CONTINENTAL VENTURE CAPITAL LTD & ORS v AMANN AVIATION PTY LTD

Court of Appeal (NSW)|2001-10-15|Before: Spigelman CJ, Mason P, Sheller JA, Hodgson CJ, Neville John J

Reported Decision : 40 ACSR 303 53 NSWLR 687

CITATION : CONTINENTAL VENTURE CAPITAL LTD & ORS v AMANN AVIATION PTY LTD (IN LIQ) & ORS [2001] NSWCA 476 FILE NUMBER(S) : CA 40016/00 HEARING DATE(S) : 15 October 2001 JUDGMENT DATE : 14 December 2001

LOWER COURT JURISDICTION : Supreme Court LOWER COURT 1897/96 FILE NUMBER(S) : LOWER COURT Hodgson CJ in Eq JUDICIAL OFFICER :

Appellants: R G McHugh COUNSEL : Respondents: S D Robb QC/ M A Jones/ J R Clarke Attorney General (Intervening): M J Leeming/ T Catanzariti Appellants: Henry Davis York SOLICITORS : Respondents: Nash O'Neill Tomko Lawyers Attorney General: Crown Solicitor's Office CATCHWORDS : Jurisdiction - Cross-vesting scheme - Re Wakim - whether proceedings in Supreme Court fatally flawed because dependent on orders made by Federal Court without jurisdiction - Re Macks - Ex parte Saint - State Jurisdiction Act - "ineffective judgment" - statute creates its own rights, liabilities, obligations, status - whether Supreme Court proceedings a contempt of High Court prohibition - Acton Engineering Pty Ltd v Campbell. (D) Corporations (New South Wales) Act 1990 (NSW) s42(3) LEGISLATION CITED : Corporations Act 1989 (Cth) s56(2) Federal Courts (State Jurisdiction) Act 1999 (NSW) Federal Court of Australia Act 1976 (Cth) Re Wakim; Ex parte McNally and Anor. Re Wakim; Ex parte Darval. Re Brown and Ors; Ex parte Amann and Anor. Spinks & Ors V Prentice (1999) 198 CLR 511 Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1 CASES CITED: Re Macks; Ex parte Saint [2000] HCA 62 Residual Assco Group Ltd v Spalvins (2000) 202 CLR 629 Australian Solar Mesh Sales Pty Ltd v Anderson (2000) 101 FCR 1 Ex parte Sumampow & Anor; Re the Hon Justice Neville John Owen & Ors (2001) 183 ALR 372 DECISION : Appeal dismissed with costs.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40016/00 SPIGELMAN CJ MASON P SHELLER JA

Friday 14 December 2001 CONTINENTAL VENTURE CAPITAL & Ors v AMANN AVIATION (in liq) & Anor

The appellants seek the summary dismissal or permanent staying of proceedings commenced against them in the Equity Division, arising out of the winding up of the first respondent, Amann Aviation Pty Ltd.

On 3 December 1992 the Federal Court made orders that:

Amann Aviation Pty Ltd be wound up by this Court under the provisions of the Corporations Law. 2. Mr Martin Brown…an official liquidator, be appointed liquidator of the affairs of the said company.

The Federal Court's jurisdiction to make these orders depended on the cross-vesting provisions of the interlocking scheme underpinning the Corporations Law. (s42(3) Corporations (NSW) Act 1990 (NSW) , s56(2) Corporations Act 1989 (Cth) ). Mr Amann and another examinee applied to the High Court for certiorari and prohibition against the orders winding up the corporation and orders that they attend for examination on the basis that the Federal Court lacked the jurisdiction to make the orders.

The High Court held by a majority that it was constitutionally impermissible for State jurisdiction to be conferred on a Federal Court. ( Re Wakim; Ex parte McNally (1999) 198 CLR 511)

Mr Amann was granted an extension of time limited to his application to quash the examination orders of the Federal Court. The High Court made an order absolute for a writ of prohibition. This read: On the application of the first-named applicant, order absolute in the first instance for a writ of prohibition prohibiting the respondents from taking any further steps in the Federal Court under the order for the winding up of Amann Aviation Pty Ltd (In liq).

In the present proceedings, the appellants contended in both the Court below and in the Court of Appeal that the proceedings in the Equity Division were fatally flawed because the first plaintiff's status as a corporation in liquidation and the second plaintiff's status as its liquidator depended on orders now known to have been made without jurisdiction by the Federal Court.

Hodgson CJ in Eq found in the plaintiff's favour. This is an appeal from that decision.

The Federal Court is a superior court of record with jurisdiction to determine its own jurisdiction. Unless and until its orders are set aside they are a source of rights, obligations and status.

Discussion of Re Macks; Ex parte Saint [2000] HCA 62.

The reasoning in Re Macks applies and the decision cannot be distinguished on any grounds advanced by the appellants.

a) "Ineffective judgment" in s4 of the State Jurisdiction Act is not restricted to judgments or orders which have in fact been set aside by appellate or prerogative proceedings. It clearly engages the Federal Court orders under consideration.

b) s6 of the State Jurisdiction Act does not deem the ineffective Federal Court judgment to be a judgment of the Supreme Court of NSW. Rather, it creates its own rights, liabilities, obligations and status.

c) The appellant's argument that under the Corporations Law the Supreme Court of NSW could not have varied, stayed or terminated the Federal Court orders as this would involve resort to powers inconsistent with the Federal Court Act has no bearing on the capacity of the plaintiffs to institute the proceedings.

The proceedings in the Supreme Court are not a contempt of the High Court prohibition. The order that the company be "wound up by this Court" only meant that the compulsory winding up process was initiated by the Federal Court, not that that Court alone was to carry out the supervision of the winding up process. Nor is the liquidator an agent of the Federal Court.

