His Honour said, at 99:
"… the proper procedure for an appeal by a person claiming to be a creditor of a company in liquidation against the rejection by the liquidator of a proof of debt is by motion in the winding up proceedings, and … the company should not be made a party to the motion. The person appealing should be the applicant and the liquidator should be the respondent. An appeal against the rejection by a liquidator of a proof of debt is an application to the Court for the determination of a question arising in the administration of the winding up by the Court, by the exercise of the Court's control over its own officer, which raises issues directly affecting only the respective rights of persons in whose interests the winding up is being conducted, namely creditors and/or contributories of the company. It is, in short, an application which is internal to the administration of the winding up. As such it is an "application in the winding up" (see Part 80A rule 3(4)(d) of the Supreme Court Rules ) required to be made by motion in the winding up proceedings. The company itself is neither a necessary nor a proper party to an application of that kind."
53 Rule 2.2 of the Supreme Court (Corporations) Rules 1999 contains the same concept as Part 80A, rule 3(4)(d), of whether an application is made "in" a proceeding which is already on foot.
54 When the Court makes an order that a company be wound up in insolvency it appoints an official liquidator to be the liquidator of the company (section 472(1) Corporations Act 2001 (Cth)) whose powers are subject to the control of the Court (section 477(6) Corporations Act 2001 (Cth)). The order that the company be wound up in insolvency is an order that a process be gone through, under the supervision of a court-appointed officer, all of whose powers are subject to the control of the Court. The process is, in the broadest terms, that the assets of the company be ascertained and got in, its liabilities ascertained, its contributories ascertained, any uncertainties about the respective entitlements of particular creditors or contributories decided, the assets distributed amongst those creditors and contributories entitled to them, and the company then dissolved. An appeal against rejection of a proof of debt is one matter which the Court decides, as an incident of the carrying through of the process which the Court has ordered, for the winding up of the company. That is why such an application is one which is made "in a proceeding already commenced in the Court", namely the winding up proceedings. Hence, Rule 2.2 of the Supreme Court (Corporations) Rules 1999 requires it to be brought by filing an Interlocutory Process.
55 Once the proceedings appealing against rejection of the proof of debt are commenced, there are no particular procedural bounds within which they must be conducted, other than those imposed by the Supreme Court (Corporations) Rules 1999 and Supreme Court Rules 1970 themselves. Section 1321 Corporations Act 2001 (Cth) itself confers upon the Court the widest power to make such order and give such directions as it thinks fit. That power is one which the Court itself exercises in accordance with its own rules. Once the proceedings have been begun, the Court can give directions so that the real issues involved in the proceedings can be determined, in whatever way seems best fitted to the particular case. In so doing, it exercises the powers of the court under section 76A Supreme Court Act 1970 and Part 26, rule 1 Supreme Court Rules 1970, applied in accordance with the "overriding purpose" rule contained in Part 1, rule 3 Supreme Court Rules 1970.
56 This means that there are no invariable rules about how appeals from rejection of a proof of debt are conducted, as to whether the case proceeds on pleadings or by a summary procedure, as to whether the evidence is given orally or on affidavit, or as to whether cross-examination is permitted.
57 If the issues in the appeal are such that they should be defined by pleadings, the Court can so order. There were pleadings in Tanning Research Laboratories at first instance (Tanning Research Laboratories Inc v O'Brien (1987) 11 ACLR 778 at 782).
58 As the terms of rule 2.4(1) and rule 14.1(4) Supreme Court (Corporations) Rules 1999 make clear, it is not an invariable requirement that the evidence in support of the Interlocutory Application be, even in the first instance, on affidavit.
59 There are examples of cross-examination occurring in proceedings involving an appeal from a liquidator's rejection of a proof of debt. Cross-examination occurred in Tanning Research Laboratories at first instance (Tanning Research Laboratories Inc v O'Brien (1998) 11 ACLR 778 at 783), to determine a disputed aspect of Florida law. Cross-examination was also permitted in such litigation in In re Trepca Mines Ltd [1960] 1 WLR 1273 at 1278, and in Romero v Auty [2000] VSC 462 at [48]; (2001) 19 ACLC 206 at 213.
60 The fact that the appeal is a hearing de novo has the consequence that the Court may make its decision on evidence that was not before the liquidator: In re Kentwood Constructions Ltd [1960] 1 WLR 646 at 648 (Buckley J); Romero v Auty [2000] VSC 462 at [41]; (2001) 19 ACLC 206 at 211 (Warren J); Marsland v Gamble [2002] WASC 213 at [10], [12] (Barker J).
