Solar Shop Australia Pty Ltd (Receivers & Managers Appointed) (in liq) v Steele, in the matter of Solar Shop Australia Pty Ltd

The Claims made by Solar Shop against Mr Steele 4 The following description of Solar Shop's claims against Mr Steele is based on the allegations in the Statement of Claim. 5 Solar Shop alleges that Mr Steele was appointed as a director of the company on 22 May 2009 and that he ceased to be a director on 25 October 2011. Solar Shop alleges that on 7 September 2011, three individuals were appointed by Westpac Banking Corporation (Westpac) as receivers and managers over the assets and undertaking of Solar Shop. It alleges that on 21 October 2011, the present liquidators of the company were appointed as voluntary administrators of Solar Shop by a resolution of the company's directors. It alleges that on 25 November 2011, the present liquidators were appointed as liquidators of the company by resolution of its creditors pursuant to s 439C(c) of the Corporations Act 2001 (Cth). It alleges that on 7 June 2016, this Court made an order that the company be wound up under the provisions of the Corporations Act and the Court made an order that the present liquidators continue to be appointed as liquidators of Solar Shop. 6 Prior to going into administration, Solar Shop carried on business throughout Australia as a supplier and installer of solar panels and associated equipment. Solar Shop alleges that between 5 August 2010 and 9 August 2010, it executed a number of agreements. One such agreement was an agreement between Solar Shop and Mr and Mrs Ferraretto as trustees of the Ferraretto Trust described as the Share Buy-Back Agreement. Solar Shop alleges that the buy-back effected by the Share Buy-Back Agreement constituted a contravention of s 259A of the Corporations Act by Solar Shop and that each of Mr Steele and Mr Thornton was involved in Solar Shop's contravention of s 259A and by that involvement, each of them contravened s 259F(2) of the Corporations Act. In addition, Solar Shop alleges that by reason of the fact that the Share Buy-Back Agreement contemplated a reduction of Solar Shop's share capital, the buy-back effected by the Share Buy-Back Agreement constituted a contravention of s 256D of the Corporations Act by Solar Shop by reason that it was not the case that the buy-back would not materially prejudice Solar Shop's ability to pay its creditors. Solar Shop alleges that each of Mr Steele and Mr Thornton was involved in Solar Shop's contravention of s 256D and thereby contravened s 256D(3) of the Corporations Act. Solar Shop alleges that between 5 August 2010 and 9 August 2010, it entered into another agreement with a Mr Leggett as trustee for the Pennsylvania Avenue Discretionary Trust under which Solar Shop agreed to lend funds to fund Mr Leggett as trustee for the Pennsylvania Avenue Discretionary Trust to acquire shares in Solar Shop from Mr and Mrs Ferraretto as trustees of the Ferraretto Trust. This agreement is described as the Thornton Loan Agreement. Solar Shop alleges that the loan effected by the Thornton Loan Agreement constituted a contravention of s 260A of the Corporations Act and that each of Mr Steele and Mr Thornton was involved in Solar Shop's contravention of s 260A and thereby contravened s 260D of the Corporations Act. 7 Solar Shop also alleges that at all material times during the 2010 calendar year, each of Mr Steele and Mr Thornton as directors and officers of Solar Shop owed duties to the company, including duties at common law and under ss 180 and 181 of the Corporations Act. Solar Shop alleges that each of Mr Steele and Mr Thornton breached these duties in (among other acts) resolving that Solar Shop enter into the Share Buy-Back Agreement and that it enter into the Thornton Loan Agreement. 8 Solar Shop alleges that it has suffered loss and damage as a result of the breaches of duty and the contraventions of the Corporations Act by Mr Steele and Mr Thornton. The losses include the sum of $9,999,973.48 comprising the purchase price paid by Solar Shop under the Share Buy-Back Agreement and the sum of $699,930.96 advanced under the Thornton Loan Agreement which is said to be unrecoverable or substantially unrecoverable. 9 Solar Shop also alleges that each of Mr Steele and Mr Thornton engaged in misleading and deceptive conduct under the Fair Trading Act 1987 (SA), the Corporations Act, the Australian Securities and Investments Commission Act 2001 (Cth), and the Trade Practices Act 1974 (Cth) in connection with giving effect to the provisions of the Share Buy-Back Agreement and the Thornton Loan Agreement. The losses claimed are the same as the losses claimed in relation to the contraventions of the Corporations Act and the breaches of duty.