In re Phoenix Oil and Transport Co Ltd [1958] Ch 560; Deloitte and Touche AG v Johnson [1999] 1 WLR 1605; Commissioner for Corporate Affairs v Harvey [1980] VR 669 (distinguished); Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1(discussed).

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40016/00 SPIGELMAN CJ MASON P SHELLER JA

Friday 14 December 2001 CONTINENTAL VENTURE CAPITAL & Ors v AMANN AVIATION (in liq) & Anor

1 SPIGELMAN CJ: I have read the reasons for judgment of Mason P in draft. I agree that the appeal must be dismissed for the reasons his Honour gives. 2 The proceedings are not concerned with any attempt to modify rights or liabilities which flow from the order of the Federal Court. Nor do the proceedings involve any attempt to appeal from the judgment of the Federal Court. For the reasons given by Mason P and Sheller JA, these proceedings fall within ss6, 7(1) and 8 of the Federal Courts (State Jurisdiction) Act 1999 and are valid in accordance with the reasoning of the majority of the High Court in Re Macks; ex parte Saint (2000) 75 ALJR 203, see especially at [25], [83], [120], [121], [125], [132], [229] and [351]. 3 The Parliament of New South Wales can grant persons standing to institute and pursue proceedings, being persons who would not have such standing at common law. Similarly, for purposes of an Act of New South Wales which, relevantly, the Corporations Law is, the Parliament of New South Wales can permit a legislative scheme to operate on an assumed basis. In practical terms, that is the effect in the present case of ss6, 7(1) and (8) of the State Jurisdiction Act. The proceedings may be continued on the assumption that a company had been ordered to be wound up by the Supreme Court and on the further assumption that a particular person had been appointed as liquidator by the Supreme Court. On the basis of this legislative fiction, the scheme operates in accordance with its terms. 4 MASON P: The appellants seek the summary dismissal or permanent staying of proceedings commenced against them in the Equity Division of the Supreme Court. The proceedings were commenced in 1996 by the respondents. The claims arise out of the winding up of the first respondent Amann Aviation Pty Ltd. Most of the appellants, corporate and noncorporate, are sued on the basis of having been directors of Amann Aviation Pty Ltd. It is pleaded against all appellants that they committed or participated in breaches of directors' duty or entered into transactions void against the liquidator. 5 In the proceedings, the first plaintiff is described as Amann Aviation Pty Limited (in liquidation) and the second plaintiff, Martin Russell Brown, sues in his capacity as liquidator of that corporation. A material part of the statement of claim pleads: 13. The Company was ordered to be wound up by an order of the Federal Court of Australia made on 30 November 1992 and the Liquidator was appointed liquidator of the Company. 6 It is this assertion of standing and title to make claims stemming from the liquidation that lies at the heart of the appellants' challenge to the proceedings. 7 Amann Aviation Pty Ltd (hereafter the corporation) was incorporated in New South Wales. 8 On 3 December 1992 the Federal Court (Victorian Registry) made orders on the application of BP Australia Ltd that: 1. Amann Aviation Pty Ltd be wound up by this Court under the provisions of the Corporations Law. 2. Mr Martin Brown... an official liquidator, be appointed liquidator of the affairs of the said company.

9 Power to make such orders was conferred on various "Courts" by s472 of the Corporations Law. The facts of the instant case did not engage federal jurisdiction, with the consequence that the Federal Court's jurisdiction to make those orders depended on the cross-vesting provisions of the interlocking scheme underpinning the Corporations Law. The relevant provisions were s42(3) of the Corporations (New South Wales) Act 1990 (NSW) and s56(2) of the Corporations Act 1989 (Cth). 10 On 7 July 1995 the Federal Court ordered that certain persons attend for the purpose of being examined about the "examinable affairs" of the corporation. Some of the examinees, including the present appellant Vanda Russell Gould, sought by notice of motion an order setting aside the winding up and the examination summonses. Certain questions were then referred to the Full Court that raised issues as to the validity of the provisions that conferred jurisdiction on the Federal Court to make the examination orders. That Court's jurisdiction and the constitutional validity of the cross vesting scheme were upheld by the Full Court (BP Australia Ltd v Amann Aviation Pty Ltd (1996) 62 FCR 451). The examinees appealed to the High Court which, being equally divided, dismissed the appeal (see Gould v Brown (1998) 193 CLR 346). The notice of motion seeking to have the winding up and the examination orders set aside was never proceeded with to finality (see 198 CLR at 591). 11 Later, Mr Gould and another examinee (Mr Amann) took a further opportunity to challenge the orders of the Federal Court. They applied to the High Court for certiorari to set aside the orders winding up the corporation and the orders that they attend for examination; and prohibition prohibiting the conducting of any examination or the taking of any further steps in the winding up, on the ground that the Federal Court lacked jurisdiction to make the orders. Gaudron J directed that the application be made by notice of motion to the Full Court of the High Court (see 198 CLR 511 at 515). The application was heard together with other challenges to the general cross-vesting scheme and the particular cross-vesting scheme arising under the Corporations Law. 12 On 17 June 1999 the High Court (by a majority) held that it was constitutionally impermissible for State jurisdiction to be conferred on a Federal Court (Re Wakim; Ex parte McNally and Anor. Re Wakim; Ex parte Darval. Re Brown and Ors; Ex parte Amann and Anor. Spinks & Ors v Prentice (1999) 198 CLR 511). 13 It is necessary to look at the particular orders touching the parties to this appeal: see 198 CLR at 636-7. 14 The High Court refused Mr Gould an extension of time in which to apply for certiorari (see 198 CLR at 636 (order 4)). The reasons were given at 591-2 per Gummow and Hayne JJ, with whose reasons on this matter Gleeson CJ (at 546) and Gaudron J (at 546) agreed. 15 The other examinee (Mr Amann) was granted an extension of time limited to his application to quash the examination orders of the Federal Court made on 7 July 1995 and an order absolute was made for a writ of certiorari to quash those orders (see 198 CLR at 636). On Mr Amann's application, the High Court originally made an order absolute for a writ of prohibition: … prohibiting the respondents from taking any further steps in the winding up of Amann Aviation Pty Ltd (In liq). (see 73 ALJR 839 at 899)

