Garrett v The Chief Executive Officer of Austrade

JUDGE: JESSUP J DATE: 5 FEBRUARY 2015 PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 In each of the two proceedings now before the court, the applicant is Andrew Garrett and the respondents are the Chief Executive Officer ("the CEO") of the Australian Trade Commission ("Austrade") and Paul Wan, described as "Senior Grant Auditor" of Austrade. By notices filed in both proceedings, the respondents object to the competency of the proceedings. It is those objections that now require resolution. 2 In VID 584/2014, the applicant invokes the court's jurisdiction under s 39B of the Judiciary Act 1903 (Cth). I shall refer to this as the s 39B proceeding. The applicant seeks a writ of mandamus directing the respondents to comply with s 87C of the Export Market Development Grants Act 1997 (Cth) ("the Grants Act") "and accept a Certificate of Solvency issued by a person authorised to do so under section 87C(3)(b) of the [Grants] Act that the Applicant Company is deemed to be solvent", a writ of prohibition preventing the respondents "from not accepting a certificate of solvency issued by persons authorised to do so under subsections 87CCsic(a), (b), (c), (d), (e) & (f)", and an order "reviewing the Notice of Grant Determination No 253435 dated 16 September 2014 in terms that this Honourable Court deems fit". As will appear, the expression "applicant company" is not a reference to a party to this proceeding, as the applicant himself is the only applicant. I shall refer to this entity, which is now known as "ACN 133 861 579 Pty Ltd", as "the company". 3 In VID 585/2014, the applicant invokes the court's jurisdiction under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act"). I shall refer to this as the ADJR proceeding. The applicant seeks a review of the decision formalised in the Notice of Grant Determination No 253435 whereby it was determined that a "nil amount" was payable to the company under the Grants Act, and a review of the conduct of the respondents whereby they failed to accept a certificate of solvency issued by the applicant on 14 March 2014 "as a person authorised to issue pursuant to s 87C(3)(b) that has the effect of deeming [the company] to be solvent" and disallowed any expenditure whatsoever in respect of the "Grant Application". 4 I note that the two proceedings were commenced in the matter now before the court in contravention of r 31.12(1) of the Federal Court Rules 2011 (Cth) ("the Rules"), but neither party drew attention to that circumstance, nor proposed any step that the court should now take in relation to it. As matters stand, there are two separate proceedings before the court, in each of which a Notice of Objection to Competency has been filed. That raises issues on the procedural front, to which I shall be obliged to turn. For the moment, however, I shall set out a brief overview of the facts out of which the proceedings arise. 5 On 12 August 2013, the company applied for a grant under the Grants Act. It did so in its capacity as trustee of the Andrew Garrett Family Trust No 3 ("the trust"). That application invoked the operation of the provisions of Pt 7 of the Grants Act. By s 80, in Subdiv 1 of Div 3, the CEO was required to consider the application for a grant, to determine whether the company was entitled to a grant and, if there were such an entitlement, to determine the amount of the grant. Subdivision 2, headed "When grant payable", was concerned with the timing of the payment of a grant in relation to which an entitlement had been upheld under s 80. 6 Subdivision 3 was concerned with circumstances under which a grant would not be payable, notwithstanding a positive determination of entitlement under s 80. Of importance in the circumstances leading to the present proceedings was s 87(1), which provided as follows: Despite Subdivision 2, a grant, or an advance on account of a grant, is not payable to a person if, at the time when, or at any time after, the person becomes entitled to the grant or advance: (a) if paragraph (b) does not apply - the person or (where applicable) an associate of the person; or (b) if the person is entitled to the grant or advance in the capacity of trustee of a trust estate: (i) the person or (where applicable) an associate of the person; or (ii) any beneficiary of the trust estate or (where applicable) an associate of the beneficiary; is under insolvency administration. The expression "under insolvency administration" was a term of art under the Grants Act, s 87C providing as follows: When is a body corporate under insolvency administration? (1) Subject to subsection (2), a body corporate is under insolvency administration only if: (a) it is in any of the following situations under the Corporations Law: (i) the body corporate is being wound up; (ii) there is a receiver, receiver and manager, or other controller, of property of the body corporate who has functions or powers in connection with managing the body corporate; (iii) the body corporate is under administration; (iv) the body corporate has executed a deed of company arrangement that has not yet terminated; (v) the body corporate has entered into a compromise or arrangement with another person and the administration of the compromise or arrangement has not been concluded; or (b) the body corporate is in a situation of a kind referred to in paragraph (a) under the law of an external Territory or a foreign country. Note: For external Territory and foreign country see section 2B of the Acts Interpretation Act 1901. (2) Despite subsection (1), a body corporate that, apart from this subsection, would be under insolvency administration is taken not to be under insolvency