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[2013] FCA 753
Federal Court of Australia
2013-08-01
Miss P, Mortimer J
Original judgment source is linked above.
THE APPLICATION FOR FURTHER DISCOVERY 23 Ms Neskovcin agreed that the application for further discovery is supplementary to the application for leave to proceed, and is intended by the ACCC to facilitate the submissions it will make, and the evidence it can rely upon, in seeking penalties against the second and third respondents. 24 If further discovery against the first respondent were the only basis for the application under s 500(2) I may not have granted leave. The ACCC's purpose in seeking further discovery could have been achieved by seeking leave to issue a subpoena to the company. Since final relief by way of declarations is sought against Artorios and since I have concluded the seeking of that relief is appropriate, I need not rely on the ACCC's application for further discovery in the grant of leave. 25 However, having decided to grant leave, I consider it is appropriate in the circumstances to order further discovery in the terms sought by the ACCC, so as to facilitate the conduct of the penalty hearing. Given Artorios has already made discovery while it actively contested the proceeding, and the substance of the ACCC's submission is that discovery was inadequate, further orders are appropriate. 26 Again, the second and third respondents consent to the orders for further discovery sought by the ACCC. The liquidators made no submission about the categories of further discovery sought, nor did they oppose the orders for further discovery. However Mr McMahon made some submissions about the need for compliance with the Court's rules as to the making of discovery, subject to compliance being dispensed with. 27 Ms Neskovcin submitted the ACCC did not anticipate there should be a need for any further discovery if the proposed orders were made and complied with. Appropriately, she accepted she could not rule out entirely such an application. In those circumstances, and in order to ensure discovery proceeds regularly in this matter as it has done to date, I do not propose to dispense with compliance with r 20.16 as to the making of discovery by way of a list of documents annexed to an affidavit. The Court and all parties will then be clear about what is in the possession, custody or control of the company and what is not, and whether there are any documents over which privilege is claimed or there are not. 28 There will be orders as to leave and discovery in accordance with these reasons. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mortimer.
Australian Competition and Consumer Commission
Artorios Ink Co Pty Ltd
THE APPLICABLE PRINCIPLES 7 The original explanation for staying proceedings and requiring leave to proceed against a company in liquidation was directed at ensuring the liquidation process remains fair and orderly, avoiding a multiplicity of actions which would be expensive and time consuming, and in some cases unnecessary: Re Gordon Grant and Grant Pty Ltd [1983] 2 Qd R 314 at 316. So, too, the considerations set out by Zeeman J in Oceanic Life Ltd v Insurance and Retirement Services Pty Ltd (in liq) (1993) 11 ACSR 516 at 520 substantially reflect the approach taken where an applicant would otherwise have a claim in the liquidation of a corporation but seeks instead to pursue a proceeding against that corporation. 8 The proposition that s 500(2) is principally directed at these circumstances finds some support in the location of s 500(2) in the Act, placed as it is amongst other provisions designed to give efficacy, and some priority, to the liquidation process. 9 Although some of the considerations referred to in Grant and Oceanic Life may be relevant, where leave is sought by a regulator to continue a contravention proceeding against a company in liquidation, a different focus is required. 10 In bringing proceedings such as these, the ACCC is performing important regulatory functions under the CCA and the ACL. It is seeking to ensure that the objects in s 2 of the CCA are fulfilled by seeking penalties for conduct said to contravene the ACL, as well as orders restraining future alleged contraventions if appropriate. By s 131 of the CCA, the prohibitions in ss 18, 29 and 40 extend to the conduct of corporations. In this proceeding the conduct constituting the contraventions is alleged, at paragraphs 17-18, 31-32, 52-54, 74-76 and 93-94 of the applicant's statement of claim dated 10 September 2012, to be that of the corporation Artorios. The second and third respondents' alleged liability under s 224 of the ACL, set out at paragraphs 19(b), 20(b), 33(b), 34(b), 56(b), 57(b), 78(b), 79(b), 95(b) and 96(b) of the applicant's statement of claim, is dependent on their knowledge of, or involvement in, Artorios' conduct. Similarly with their alleged liability under s 232(1)(e) and 248(1)(a), set out at paragraphs 19(c)-(d), 20(c)-(d), 33(c)-(d), 34(c)-(d), 56(c)-(d), 57(c)-(d), 78(c)-(d), 79(c)-(d), 95(c)-(d) and 96(c)-(d), such liability depends on the principal conduct alleged against Artorios. It is, as the ACCC submitted, incongruous that the principal entity towards whom the alleged contraventions are directed, and against whom in this context the relevant prohibitions in the ACL are intended to operate, should escape liability by reason of voluntary liquidation, while proceedings continue only against those whose liability is dependent upon the alleged conduct of the corporation. 11 Some of the factors referred to in the authorities dealing with leave sought by a regulator, usually the ACCC, are: a) General deterrence in respect of the alleged conduct and contraventions: Australian Competition and Consumer Commission v SIP Australia Pty Ltd [2003] ATPR 41-937 at [59] per Goldberg J; and b) General public policy considerations flowing from the ACCC's position as regulator under the ACL: Australian Competition and Consumer Commission v ACN 135 183 372 (admin appted) [2012] FCA 586 at [6] per Marshall J. 12 The factors that overlap with applications for leave by a private person or entity include some of those set out in Oceanic Life at 520, as well as factors such as the stage to which the proceedings have progressed: Viscariello v Bernsteen Pty Ltd (in liq) (2004) 235 LSJS 277 at 280 per Besanko J, Doyle CJ and White J agreeing at 277 and 284 respectively. 13 It is by no means automatic that leave will be granted, and the Court must be satisfied there is utility in the proceeding continuing against the corporation: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 794 at [58] per Gray J. In Leahy Petroleum, Gray J found, in the circumstances of a proceeding with a large number of corporate and individual respondents, there was no utility in the ACCC being given leave to seek declaratory relief against the first respondent, Leahy Petroleum. His Honour was also not persuaded that the "trouble and expense" of seeking pecuniary penalties against Leahy Petroleum had utility, where there was little or no prospect of those penalties being collected. His Honour's reasons, and the other authorities to which I have referred, demonstrate the importance of considering the circumstances of the particular proceeding in which leave is sought, the nature of the relief sought by the regulator and the circumstances of other parties to that proceeding.