16 The order for prohibition was subsequently varied under the slip rule by deleting the word "in" in the phrase "in the winding up of Amann Aviation Pty Ltd (In Liq)" and substituting therefor the phrase "in the Federal Court under the order for". Thus, the prohibition was varied to read: On the application of the first-named applicant, order absolute in the first instance for a writ of prohibition prohibiting the respondents from taking any further steps in the Federal Court under the order for the winding up of Amann Aviation Pty Ltd (In liq). (see 198 CLR at 637). 17 Otherwise, Mr Gould's and Mr Amann's applications were dismissed.

Application before Hodgson CJ in Eq 18 In the Court below, as here, the appellants contended that the proceedings in the Equity Division are fatally flawed because the first plaintiff's status as a corporation in liquidation and the second plaintiff's status as its liquidator depend upon orders now known to have been made without jurisdiction by the Federal Court on 3 December 1992. 19 The plaintiffs' response before Hodgson CJ in Eq was essentially two-fold. First, they submitted that the particular orders made by the High Court in Gould v Brown (1998) and Re Brown & Ors Ex parte Amann & Anor (1999) did not remove the plaintiffs' grounds for suing in the Supreme Court or otherwise prohibit them from doing so. Secondly, the plaintiffs relied upon the legislation enacted in response to the striking down of the cross-vesting scheme, particularly the Federal Courts (State Jurisdiction) Act 1999 (NSW) (hereafter the State Jurisdiction Act). 20 Hodgson CJ in Eq resolved the matter in the plaintiffs' favour on the first ground (see Amann Aviation Pty Ltd & Anor v Continental Venture Capital Limited & Ors [1999] NSWSC 1212). He found it unnecessary to address the argument based on the State Jurisdiction Act. 21 His Honour proceeded in three steps. 22 First, he interpreted the Federal Court order relating to the winding up as stating that the corporation was to be wound up under the provisions of the Corporations Law of New South Wales. He also held that the order that the corporation was to be "wound up by the Court" did not mean that the Federal Court would actually conduct the process of winding up either by itself or by an agent, nor that the Federal Court and the Federal Court alone would carry out the supervisory role over the liquidator that is part and parcel of a winding up by a court. Citing s58AA of the Corporations Law and Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1, the Judge held that the powers of the Court in respect of a winding up could be exercised by any court with jurisdiction in such matters under the national scheme, not just by the court that made the winding up order. In his Honour's words, "on its proper construction, the order means no more than the winding up process is initiated by the Federal Court". 23 Secondly, the learned Judge considered the impact of the reasoning in Re Wakim touching the Federal Court's lack of jurisdiction to make orders in matters whose facts did not attract federal jurisdiction. Although Re Wakim meant that the Federal Court had no jurisdiction to make the order in the instant case, it was however common ground that, since the Federal Court is a superior court of record, its order remained valid and binding until set aside or quashed. The inability of the Federal Court to take any further role in the winding up was now clear, because its lack of jurisdiction had been established. Nevertheless, the decision in Acton suggested that it would be entirely appropriate that the New South Wales Supreme Court could continue whatever supervisory role was required in the winding up of a New South Wales company. His Honour rejected the submission that Acton ceased to be applicable merely because its reasoning could no longer (since Re Wakim) operate as a statement of the powers of the Federal Court ancillary to a winding up ordered a State Supreme Court. Acton also established that a liquidator was not to be considered as an officer exclusively of the Court which made the winding up order. The Supreme Court of New South Wales had jurisdiction to carry out any curial functions stemming from the New South Wales Corporations Law in relation to the particular winding up, including the supervision of the liquidator (if necessary). 24 Thirdly, the Judge addressed the effect of the High Court order in Re Brown & Ors; Ex parte Amann & Anor. He recorded that it was common ground that the Federal Court order was a valid and binding order, having been made by a superior court of record, albeit without jurisdiction. It was plain that the High Court had done nothing to set aside or quash the order itself, so that it remained valid and binding. The submission that the High Court had ordered a stay of the winding up order was rejected, because all that the High Court had done was to prohibit identified persons from taking any step in the Federal Court. 25 His Honour then addressed the submission that doing anything more in the winding up would involve taking steps in the Federal Court contrary to the High Court's order. He reiterated the finding that the Federal Court order could not be construed as requiring that the winding up be by the Federal Court or as treating the liquidator as exclusively an officer of the Federal Court. Hodgson CJ in Eq also rejected various submissions stemming from remarks made arguendo by Gaudron J in the slip-rule application (supra) and dicta of Gummow and Hayne JJ in Re Wakim at 592. 26 In this Court the respondents rely upon this reasoning. 27 The respondents also defended the order of the primary judge by invoking the State Jurisdiction Act. The Attorney General for New South Wales intervened with helpful supporting arguments. 28 In the period that has elapsed since the decision under appeal and the hearing of this appeal the High Court heard and determined Re Macks; Ex parte Saint [2000] HCA 62, 75 ALJR 203, 176 ALR 545. The Court rejected a challenge to the validity of ss6, 7 and 8 of the Federal Courts (State Jurisdiction) Act 1999. In doing so, it explained the operation of those provisions and discussed matters directly relevant to the appellants' challenge to the reasoning of Hodgson CJ in Eq.

