passage quoted above at [4].

22 The liquidator has not purported to form a concluded view as to the underlying factual dispute. By an affidavit sworn 18 September 2006, he deposes that he convened a creditors' meeting on 31 March 2006 to convey to the creditors advice he had received from counsel, as to the merits of an application to set aside the restraining order. He further deposes:

On 31 March 2006, I convened and held a further creditors' meeting to report to creditors the advice received from Dr Bleechmore and to seek their further views. The creditors expressed the view that they wished the liquidator, in accordance with the advice, to instruct his legal advisers to make an application to set aside the orders obtained ex parte on 18 July. During that meeting, I spoke with Mr Rainer Ellinghaus, solicitor for the creditors, and asked him if there would be a response to my two letters requesting information, in particular as to his claim as a creditor. He replied with words to the effect that he did not propose to provide further particulars of his claim, and the other creditors would do likewise, because to do so would be premature in the light of a possible application to set aside the new restraining order.

I have not as yet taken the course of requiring those creditors, whose claims are at issue, to make final claims. It is my view that the Act provides a procedure which should be strictly adhered to in the process of administering the winding up of the affairs of the company. The sections serially set forth the steps which should be taken. It is my view that the liquidation in this case has reached the stage governed by s.479(2) of the Corporations Act. In this case, unless and until an application is made to set aside the restraining orders of 18 July, I am not able to ascertain what assets are in fact available for distribution. It is therefore my view that it would be premature to require the creditors to make their final claims in the face of uncertainty as to whether any of the apparent assets are in fact available to be distributed to them.

23 There was no suggestion at the hearing before me that the affidavit material filed on behalf of the DPP and referred to by Gillard J, did not disclose a proper basis for concluding that it is suspected on reasonable grounds that the property in issue is not in fact property to which the creditors are entitled.

24 The evidence before me thus does not establish that the creditors are owed payment in respect of the debts in issue, but to the contrary provides a basis for serious doubt that this is in fact so. This factual situation complicates the application of the Corporations Act to the matters in issue. The DPP asserts that the debts in issue are not payable by the company, while the respondents other than the company maintain that they are. The liquidator takes no concluded position but seeks to set aside the restraining order which would prevent him paying claims based on the alleged debts. In one sense this proceeding thus raises the question whether the restraining order is a valid procedural device for resolving the underlying dispute as to the facts. It is clear that the underlying factual dispute could be brought before the Court for determination under the Confiscation Act. Gillard J expressly reserved general liberty to apply to the parties affected by it. Further, there is no doubt that it is open to the respondents to seek exclusion of property from it on the basis of their asserted interests. The same financial interest of the alleged creditors is thus capable of being raised both pursuant to the Corporations Act and pursuant to the Confiscation Act.

25 The present application is made pursuant to Rule 46.08 and seeks to set aside the ex parte order made by Gillard J of 18 July 2005.

26 The DPP submits Rule 46.08 is irrelevant because s.133(2) of the Confiscation Act provides that:

... The rules regulating the practice and procedure of a court in civil proceedings to do not apply to a proceeding on an application under this Act.

27 Nevertheless the DPP concedes the plaintiff is entitled to re-open the question of the appropriateness of the impugned order ex debito justitiae.[24]

28 It is submitted on behalf of the plaintiff that the order presently attacked gives an operation to the relevant provisions of the Confiscation Act which alters, impairs and detracts from the operation of the Corporations Act and brings the former into direct inconsistency with the latter.

29 It is submitted direct inconsistency arises because the order ventures beyond a restraint upon the creditors from dealing with funds in their hands, to a restraint upon the liquidator in performing an essential part of his function, namely paying the debts of the company in liquidation. This it is submitted alters, impacts or detracts from the statutory process of liquidation.

30 Reliance is placed upon the fundamental concept of liquidation:

A process whereby the assets of a company are all collected and realised, the resulting proceeds are applied in discharging all the debts and liabilities, and any balance which remains after paying the costs and expenses of winding up is distributed among the members according to their rights and interests, or otherwise dealt with as the constitution of the company directs.[25]

31 It is further submitted that particular provisions of Chapter 5 of the Corporations Act support the conclusion that there is an operational inconsistency between the Corporations Act and the restraining order provisions of the Confiscation Act.

32 The DPP concedes that if the Court is satisfied that there is a direct inconsistency between the operation of the restraining order and the Corporations Act the restraining order should be set aside.