The Allegations made in Mr Steele's Cross-Claim against Mr Ferraretto 10 Mr Steele alleges that Mr Ferraretto was a director of Solar Shop from 29 June 2001 to 21 July 2010 and was at all material times an employee of Solar Shop. He alleges that Mr Ferraretto jointly with Mrs Tania Ferraretto as trustee of the A & T Ferraretto Family Trust were the majority shareholders of Solar Shop at all material times up to 20 October 2010. Mr Steele pleads certain allegations made against him by Solar Shop in its Statement of Claim. I do not need to summarise those allegations. He then pleads the following: 7. If, which is denied; 7.1 Solar Shop contravened section 259A and 259D of the Act in the manner referred to in paragraph 5 above; and 7.2 Mr Steele was involved in such contraventions and thereby contravened sections 259F, 256D(3) and 260D of the Act in the manner referred to in paragraph 5 above; then 7.3 Mr Ferraretto was also involved in such contraventions by reason that he: 7.3.1 aided, abetted, counselled or procured the contraventions; 7.3.2 further, or in the alternative, induced the contraventions; 7.3.3 further, or in the alternative, were directly or indirectly knowingly concerned in, or a party to the contraventions. Particulars 7.3.3.1 Mr Steele refers to paragraphs 8 and 9 below. I will not set out paragraphs 8 and 9 of Mr Steele's cross-claim. The following is a summary of the allegations made against Mr Ferraretto in those paragraphs. On 29 June 2010, Mr Ferraretto informed Mr Steele of his interest in selling the shares in Solar Shop held by the Ferraretto Trust and proposed a transaction which included a proposal whereby he might resign as a director of Solar Shop. Mr Ferraretto was involved in negotiations with Solar Shop, and by letter dated 21 July 2010 and, as joint trustee of the Ferraretto Trust, he agreed in principle to a transaction. Mr Ferraretto negotiated the terms of the Share Buy-Back Agreement and the Thornton Share Purchase Agreement between 29 June 2010 and 5 August 2010 on behalf of the Ferraretto Trust. He executed the Share Buy-Back Agreement and the Thornton Share Purchase Agreement on or about 5 August 2010 as trustee of the Ferraretto Trust. Mr Steele alleges that Mr Ferraretto knew, or alternatively ought to have known, certain matters in relation to the Share Buy-Back Agreement and, in particular, that it meant that Solar Shop would have to enter into a new Facility Agreement with Westpac to finance the purchase of the shares held in the Ferraretto Trust. Mr Steele alleges that Mr Ferraretto knew certain matters in relation to the Thornton Loan Agreement. He alleges that on 12 October 2010 and, as trustee of the Ferraretto Trust, Mr Ferraretto voted in favour of the shareholders' resolution to approve the financial assistance to Mr Thornton. Mr Steele alleges that Mr Ferraretto facilitated the completion of the Share Buy-Back Agreement and the completion of the Thornton Share Purchase Agreement. 11 Mr Steele alleges that if he knew or ought to have known certain matters pleaded in the Statement of Claim as at 5 August 2010, then Mr Ferraretto also knew or ought to have known of those matters by 5 August 2010 by reason of his position as a director of Solar Shop until 21 July 2010 and there being no material change in Solar Shop's financial circumstances between that date and 5 August 2010. I will not set out the details of those matters other than to say that they relate in one way or another to Solar Shop's financial circumstances. Mr Steele alleges that but for Mr Ferraretto's conduct, Solar Shop would not have entered into, or completed, the Share Buy-Back Agreement or the Thornton Loan Agreement and the company would not have entered into the Facility Agreement with Westpac. 12 Mr Steele's claim for contribution against Mr Ferraretto is as follows: 11. In the circumstances, Mr Steele is entitled to an equitable contribution to his liability for Solar Shop's Losses and Mr Ferraretto must contribute rateably to Mr Steele's liability to pay compensation to Solar Shop in such amount and manner as the Court considers just and equitable. 12. Further, or alternatively, if, which is denied, Mr Steele is liable to compensate Solar Shop for Solar Shop's Losses by reason of the alleged contraventions of the Act: 12.1. his liability is a liability in damages arising under statute within the meaning of section 4 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) (the Law Reform Act); 12.2. as particularised above, Mr Ferraretto is liable in damages for the same harm within the meaning of section 6 of the Law Reform Act; and 12.3. Mr Steele may recover contribution from Mr Ferraretto under Section 6 of the Law Reform Act in an amount that is fair and equitable having regard to the extent of his responsibility for the harm and that of Mr Ferraretto. 13 Mr Steele's claims for relief against Mr Ferraretto are, relevantly, as follows: 1. Contribution in equity towards Mr Steele's liability to Solar Shop (if any). 2. Alternatively, contribution under the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) towards Mr Steel's liability towards Solar Shop (if any). 14 Mr Ferraretto submits that the facts alleged against him by Mr Steele do not engage the doctrine of equitable contribution. He submits that the relevant provisions of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) (CNAL Act) are inconsistent with the relevant provisions of the Corporations Act and are inoperative to the extent of the inconsistency. Because of this allegation, Mr Ferraretto has served notices under s 78B of the Judiciary Act 1903 (Cth). None of the Attorneys-General sought to intervene in the proceeding.