Federal Courts (State Jurisdiction) Act 1999 29 So far as relevant, the State Jurisdiction Act provides: 1. Name of Act and purpose (1) This Act is the Federal Courts (State Jurisdiction) Act 1999 . (2) The purpose of this Act is to provide that certain decisions of the Federal Court of Australia or the Family Court of Australia have effect as decisions of the Supreme Court and to make other provision relating to certain matters relating to the jurisdiction of those courts.

… 4. Meaning of ineffective judgment (1) A reference in this Act to an ineffective judgment is a reference to a judgment of a federal court in a State matter given or recorded, before the commencement of this section, in the purported exercise of jurisdiction purporting to have been conferred on the federal court by a relevant State Act. (2) If: (a) a Full Court of the Federal Court of Australia in its appellate jurisdiction has purported to affirm, reverse or vary an ineffective judgment, or (b) a Full Court of the Family Court of Australia has purported to affirm, reverse or vary an ineffective judgment, a reference in this Act to the ineffective judgment is a reference to the ineffective judgment in the form in which, and to the extent to which, it purports or purported to have effect from time to time.

… 6. Rights and liabilities declared in certain cases The rights and liabilities of all persons are, by force of this Act, declared to be, and always to have been, the same as if: (a) each ineffective judgment of: (i) the Federal Court of Australia, otherwise than as a Full Court of the Federal Court of Australia, …. had been a valid judgment of the Supreme Court in a Division constituted by a Judge of the Supreme Court, … 7. Effect of declared rights and liabilities (1) A right or liability conferred, imposed or affected by section 6: (a) is exercisable or enforceable, and (b) is to be regarded as always having been exercisable or enforceable, as if it were a right or liability conferred, imposed or affected by a judgment of the Supreme Court. (2) Without limiting section 6 or subsection(1) of this section, the rights and liabilities conferred, imposed or affected by section 6 include the right of a person who was a party to the proceeding or purported proceeding in which the ineffective judgment was given or recorded to appeal against that judgment. (3) For the purposes of subsection (2), each ineffective judgment of: (a) the Federal Court of Australia, otherwise than as a Full Court of the Federal Court of Australia, or (b) the Family Court of Australia, otherwise than as a Full Court of the Family Court of Australia, is deemed to be a judgment of the Supreme Court in a Division constituted by a Judge of the Supreme Court.

Effect of things done or omitted to be done under or in relation to rights and liabilities (1) Any act or thing done or omitted to be done before or after the commencement of this section under or in relation to a right or liability conferred, imposed or affected by section 6: (a) has the same effect, and gives rise to the same consequences, for the purposes of any written or other law, and (b) is to be regarded as always having had the same effect, and given rise to the same consequences, for the purposes of any written or other law, as if it were done, or omitted to be done, to give effect to, or under the authority of, or in reliance on, a judgment of the Supreme Court. (2) For the purposes of an enforcement law, any act or thing done or omitted to be done before or after the commencement of this section gives rise to the same consequences, as if each ineffective judgment were a valid judgment of the Supreme Court given in or in relation to the proceeding in or in relation to which the ineffective judgment was given or recorded. (3) In this section: enforcement law means a provision of a law (other than a law relating to contempt of court) that sets out a consequence for a person if the person: (a) contravenes, or (b) acts in a specified way while there is in force, a judgment, or a particular kind of judgment, given by a court.

