Queensland Mining Corporation Ltd v Renshaw

Federal Court of Australia|2014-05-05|Before: Commission J, Perry J

The First Defendant holds an amount of $270,000.00 on trust for the Plaintiff pursuant to section 200J(1) of the Corporations Act 2001 (Cth).
The Second Defendant holds an amount of $264,000.00 on trust for the Plaintiff pursuant to section 200J(1) of the Corporations Act 2001 (Cth).
The First and Second Defendants hold an amount of $143,333.00 on trust for the Plaintiff pursuant to section 200J(1) of the Corporations Act 2001 (Cth).

THE COURT ORDERS THAT: 4. Judgment be entered against the First Defendant in favour of the Plaintiff in the amount of $270,000.00 together with pre-judgment interest pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth) from 23 October 2012 to the date of judgment as agreed or assessed. 5. Judgment be entered against the Second Defendant in favour of the Plaintiff in the amount of $264,000.00 together with pre-judgment interest pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth) from 23 October 2012 to the date of judgment as agreed or assessed. 6. Judgment be entered against the First and Second Defendants in favour of the Plaintiff in the amount of $143,333.00 together with pre-judgment interest pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth) from 23 October 2012 to the date of judgment as agreed or assessed. 7. The sum of $50,333.00 held by the Third Defendant subject to undertakings given by the Third Defendant to the Court on 24 October 2013 be paid forthwith by the Third Defendant to the Plaintiff. 8. Upon payment of the sum referred to in order 7 above, the Plaintiff is restrained from enforcing the judgment referred to in order 6 above save to the extent that it may enforce judgment up to the amount of $93,000.00. 9. The First and Second Defendants are to pay the Plaintiff's costs of the Cross-Claim. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1308 of 2013

BETWEEN: QUEENSLAND MINING CORPORATION LIMITED (ACN 109 962 469)

PRELIMINARY 1 By the proceedings, the plaintiff, Queensland Mining Corporation Limited (QMCL) sought to recover termination payments allegedly made to the first and second defendants, Mr Howard Renshaw and Butmall Pty Ltd (the Renshaw defendants), in contravention of the Corporations Act 2001 (Cth) (Corporations Act). I delivered reasons in these proceedings on 10 April 2014 in which I held that the application for recovery of the termination payments should be allowed on the ground that the termination payments were made in breach of s 200B of the Corporations Act and were recoverable under s 200J: Queensland Mining Corporation Ltd v Renshaw [2014] FCA 365. I also held that the cross-claim by the Renshaw defendants must be dismissed. However, I deferred the making of final orders pending the submission by the parties of short minutes of order that gave effect to the reasons of the Court. 2 The parties were unable to agree minutes of order and leave was granted to the parties to provide short submissions in support of the proposed minutes of order. 3 The matters on which the parties remain divided are as follows: a) whether the orders should include a declaration that QMCL has contravened s 200B(1) of the Corporations Act, as the Renshaw defendants contend; b) whether orders should be made that the third defendant, 23 Martin Place Pty Limited (formerly and at all relevant times DFK Hill Pty Ltd) (DFK Hill), is liable to repay certain monies paid to it on trust for Mr Renshaw and Butmall (as the Renshaw defendants contend) or whether the order should be that the Renshaw defendants are jointly and severally liable for the amount (as QMCL contends); c) whether an award of interest should be made on the total amounts to be repaid by or on behalf of the Renshaw defendants; and d) whether it was necessary for an order to be made extending the period of time within which any appeal against my judgment could be instituted. 4 Furthermore, while accepting that QMCL should be entitled to its costs on the counterclaim, the Renshaw defendants included short submissions to the effect that the parties should bear their own costs on the application for recovery of the termination benefits under s 200J of the Corporations Act. Notwithstanding that I had intimated that I would award QMCL its costs at [186] of my reasons, I consider that it is fair in all of the circumstances to permit the Renshaw defendants to raise the issue. Accordingly, following receipt of the Renshaw defendants' submissions, the Court advised the parties that it would hear short oral submissions on the question of costs on 5 May 2014 when these reasons were to be delivered and final orders otherwise made.