CONCLUSION ON THE LEAVE APPLICATION 17 The particular circumstances of this case provide a firm basis for the grant of leave. Given there are extensive proposed agreed facts, and admissions by the second and third respondents, there is clearly a serious question to be tried. The second and third respondents consent to the grant of leave and the liquidator does not oppose the grant. These are factors of some weight. 18 The proceeding, which has been vigorously contested until relatively recently, is at an advanced stage. Subject to some procedural orders, it is ready for hearing as to relief. Public resources employed by the ACCC in proving its case against all three respondents in the proceeding would - at least to some extent - have been wasted if there could be no relief sought against the first respondent. Particularly so where it is the corporation's conduct that is alleged to constitute the contraventions. In circumstances where the conduct alleged is now conceded and the contraventions admitted, a decision by the sole member of the first respondent to enter into voluntary liquidation should not be permitted to avoid the proper conclusion of this proceeding against it. 19 In the particular circumstances of this proceeding (cf Gray J's view in Leahy Petroleum at [58]), the grant of declarations has utility. Declaratory relief is granted not only to mark out the boundaries of lawful conduct for the future, but also to make plain the Court's finding as to unlawful conduct in the past: Australian Securities and Investments Commission v McDougall (2006) 229 ALR 158 at [55] per Young J; Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 97-99 per Sheppard J, Foster and Hill JJ agreeing. In Australian Securities and Investments Commission v Sweeney [2001] NSWSC 114 at [35], Austin J said (of the regulator's role and functions under the Australian Securities and Investments Commission Act 1989 (Cth), but there is in my opinion no material difference for present purposes): These provisions imply that it is appropriate for the Commission to take civil proceedings for declaratory and injunctive relief in respect of past events, even if there is no risk of repetition, where the outcome may establish that the conduct complained of was wrongful (and thereby mark the Court's and the community's disapproval of it) and may deter other wrongdoers. 20 Especially in a legislative scheme where the liability of others is linked to, or dependent upon, contravening conduct of a corporation, the formal recognition by the Court of the unlawfulness of the corporation's conduct is significant. Indeed, it may be essential. 21 In both SIP Australia and Leahy Petroleum, the seeking of pecuniary penalties was an important factor in the Court's reasoning, albeit to different outcomes. In the context of the current proceeding, the ACCC's abstention from seeking such relief against Artorios tends both for and against the grant of leave. It tends against the grant of leave because the principles of general deterrence are of less weight than they might be if penalties were sought. Declaratory relief of itself is unlikely to persuade wrongdoers to adjust or alter their conduct in the future, although it nevertheless makes clear for those regulated by the ACL what conduct is lawful and what is not. The abstention by the ACCC tends in favour of the grant of leave because there is no likely impact on the liquidation, and the Court need not consider the question whether penalties if ordered could not be satisfied (cf Gray J's concerns in Leahy Petroleum). Overall, the fact that the ACCC does not seek the imposition of pecuniary penalty weighs in favour of the grant of leave in the particular circumstances of this proceeding. 22 Finally I accept that, where there are now agreed facts and admissions as to contravening conduct, there would be some incongruity in not allowing the ACCC to seek relief against Artorios as the principal actor in that conduct so far as the operation of the ACL in this case is concerned. I also accept that, perhaps especially in a sole member corporation, an election to go into voluntary liquidation should not be permitted to frustrate or avoid the legal consequences which that sole member, by his agreement to facts and admissions of contravening conduct, otherwise now accepts should flow from the conduct alleged.
(2006) 229 ALR 158
(1993) 41 FCR 89