BARBOUTIS -v- THE KART CENTRE PTY LTD [2019] WASCA 184 (15 November 2019)

1. By originating process filed on 5 April 2019, the appellants applied under s 459P and s 461(1)(k) for an order that the respondent be wound up. Section 459P provides for certain persons to apply to the Court for a company to be wound up in insolvency. Section 461(1)(k) provides that the Court may order the winding up of the company if the Court is of the opinion that it is just and equitable that the company be wound up. We shall refer to the application under s 459P as the Winding Up Application.
2. Section 459R of the Corporations Act provided for the period within which the Winding Up Application had to be determined:

(1) An application for a company to be wound up in insolvency is to be determined within 6 months after it is made.

(2) The Court may by order extend the period within which an application must be determined, but only if:

(a) the Court is satisfied that special circumstances justify the extension; and

(b) the order is made within that period as prescribed by subsection (1), or as last extended under this subsection, as the case requires.

(3) An application is, because of this subsection, dismissed if it is not determined as required by this section.

(4) An order under subsection (2) may be made subject to conditions.

1. Absent an extension under s 459R(2), the period for determination of the Winding Up Application would have expired on 5 October 2019. On 16 August 2019, the acting master made an order under s 459R(2), extending the period for determination of the Winding Up Application to 16 November 2019.
2. On 2 October 2019, the acting master dismissed the Winding Up Application for written reasons which she then published.[1]
3. On 16 October 2019, the appellants commenced the present appeal. On 7 November 2019, the appellants filed the Extension Application, seeking a further extension of the period for determination of the Winding Up Application, pursuant to s 459R(2), to 16 June 2020. They made the Extension Application out of concern that the appeal may be rendered nugatory if the period is not further extended and, in that event, this court would be precluded from making a winding up order in the appeal after 16 November 2019.

Respondent's position as to the application of s 459R

1. The respondent did not challenge the appellants' contention that this court had power to grant an extension under s 459R(2) of the Corporations Act, to any extent that s 459R applied to the exercise of this court's appellate jurisdiction. We accept that this court would have jurisdiction to make such an order if it were necessary to preserve the effective exercise of its appellate jurisdiction.[2]
2. However, the respondent submitted that no occasion arises for this court to extend the period within which the Winding Up Application must be determined, for two reasons.
3. First, s 459R only applies to applications to wind up a company in insolvency. It does not apply to an application to wind up a company on the just and equitable ground. While the originating process applied to wind up the respondent on both grounds, the draft grounds of appeal filed by the appellants do not seek to impugn the acting master's finding that the evidence in the primary proceedings did not prove that the respondent was insolvent. The respondent contends that any order for winding up that this court might make on appeal would therefore be on the just and equitable ground. The respondent said that there is no basis on which s 459R would constrain the making of such an order.
4. Secondly, the Winding Up Application was determined when it was dismissed by the acting master on 2 October 2019. The respondent said that s 459R was therefore complied with, and the provision for automatic dismissal in s 459R(3) could not be engaged. The respondent said that it is not open to this court to further extend the period for determining an application that has already been determined. The respondent accepted that, if the appeal were allowed and this court were satisfied that an order should be made winding up the respondent in insolvency, this court could do so without infringing s 459R of the Corporations Act.

1. The appellants answer the respondent's first contention by submitting that their grounds of appeal are intended to challenge the acting master's finding that the respondent's insolvency had not been established. We do not consider that the draft grounds filed for the purposes of dealing with the Extension Application properly challenge that finding. However, it will be open to the appellants to give better effect to their proposed contention in the finalised grounds contained in the appellants' case. We therefore did not dismiss the Extension Application on the basis of the respondent's first contention.