33 It is submitted however that no such inconsistency arises because the restraining order "does not in any real or practical sense alter, impair or detract from the rights granted to and obligations imposed on the liquidator of Bow Ye under the Corporations Act".

34 It is further submitted the dividends which are the subject of the restraining order are only restrained in the hands of the proposed creditors. It is submitted the restraining order does not prevent the liquidator from conducting or concluding the winding up of Bow Ye in the ordinary course.

35 The test of inconsistency is that stated by Dixon J in The Kakariki[26] and applied by the Court of Appeal in ruling that there was a direct inconsistency between ss.70 and 72 of the Confiscation Act and the winding up provisions of the Corporations Act.[27] The Kakariki was a steamship which sunk in Port Phillip Bay in 1937. The question arose whether officers of the State of Victoria were able to remove the ship wreck pursuant to the Marine Act 1928 (Vic) with consequential rights to recover costs or whether this state Act was inconsistent with the Navigation Act (Cth), which gave similar rights to Commonwealth officials to remove sunken ships. The Court held that there was no inconsistency under s.109 of the Constitution because the power conferred on Commonwealth officials to remove ship wrecks was compatible with and aided by the co-existence of other powers for securing the removal of wrecks.[28] Dixon J stated the test of inconsistency under s.109 as follows:

When a State law, if valid, would alter, impair or detract from the operation of a law of the Commonwealth Parliament, then to that extent it is invalid. Moreover, if it appears from the terms, the nature or the subject matter of a Federal enactment that it was intended as a complete statement of the law governing a particular matter or set of rights and duties, then for a State law to regulate or apply to the same matter or relation is regarded as a detraction from the full operation of the Commonwealth law and so as inconsistent. [29]

36 The question in the present case is whether there is a direct conflict between the effect of the relevant provisions of the Confiscation Act and the provisions of Chapter 5 of the Corporations Act of a type which would "alter, impair or detract from the operation of the law of the Commonwealth Parliament". It is not submitted that the Corporations Act is intended to "cover the field", nor that the Commonwealth and State laws in terms make contradictory provisions concerning the same topic.

37 The inconsistency for which the liquidator contends, is most simply illustrated by reference to ss.501 and 506(3) of Division 4 of Chapter 5 of the Corporations Act, which are generally applicable to voluntary winding up.

38 Section 501 provides:

Subject to the provisions of this Act as to preferential payments, the property of a company must, on its winding up, be applied in satisfaction of its liabilities equally and, subject to that application, must, unless the company's constitution otherwise provides, be distributed among the members according to their rights and interests in the company.[30]

The liquidator must pay the debts of the company and adjusts the rights of the contributories among themselves.

40 It can be seen that s.501 creates a duty on winding up to apply the property of a company "in satisfaction of its liabilities".

41 Section 14(1) of the Confiscation Act authorises an order restraining any disposal of or dealing with the property restrained. As such it purports to authorise a freezing of assets of a company in liquidation. It purports to authorise the restraint of payment in satisfaction of a company's liabilities. As such it is submitted it alters, impairs and detracts from the operation of the Corporations Act.

42 The restraining order made by Gillard J exercises this power by order [2] which expressly restrains the respondents from disposing of, or in any other way dealing with the property there specified. Such property comprises a series of dividends otherwise payable or potentially payable to named individuals, and any surplus on the liquidation. The order for payment to a trustee is ancillary to this primary order. It is made pending the hearing of any application in respect of the funds or further order.

43 It may also be observed that the duty stated in s.501 is expressed to be "subject to provisions of this Act as to preferential payments". Such provisions have themselves been held to be inconsistent with ss.70 and 72 of the Confiscation Act by the Court of Appeal in the case I have referred to. This further supports the view that the scheme or obligation imposed by s.501 is potentially inconsistent with the restraining order provisions of the Confiscation Act.

44 Section 506(3) expressly requires the liquidator to pay the debts of the company and adjust the rights of the contributories among themselves.

45 On its face the exercise of the Confiscation Act power to impose a restraining order is also potentially inconsistent with the performance of this specific obligation.

46 I do not accept the distinction between payment of a dividend by a liquidator and payment of the company's debts,[31] in itself enables the DPP to avoid the inconsistency to which I have referred. The imposition of a restraining order may potentially prevent the uninterrupted liquidation of the company in accordance with the provisions of the Corporations Act.

47 I further do not accept that the power given by s.14 of the Confiscation Act or the exercise of it in the present case, bears simply upon the receipt of payments by creditors. The terms of both the section and the restraining order in the present case are plain. A restraining order is an order that no property to which the order applies is to be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order.[32] It is the liquidator who is effectively restrained from disposing of or dealing with the property other than in accordance with the order.

