Emanuele v Australian Securities Commission

Emanuele v Australian Securities Commission - [1997] HCA 20 - HCA 1997 case summary — Zoe

[18]

It was the duty of the learned judge to apply reg 22 if he found as a fact that Cameron was a member of the forces at the time of the presentation of the petition. Where the court is actually dealing with and is in control of proceedings which have been taken in breach of such a regulation as reg 22, it is the duty of the court to apply the regulation, and not to act upon the basis that if, in spite of the regulation, the proceedings are completed and an order made, the failure to observe the regulation would not in itself invalidate the proceedings, though they might be invalidated under reg 33(2). The court should, the proceedings still being pending, have applied reg 22, and if it were found that Cameron was a member of the forces when the petition was presented, should not have proceeded with the hearing of the petition, and should have dismissed the petition. The question was not argued, but the terms of reg 22 appear to require leave for the presentation of a petition to be granted, where necessary, before the petition is presented. The High Court remitted the question of the appellant's status to the trial judge who found that the appellant had not discharged the onus of proving that he was a member of the Armed Forces at the relevant time. The High Court then proceeded to determine the other grounds of appeal. The other Justices who referred to the Regulations in their judgment were of the same opinion as Latham CJ [7] . Starke J stated [8] the position quite clearly: A bankruptcy notice or a petition presented contrary to the provisions of the Regulations is irregular, and a party is entitled ex debito justitiae to have it set aside or treated as ineffective. 1. (1944) 68 CLR 571. 2. National Security (War Service Moratorium) Regulations Cth, reg 22 of SR 1941 No 61. 3. reg 33(2) of SR 1941 No 61. 4. Cameron v Cole (1944) 68 CLR 571 at 580-581. 5. See Cameron v Cole (1944) 68 CLR 571 at 588, per Rich J; at 595-596, per Starke J; at 611-612, per Williams J; and cf at 596, per McTiernan J. 6. Cameron v Cole (1944) 68 CLR 571 at 596.

[192]

Whilst it is true that, superficially, the language of s 459P looks more emphatic than a number of the predecessors referred to in the cases just cited, the differences should not be taken at face value. The Law has deliberately been expressed in a different style of drafting, as the Explanatory Memorandum makes clear. Had there been some particular new problem which was thought by those who proposed the new procedures for the winding up of companies in insolvency to require leave, with a more inflexible consequence than had previously been the case in company law cases, it might have been expected that the statute would have provided expressly for the consequence of the absence of leave. Alternatively, it might have been anticipated that the Law Reform Commission's Discussion Paper and report would have revealed the additional mischief. Instead, the explanations given for the leave requirement are the familiar ones. In the case of the ASC, already bound by obligations to conform to its statute and having other, separate entitlements to procure the winding up of a company in stated circumstances, the notion of introducing a novel procedure of absolute strictness is not an immediately attractive one. The oversight should not have occurred. But the jurisdiction of the Federal Court to consider its consequences was not challenged in this case. That Court having the matter before it could penalise the ASC in costs whilst ensuring that substantial justice was attained, in a matter closely affecting the public interest. It is not in the public interest that insolvent companies should continue to trade [117] . The apparent objective of the reforms recommended by the Law Reform Commission and enacted to form Pt 5.4 of the Law, was that the winding up process for insolvent companies should be speedier and more efficient. It would not promote these objectives if s 459P(2) were construed as strictly as the appellants submit. The Full Court was clearly right to observe that in urgent cases "which experience shows are not uncommon" the suggested procedure of a completely separate application for leave would be "surprisingly cumbersome and time consuming". It is not what the section says or requires.

[196]

Although the decision in Grant [119] concerned a provision in some ways similarly expressed and in the same Part of the Law, it is readily distinguishable. The provision there in question (s 459G) conferred private rights against companies which had failed to comply with demands within a time fixed by the Law. The explanatory material, cited in Grant [120] , makes it clear that the purpose of the Law in that regard was to establish a complete code for the resolution of disputes involving statutory demands and to remove the technical deficiencies which had led to much commercial inconvenience. A degree of strictness was contemplated by the drafters. It was provided by the language adopted in the Law. Given such purposes, the decision in Grant is hardly surprising. The position under s 459P, in question in these proceedings, is quite different. Section 459P(2) does not confer private rights, least of all on the ASC. The right to apply for an order arises elsewhere. The structure of Pt 5.4 of the Law makes it clear that what s 459P is dealing with is a procedure to be followed in making the application. Only certain designated persons are to have standing. Amongst them, half of those specified (including the ASC) are obliged to seek leave. But the application was undoubtedly before the Court which has jurisdiction. That jurisdiction having attached in the present case, it may be inferred that Parliament contemplated that oversight and inadvertence would sometimes occur for which the Court's general powers of correction would be available, within the limited area of operation and compatibly with the statutory requirement that ordinarily leave should first be obtained [121] . As in Re Testro Bros [122] , it can be said that what was missing in this case was the Court's own leave. It was not an attempt by a party, subject to strict time limitations, to bring proceedings outside the time specified. The requirement of the Court's leave is there for the superintendence of the proceedings by the Court. At least in the case of a superior court of record such as the Federal Court, it is available, retrospectively, to sanction the Court's own proceedings. The missing ingredient was a step by the Court itself which, if justice required it, could, exceptionally, be ordered retrospectively by a nunc pro tunc order. The power to so order was not excluded by the express provisions of the Law [123] .

[198]

Once the power to make such an order is accepted as consonant with the language of the Law, the provision of that relief in the present case was wholly unsurprising and clearly within the discretion of the Full Court. On the material before O'Loughlin J, it was plainly in the public interest, and the interests of the creditors, that the Group A companies should have been wound up in insolvency as soon as possible, as his Honour ordered. The proceedings relating to the Emanuel Group of companies had been on foot for a considerable length of time, at least since June 1995. The Group A companies formed part of a large and complex corporate group of approximately seventy companies with a negative net worth of more than $192 million. The amount owing to the ATO for unpaid income tax in respect of the Group A companies was estimated, in March 1995, as approximately $50 million. Allegations had also been made which were highly critical of the conduct of the directors of the Emanuel Group of companies. The administrator of the deeds of company arrangement entered into by the Group A companies reported that material information had not been made known to him at the time that the deeds were entered into. In these circumstances, it was entirely appropriate that the control of the companies' affairs should be with an official liquidator. There was a need for the activities of the directors to be examined by such a liquidator as soon as possible. Further delay was to the prejudice of the creditors of the companies and contrary to the public interest. On 30 August 1995, the date on which O'Loughlin J made his orders, it was clear that the companies were insolvent. A prima facie case of insolvency was certainly established. In these circumstances, the failure of the ASC to seek and obtain leave as s 459P(2) contemplated was a departure from the Act. But it was susceptible to the corrective order which the Full Court of the Federal Court made in the interests of justice. Doing so repaired the oversight, without which the leave would certainly have been granted [124] . That order, as I have shown, was similar to orders which have been made in like circumstances over a century of company law. It was the order which justice required. It should not be disturbed.

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Cases Cited (25)