Relevant Principles for Summary Judgment 15 Rule 26.01 of the Rules provides as follows: (1) A party may apply to the court for an order that judgment be given against another party because: (a) the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; … 16 Section 31A(2) of the Federal Court of Australia Act 1976 (Cth) is in similar terms. That subsection together with s 31A(3) are as follows: (2) The Court may give judgment for one party against another in relation to the whole or any part of the proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. 17 The scope of s 31A(2) of the Federal Court of Australia Act was considered by the High Court in Spencer v The Commonwealth of Australia (2010) 241 CLR 118. French CJ and Gummow J said that the exercise of the power to summarily terminate proceedings must always be attended with caution. However, their Honours also said that s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary disposition. Their Honours said (at [25]): Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success. Hayne, Crennan, Kiefel and Bell JJ noted that the enquiry under ss 31A(2) and 31A(3) of the Federal Court of Australia Act is directed towards whether there is a "reasonable" prospect of prosecuting the proceeding, not to whether "a certain and concluded determination could be made that the proceeding would necessarily fail" (at [52]). To this extent, s 31A of the Federal Court of Australia Act was a radical departure from the basis upon which earlier rules permitting the entry of summary judgment had been understood and administered. Their Honours said that the earlier provisions were understood as requiring the formulation of a certain and concluded determination that a proceeding would necessarily fail. The enquiry to be undertaken under s 31A is a different one. Their Honours said that no paraphrase of the expression "no reasonable prospect" can be adopted as a sufficient explanation of its operation, "let alone definition of its content" (at [58]). Their Honours said that the legislative purpose revealed by the text of s 31A would be defeated if its application was read as confined to cases of a kind which fell within earlier, different procedural regimes (at [60]). 18 The authorities make it clear that whereas a real issue of fact may be a complete answer to an application for summary judgment, a real issue of law may not necessarily lead to the same result because the Court may decide to determine the issue of law. Of course, the judge has a discretion not to do so if, for example, the issue of law is so difficult that it ought not be decided summarily (Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd and Others (2008) 167 FCR 372 at [23] per Finkelstein J; at [74] and [114] per Rares J; at [131] per Gordon J; Kowalski v MMAL Staff Superannuation Fund Pty Ltd and Another (2009) 178 FCR 401 at [28]-[31]; Nichol v Discovery Africa Limited [2016] FCAFC 182 at [132]-[142]). 19 These observations and principles about the scope and operation of s 31A(2) apply with equal force to r 26.01(a) of the Rules. 20 In the alternative, Mr Ferraretto seeks an order under r 16.21 striking out paragraphs 11 and 12 and the prayers for relief in paragraphs 1 and 2 of the cross-claim. Rule 16.21(1) provides as follows: (1) A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading: (a) contains scandalous material; or (b) …; or (c) is evasive or ambiguous; or (d) … (e) fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or (f) … 21 Two matters about this claim for alternative relief should be noted. First, the cross-claim cannot stand if paragraphs 11 and 12, and claims for relief 1 and 2, are struck out. That follows from the fact that if that was the order made, no substantive cause of action or claim for relief would remain in the cross-claim. Secondly, for reasons which will become clear, the reasons for rejecting Mr Ferraretto's application for summary judgment are also the reasons his application to strike out paragraphs and claims for relief in the cross-claim should be refused.

The Application of the CNAL Act 22 Mr Ferraretto submitted that the CNAL Act did not apply to Mr Steele's claim against him because s 4 does not apply to the claim made and, as a separate point, s 6 does not apply because he is not liable in damages for the same harm as Mr Steele. These submissions precede the inconsistency and constitutional issue in the sense that if the submissions are correct, there is no need to consider those issues. 23 I set out now the relevant provisions of the CNAL Act. 24 Section 4(1) of the CNAL Act deals with the application of the Act and relevantly provides: (1) This Act applies to liabilities of the following kinds- (a) a liability in damages that arises under the law of torts; (b) a liability in damages for breach of a contractual duty of care; (c) a liability in damages that arises under statute. Section 3 defines damages and harm in the following way: damages means compensation or damages for harm and includes solatium but does not include workers compensation. harm includes loss of life, personal injury, damage to property, economic loss and loss of any other kind (whether the harm is primary or derivative). 25 Section 6 of the CNAL Act deals with the recovery of contribution by a person liable in damages for harm suffered by another. The section relevantly provides: (1) A person who is liable in damages for harm suffered by another may recover contribution from a third person who is also liable in damages for the same harm. (2) … (3) An action for contribution may be brought- (a) by way of third party proceedings, or proceedings between the parties, in an action in which damages are sought from the person entitled to contribution; or (b) by way of a separate action brought within the relevant time limit against the person from whom contribution is sought. (4) … (5) The contribution is to be an amount that is fair and equitable having regard to the extent of each contributory's responsibility for the harm. (6) … (7) If it is fair and equitable to do so, the court may exempt a person from liability to make contribution or order that the contribution to be recovered is to amount to a complete indemnity. 26 Section 7 of the CNAL Act deals with contributory negligence and s 8 deals with apportionable liability (see also s 3(2)). 27 Mr Ferraretto's first submission is that the CNAL Act does not cover liabilities for contraventions of sections in Chapter 2J of the Corporations Act. He submitted that the CNAL Act only applied to liabilities arising as a result of breaches of a duty of care whether the source for the duty of care is tort, contract or statute. An immediate problem for this submission is that s 4(1)(a) provides that the Act applies to a liability in damages that arises under all torts and not just the tort of negligence. 28 I think it is reasonably arguable that the CNAL Act applies to the liabilities raised in the cross-claim and, in that respect, I rely on the observations of Middleton J in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd and Another (2007) 164 FCR 450 (Dartberg v Wealthcare) at [27]. 29 As to Mr Ferraretto's second submission, the definition of harm includes economic loss and loss of any other kind. It is reasonably arguable that if Mr Ferraretto and Mr Steele are liable for harm to Solar Shop, then it is the same harm, being the economic loss suffered by the company. The fact that Mr Ferraretto is sued in his capacity as vendor of the shares (assuming that to be the case) does not bear upon the nature of the harm suffered by Solar Shop. Nor does the potential for an award under s 1317H of the Corporations Act less than the full amount of the loss claimed or, relief from liability under s 1317S, mean that the nature of the economic loss is different. Mr Ferraretto's submission in this context that Mr Steele has the benefit of s 1317S as well as the discretionary jurisdiction inherent in s 1317H(1) and s 1318(1) and is not prejudiced by an inability to join or seek contribution from Mr Ferraretto (even if correct) is not to the point in determining whether Mr Ferraretto and Mr Steele are liable in damages for the same harm. 30 It is reasonably arguable that, having regard to its terms, the CNAL Act can apply to the claim made in Mr Steele's cross-claim.

