Tran v Commonwealth

INTRODUCTION 1 Mr Deppeler and Mr Cooper are experienced insolvency practitioners. 2 Their registrations as liquidators expired earlier this year because, through inadvertence, they did not renew their registrations by the due date, which in their case was 3 May 2017. On 6 July 2017, the Court made an order under s 20-70(2) of Sch 2 to the Corporations Act 2001 (Cth) (Corporations Act) extending the time within which each of them was permitted to apply to the Australian Securities and Investments Commission (ASIC) to have their registrations as liquidators renewed: see Deppeler, in the matter of Deppeler [2017] FCA 768. 3 Mr Deppeler and Mr Cooper also sought an order that, subject to ASIC renewing their registration as liquidators, the non-renewal of their registration in the intervening period did not affect the validity or effectiveness of their appointments during the period that they were not registered or any actions taken by them in connection with their roles as liquidators or administrators. I adjourned the further hearing of that application (the adjourned application) because it seemed to me that there was doubt about whether the Court had power to make such orders, unless and until the plaintiffs again became registered liquidators, which they then were not: see s 45-1 of Sch 2 to the Corporations Act, which provides in sub-s (1) that "The Court may make such orders as it thinks fit in relation to a registered liquidator" (emphasis added). 4 Mr Deppeler and Mr Cooper made their applications for renewal, which were granted, shortly after the extension of time order was made. Accordingly, ASIC issued certificates, dated 10 July 2017, headed "Certificate of Registration as a Liquidator - Corporations Act 2001", certifying that each of Mr Deppeler and Mr Cooper "is registered as a Liquidator under section 20-30(1) of Schedule 2 - Insolvency Practice Schedule (Corporations) of the Corporations Act 2001", and that their "Period of Registration is: 03 May 2017 to 02 May 2020". 5 I heard submissions in relation to the adjourned application on 4 August 2017. Mr McAloon again appeared for Mr Deppeler and Mr Cooper. Leave was granted to ASIC to make submissions in relation to the issues the subject of the adjourned application. Mr Boston of counsel appeared for ASIC. 6 Having heard those submissions, I made declarations in both proceedings in the following terms: 1. Between 3 May 2017 and 10 July 2017 the Plaintiff is taken to have been registered as a liquidator under Subdivision B of Division 20 of the Insolvency Practice Schedule (Corporations) of the Corporations Act 2001 (Cth) (the Act). 2. The Plaintiff's registration as a liquidator for the period 3 May 2017 to 2 May 2020 is not subject to: (a) the condition expressed at section 1560(2) of the Act (to the effect that an "old Act registrant" must not accept further appointments as external administrator of a company); or (b) section 1560(4) of the Act. 7 I also made orders as to costs and liberty to apply. 8 I told the parties that at a later date I would provide reasons for making the declarations. These are those reasons.

ISSUES 9 The issues that arise involve the proper construction of s 1560 of the Corporations Act. It provides: 1560 Old Act registrant chooses not to renew Application of this section (1) This section applies if an old Act registrant does not apply for renewal of his or her registration under the Insolvency Practice Schedule (Corporations) before his or her period of registration under subsection 1555(1) ends (the expiry day). Old Act registrant may not accept further appointments after registration expires (2) The old Act registrant is taken to be registered as a liquidator under Subdivision B of Division 20 of the Insolvency Practice Schedule (Corporations) after the expiry day, subject to a condition that he or she must not accept any further appointments as external administrator of a company. (3) That condition is a current condition imposed on the old Act registrant. Registration cancelled once current administrations completed (4) On the day immediately after all of the external administrations of companies that the old Act registrant is entitled to carry out in accordance with his or her current conditions ends: (a) the old Act registrant is taken to have lodged a request in the approved form in accordance with paragraph 40-30(1)(f) of the Insolvency Practice Schedule (Corporations) to have his or her registration as a liquidator cancelled; and (b) ASIC is taken to have cancelled the registration under subsection 40-30(1) of the Insolvency Practice Schedule (Corporations). 10 In this case, Mr Deppeler and Mr Cooper, both of whom were, and maybe still are, "old Act registrants", did not "choose…not to renew" (to use the words in the heading to s 1560). They did not renew because of their inadvertence. The first issue, therefore, is whether the transitional provisions in s 1560 have any application in their case, and in any other case in which an insolvency practitioner inadvertently fails or forgets to renew their registration on time. Mr Deppeler and Mr Cooper had initially submitted that the provision did not apply because, on any view of the facts, they did not "choose…not to renew". 11 The second question concerns s 1560(2). Under sub-s (2), an old Act registrant who "does not apply for renewal" is "taken to be registered as a liquidator" after the expiry day, subject to a condition that he or she must not accept any further appointments as external administrator of a company. If, as occurred here, the old Act registrant does accept such further appointments after the expiry date, is such an old Act registrant nonetheless still to be taken to be registered as a liquidator?