61 In Ogilvie-Grant v East as Liquidator of Gordon Grant and Grant Pty Ltd (in liq) (1983) 1 ACLC 742 McPherson J (with whom Wanstall CJ and Sheahan J agreed) dealt with an appeal from a trial judge's refusal of leave to proceed against the company in liquidation. McPherson J said, at 744-5, in a passage often since cited:
"As a matter of history, a winding up by the Court was and remains today an administration conducted by the Court ... Both because of this, and because it was before the Judicature Act an administration conducted in Chancery, it was inevitable that there should be restrictions on the bringing of proceedings, whether at common law or otherwise, during the course of that administration. What is substituted for litigation in the ordinary form is a procedure by which a claimant lodges a verified proof of debt with the liquidator, who admits or rejects it wholly or in part, and from whom an appeal lies to a Judge, who determines that appeal de novo primarily on affidavit material ... There can be no doubt that ordinarily such a procedure is, and is designed to be, much more expeditious and less expensive than ordinary proceedings by way of action. If this means that it occasionally has the consequence that the attainment of perfect justice is sacrificed to expedience, it may be justified by the circumstance that on appeal it is possible under modern rules of procedure for the Judge in appropriate cases to make orders for discovery and even for the delivery of pleadings where it appears necessary or desirable to do so.
The question whether a claimant should be permitted to proceed by action, or should be required to submit his proof of debt and, if dissatisfied, appeal to a Judge, is therefore reduced largely to one of choosing between alternative forms of procedure. The effect of sec 230(3) is to require the claimant to adopt the course of lodging proof of debt unless he can demonstrate that there is some good reason why a departure from that procedure is justified in the case of the particular claim in dispute. This is really all that is meant in this context by expressions such as "convenience" and "balance of convenience" that appear in judgments on the matter: see, for example, Re The Queensland Mercantile Agency Company Ltd (1888) 58 LT 878 at p.879; [ Stewart v Intercity Distributors Limited (1960) NZLR 944 at p.946 and cf Century Mercantile Co v Auckland Provincial Fruitgrowers' Co-operative Society Ltd (1921) NZLR 272 at p.276."
62 His Honour's remark that on an appeal the judge determines the appeal "primarily on affidavit material" is not a statement of law relating to such appeals; rather, it is an empirical generalisation about how most appeals in fact proceed. The final sentence of the paragraph in which that remark appears makes clear that his Honour fully recognises the flexibility of procedure which is possible on an appeal from a rejection of a proof of debt. His Honour's remark that "ordinarily such a procedure is, and is designed to be, much more expeditious and less expensive than ordinary proceedings by way of action" is also (as is shown by the word "ordinarily") an empirical generalisation. Further, it is an empirical generalisation which relates to the overall process by which first proofs are lodged, and then anyone dissatisfied with the decision of the liquidator concerning the proof might appeal - it is that combined process, in which by no means every decision of the liquidator is appealed against, which is ordinarily more expeditious and less expensive than if every creditor were to establish its debt by way of action. His Honour is not saying that, in any particular appeal from rejection of a proof of debt, the proceedings will be any simpler than would be proceedings in which the creditor sought to establish its claim by direct action against the company. Indeed, his Honour, at the end of the first paragraph quoted, identifies the possibility of there being discovery and pleadings on an appeal (which I take to be merely examples of the procedures available in fully contested litigation) as the justification for the less than perfect justice that might be involved in the proof of debt process at the stage of the liquidator making the decision whether to admit the proof. He is not suggesting that expedience or second-rate justice are involved in appeals from rejection of a proof of debt.
Principles Concerning Relationship of Interlocutory Process to Principal Relief
63 One strand of the arguments which the Applicant presents in this Notice of Motion depends upon the relationship which an interlocutory application ought bear to the principal proceedings in which the interlocutory application is made.
64 An interlocutory application can involve a subject matter which will not arise in the principal proceedings - for example, whether a claim made against an overseas defendant is one which can properly be served outside Australia under Part 10 Supreme Court Rules 1970, whether a particular document need not be produced on the ground of privilege, or whether a particular interrogatory should be answered. Further, an interlocutory application can involve parties who are not parties to the principal proceedings - for example, a stranger to the litigation served with a subpoena applies on notice of motion in the proceedings to have that subpoena set aside. But relief which is sought in an interlocutory application must always be relief which is sought for the purpose of advancing claims which either a plaintiff or a defendant makes in the principal proceedings.