The Alleged Inconsistency between the Provisions of the Corporations Act and the Provisions of the CNAL Act 31 Mr Ferraretto describes the nature of the Constitutional matter in his Notice of a Constitutional Matter under s 78B of the Judiciary Act as follows: (1) Inconsistency within the meaning of s 109 of the Constitution between: 1.1 Sections 4 and 6 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) (the CNAL Act); and 1.2 the particular regime created by Chapter 2J combined with Chapter 9, Parts 9.4B, 9.5 and 9.6 of the Corporations Act 2001 (Cth) (the Act). 32 I have already set out ss 4 and 6 of the CNAL Act. 33 As far as the Corporations Act is concerned, the following sections appear in Chapter 2J. Section 259A of the Corporations Act prohibits a company from acquiring shares in itself except in certain circumstances which are identified in the section. Section 259F(2) provides that any person who is involved in a company's contravention of s 259A or s 259B(1) contravenes the subsection. Section 259F(2) is a civil penalty provision. Section 256B(1) provides that a company may reduce its share capital in a way that is not otherwise authorised by law if the reduction has certain characteristics. Section 256D(1) provides that a company must not make the reduction unless it complies with s 256B(1). Section 256D(3) provides that any person who is involved in a company's contravention of s 256D(1) contravenes the subsection. Section 256D(3) is a civil penalty provision. Section 260A provides that a company may financially assist a person to acquire shares in the company only if the financial assistance has certain characteristics. Section 260D(2) provides that any person who is involved in a company's contravention of s 260A contravenes the subsection. Section 260D(2) is a civil penalty provision. These sections appear in Chapter 2J of the Corporations Act. 34 Section 1317E(1) which appears in Chapter 9, Part 9.4B of the Corporations Act provides that if a Court is satisfied that a person has contravened a civil penalty provision, then it must make a declaration of contravention. Section 1317G makes provision for pecuniary penalty orders in relation to a contravention of a civil penalty provision. Section 1317H gives the Court the power to compensate a corporation for damage suffered by the corporation in relation to the contravention of a civil penalty provision. It is sufficient to set out subsection (1): (1) A Court may order a person to compensate a corporation or registered scheme for damage suffered by the corporation or scheme if: (a) the person has contravened a corporation/scheme civil penalty provision in relation to the corporation or scheme; and (b) the damage resulted from the contravention. The order must specify the amount of the compensation. Note: An order may be made under this subsection whether or not a declaration of contravention has been made under section 1317E. 35 Section 1317J deals with standing to apply for (among other orders) a compensation order. Only the Australian Securities and Investments Commission (ASIC) and the corporation have standing to apply for such an order. 36 The Court has the power to relieve a person wholly or partly of a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention. Section 1317S provides as follows: (1) In this section: eligible proceedings: (a) means proceedings for a contravention of a civil penalty provision (including proceedings under section 588M, 588W, 961M, 1317GA, 1317H, 1317HA or 1317HB); and (b) does not include proceedings for an offence (except so far as the proceedings relate to the question whether the court should make an order under section 588K, 1317H, 1317HA or 1317HB). (2) If: (a) eligible proceedings are brought against a person; and (b) in the proceedings it appears to the court that the person has, or may have, contravened a civil penalty provision but that: (i) the person has acted honestly; and (ii) having regard to all the circumstances of the case (including, where applicable, those connected with the person's appointment as an officer, or employment as an employee, of a corporation or of a Part 5.7 body), the person ought fairly to be excused for the contravention; the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention. (3) In determining under subsection (2) whether a person ought fairly to be excused for a contravention of section 588G, the matters to which regard is to be had include, but are not limited to: (a) any action the person took with a view to appointing an administrator of the company or Part 5.7 body; and (b) when that action was taken; and (c) the results of that action. (4) If a person thinks that eligible proceedings will or may be begun against them, they may apply to the Court for relief. (5) On an application under subsection (4), the Court may grant relief under subsection (2) as if the eligible proceedings had been begun in the Court. (6) For the purposes of subsection (2) as applying for the purposes of a case tried by a judge with a jury: (a) a reference in that subsection to the court is a reference to the judge; and (b) the relief that may be granted includes withdrawing the case in whole or in part from the jury and directing judgment to be entered for the defendant on such terms as to costs as the judge thinks appropriate. (7) Nothing in this section limits, or is limited by, section 1318. 37 Section 1318, which appears in Chapter 9, Part 9.5 of the Corporations Act, gives the Court power to grant relief to certain persons in civil proceedings if they ought fairly to be excused for negligence, default or breach. It is not necessary for me to set out the terms of that section. 38 Finally, in terms of the Corporations Act, I should mention s 5E which provides that the Corporations Act is not intended to exclude or limit the concurrent operation of any law of a State or Territory. The section does not apply where there is direct inconsistency (s 5E(4)). 