Should a DECLARATION be made THAT S 200B HAS BEEN CONTRAVENED? 5 The Renshaw defendants seek a declaration that QMCL has contravened s 200B(1) of the Corporations Act by making the termination payments. They contend that the order is "necessary" in order for the monies to be recovered under s 200J because those monies are payable only if there is a contravention of s 200B. It is their submission that "[w]ithout the declaration, there is no authority for orders under section 200J." 6 The declaration is opposed by QMCL on the grounds that the declaration was not pleaded; nor was it the subject of submissions at trial. Furthermore, it is said that the declaration would lack any utility and is therefore contrary to authority (citing Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582). 7 It is clear that s 21 of the Federal Court of Australia Act 1976 (Cth) gives the Court power to grant a declaration of right in any matter within its jurisdiction. There are, however, a number of significant difficulties which stand in the way of such a declaration being granted in this case. 8 The short point is that there is no statutory precondition requiring the making of a declaration that s 200B of the Corporations Act has been contravened before an order can be made under s 200J. It is sufficient in law for me to find that the statutory criteria which must be met before an order can be made under s 200J are satisfied, as I have found in my substantive reasons published on 10 April 2014 inter alia at [2]. It follows that the sole ground on which the declaration was sought is, in my view, mistaken. 9 Nor do I accept that there would be any utility in making the declaration, or that it would otherwise be appropriate. First, this is not a case in which a public body charged with enforcing the Corporations Act has a real interest in seeking such relief: cf, eg, Australian Competition and Consumer Commission v Kokos International Pty Ltd (No 2) [2008] FCA 5 at [48] (French J, as his Honour then was). Secondly, the declaration would do no more than state in a summary form, one of the conclusions reached by the Court in its reasons for judgment, albeit a conclusion from which the rights and liabilities in question flowed: Warramunda Village Inc v Pryde (2001) 105 FCR 437 at 440 [8] (Gray, Branson and North JJ). Thirdly, given that s 200B creates an offence of strict liability, I do not consider that it is appropriate in the context of the present proceedings to make such a declaration. Finally, the question of whether a declaration should be made was raised for the first time only in submissions after reasons had been published on 10 April 2014 for which no explanation has been given. This raises serious questions as to the fairness in permitting the issue to be raised at this late stage.

The appropriate form of orders for the repayment of MONIES 10 The Renshaw defendants proposed the following orders as to the amounts to be paid: 5. The Court orders the First Defendant pay an amount of $363,000.00 to the Plaintiff; 6. The Court orders the Second Defendant to pay an amount of $264,000.00 to the Plaintiff; 7. The Court orders the Third Defendant pay the amount of $50,333.00 referred to in Order 4 above, to the Plaintiff; 11 At [9] and [10] of my reasons, I found that on 23 October 2012 $270,000 was paid to Mr Renshaw, $264,000 was paid to Butmall and $143,333 was paid to DFK Hill (by two separate cheques), of which $50,333 remains in the DFK Hill account and is the subject of undertakings to the Court. The $363,000 referred to in proposed order 5 reflects a figure therefore from which the sum of $50,333 referred to in proposed order 7 has been subtracted. 12 The plaintiff objects to these orders on a number of grounds, namely: "First, Butmall escapes a liability that would otherwise be imposed by s 200J of the Act: the $143,000 paid by QMCL was held for both Mr Renshaw and Butmall, not Mr Renshaw alone (see Judgment at [10]). In the event of Mr Renshaw's being unable to pay some or all of that amount, QMCL should be entitled to look to Butmall for payment. Secondly, the proposed approach would make neither Mr Renshaw nor Butmall liable for the $50,333 that remains in DFK Hill's trust account. DFK Hill retains this amount pursuant to undertakings given to the Court, and it appears to be common ground that it should now be paid out to QMCL. However, first, the effect of s 200J is to make Renshaw and Butmall indebted to QMCL in that amount. Secondly, excluding $50,333 from the amount for which judgment is entered against Mr Renshaw and Butmall would deprive QMCL of an award of interest on that amount, unless DFK Hill is to be made liable for interest…" 13 Thus the plaintiff contends that judgment should be entered against Mr Renshaw in the sum of $270,000, Butmall in the amount of $264,000, and against Mr Renshaw and Butmall jointly and severally in the amount of $143,000 [sic] while accepting that it should not be able to enforce the judgment of $143,000 to the extent that it receives payment of some of that amount from DFK Hill as proposed by its order 11. 14 The objection to the plaintiff's approach raised by the Renshaw defendants is that it is said to be contrary to s 200J of the Corporations Act. Specifically it is said that: "Section 200J imposes an obligation on the 'recipient', not third parties. The orders are drafted to be consistent with the findings of who received the money from the 'giver'… A third party cannot hold money on trust if it did not receive those monies. No order was sought in the Application or Statement of Claim nor is it available under section 200J to make [sic] defendants jointly and severally liable." 15 I consider that the flaw in the defendants' approach is that it does not regard the "giver" as having given a benefit to the beneficiary of a trust for the purposes of s 200J when the monies in question are paid to the trustee. The fact that s 200J(1) provides that "the amount of the benefit…" is taken to be received by the recipient on trust for the giver and must be immediately repaid, as opposed to the benefit itself, supports the view that the beneficial interest in monies paid to the trustee is itself, by force of s 200J, held on trust for the giver and recoverable as a debt. So understood, I consider that it is appropriate for liability to repay the amount to be imposed upon the beneficiaries, Mr Renshaw and Butmall, which liability is set off to the extent that the monies held by DFK Hill on trust for Mr Renshaw and Butmall are paid to QMCL. 16 In line with this conclusion, declarations as to monies held on trust under s 200J should be made such that Mr Renshaw holds an amount of $270,000.00 on trust for QMCL, Butmall holds an amount of $264,000.00 on trust for QMCL, and Mr Renshaw and Butmall hold an amount of $143,333 on trust for QMCL.