Section 459R and the exercise of appellate jurisdiction

1. In our view, the second of the above contentions should be accepted. The references in s 459R to an application being 'determined' are to an order made by the primary court finally disposing of the application by either dismissing it or ordering that the company be wound up in insolvency. Section 459R(1) requires one of those orders to be made within six months, unless the period is extended under s 459R(2). Section 459R(3) provides for the automatic dismissal of the application to wind up in insolvency if neither of those orders is made within that period. However, if either an order dismissing the application or an order winding up the company in insolvency is made within the prescribed period, s 459R is satisfied.
2. That reading is consistent with the provisions of the Corporations Act concerning how an application to wind up a company may be determined. Section 459A provides that, on an application under s 459P, the Court may order that an insolvent company be wound up in insolvency. Section 467(1) provides for the other powers of the Court on hearing a winding up application, which are, relevantly, to dismiss the application, to adjourn the hearing or to make any interim or other order that it thinks fit. It appears from these provisions that an application under s 459P is finally disposed of when either the company is ordered to be wound up in insolvency or the application is dismissed. Once either occurs, the application is 'determined' for the purposes of s 459R. That construction accords with the natural meaning of the statutory language, understood in its context. Once the Winding Up Application was dismissed by the acting master, it was 'determined' for the purposes of s 459R.
3. If an application was only 'determined' once the time for appealing against the order expired or any appeal was decided, the operation of this part of the Corporations Act would be subject to a number of anomalies. This counts against a construction under which an application is only determined if both of the following requirements are satisfied:

(1) Either an order dismissing the application or an order winding up the company in insolvency is made; and

(2) Either the time for appealing against the order has expired without an appeal being instituted or any appeal is determined.

1. On that alternate construction, if a winding up order was made and was the subject of an appeal, the application to wind up in insolvency would not be 'determined' until the appeal was finally disposed of. If the appeal was not determined in the prescribed period, then s 459R(3) would operate to dismiss the application, notwithstanding that an order for winding up in insolvency had been made in the primary proceedings.
2. Further, on that alternate construction, difficulties would arise where there was an application for an extension of time in which to appeal, or where the capacity of a party to appeal was subject to a requirement of leave or special leave to appeal.
3. Counsel for the appellants submitted that even if the order of the acting master determined the Winding Up Application, an order by this court substituting different orders would be a further determination and could only be made if the period provided for by s 459R was extended. On that view, an appeal from an order determining an application under s 459P could only ever be dismissed unless it was determined within the six month period of the original application or unless an extension was granted under s 459R(2). That anomalous result also counts against the appellants' construction.
4. The above anomalies produced by the appellants' construction of s 459R are not resolved by recourse to the power of the court to extend the period within which an application must be determined. The power under s 459R(2) may only be exercised where the Court is satisfied that special circumstances justify the extension. The mere existence of an appeal against a primary determination will not always constitute 'special circumstances' for this purpose. Absent special circumstances, the court would be powerless to prevent the anomalies noted above from arising.
5. In our view, a more natural reading of the provision - and one consistent with the statutory context - is that an application to wind up in insolvency is determined when either a winding up order is made or the application under s 459P is dismissed by the primary court. Subject to one exception, s 459R does not speak to or constrain the exercise of this court's appellate jurisdiction on an appeal from either the grant or refusal of an application to wind up in insolvency. That is because the exercise in which this court is engaged is deciding the appeal from the determination of the Winding Up Application, rather than itself determining the original application for the purposes of s 459R of the Corporations Act.
6. The exception referred to in the previous paragraph is that s 459R would constrain this court from setting aside the order of the primary court which determined the application and remitting the application to the primary court. If this court made orders setting aside the determination without substituting orders that should have been made, then s 459R(3) may operate to automatically dismiss the now undetermined application in the primary court.
7. Any substituted order made by this court on appeal would ordinarily take effect on the date it was made,[3] and any winding up order would be taken to have commenced at the time provided by s 513A of the Corporations Act. However, when this court sets aside an order of a primary court determining an application under s 459P and substitutes another order, it is determining the appeal from the primary court's order determining the application, rather than itself determining the application for the purposes of s 459R. Even where a winding up order substituted by this court on appeal takes effect when the order is made, after the period prescribed by s 459R has expired, s 459R is not infringed.
8. The appellants refer to the decision of Spender J in Merrill Lynch Equities (Australia) Ltd v Triangle Packing Case Pty Ltd.[4] In that case, a single judge of the Federal Court of Australia was conducting a de novo review of the decision of a registrar, exercising delegated judicial power, dismissing an application to wind up a company. Spender J held that if he were to make an order winding up the company on the review, the court would be determining the application to wind up the company outside the six months prescribed by s 459R(1).[5]
9. Arguments as to the correctness of Merrill Lynch were noted but not resolved by Banks-Smith J in Owen-Pearse v Lander Land Co Pty Ltd.[6] Nor is it necessary to determine the correctness of Merrill Lynch in the present case, as it is distinguishable for the following reasons.
10. The acting master was not exercising delegated judicial power subject to the de novo review of a judge. The power to determine an application under s 459P is conferred on the 'Court', relevantly defined in s 58AA to mean the Supreme Court of a State. The Supreme Court of Western Australia was relevantly constituted by the acting master under s 6(3)(f) of the Supreme Court Act 1935 (WA). Federal jurisdiction was conferred on the Supreme Court of Western Australia, including as constituted by an acting master, by s 1337B(2)(a) of the Corporations Act. There is no de novo review of the acting master's decision, only an appeal by way of rehearing.[7]
11. The reasoning in Merrill Lynch cannot be applied to the present case, which involved the acting master making a final order subject to an appeal by way of rehearing, rather than de novo review.
12. The appellant points to a passage from Austin and Black's Annotations to the Corporations Act,[8] which states that an appeal against a refusal of a winding up application must also be heard within the six month period, unless the court extends that period under s 459R(2). The only authority cited by the authors in support of that proposition is Merrill Lynch which, as we have noted, did not concern an appeal. As we have explained, even assuming that the reasoning in Merrill Lynch is correct in the context of a de novo review of the exercise of a registrar's delegated judicial power, that reasoning cannot be applied to the present appeal.
13. Our construction of s 459R is consistent with the approach taken to the construction of similar language in s 459F of the Corporations Act. Section 459F(2)(a)(ii) provides for the time for compliance with a statutory demand, in circumstances where the company applies to set aside the statutory demand under s 459G, to end:

7 days after the application under s 459G is finally determined or otherwise disposed of.

1. The reference to a final determination of the application under s 459G is not to the determination of an appeal against an order dismissing the application. In Complete Hire,[9] this court recognised that, absent an extension of time under s 459F(2)(a)(i), the time for compliance with the statutory demand would end 7 days after the primary dismissal of an application under s 459G, notwithstanding that an appeal against that dismissal was on foot.

1. For the above reasons, the Winding Up Application was determined, for the purposes of s 459R, when it was dismissed by the acting master within the period provided for by s 459R, as extended. The grant of a further extension was not necessary to preserve the effective exercise of this court's appellate jurisdiction. Nor was there any proper basis on which this court could further extend the period for the determination of the Winding Up Application when that application has already been determined. We therefore dismissed the Extension Application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Barboutis v The Kart Centre Pty Ltd [2019] WASC 353.

[2] See, by analogy, Complete Hire and Sales Pty Ltd v Terra Firma Constructions Pty Ltd [2018] WASCA 88 [4] - [9] and Jebb v Superior Lawns Australia Pty Ltd [2018] WASCA 123 [58] - [63].

[3] See Smolarek v Liwszyc [No 2] [2006] WASCA 50 (S); (2006) 32 WAR 129 [4] - [7].

[4] Merrill Lynch Equities (Australia) Ltd v Triangle Packing Case Pty Ltd [1999] FCA 810; (1999) 17 ACLC 1522.

[6] Owen-Pearse v Lander Land Co Pty Ltd [2018] FCA 2077 [118] - [134].

[7] Under s 1337B(2)(a) of the Corporations Act read with s 58(1)(b) of the Supreme Court Act and r 25 of the Supreme Court (Court of Appeal) Rules 2005 (WA): see Jebb [58]. The Supreme Court (Court of Appeal) Rules apply to this court's exercise of federal jurisdiction under the Corporations Act by r 1.3(2) of the Supreme Court (Corporations) (WA) Rules 2004: see Jebb [66].

[8] Austin and Black's Annotations to the Corporations Act [5.459R].