39 Mr Ferraretto submits that the relevant provisions of the Corporations Act cover the field in a case such as the present and there is no room for the operation of ss 4 and 6 of the CNAL Act. He submits that the claim for contribution under that Act cannot succeed. 40 The tests for inconsistency are well established and it is sufficient for me to refer to Jemena Asset Management (3) Pty Ltd and Others v Coinvest Limited (2011) 244 CLR 508 in which the High Court said (at [39]-[40]): Applicable principles have been reiterated in the joint reasons of the whole Court in Dickson v The Queen: "The statement of principle respecting s 109 of the Constitution which had been made by Dixon J in Victoria v The Commonwealth [('the Kakariki Case')] was taken up in the joint reasons of the whole Court in Telstra Corporation Ltd v Worthing as follows: 'In Victoria v The Commonwealth, Dixon J stated two propositions which are presently material. The first was: "When a State law, if valid, would alter, impair or detract from the operation of a law of the Commonwealth Parliament, then to that extent it is invalid." The second, which followed immediately in the same passage, was: "Moreover, if it appears from the terms, the nature or the subject matter of a Federal enactment that it was intended as a complete statement of the law governing a particular matter or set of rights and duties, then for a State law to regulate or apply to the same matter or relation is regarded as a detraction from the full operation of the Commonwealth law and so as inconsistent." …' The first proposition is often associated with the description 'direct inconsistency', and the second with the expressions 'covering the field' and 'indirect inconsistency'." The expression "cover the field" means "cover the subject matter", which was the description used and explained by Dixon J in Ex parte McLean. From the outset the aspect of inconsistency associated with the expression "covering the field" has not been free from criticism. There can be little doubt that indirect inconsistency involves "more subtle … contrariety" than any "textual" or "direct collision" between the provisions of a Commonwealth law and a State law. (Citations omitted.) 41 The matters which Mr Ferraretto relied on to establish inconsistency within s 109 of the Constitution are as follows. 42 First, Mr Ferraretto submitted that claims for compensation under s 1317H of the Corporations Act for contraventions of civil penalty provisions are subject to a well-defined scheme which has the following key features: (1) The only parties who can bring proceedings under s 1317H for a compensation order are ASIC and the company (s 1317J(1) and (2)). ASIC has the general administration of the Corporations Act (s 5B) and, at least in the usual case, would be liable for costs where it brought an action which is unsuccessful. A company considering whether to bring an action under s 1317H is likely to be in liquidation and the liquidator will have extensive powers available to him or her to gather information to assist the liquidator in deciding whether to bring proceedings (for example, examinations and document production under ss 596A, 596B and 597). Like ASIC, a liquidator can be expected to consider carefully the costs implications of an unsuccessful claim under s 1317H. (2) The Corporations Act specifically addresses the circumstances in which a defendant to a claim under s 1317H may be relieved of liability in whole or in part. That is by the exercise of the power in s 1317S and by reference to the grounds specified therein. It seemed to be common ground between the parties that, although the power could be invoked by a person in the position of Mr Steele, it could not be invoked by a respondent to a cross-claim such as Mr Ferraretto. The Corporations Act does not provide a right of contribution whereby a defendant to an action under s 1317H is able to share the burden of liability. Mr Ferraretto submitted that the difficulties of allowing a right of contribution are illustrated by the facts of this case. The liquidators have decided not to pursue him and yet he is brought into the action by a cross-claim in circumstances where, unlike the cross-claimant, he is unable to seek the benefit of s 1317S. 43 Secondly, Mr Ferraretto submitted that it would be inconsistent with the scheme of the Corporations Act to allow a contribution claim where, as in this case, the claims against the party seeking contribution consist of apportionable and non-apportionable claims. The apportionable claims were said to be the common law claim for breach of director's duties and the misleading and deceptive conduct claims (see s 1041L and following) and the non-apportionable claims are those made under Chapter 2J. It was submitted that a person in the position of Mr Steele could take advantage of apportionment, whereas a person in the position of Mr Ferraretto, could not. 44 Thirdly, Mr Ferraretto submitted that to allow a right of contribution by Mr Steele could lead to incongruous or unintended results. The example Mr Ferraretto gave was an action by ASIC for a compensation under s 1317H of the Corporations Act coupled with an application for disqualification order. In such a case, ASIC could not obtain orders for discovery (Rich and Another v Australian Securities and Investments Commission (2004) 220 CLR 129), but assuming a right of contribution, a cross-claimant could obtain discovery against a cross-respondent. This showed, Mr Ferraretto submitted, that the potential for the impairment of Commonwealth law was too great. 