administration if there is in force a certificate given by the person administering the body corporate stating that the body corporate is able to pay all its debts as and when they become due and payable. Note: For person administering the body corporate see subsection (3). (3) In subsection (2): person administering a body corporate means whichever of the following has been appointed in relation to the body corporate: (a) the liquidator or provisional liquidator of the body corporate; (b) the receiver, receiver and manager, or other controller, of property of the body corporate; (c) the administrator of the body corporate; (d) the administrator of the deed of company arrangement executed by the body corporate; (e) the administrator of any compromise or arrangement into which the body corporate has entered; (f) a person exercising, under the law of an external Territory or a foreign country, the same functions and the same powers as a person referred to in one of paragraphs (a) to (e). 7 While the company's application was pending, on 22 January 2014 an order was made by the court for the company to be wound up in insolvency under the provisions of the Corporations Act 2001 (Cth) ("the Corporations Act"). Timothy James Clifton ("the liquidator") was appointed the liquidator of the company. The company thereby came within the terms of s 87C(1)(a)(i) of the Grants Act. 8 The winding up order also had consequences under the deed by which the trust was constituted. By cl 11.2 of that deed, the company automatically vacated its office of trustee upon the making of that order. As it happened, the company was, at the time, a joint trustee with a second company called The Light Pty Ltd ("The Light"), which continued thereafter as trustee of the trust. 9 On 23 January 2014, the company was served with a "Notice of Crystallisation of Charge" under a charge into which it had entered, as chargor, on 28 July 2012. Two things should be noted about this charge: first, the company ostensibly executed the charge as trustee for another trust ("the other trust"), and secondly, the chargee was The Light, ostensibly in its capacity as trustee for the trust. Notwithstanding those ostensible indications, cl 7.2 of the charge provided as follows: The chargor warrants and represents that the chargor has not entered into this document and does not hold any of the secured property as trustee of any trust and the chargor enters into this document as beneficial owner of the secured property. The "secured property" was - … all property, rights and undertaking of the chargor whether present or future, legal or equitable, and wherever situated, including, without limitation, all real and personal property, choses in action, goodwill and uncalled capital and called but unpaid capital from time to time and including specifically the assets listed in schedule A. Clause 7.2 was a warranty by the company as chargor. How the clause might have been reconciled with the ostensible capacity in which the company executed the charge may have been a question, but it is tolerably clear that the charge contemplated that the secured property might include property in which the company held the bare legal interest only. 10 Whether or not because of the tensions just referred to, on 20 September 2012 cl 7.2 of the charge was replaced with the following: The Chargee warrants and represents that the Chargee has entered into this charge personally and in its capacity as a Trustee of Trusts and the Chargor enters into this Charge as Beneficial Owner of the secured property subject to the Charge. The construction of the second limb of this clause is problematic: was it merely a warranty, inconsistent with the execution clause of the charge, that the company was the beneficial owner of the property of the other trust? Or was it an indication that the charge related only to property in which the company did hold the beneficial interest, that is, not including the property of the other trust? 11 None of these ambiguities related to the position of the chargee, The Light, as trustee for the trust. After amendment, cl 7.2 of the charge was conformable with the capacity in which The Light executed the charge, and it was the trust that was beneficially entitled to the rights arising under the charge, whatever they may have been. 12 Also on 23 January 2014, The Light, as chargee, resolved to appoint the applicant "pursuant to the provisions of Part 5.2 of the [Corporations Act] to take control of the assets and undertakings of the chargor". It was, of course, not Pt 5.2 that provided for a power to appoint a controller: the sense of this resolution may have been intended as "subject to" the provisions referred to. It was the charge itself that provided for a power to appoint a "receiver", as agent of the chargee. Subject to that, under the charge the chargee was empowered to take possession and control of the secured property. It will be apparent from what I have said above that there may be a question whether these assets and undertakings were those held by the company beneficially, were the assets of the other trust, or were limited to the company's legal interest in the assets of the other trust. On no view, however, did they include the beneficial interest in the property of the trust. Not only that, but, on 23 January 2014, the company was not a trustee of the trust. It had no interest, legal or otherwise, in that property. 