Interest 17 QMCL seeks an award of interest pursuant to s 51A of the FCA Act on the amounts to be repaid. Section 51A of the FCA Act provides that: (1) In any proceedings, for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either: a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest." 18 The present proceedings are for the recovery of money as a debt due by virtue of section 200J of the Corporations Act. Interest was claimed in the originating application filed by QMCL on 9 July 2013. As such, in my view there is no reason why s 51A(1) would not apply so as to empower the Court to make an award of interest unless there is "good cause" not to do so. In this regard, it is important to emphasize that only rarely will there be good cause not to award interest; it will be shown only in "exceptional circumstances": Khazar (Liquidator) v Kargarian; In the Matter of Frontier Architects Pty Ltd (In Liq) (2011) 197 FCR 113 at 136 [97] (Foster J) (with whose reasons Greenwood and Rares JJ relevantly agreed). 19 The Renshaw defendants object to any award of interest on the grounds that the plaintiff "should not profit from its own breach by requiring the payment of interest" and that "the Defendants should not be penalised for the Plaintiff's breach of section 200B." It is true that QMCL was a party to the agreement to make the termination payments which it sought to recover under s 200J and that it made those payments. Nonetheless, with respect, these submissions misconceive the purpose of an award of interest. An award of interest is designed "to compensate a successful applicant for the fact that he or she has been kept out of his or her due monetary entitlements (Haines v Bendall (1991) 172 CLR 60 at 66) while his or her claims are made, litigated and determined.": Khazar at 136 [97]. As such, the purpose of an award of interest is neither to enable the plaintiff to profit, nor to impose a penalty upon the defendants. 20 Furthermore, I do not consider that "good cause" is shown merely because QMCL was a party to the breach of s 200B which led to the need to recover the moneys under s 200J. Rather, it is in the nature of the breach which triggers the obligation in s 200J to repay the benefit that the "giver" will be a party to the breach. Nonetheless a statutory obligation is imposed upon the recipient to repay the benefit to the giver and to do so immediately. The purpose of that obligation is to protect the interests of the shareholders whose approval should have been obtained before the termination benefits were given. It follows that, if interest is not awarded on a benefit taking the form of monetary payment where the obligation to repay it was not immediately complied with, the real value of those monies when repaid may be less than when initially paid, to the detriment of the shareholders. In other words, the fact that the corporation which gave the benefit was a party to the breach would not, without more, suffice to show "good cause" for declining an award of interest, as to hold otherwise may operate to the detriment of the shareholders whose interests were sought to be protected by Div 2 of Part 2D.2 of the Corporations Act. 21 Furthermore, while delay alone in instituting proceedings will rarely disentitle an applicant from an award of prejudgement interest (Kazar at 132 [78]), in the present case it cannot be said that there was any relevant delay. QMCL commenced proceedings within approximately 9 months. 22 There being no other grounds on which an award of interest is resisted, I consider that it is appropriate for an award of interest to be made from the date on which the termination payments were made to the Renshaw defendants and the cause of action under s 200J of the Corporations Act arose, namely, from 23 October 2012 to the date of judgment, such interest to be agreed or assessed.

Order extending time for any appeal 23 I gave my reasons for judgment on 10 April 2014. However, no final orders were made at that time. The Renshaw defendants submit that, in those circumstances, an order should be made extending the time within which any appeal may be instituted pursuant to r 36.03 of the Federal Court Rules 2011 (Cth). That rule relevantly provides that an appellant must file a notice of appeal within 21 days after "the date on which the judgment appealed from was pronounced or the order was made" or "on or before a date fixed for that purpose by the court appealed from." 24 Rule 36.03 makes provision in relation to the jurisdiction vested in the Court by s 24(1)(a) of the FCA Act to hear and determine appeals from "judgments" of the Court by a single Judge exercising original jurisdiction. The term "judgment" is defined in s 4 of the FCA Act to mean (relevantly) "a judgment, decree or order, whether final or interlocutory". Those words, in turn, have the same meaning as the words "all judgments, decrees or orders" in s 73 of the Constitution and refer to "the formal order whereby a court disposes of the matter before it": Ah Toy v Registrar of Companies (NT) (1985) 10 FCR 280 at 286 (Toohey, Morling and Wilcox JJ). It follows that reasons for judgment are not of themselves judgments. These principles are well settled. As a result, there is no need for any order to be made extending time within which any appeal may be instituted by reason of the time which has passed between the date on which I gave my reasons for judgment and the date on which final orders were made. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry.

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