45 The High Court delivered its decision in Rizeq v The State of Western Australia [2017] HCA 23 (Rizeq) after submissions had been made in this matter. Mr Steele made supplementary submissions in which he submitted that s 109 of the Constitution was irrelevant and the real question was whether s 6 of the CNAL Act was picked up by s 79 of the Judiciary Act. 46 Mr Steele submitted that there are State laws which are not capable of operating on federal courts or courts exercising federal jurisdiction. The CNAL Act is such a law just as the Law Reform Act 1995 (Q) considered in Austral Pacific Group Limited (in liquidation) v Airservices Australia (2000) 203 CLR 136 (Austral Pacific) was such a law. In Rizeq, Bell, Gageler, Keane, Nettle and Gordon JJ said that neither s 6 nor s 7 of the Law Reform Act was capable of applying in federal jurisdiction as State law, but both were within the field of operation of s 79 of the Judiciary Act. Their Honours said (at[ 99]-[100]): Austral Pacific Group Ltd (In liq) v Airservices Australia was an appeal to the High Court from a decision of the Court of Appeal of the Supreme Court of Queensland. The Court of Appeal had held that a manufacturer of equipment who had been sued for damages in negligence and under the Trade Practices Act 1974 (Cth) in the District Court of Queensland was precluded by the operation of s 44(1) of the Safety, Rehabilitation and Compensation Act 1988 (Cth) from having any right to claim contribution under ss 6 and 7 of the Law Reform Act 1995 (Q) from Airservices Australia, a body established under the Air Services Act 1995 (Cth), which was the successor to the assets and liabilities of the plaintiff's employer, the Civil Aviation Authority established under the Civil Aviation Act 1988 (Cth). The High Court dismissed the appeal, unanimously affirming the decision of the Court of Appeal. Noting that the contrary had not been argued, Gleeson CJ, Gummow and Hayne JJ stated that it was to be assumed that the District Court had been exercising federal jurisdiction conferred on it by s 39(2) of the Judiciary Act on the basis that the claim against the manufacturer was a matter arising under the Trade Practices Act within s 76(ii) of the Constitution and on the further basis that Airservices Australia answered the description of "the Commonwealth" so as to bring the matter, as a result of the manufacturer's claim for contribution against Airservices Australia, also within s 75(iii) of the Constitution . Again noting that the contrary had not been argued, their Honours stated that it was to be assumed that s 79 of the Judiciary Act operated to apply ss 6 and 7 of the Law Reform Act in the exercise of the District Court's federal jurisdiction unless a law of the Commonwealth "otherwise provided". Section 44(1) of the Safety, Rehabilitation and Compensation Act was held to be such a law. The right of a tortfeasor to recover contribution from another tortfeasor under s 6 of the Law Reform Act is a right to such amount of contribution as a court might find to be "just and equitable" in the exercise of the power conferred on the court by s 7 of the Law Reform Act. The s 6 right is inseparable from the s 7 power. Neither is therefore capable of applying in federal jurisdiction as State law. Both are within the field of operation of s 79 of the Judiciary Act. (Citations omitted.) 47 Chief Justice Kiefel made similar points when her Honour said (at [22] and [28]): Section 79 has been held to apply to laws which provide that contribution may be sought by a tortfeasor which has been held liable from another tortfeasor. And it has been applied to statutes of limitations provisions. State laws of this kind are also to be understood by reference to the purpose of s 79 rather than whether they are substantive laws because they affect rights. They may be understood as laws which define the circumstances in which a proceeding may, or may not, be brought in a court and which permit a court to determine that matter. Without s 79 they could not apply to courts exercising federal jurisdiction. … The reasons why s 79 operated upon the State laws in three of the cases referred to by the appellant are explicable by reference to the purpose of s 79. They were laws directed to State courts and their powers. Austral Pacific Group Ltd (In liq) v Airservices Australia concerned provisions relating to proceedings for contribution as between tortfeasors and the exercise of the power conferred on the court to determine the amount of contribution. Such provisions may be understood as directed to courts, as discussed above, and are therefore laws to which s 79 refers. Similarly, in Parker v The Commonwealth, the State law which Windeyer J identified as picked up by s 79 made provision for the assessment, by the court, of damages. In R v Oregan; Ex parte Oregan, Webb J said that the laws referred to in s 79 include substantive laws, such as those dealing with the custody of infants. However, the provision which his Honour identified as applicable was one which directed the court making an order with respect to custody to consider the interests of the child as paramount. These cases have nothing to say about an offence provision such as s 6(1)(a) of the MDA. (Citations omitted.) 48 Mr Steele next submitted that ss 4 and 6 of the CNAL Act are picked up by s 79 of the Judiciary Act unless the relevant provisions of the Corporations Act otherwise provide. The test for determining that issue was stated by Gleeson CJ, Gummow and Hayne JJ in Austral Pacific at [17]: … The question is whether the operation of the Compensation Act would so reduce the ambit of the Contribution Act that the provisions of the Compensation Act are irreconcilable with the other law. If so, the Compensation Act "otherwise provides" within the meaning of section 79 of the Judiciary Act. GPAO shows that the question is not answered by application of the doctrine identified, in the decisions construing s 109 of the Constitution, with the phrase "covering the field". In Austral Pacific, Gleeson CJ, Gummow and Hayne JJ held that the Commonwealth law did not otherwise provide with s 79 of the Judiciary Act. Their Honours said (at [28]): However, the Compensation Act is silent respecting the rights and obligations inter se of a Commonwealth authority or other party identified in s 44 and a third party where what is at stake is not the ultimate incidence of compensation payments, but the distribution between the tortfeasors of the burden of the common law liabilities in damages to the employee. This is consistent with a legislative intention to leave such matters for the operation of State or Territorial legislation "picked up" by