13 From there it is necessary to pick up so much of the narrative as relates to the company's application under the Grants Act. On 14 March 2014, the applicant sent an email to Mr Wan in the following terms: Further to section 87C(2) and Section 87(3) of the [Grants] Act I confirm that I am a controller of the assets of a body corporate Section 87(3)(b). I hereby certify that ACN 133 861 579 Pty Ltd (In Liquidation)(Controller Appointed) is able to meet its debts as and when they fall due. Fairly clearly, the applicant's reference to s 87(3)(b) of the Grants Act was an intended reference to s 87C(3)(b), and would have been so understood by Mr Wan. 14 On 25 March 2014, and again on 8 September 2014, the liquidator advised Austrade that he was unable to certify, pursuant to s 87C(2) of the Grants Act, that the company could pay all its debts as and when they became due and payable. 15 On 16 September 2014, Mr Wan wrote to the liquidator stating that Austrade had determined that, by reason of the effect of s 87 of the Grants Act, a grant was not payable to the company. With respect to what he described as the applicant's purported certificate under s 87C(2), Mr Wan referred to paras 10 and 11 of the court's reasons in Garrett v Deputy Commissioner of Taxation [2014] FCA 576, and noted that the applicant had not been granted leave to manage corporations under s 206G(3) of the Corporations Act. Mr Wan's communication of 16 September 2014 was accompanied by Notice of Determination No 253435, setting out particulars of the grants payable to the company, in each case "$0". Each of the amounts claimed by the company had been adjusted negatively by the amount claimed, the explanation given in each case being "Applicant business under Insolvency Administration", with a reference to the accompanying letter. 16 On 24 September 2014, the proceedings now before the court were commenced. In them, the applicant challenges the determinations referred to in the previous paragraph, including the respondents' refusal to accept the applicant's purported certificate given on 14 March 2014 (see para 13 above) for the purposes of s 87C(2) of the Grants Act. 17 On 16 October 2014, The Light (by then re-named, but nothing turns on that) exercised a power arising under the terms of the trust to retire as trustee and to appoint the applicant in its place. 18 I turn next to a consideration of the respondents' notices of objection to competency. In the ADJR proceeding, the notice was given pursuant to r 31.05 of the Rules. Pursuant to subr (2), the applicant carries the burden of establishing the competency of his application. In relation to the s 39B proceeding, there is no such provision in the Rules. The respondents' solicitor, who appeared on their behalves on this occasion, approached the notices as though they applied in the same way in each proceeding, but he was unable to identify any provision, either in the Rules or elsewhere, that provided the procedural framework for the kind of objection which his clients took in the s 39B proceeding. The answer lies in r 13.01(1)(a) of the Rules, the predecessor of which was applied on an occasion analogous to the present one in Garrett v Foster's Wine Estates Ltd [2007] FCA 253. In this setting there is, however, no provision the equivalent of r 31.05(2), the result of which is that it is the respondents who carry the burden of persuading the court that the application should be set aside as incompetent. 19 The notices of objection to competency are in identical terms. Each has four grounds, the first three of which do not relate to competency at all, but propose various reasons why the court would, in the exercise of its discretion, decline to entertain the proceedings. To characterise the grounds in this way is to say enough to reject them. 20 The respondents' fourth ground in each proceeding is a more substantial one. It is that the applicant does not have standing to institute the proceeding concerned. In the ADJR proceeding, the question is whether he was a "person aggrieved" by the decision not to accept his certificate of 14 March 2014 and to set at $0 the grant payable to the company under the Grants Act: ADJR Act, s 5(1). At the general level, it is easy to see why the respondents take their present objection: the applicant was not the applicant under the Grants Act, and the decision of which he now complains denied him nothing. Here it must be remembered that a grant under the Grants Act was in the nature of a partial reimbursement of expenses already incurred. Thus the company applied for a grant in respect of specific "eligible expenses" which it claimed to have incurred. We are not here dealing, for example, with a case in which a public duty of broader general impact or importance is alleged not to have been performed. 21 I am not, however, called upon to consider the broad, and in some respects fluid, concept of aggrievement under s 5(1) of the ADJR Act. Because of the terms of r 31.05(2), I am concerned only with the particular bases advanced by the applicant in support of the competency of the ADJR proceeding, that is, in support of his case that he had standing to commence that proceeding. 22 There were three such bases. The first was that he was a trustee of the trust. Evidence before the court satisfies me that the applicant was originally a trustee of the trust, but that he was replaced as such by the company on 30 September 2009. At the time of the commencement of the ADJR proceeding, The Light was the only trustee. However, on 16 October 2014, the applicant again became the trustee. Had the applicant been the trustee when the proceeding was commenced, there could, in my view, have been no question as to his standing to litigate. The application to Austrade was made by the company as trustee of the trust, and, in a situation in which there had, for whatever reason, been a change in the trustee, the trustee at the time would have been not only a competent party to commence a proceeding of this kind but, in my view, a necessary party. The difficult question is whether, assuming that the applicant did not have standing when the ADJR proceeding was commenced, the proceeding became a competent one in his name when he was appointed trustee. Regrettably, neither party addressed me on this question. 