… 10. Powers of Supreme Court in relation to declared rights and liabilities (1) The Supreme Court may vary, set aside, revive or suspend a right or liability conferred, imposed or affected by section 6 as if it were a right or liability conferred, imposed or affected by the Supreme Court in or in relation to proceedings of the kind in or in relation to the ineffective judgment was given or recorded. …. Re Macks; Ex parte Saint 30 Re Macks; Ex parte Saint is very similar to the present case. Properly analysed, it demonstrates why this appeal must fail in each of its main arms. 31 Re Macks involved winding-up orders made by the Federal Court in 1995 and 1996 involving companies in the Emanuel Group. The companies were incorporated in South Australia. Although some orders took the form that a named company "be wound up by this court under the provisions of the Corporations law" and others were in the form that a named company "be wound up in insolvency" nothing turned on the form of order made (see esp per Gummow J at [179], per Hayne and Callinan JJ at [313]). In each case, Mr Macks was appointed liquidator. The Federal Court had also made funding orders confirming arrangements by the liquidator to borrow money for the purpose of certain litigation. 32 That litigation was brought by the various companies and the liquidator in the Supreme Court of South Australia. It included claims that transactions were voidable pursuant to s588FF of the Corporations Law as well as claims based upon breach of fiduciary duty and other wrongs. 33 The High Court's decision in Re Wakim meant that it became common ground in Re Macks that the winding-up orders had been made without jurisdiction in that it was established or at least assumed that no federal jurisdiction had been involved (cf Re Macks at [179], [189]). 34 Defendants in the South Australia Supreme Court proceedings moved the High Court for certiorari to quash the winding-up orders; prohibition directed to the Judges and Registrars of the Federal Court prohibiting them from taking any steps to give effect to or enforce the winding-up and funding orders; and prohibition directed to the liquidator prohibiting him from taking any further steps in the winding-up of the companies, including further steps in the Supreme Court actions. 35 The High Court proceedings raised the constitutional validity of the Federal Court (State Jurisdiction) Act 1999 of South Australia. That Act is in essentially identical terms to the New South Wales counterpart with which the present proceedings are concerned. 36 The challenge to validity occurred in a context where no attempt had been made to draw upon those provisions of the State Jurisdiction Act involved with appeals touching rights associated with ineffective judgments (s7(2)) or the variation of such rights (s10). Only for Gaudron J and Kirby J was this of any significance as regards the capacity to continue the proceedings in the Supreme Court of South Australia. 37 The High Court upheld the validity of ss6, 7(1) and 8 of the State Jurisdiction Acts. Accordingly, the applications for writs of prohibition were dismissed, thereby leaving the plaintiffs free to prosecute the Supreme Court proceedings. 38 In Re Macks, the applicants' challenge to the validity of ss6, 7(1) and 8 involved submissions that: (i) Since the Federal Court was created as a superior court of record by federal legislation, the winding-up and funding orders were binding unless and until set aside on appeal or by prerogative writ. (ii) The proceedings in the Supreme Court of South Australia had been commenced and were being prosecuted without any attempt to set those orders aside. (iii) Section 6 of the State Jurisdiction Act was an impermissible intrusion by the State legislature into areas touching the effect of Federal Court judgments (including judgments made without jurisdiction, in light of Re Wakim ). This argument was put in various ways, with the applicants invoking: (a) the principles touching Chapter 3 of the Constitution that had been affirmed in Re Wakim itself; (b) the principles discussed in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51; and (c) s109 inconsistency of the direct, indirect and operational kinds as between provisions in the Federal Court of Australia Act touching the jurisdiction of the Federal Court (on the one hand) and the State Jurisdiction Act (on the other hand). 39 The majority held that the orders of the Federal Court could not be regarded as nullities, even if made without jurisdiction. That conclusion stemmed from the status of the Federal Court as a superior court of record with jurisdiction to determine its own jurisdiction (Federal Court of Australia Act 1976 (Cth), ss5(2), 19). Unless and until the orders were set aside by appellate or prerogative process they were a source of rights, obligations and status (see per Gleeson CJ at [18]-[23], per Gaudron J at [51]-[57], per Gummow J at [216], per Hayne and Callinan JJ at [328]-[344]. See also per Kirby J at [307]. See also Residual Assco Group Ltd v Spalvins (2000) 202 CLR 629). The appellant accepts this, while attempting to distinguish Re Macks on various bases. 40 The High Court, by majority, also upheld the validity of ss6, 7(1) and 8 of the State Jurisdiction Act (hereafter the core provisions). 41 I indicated above that the majority were untroubled by arguments about the possibility of operational inconsistency later arising in relation to the exercise of rights of appeal or variation conferred by the State Jurisdiction Act. The justices held that the Act was capable of being read down in those circumstances, thereby avoiding any immediate s109 problem, including any s109 problem touching the core provisions (see per Gleeson CJ at [29], per McHugh J at [133], per Gummow J at [202], per Hayne and Callinan JJ at [351]-[365]). Gaudron J (at [66]-[83]) considered it necessary to quash the Federal Court orders so as to clear the way for the exercise of any rights of appeal or variation stemming from the State Jurisdiction Act, but her Honour was the only member of the majority to reason this way. The six justices refused prohibition to prevent the continuation of the proceedings in the Supreme Court of South Australia.

42 In my view, the crux of the reasoning of the majority was their interpretation of the operation of s6, which confers rights equivalent to those stemming from a valid Supreme Court judgment in relation to an "ineffective judgment". The majority held that the section does not do so by deeming the ineffective Federal Court judgment to be a judgment of the Supreme Court of New South Wales. Rather, it creates its own rights, liabilities, obligations and status, the same as if the ineffective judgment had been made by a valid judgment of a State court (see Re Macks per Gleeson CJ at [15], [25], [31], per Gaudron J at [46], [58]-[59], [63], [76], per McHugh J at [88], [110], [123], per Gummow J at [208], per Hayne and Callinan JJ at [348], [351]-[355], [358]. Contrast Kirby J at [260]-[304]). As Hayne and Callinan JJ put it, the Federal Court order was "no more than a factual point of reference for the creation of [the rights and liabilities which the State Validation Acts create]" (at [353]). Section 7(1) spells out that one consequence is that a right conferred by s6 is enforceable as if it were a right conferred by a judgment of the Supreme Court. 43 Thus understood, these provisions clearly invest the plaintiffs with the standing and title asserted in the Equity proceedings. The High Court in Re Macks refused to prohibit the prosecution of the proceedings in the Supreme Court of South Australia. The same outcome must follow in the present proceedings. The reasoning in Re Macks applies and the decision cannot be distinguished on any of the grounds advanced by the appellants. To these I now turn.