s 79. Part IV does not "otherwise provide" in the sense required to render s 79 inapplicable. In my opinion, these submissions are correct. There is further support for them (if further support be needed) in Bialkower v Acohs Pty Ltd and Others (1998) 83 FCR 1(Bialkower v Acohs) at 12 and Dartberg v Wealthcare at [21]-[22] per Middleton J. 49 Adapted to the circumstances of this case, the question is whether the operation of the Corporations Act, and Part 9.4B in particular, would so reduce the operation of s 6 of the CNAL Act that the provisions of the Corporations Act are irreconcilable with the other law. 50 In my opinion, it is reasonably arguable that the answer to that question is no and that is sufficient to deal with this application. I could decide the point, but I am not disposed to do so because the point is a complex one and there are other points of law involved in the application such as whether the CNAL Act applies to Mr Ferraretto's cross-claim. I refer to the earlier discussion of this point. 51 The Corporations Act does not address the issue of contribution. The nomination of the particular parties who may bring an action under s 1317H of the Corporations Act is not necessarily inconsistent with one of the defendants in an existing action seeking contribution. Nor does the ability of a defendant to seek relief from liability mean that the Corporations Act otherwise provides. A defendant may claim relief from liability under s 1317S of the Corporations Act and in the alternative, contribution against a third party. If his or her claim under s 1317S succeeds, then the claim for contribution falls away. If it does not succeed, then the claim for contribution proceeds. 52 There is authority of the Supreme Court of New South Wales to the effect that in the case of multiple defendants to an application for compensation under s 1317H of the Corporations Act, it is open to the Court not to make a compensation order against a defendant whilst at the same time not exonerating him or her. It is not open to the Court to award different amounts of compensation reflecting the responsibility as between defendants. That is the function of contribution proceedings (Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 (ASIC v Adler) at [116]-[124] per Santow J). There is authority in which the Court, relying on a State Act dealing with contribution, has ordered contribution in relation to an award of compensation under s 1317H of the Corporations Act, although the point now in issue was not argued (Digital Cinema Network Pty Ltd v Omnilab Media Pty Limited (No 2) [2011] FCA 509 (Digital Cinema Network v Omnilab) at [226]-[227] per Gordon J). 53 Mr Ferraretto relied heavily on the decision in Australian Securities and Investments Commission v Loiterton & Ors [2004] NSWSC 897; (2004) 50 ACSR 693 in which Bergin J (as her Honour then was) decided that in appropriate circumstances, an award of part of the compensation for damage suffered by a corporation could be made under s 1317H. Her Honour discussed the extent (if at all) such an approach would in effect be apportioning liability. Her Honour said (at [110]-[112]): On the basis that Santow J's approach in Adler is correct, I am not satisfied that an inability to apportion the liability for compensation, is an impediment to making an order for payment of part of the amount claimed. The Court has a discretion whether to make an order for compensation and if it decides to make such an order, it has a discretion as to the amount that is ordered to be paid. It has been submitted that because the other defendants are bankrupt and the plaintiff has not sought leave to proceed against them for an order for compensation, it would be "unjust" to order the total amount of compensation to be paid by Sapier simply because he is the only defendant who is not bankrupt. This submission has some force. Proportionate liability is of course a reality in certain circumstances in relation to loss caused by misleading and deceptive conduct: (Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004; see also Associate Professor Barbara McDonald's paper Proportionate Liability: Practical Implications of the Reforms, Sydney University, 8 September 2004, Commercial Law Seminar Series) but the capacity to apportion liability in this case is not a matter necessary for decision, particularly having regard to the Court's discretion in relation to the amount to be awarded. It seems to me that once it is recognised that the Court has a discretion in relation to the amount of compensation to be paid it is not limited to the choices of awarding "all or nothing". It may appear that the Court is apportioning liability when it orders only part of the amount of compensation claimed to be paid by a particular defendant, however it is not apportioning liability, it is making an award on the basis that the damage or loss resulted from contravening conduct and taking into account the relevant circumstances in deciding whether the defendant may be excused from paying the whole of the amount claimed. I am satisfied that notwithstanding his facilitative role, the loss or damage suffered by the company occurred as a result of the approvals and payments of the April and December dividends and Sapier was a party to that conduct in the manner described. In exercising my discretion I am taking into account the matters that would probably be taken into account if proportionate liability were being considered. These include the nature of the role played by Sapier and his far less significant role than JBL and Hall generally in the affairs of Clifford and CCL and particularly in relation to the limited knowledge that he had about the other false profits from which the dividends were paid. These are matters that persuade me that that the defendant should not have to pay the whole amount claimed. I am satisfied that in all the circumstances of this case as outlined in the liability judgment and above, a just and equitable amount of compensation to be paid by Sapier is $120,000. If I am wrong in the approach that I have taken to the Court's capacity to award only a proportion of the amount claimed and the choices are really to award all or nothing, then I would have refused to award any compensation to be paid by Sapier having regard to the matters I have outlined above in relation to Sapier's contravening conduct. 