48 Insofar as it was submitted that the DPP should be regarded as being in an analogous position to a garnishee,[33] the analogy is questionable in that it can be seen that the restraining order bears not simply upon the mode of payment for the benefit of a creditor but upon the making of any payment at all.

49 Nevertheless I accept that the example of a garnishee order is helpful because it points up the fact that the provisions of the Corporations Act do not place the property of a company in liquidation beyond the scope of a potential claim by a third party. The Corporations Act does not contemplate or require the performance of the liquidator's duties to occur in a procedural vacuum.

50 The process of attachment is itself subject to s.500 of the Corporations Act which provides in part:

1. Any attachment, sequestration, distress or execution put in force against the property of the company after the passing of the resolution for voluntary winding up is void.
2. After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.

If a winding up order is made, any "attachment, sequestration, distress or execution put in force against the property of the company after the commencement of the winding up" ... is void (s.468(4), but the court may give leave to proceed.[34] The clearest example of an attachment is a garnishee order by which a court orders that a judgment obtained by X against Y company be enforced by ordering a debtor of Y company, the judgment debtor, to pay the debt to X, the judgment creditor. The avoiding of post liquidation executions is needed to preserve the company's property for rateable distribution among the creditors, subject only to the priorities prescribed by the Corporations Act.[35]

52 The words "no action or other civil proceeding" in s.500(2) are broad ones apt to cover claims for remedies such as an order for specific performance, injunction or rescission of a contract.[36]

53 In my view such words extend to an application for a restraining order. Once it is accepted that the Corporations Act itself envisages the possibility of proceedings by leave of the Court against a company with respect to its property, it is difficult to say that the procedural provisions of the two statutes give rise to a necessary inconsistency. The performance of the duties to which the liquidator points, are subject to procedural interference with leave of the Court. In some circumstances, the Court may order that the winding up be stayed pursuant to s.482. In other circumstances it may permit the bringing of proceedings with respect to property of the company pursuant to s.500(2).[37] In the present case the performance of the liquidator's duties is also subject to the order made for the examination of the liquidator.

54 Despite the above general conclusion, however, it can be seen that the question still arises as to whether the interest asserted by the creditors and put in issue in the Confiscation Act proceeding is inconsistent with the rights and interests postulated by the Corporations Act. In my view no such inconsistency arises in the present case.

55 If the DPP is correct, then the dividends in issue are not in fact payable in discharge of the debts of the company and the liquidator has no obligation to pay them.

56 Conversely, if the contention of Loo and the creditors is correct, and the debts are not the product of sham transactions, but are genuinely payable to the purported creditors, the underlying basis of the restraining order will fall away and the relevant interests should be excluded from it.

57 The Confiscation Act provides for the validation of the creditors' claims to be assessed. It is open to both the purported creditors and Bow Ye to make application for exclusion of the dividends from the restraining order pursuant to s.20(1) as persons claiming an interest in the property.

58 In my view there is no relevant practical inconsistency between the operation of the Corporations Act and the making of the restraining order. The Corporations Act envisages that by leave of the Court, proceedings may be taken against a company with respect to its property, during the course of the liquidation. The making of the restraining order does not give rise to the assertion of rights inconsistent with the scheme of the Corporations Act. It permits the creditors to assert the same right which they seek to assert in the context of the Corporations Act. The situation is not analogous to that which the Court of Appeal considered with respect to Bow Ye, namely whether ss.70 and 72 of the Confiscation Act created rights inconsistent with the rights of creditors pursuant to ss.555 and 556 of the Corporations Act.[38]

59 In the Court of Appeal, Winneke P (with whom Charles JA agreed) stated:

Sections 555 and 556 of the Corporations Act create rights in the creditors of a company in liquidation who are entitled to have their debts and claims paid in accordance with the priorities provided for in s 556. Those rights will be adversely affected if the provisions of ss 70 and 72 of the Confiscation Act are permitted to operate according to their tenor because those provisions have the effect of creating a special class of secured creditor by means of a charge created after the commencement of the winding up.[39]

60 In the present case the rights of the purported creditors are not however to be judged by reference to a new set of priorities created by the Confiscation Act. Under both the Corporations Act and the Confiscation Act the question in issue is whether the purported creditors have genuine claims against the company.

61 In my view the application to set aside the order of Gillard J should be dismissed.

[1] Notice of a Constitutional Matter was given on 27 February 2007.