The appellants cannot distinguish Re Macks 44 The appellants submit that the orders made by the Federal Court on 3 December 1992 were not "ineffective judgments" within the meaning s4 of the State Jurisdiction Act. They rely upon the fact that the orders have been found deficient for want of jurisdiction but left standing despite the two High Court proceedings that sought to set them aside. The appellants frankly concede that some of their arguments apply to no Federal Court winding up orders other than those touching Amann Aviation. 45 The appellants next submit that ss6 and 7(1) of the State Jurisdiction Act cannot validly be invoked in the respondents' favour because the earlier High Court proceedings have left standing the Federal Court orders of 3 December 1992 and because the reasoning of Gleeson CJ, Gaudron J, Gummow J, Hayne J and Callinan J in Re Macks confirms the proposition that the order of a superior court of record cannot be treated as a nullity for want of jurisdiction unless and until it is set aside either on appeal or by prerogative review (see above). 46 The appellants point out that, in Re Macks, the High Court quashed the Federal Court orders with which those proceedings were concerned. It is submitted that such quashing was an essential aspect of the majority reasoning that affirmed the efficacy of ss6 and 7 of the State Jurisdiction Act. 47 I cannot accept these three sets of submissions. 48 There is no reason why the State Jurisdiction Act should be read down in the manner contended for by the appellants. "Ineffective judgment" is defined in s4 in such a way that it is not restricted to judgments or orders which have in fact been set aside by appellate or prerogative proceedings. Its literal terms clearly engage the Federal Court orders presently under consideration. The sections of the State Jurisdiction Act purporting to validate past transactions (ss7(1), 8(1)) further confirm this interpretation. The appellants' submissions also fail to recognise that the State Jurisdiction Act addressed a context which included Federal Court orders made in circumstances of uncertain invocation of federal jurisdiction (cf Australia Solar Mesh Sales Pty Ltd v Anderson (2000) 101 FCR 1 at 9-10). In Re Macks Gaudron J recognised that it did not matter whether or not the orders were unchallenged, had been set aside, or left standing on discretionary grounds. Her Honour did so in the very context of the orders made by the High Court in Re Brown; Ex parte Amann (see Re Macks at [59], [71]. See also per Gleeson CJ at [10], per McHugh J at [112]-[113], per Gummow J at [189], [205], per Hayne and Callinan JJ at [323], [348], [358-[359]). Nothing in the reasoning of the justices supports the idea that the winding up orders addressed in Re Macks only became "ineffective" in consequence of the grant of certiorari that issued in that case. Gaudron J (at [71]), McHugh J (at [173] and Gummow J (at [205]) expressly stated the contrary. 49 The appellants' submissions also fail to give due recognition to what I identified as the crux of the majority reasoning in Re Macks, ie recognition that the State Jurisdiction Act creates its own set of rights, liabilities, obligations and status by force of State law. Stemming from this, Gleeson CJ, McHugh J, Gummow J, and Hayne & Callinan JJ rejected arguments that s109 of the Constitution created any difficulty as regards an extant Federal Court order. Their Honours joined in refusing prohibition to block the continuation of the proceedings in the Supreme Court of South Australia which are relevantly identical to the Equity proceedings with which this appeal is concerned. 50 McHugh J's process of reasoning was radically different from that of his colleagues in this area, but that is of no present consequence. Each of these justices upheld the validity of the presently relevant sections of the State Jurisdiction Act without qualification stemming from s109 of the Constitution or the possibility of the invalidity of ss7(2) and 10(1) of the State Jurisdiction Act. For example, Gummow J said (at [230]) (omitting footnotes): The rights and liabilities which have their source in the State legislation do not deny or vary the operation of the orders of the Federal Court. Rather, the State legislation takes the imperfect orders as the factum by reference to which it then creates certain rights and liabilities. The purported exercise of jurisdiction by the Federal Court is not directly or indirectly overridden. Nor are the present applications to this Court an instance where there coexist federal and State powers potentially capable of exercise with respect to the same subject matter, but where no inconsistency can arise until there is an actual exercise of power. The issues arising in the present applications do not involve any questions of "operational inconsistency" as it is called.

(See also Ex parte Sumampow & Anor; Re the Hon Justice Neville John Owen & Ors (2001) 183 ALR 372.) 51 In Re Macks the High Court issued writs of certiorari to quash the winding-up and funding orders made by the Federal Court, thereby giving effect to the principles established in Re Wakim. But (with the exception of Gaudron J) none of the six justices in the majority treated this as a necessary step in the process of their reasoning that led to upholding the core provisions of the State Jurisdiction Act and the refusal to issue prohibition to restrain the plaintiffs in the Supreme Court proceedings from continuing to prosecute them. The remaining five justices in the majority held in effect that ss6, 7(1) and 8 of the State Jurisdiction Acts were severable from and therefore unaffected by any question concerning operational inconsistency under s109 of the Constitution touching the validity of ss7(2) (appeal) and 10(1) (variation). Kirby J dissented, insisting that the State Jurisdiction Acts were to be viewed as a whole and that they were affected root and branch with invalidity stemming from difficulties deriving from Chapter 3 and s109 of the Constitution. 52 One aspect of the appellants' argument is the submission that there is an operational inconsistency giving rise to an inability to resort to the appeal (s7(2)) and variation (s10) powers addressed in the State Jurisdiction Act. The inconsistency is said to arise between the provisions of the Federal Court of Australia Act that creates the Federal Court as a superior court of record and thereby precludes a disregard of its orders unless and until they are set aside on the one hand; and ss7(2) and 10 of the State Jurisdiction Act on the other. In Re Macks this argument was rejected as a ground for invalidating the core provisions of the State Jurisdiction Act or prohibiting continuation of the Supreme Court proceedings by all justices except Kirby J. 53 The appellants submit that under the Corporations Law the Supreme Court of New South Wales could not have varied, stayed or terminated the Federal Court's winding-up order or the order appointing Mr Brown, because to have done so would have involved resort to powers conferred by ss473(1) and 482(1) of the Corporations Law inconsistent with ss5(2) and 19 of the Federal Court Act, the source of the continuing authority of the Federal Court winding-up order. The appellants accept that this problem would be removed if the Federal Court orders were set aside, but it is at this point that they rely upon the High Court's refusal (in Re Brown) to quash those orders. 54 There are several answers to the submissions summarised in the last paragraph: (1) No one is seeking to vary, stay or terminate the winding-up order or the order appointing Mr Brown.

(2) A similar argument was rejected in Re Macks by the majority of the justices. They saw the State Validation Act as the valid and sufficient source of authority to enable the company in liquidation and its liquidator to prosecute proceedings in the Supreme Court of South Australia. The reasoning of those justices on that point did not turn upon the quashing of the winding-up order.