65 This purposive requirement was recognised by Owen CJ in Eq in Haviland v McLeary (1894) 15 NSWR (Eq) 22. In refusing to allow, in a suit involving the administration of a deceased estate in which a new trustee had been appointed, a motion for removal of that trustee, His Honour said, at 24:
"If the parties could apply now there would be no reason … why they should not do so fifteen years hence, and a trustee might then be brought before the Court on motion in an old suit instituted for a different purpose, and one which had years ago been attained ." (emphasis added)
66 In Phillips v Walsh (1990) 20 NSWLR 206 McLelland J considered a Notice of Motion, brought in proceedings concerning administration of a deceased's estate, which sought relief beyond that claimed by the principal proceedings. He referred to Part 19, rule 1 of the Supreme Court Rules 1970, which provided (and still provides in Part 19, rule 1(1):
"An interlocutory or other application, in or for the purposes of or in relation to proceedings commenced by statement of claim or by summons, shall be made by motion."
67 It is to be noted that this rule requires an application to be made by motion in three differently described circumstances - when it is "in" proceedings, when it is "for the purpose of" proceedings, or when it is "in relation to" proceedings. In Phillips v Walsh (1990) 20 NSWLR 206 the plaintiff submitted that the relief sought in her Notice of Motion was appropriate because it was "in relation to" the original proceedings commenced by Statement of Claim because both related to the administration of the same estate, and because the relief was intended to enforce compliance with a consent order which had been made in the principal proceedings. His Honour said, at 209-10:
"In my opinion, it is not the purpose or the effect of Pt 19, r 1, to prescribe the kinds of applications which can be made in existing proceedings: the purpose of the rule is merely to prescribe the mode by which applications in existing proceedings are to be made, namely by motion. The question whether any particular application can properly be made in existing proceedings is a matter to be determined according to general law principles as modified by any relevant statutory provision … This exception or qualification does not, however, extend to an application made for the purpose of giving substantive relief not sought in the statement of claim or which is substantially different to that given by the final order: see generally Haviland v McLeary (1894) 15 LR (NSW) (Eq) 22; 10 WN (NSW) 146; Poisson & Woods v Robertson & Turvey (1902) 86 LT 302; 50 WR 260; 46 Sol Jo 196; Dowdle v Hillier (1949) 66 WN (NSW) 155; Re Porteous [1949] VLR 383; [1950] ALR 89; Cristel v Cristel [1951] 2 KB 725 and Re Scott (1964) 82 WN (Pt 1) (NSW) 313; [1964-5] NSWR 1636.
68 At 210 McLelland J concluded that it was inappropriate to try, on motion in proceedings, a question of whether those proceedings had themselves been compromised, and said:
"it would not be proper to do so where substantial matters are involved beyond the ambit of the proceedings as originally constituted, or where, in the interests of justice, disposition of the matter on summary application is inappropriate".
69 In Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 at 697, Handley JA recognised that a consent judgment can be set aside on the same grounds as an agreement to compromise proceedings can be set aside, and continued:
"However it is also established that the jurisdiction to set aside a consent order on such a ground should be invoked by a new action brought for that purpose and not by a motion in the original proceedings: see Ainsworth v Wilding [1896] 1 Ch 673 and Kinch v Walcott [1929] AC 482 at 494; compare Phillips v Walsh (1990) 20 NSWLR 206. This rule was described by the Privy Council as "alone consistent with convenient practice" : see Kinch v Walcott (at 494)."
70 In Johnston v Australia and New Zealand Banking Group Ltd; Johnston v Richardson [2003] NSWSC 454 at [57], Davies AJ declined to entertain an interlocutory motion seeking to have a person declared a vexatious litigant, and required any such application to be brought by separate proceedings. All the cases I have just been considering can be seen to be ones where the court declined to entertain an interlocutory motion because it was not for the purpose of advancing the relief claimed in the principal proceedings.
71 By contrast, in St George v Wallis [2001] NSWSC 23 Rolfe J said, at [58]:
"… it is necessary in any given case to consider whether it is appropriate on the facts, to allow proceedings to go forward by way of motion. The factors making it appropriate in the exercise of the Court's discretion to do so in this case are that the matter is within the ambit of the original proceedings, the matter of substance is confined to an issue of construction on basically uncontradicted facts, and the interests of justice certainly favour a conclusion of these long drawn out proceedings without delay."