[2] DPP v McDermott [2006] (Unreported, Warren CJ, 16 June 2006).

[3] The DPP filed its application by originating motion on 14 November 2000.

[4] DPP v Tat Sang Loo [2002] NSWSC 856; (2002) 42 ACSR 459, [13].

[7] See Corporations Act 2001 (Cth) s.513B.

[8] The Oakleigh property was sold by Loo and his wife to Bow Ye in 1997 for the sum of $249,000. The City property was bought by Bow Ye in 1997 for the sum of $275,000.

[9] DPP v Tat Sang Loo [2002] NSWSC 856; (2002) 42 ACSR 459, [79] (Ashley J).

[10] Tat Sang Loo v DPP [2005] VSCA 161; (2005) 12 VR 665, 668 (Winneke P).

[11] The restraining order was initially made on 19 November 1998.

[12] DPP v Tat Sang Loo [2002] NSWSC 856; (2002) 42 ACSR 459.

[13] Tat Sang Loo v DPP [2005] VSCA 161; (2005) 12 VR 665.

[14] The named creditors identified in paragraph [2] of Gillard J's order were: Leong Mei Fong / Benteng Kiarra SDN BHD; Leong Jeet Yui; William Tang (aka Tang Kok Song) and Robert Loh.

[15] DPP v McDermott [2006] (Unreported, Warren CJ, 16 June 2006) [37].

[17] [1997] HCA 48; (1997) 148 ALR 174, 183.

[18] [1996] VicRp 4; [1996] 1 VR 24.

[19] Ibid 32-34 (Brooking, JD Phillips and Hansen JJ).

[20] Harold Ford, Robert Austin and Ian Ramsay, Ford's Principles of Corporations Law (11th ed, 2003) [27.100].

[22] C/T Vol. 10292, Fol. 632; Vol. 10292, Fol. 164.

[23] Tat Sang Loo v DPP [2005] VSCA 161; (2005) 12 VR 665, 667-668.

[24] Taylor v Taylor [1979] HCA 38; (1979) 143 CLR 1; Savcor Pty Ltd v Cathodic Protection International APS [2005] VSCA 213; (2005) 12 VR 639; Duck Boo International Company Limited v Mizzan Pty Ltd [2006] VSCA 241.

[25] B.H McPherson et al, McPherson: The Law of Company Liquidation (4th ed, 1999).

[26] Victoria v The Commonwealth [1937] HCA 82; (1937) 58 CLR 618, 630 ("Kakariki").

[27] Tat Sang Loo v DPP [2005] VSCA 161; (2005) 12 VR 665, (Winneke P, Callaway JA, Charles JA).

[28] Kakariki [1937] HCA 82; (1937) 58 CLR 618, 630 (Dixon J).

[30] Reliance was also placed on the [power] to pay any class of creditors in full pursuant to ss.506(1)(b) and 477(4)(b), as to which see Re Walker Hare Pty Ltd (in liq) [1968] VicRp 56; [1968] VR 447. Reference was also made to s.480 governing the release of the liquidator and deregistration of the Company.

[31] See Re HIH Casualty and General Insurance Limited and Ors [2005] NSWSC 240; (2005) 215 ALR 562 and Motor Terms Company Pty Ltd v Liberty Insurance Limited (in liq) [1967] HCA 9; (1967) 116 CLR 177, 180 ( Kitto J).

[32] As to the meaning of "property" see DPP v Le [2007] VSCA 18; (2007) 15 VR 352.

[33] Reference was made to Horwood v Murdoch (1879) 5 VR 435; Evans v Stephen (1882) 3 NSWR 154.

[34] Daemar v Opeskin (1985) 10 ACLR 67.

[35] Harold Ford et al, Ford's Principles of Corporations Law (11th ed, 2003) [28.150].

[36] Fielding v Vanguard Pty Ltd (in liq) [1992] FCA 617; (1992) 39 FCR 251, Vanguard Pty Ltd (in liq) v Fielding (1993) 41 FCR 550.

[37] As has occurred by reason of the order of Master Evans of 1 December 2000 in this proceeding.

[38] Tat Sang Loo v DPP [2005] VSCA 161; (2005) 12 VR 665, 688 (Winneke P), 690-691 (Callaway JA)..

[39] Ibid 688. See also HIH Casualty & General Insurance Ltd v Building Insurers' Guarantee Corp [2003] NSWSC 1083; (2003) 188 FLR 153, 196-198.