(3) Since the commencement of the Corporations Act 2001 (Cth) the Corporations Law has ceased to be the source of any power to vary, stay or terminate orders made under the Corporations Law or to give directions to a liquidator. That power is now to be found in federal law operating by reference to the state of affairs established by the State Jurisdiction Act (see now ss473(1), 477(6), 482(1), 536, 1337B(2), 1370, 1373,.

The scope and operation of the prohibition issued in Re Brown & Ors; Ex parte Amann & Anor 55 A key plank in the appellants' case on both arms of the appeal is the submission that the order for prohibition made by the High Court in Re Brown & Ors; Ex parte Amann & Anor (1999) effectively prohibits the liquidator from bringing proceedings in the Supreme Court of New South Wales in reliance upon his title and standing stemming from the orders of the Federal Court made on 3 December 1992. 56 In my view Hodgson CJ in Eq was correct to reject this argument (see [1999] NSWSC 1212 at [16]-[28]). His Honour's reasons are summarised above. The order that the company be "wound up by this Court" only meant that the compulsory winding up process was initiated by the Federal Court. It did not mean that that Court and it alone was to carry out the role of supervising the winding up process. Prohibition issued by the High Court because, in the words of Gummow and Hayne JJ (at 592), the Federal Court order "was an order made without jurisdiction and further effect should not now be given to it by that Court" (my emphasis). Any possible doubt as to the scope of the prohibition order was removed when Gaudron J amended it restrictively pursuant to the slip rule. 57 It therefore cannot be said that the proceedings in the Supreme Court are a contempt of the prohibition. They are not brought in or by the Federal Court. Nor is the liquidator an agent of the Federal Court even though he would have been amenable to that Court's non-exclusive supervisory jurisdiction under the Corporations Law had it not been for the decision in Re Wakim and the writ of prohibition granted by the High Court. 58 The appellants seek to construe the Federal Court order as stating and requiring that the administration of the winding up must be by the Federal Court, with the appointed liquidator acting (solely) as officer of and under the control of that Court. 59 The appellants rely on general statements as to the relationship between a liquidator and the Court that orders a company to be wound up (In re Phoenix Oil and Transport Co Ltd [1958] Ch 560 at 570, Deloitte and Touche AG v Johnson [1999] 1 WLR 1605 at 1611-2, Commissioner for Corporate Affairs v Harvey [1980] VR 669 at 695-6). These dicta are found in contexts which are totally removed from the present circumstances. The thrust of these statements was to emphasise that the court-appointed liquidator assumed the mantle of the court as regards impartiality and amenability to judicial control. None of these cases are inconsistent with the possibility of a liquidator falling under the concurrent oversight of several courts functioning under a cooperative, federal scheme. 60 Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1 demonstrates why the scheme of the Corporations Law operated differently. Section 42 of the Corporations (New South Wales) Act 1990 and its interstate counterparts cross-vested the jurisdiction of the local Supreme Court arising under the local Corporations Law in the superior courts of all other participating jurisdictions. Section 44 provided for the transfer of proceedings between these courts having regard to the interests of justice. And s46 provided inter alia that all courts having jurisdiction in civil matters arising under the Corporations Law must severally act in aid of, and be auxiliary to, each other in all such matters. 61 Section 9 defined "court" to mean "any court when exercising the jurisdiction of this jurisdiction". "Jurisdiction" when second appearing was defined to mean "a State or the Capital Territory". This provision was replaced in 1994 by s58AA of the Corporations Law, without relevant change of substance. 62 In Acton the Full Federal Court confirmed the scope of these provisions. A company had been ordered to be wound up by the Supreme Court of Queensland pursuant to the Corporations Law. A party having a claim against the company applied to the Federal Court for leave to proceed in the Federal Court. Section 471(2) of the Corporations Law provided that where an order had been made for the winding up of a company, no action or other civil proceeding may be commenced or proceeded with against the company except "by leave of the Court". Acton held that the "the Court" was not confined to the Court that had appointed the liquidator. It extended in the instant case to the Federal Court. As Lockhart J put it (at 13 and 15-16):