23 Section 5 of the ADJR Act provides that a person aggrieved "may apply" to the court. As a matter of terminology, someone who is not such a person may not apply. An application by him or her would be incompetent. There may be some other way of approaching the question of standing in a case such as the present, but the applicant did not propose any. There may also be some kind of order that the court could make to regularise the position in which the applicant finds himself, but none was sought or suggested. In the circumstances, and possibly because of the jurisprudential poverty of the applicant's submissions, the conclusion I reach is that the applicant has not discharged the burden of persuading the court that he had and has standing because he became trustee of the trust on 16 October 2014. 24 The second basis upon which the applicant relied was that he was controller of the property of the trust pursuant to the resolution referred to in para 12 above. As I have indicated in that paragraph, however, that submission was based on a misapprehension of the scope of the property to which the charge related at the time this resolution was passed. Accepting, as the applicant would have me do, that the property of the trust included such rights as inhered in the application made under the Grants Act, it is clear that he was not the controller of that property. I would hold, therefore, that the applicant does not have standing because of his position, if he does have a position, as controller (or, more accurately, receiver) under the charge. 25 The third basis upon which the applicant relied was that he was within the class of discretionary beneficiaries under the terms of the trust. Generally, such a beneficiary will not have standing, without joining the trustee, to sue a third party to establish a right, or to secure or to enhance the property, of the trust: Lee, WA, et al, The Law of Trusts, Thomson Reuters, [17.11010]. No submission was made by the applicant that this general rule was inapplicable to the circumstances of this case, or that the case came within one of the established exceptions to it. I can see no reason not to apply the rule to the situation arising under s 5(1) of the ADJR Act, that is, one in which it was the trustee (or his or her predecessor) which sought the particular benefit which was denied in the decision being challenged. It is, however, sufficient to say that nothing was put by the applicant to persuade me that a discretionary beneficiary should be regarded as a "person aggrieved" under the section. 26 For the above reasons, I propose to uphold the respondents' objection to competency in the ADJR proceeding. Conformably with r 31.05(5) of the Rules, the application in that proceeding will be dismissed. 27 With respect to the s 39B proceeding, the burden of persuasion under r 13.01(1)(a) of the Rules lies on the respondents. In this proceeding, it is significant that the application is brought not pursuant to a provision to the effect that a person with a relevant interest "may apply", but pursuant to a provision, s 39B itself, that invests the court with jurisdiction with respect to the matter in which the writs are sought. That is to say, it is not self-evident that the proceeding itself is incurably incompetent if it be the case that the applicant did not have the required interest at the time when the proceeding was instituted. In the case of a proceeding brought by a wrong party, for example - such as a proceeding brought by a beneficiary under a trust instead of the trustee - it may be that the position would be covered by r 9.07 of the Rules. I do not hold that it would, since I was not addressed on the subject, but it does not strike me as obvious that it would not. 28 In the context of the ADJR proceeding, I have referred above to the three bases upon which the applicant sought to resist the respondents' contention that he did not have standing in that proceeding. As it happened, the applicant made an undifferentiated submission in that proceeding and in the s 39B proceeding: he relied on those three bases in each. Notwithstanding the paucity of the submissions made on behalf of the respondents, I take the view that the applicant does not have standing in the s 39B proceeding on either of the second and third bases upon which he relied, and I do so for the reasons given in those respects above. However, for reasons given in the previous paragraph, I am not persuaded by the respondents that their standing objection would be fatal to the competency of the proceeding insofar as the applicant is to be viewed as someone who, as trustee, now indisputably has standing to seek the constitutional writs, albeit that the basis for that standing did not arise until after the proceeding was commenced. The objection may be a good one, but no clearly articulated submission in support of it was advanced on behalf of the respondents. 29 For the above reasons, I propose to reject the respondents' objection to competency in the s 39B proceeding. 30 In the ADJR proceeding, the respondents will have their costs. In the s 39B proceeding, the applicant, who represented himself, will get his disbursements. If a particular cost or disbursement cannot be allocated to one proceeding or the other, it will be sufficient for the taxing officer to allocate one half to each. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.