54 The point which Mr Ferraretto makes is that if the approach in ASIC v Loiterton is correct, then there is no room for contribution legislation. 55 The extent to which the approach in ASIC v Loiterton is consistent with Middleton J's reasoning in Dartberg v Wealthcare Financial (at [33]) may well be the subject of further debate. It seems to me that reference to these authorities illustrates the complexities in this area and that the arguments raised by Mr Steele are at least reasonably arguable. Contribution orders under State legislation were made in Digital Cinema Network v Omnilab (although the question of power was not argued), assumed as open in ASIC v Adler and applied in Bialkower v Acohs (albeit in the context of a claim for damages under s 82 of the Trade Practices Act 1974 (Cth) for a contravention of s 52). The point is reasonably arguable. 56 I do not consider that there is anything in Mr Ferraretto's other points which suggest that Mr Steele's contentions are not reasonably arguable. The fact that the claims against Mr Steele by Solar Shop are both apportionable and non-apportionable is a complicating circumstance, but there is nothing inherent in that circumstance that means that the Corporations Act reduces the ambit of the CNAL Act. The same can be said of Mr Ferraretto's example concerning discovery where a disqualification order is sought. 57 I would add that had the issue been analysed under s 109 of the Constitution, the same conclusion would follow. It is certainly reasonably arguable that s 6 of the CNAL Act can apply without any suggestion of inconsistency. Nothing I have said is contrary to the decision of Middleton J in Dartberg v Wealthcare. Mr Steele accepts that the apportionable liability provisions in the CNAL Act (s 8) would not be picked up in the case of an application under s 1317H of the Corporations Act, but that is not the issue in this case.

Equitable Contribution 58 Mr Ferraretto seemed to argue at one point that the CNAL Act excluded the doctrine of equitable contribution, but did not itself apply. I cannot see how that is so. As I understand it, Mr Steele's claims for contribution under the CNAL Act and by reference to the doctrine of equitable contribution are put in the alternative. Mr Steele is entitled to put claims in the alternative and I do not need to consider whether the two bases of contribution could apply in the one factual situation. 59 The doctrine of equitable contribution has been considered by the High Court in recent times in Burke and Another v LFOT Pty Ltd and Others (2002) 209 CLR 282 (Burke) at [14]-[22] per Gaudron A-CJ and Hayne J, at [52]-[54] per McHugh J; Friend v Brooker and Another (2009) 239 CLR 129 at [38]-[39] per French CJ, Gummow, Hayne and Bell JJ; and in HIH Claims Support Limited v Insurance Australia Limited (2011) 244 CLR 72 at [43]-[48] per Gummow A-CJ, Hayne, Crennan and Kiefel JJ. 60 The authorities have moved from emphasising the need for a common obligation to the need for co-ordinate liabilities. The authorities establish that the liabilities can have a different source, for example, one in contract and the other in statute, but they must be of the same nature and extent. Gaudron A-CJ and Hayne J in Burke did not need to consider the relevance of the degree of culpability and causal significance. Natural justice is at the heart of the principle and sometimes a claim can be dismissed because it offends this notion (see Burke). The authorities establish that it is not enough to show that somebody's payment has operated to the benefit of another person. 61 Mr Ferraretto's submissions as to equitable contribution can be seen as falling into two categories. First, he submitted that there is no common obligation between Mr Steele and himself. Mr Steele was being sued for his conduct as a director, whereas he was being sued for his conduct as a vendor. Furthermore, each of them are alleged to have had involvement in the relevant transactions at different times. It seems to me that the answer to those submissions is that, for the purposes of this application for summary judgment, the issue can only be approached at a fairly high level of generality and at that level, there appears to be a common obligation, being an obligation not to be involved in a contravention of the relevant sections of the Corporations Act. To the extent that the facts may inform the content of the obligations and whether they are common obligations or co-ordinate liabilities for the purposes of the doctrine of equitable contribution, the determination of the facts is a matter for trial. 62 The second category of submissions is similar to the first in that it relates to the issue of whether there is a common obligation or co-ordinate liabilities but focuses on the provisions of the Corporations Act and the authorities to suggest that this requirement is not met. Reference was made to the power to reduce the compensation awarded under s 1317H and the power to relieve from liability in s 1317S of the Corporations Act. It seems to me that there are two answers to this category of submissions. First, those provisions do not effect whether the obligation of Mr Ferraretto and Mr Steele is the same, although they might affect the consequences of a breach in any particular case. Secondly, the potential to affect the application of the doctrine is not sufficient and one would have to wait and see whether the doctrine could be applied, having regard to the facts found at trial.

Conclusion 63 The second cross-respondent's interlocutory applications dated 21 April 2017 should be dismissed. I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

SCHEDULE OF PARTIES SAD 215 of 2016 Cross-Defendants Second Cross-Respondent in each Cross-Claim ADRIAN FERRARETTO