It is true, … that under former Companies legislation a compulsory winding up was recognised as an administration conducted by the court which made the winding up order. An official liquidator appointed to conduct that administration was an officer of the court which made the appointment. It is also true that, speaking generally and so far as practicable, the winding up of a company should be conducted by the court which made the winding up order, but this is because in practice it is convenient that applications in the course of the winding up of a company are generally best made to that court as it will have the winding up file under its control or the control of its masters, registrars or officers and may be familiar with the winding up generally or at least with earlier applications that may have been made in it by liquidators, creditors or others. That is a matter of convenience, not jurisdiction, under the national Corporations legislation now in force in Australia. … To a lawyer like myself who from early days at the Bar spent a deal of time practising in the Equity Division of the Supreme Court of New South Wales (including matters relating to the winding up of companies), it is on first impression a strange notion that a court, other than the court which made an order that a company be wound up, may have jurisdiction with respect to the winding up of that company. But all of this thinking has been swept away by the Corporations legislation of the federal and State legislatures and the legislature of the Northern Territory that together constitute the present Corporations Law . The evident intent of all legislatures within Australia is that each of the Federal Court and the Supreme Courts may exercise jurisdiction in respect of civil matters arising under the Corporations Law . Hence an order for the winding up of a company may, for example, be made by the Supreme Court of Queensland and subsequent applications or motions in the winding up be made to that Court or to any other State or Territory Supreme Court or the Federal Court. 63 This reasoning did not turn upon any issue as to the validity of the cross-vesting of State jurisdiction in federal Courts. Rather, it addressed the intended scope of the cooperative scheme and the operation of an order made under it. The reasoning survived Re Wakim and is available to be applied in the regime established by the State Jurisdiction Acts. Several of the justices in Re Macks affirmed this explicitly or implicitly (see per Gleeson CJ at [5], [27], per Gummow J at [182], per Kirby J at [281]-[286], per Hayne and Callinan JJ at [381]-[362]). 64 The appellants submit that Acton depends upon the proposition that the winding-up order was made under the Corporations Law so as to attract the operation of the supposed national scheme; and that this assumption was falsified by Re Wakim. I do not accept this submission. The core provisions of the State Jurisdiction Act give the force of State law to the factum represented by the winding-up order made by the Federal Court. The intended and enacted effect is to give that factum the operation it would have had under the national scheme were it not for the cross-vesting problem exposed in Re Wakim. That operation included the incidents of the scheme expounded in Acton. 65 The appeal should be dismissed with costs. 66 SHELLER JA: I have had the benefit of reading in draft the reasons for judgment prepared by Mason P. I will not restate the facts and circumstances which give rise to this appeal or the legislative provisions under consideration except so far as necessary to explain my reasons. 67 68 Section 4 (1) of the Federal Courts (State Jurisdiction) Act 1999 (the State Jurisdiction Act) provides that a reference in the Act to an ineffective judgment is a reference to a judgment of a Federal Court in a State matter given or recorded, "before the commencement of this Act, in the purported exercise of jurisdiction purporting to have been conferred on the Federal Court by a relevant State Act". The orders of the Federal Court of 3 December 1992 winding up Amann Aviation Pty Limited and appointing Mr Brown the liquidator remains binding and effective even though made without jurisdiction: s5(2) of the Federal Court of Australia Act 1976; Cameron v Cole (1944) 68 CLR 571 at 590 and 598. So much seems to be accepted even though the Federal Court is not a superior court of record having general jurisdiction. "Ineffective judgment" is not defined in s4(1) to be limited to a judgment which is ineffective. "…..[T]he State Jurisdiction Acts operate with respect to ineffective judgments, whether or not they have been set aside" per Gaudron J in In re Macks; ex parte Saint (2000) HCA 62; 75 ALJR 203 at 218 para 71. The result is that s6 of the State Jurisdiction Act confers or imposes rights and liabilities on persons which are separate from but the same as rights and liabilities conferred or imposed by the ineffective judgment as if the ineffective judgment had been a valid judgment of a division of the Supreme Court. Section 7(1) provides that a right or liability conferred or imposed by s6 is exercisable or enforceable and is to be regarded as always having been exercisable or enforceable as if it were a right or liability conferred or imposed by a judgment of the Supreme Court. Section 8(1) provides that any act or thing done or omitted to be done before or after the commencement of the section under or in relation to a right or liability conferred or imposed by s6 has the same effect and gives rise to the same consequences for the purposes of any written or other law and is to be regarded as always having had the same effect and given rise to the same consequences for the purposes of any written or other law. 69 The position is summarised by Gleeson CJ in In re Macks at 211 para 25: "The State jurisdiction Acts operate to confer, impose and affect rights and liabilities of persons. They do that by reference to ineffective judgments of the Federal Court, as defined. They do not purport to affect those judgments. They do not purport to validate ineffective judgments of the Federal Court, or to deem such judgments to be judgments of the relevant State Supreme Court. The hypothesis upon which the judgments are defined as ineffective is that they were made without jurisdiction because the State Act purporting to confer jurisdiction was invalid (s4). The rights and liabilities declared by s6 are the same as if an ineffective judgment had been a valid judgment of a State court. They are rights and liabilities of a kind which State parliaments have legislative power to impose." 70 The proceedings begun in April 1996 by Amann Aviation and Mr Brown in his capacity as its liquidator were founded on status and power derived from that status which flow from what must be regarded as a valid judgment of a division of the Supreme Court and from State legislation, the Corporations (New South Wales) Act 1990. Any doubt about the effect of rights and liabilities conferred or imposed by s6 is, relevantly, removed by s7(1). Any doubt about the effect of things done or omitted to be done in relation to a right or liability conferred or imposed by s6 is removed by s8. We are not here concerned with any claim in by the proceedings to modify rights and liabilities embodied in the Federal Court order. Compare In re Macks at 220 para 83 per Gaudron J. The constitutional challenge to the State Jurisdiction Acts failed in In re Macks. In particular, see per Hayne and Callinan JJ at 274 para 368 where their Honours said there was no direct or indirect inconsistency between the Federal Court Act and the State Jurisdiction Acts. "The liquidator has rights and liabilities from the Federal Court orders and the State Acts which are for present purposes identical". Their Honours made reference to possible operational inconsistency if application was made to change the rights and liabilities which arose under s6 of the State Jurisdiction Act but observed that there could be no operational inconsistency if the Federal Court orders were quashed. In the present case the Federal Court orders have not been quashed but no application has been made to change the rights and liabilities which arise under s6. 71 Mason P has addressed the arguments advanced by the appellants in these proceedings. I agree that the High Court by a majority upheld the validity of s6, 7(1) and 8 of the State Jurisdiction Act. I agree that those provisions invest the plaintiffs with the standing and title asserted in the equity proceedings and that the reasoning in In re Macks applies and that the decision cannot be distinguished on any of the grounds the appellants advance. The fact that the Federal Court judgment was not quashed or set aside by the High Court has no consequence so far as these proceedings are concerned. 72 For the reasons that Mason P has explained, the order for prohibition made by the High Court in Re Brown & Ors; ex parte Amann & Anor reported with Re Wakim; ex parte McNally & Anor (1999) 198 CLR 511 at 637 does not prevent or inhibit the bringing of the proceedings. 73 In my opinion the appeal should be dismissed with costs. ***********

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(D) Corporations (New South Wales) Act 1990(NSW)

(Federal Court of Australia Act 1976(Cth)

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