The first question 12 Section 5C(2) of the Corporations Act provides that the Acts Interpretation Act 1901 (Cth) (the Acts Interpretation Act) as in force on the date of commencement of s 4 of the Legislative Instruments (Transitional and Consequential Amendments) Act 2003 (Cth) (the Legislative Instruments commencement day) applies to the Corporations Act. That date is 1 January 2005. Section 5C(3) of the Corporations Act provides that amendments made to the Acts Interpretation Act after the Legislative Instruments commencement day do not apply to the Act. 13 Section 13(3) of the Acts Interpretation Act, as in force on 1 January 2005, provided: "No marginal note, footnote or endnote to an Act, and no heading to a section of an Act, shall be taken to be part of the Act". (Section 13(3) was repealed and substituted by item 22 in Sch 1 of the Acts Interpretation Amending Act 2011 (Cth), with effect from 27 December 2011.) 14 Section 15AB of the Acts Interpretation Act, as in force on 1 January 2005, relevantly provided: (1) Subject to subsection (3), in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material: (a) to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; or (b) to determine the meaning of the provision when: (i) the provision is ambiguous or obscure; or (ii) the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable. (2) Without limiting the generality of subsection (1), the material that may be considered in accordance with that subsection in the interpretation of a provision of an Act includes: (a) all matters not forming part of the Act that are set out in the document containing the text of the Act as printed by the Government Printer; … 15 It follows, as Rares J said in Tran v Commonwealth (2010) 187 FCR 54 at [65]: …The heading to a section is not part of an Act, but is extrinsic material which the Court may consider in construing a substantive provision either to confirm that its meaning is the ordinary meaning conveyed by the text of the section taking into account its context in the Act and the purpose or object underlying the Act, or where the meaning is obscure or ambiguous or that ordinary meaning leads to a result that is manifestly absurd or unreasonable … Laemthong International Lines Co Ltd v BPS Shipping Ltd (1997) 190 CLR 181 at 201 per Gaudron, Gummow and Kirby JJ. As Mansfield J has said, a heading can also be used as a brief guide, not necessarily accurate or complete, for the provisions that it introduces: Australian Prudential Regulation Authority v Holloway (2000) 104 FCR 521 at [50]-[51]. 16 In this case, the words "if an old Act registrant does not apply for renewal of his or her registration…before his or her period of registration under subsection 1555(1) ends…" in s 1560(1), are not obscure or ambiguous, and nor does the ordinary meaning of those words lead to a result that is manifestly absurd or unreasonable. The phrase "does not apply" includes, as a matter of ordinary English, an old Act registrant who chooses not to apply, just as readily as one who forgets to apply, or one who did not know of the need to apply. In those circumstances, precisely because the section heading does not form part of the Act, no occasion arises to have any regard to it. There is no warrant - and it would be impermissible as a matter of statutory construction - to read the words "does not apply" as meaning "chooses not to apply". There being no other provision anywhere in the Corporations Act to suggest that Parliament intended the application of s 1560 to be restricted to old Act registrants who "choose…not to renew", that, it seems to me, is sufficient to dispose of the point. As Street CJ said in The Ombudsman v Moroney [1983] 1 NSWLR 317 at 325D-E (Moffitt P agreeing at 333E-F) in relation to marginal notes (which he noted are the same as section headings): Whilst asserting, as I do, the permissibility of turning to an authenticated marginal note to assist in resolving the interpretation of a doubtful or ambiguous section, I fully recognize that, not being part of the Act, it cannot control the meaning of the section. It may well be only rarely that such doubt or ambiguity will arise as will result in useful reference to an authenticated marginal note for its resolution. As Lord Upjohn said in Director of Public Prosecutions v Schildkamp [1971] AC 1, at 28: "…I can conceive of cases where very rarely it might throw some light on the intentions of Parliament just as a punctuation mark."

The second question 17 Sub-sections (2) and (3) of s 1560 provide: Old Act registrant may not accept further appointments after registration expires (2) The old Act registrant is taken to be registered as a liquidator under Subdivision B of Division 20 of the Insolvency Practice Schedule (Corporations) after the expiry day, subject to a condition that he or she must not accept any further appointments as external administrator of a company. (3) That condition is a current condition imposed on the old Act registrant. 18 The issue that arises is what is the consequence of an old Act registrant accepting further appointments after their registration expires, as occurred in this case? 19 The answer to that question, as ASIC submitted, is found in Div 40 of Sch 2 to the Corporations Act. 20 That Division is headed "Disciplinary and other action". Section 40-20 is headed "Automatic cancellation" and provides that the registration of a person as a liquidator is cancelled if the person becomes "an insolvent under administration" or dies. Sections 40-25 and 40-30 respectively provide that ASIC may suspend (s 40-25) or cancel (s 40-30) the registration of a person as a liquidator if: (1) the person is disqualified from managing corporations under Pt 2D.6 of the Corporations Act, or under a law of an external Territory or a law of a foreign country: ss 40-25(1)(a), 40-30(1)(a); or the person ceases to have adequate and appropriate professional indemnity insurance (ss 40-25(1)(b)(i), 40-30(1)(b)(i)) or adequate and appropriate fidelity insurance (ss 40-25(1)(b)(ii), 40-30(1)(b)(ii)) against the liabilities that the person may incur working as a registered liquidator; or (2) the person's registration as a trustee under the Bankruptcy Act 1966 (Cth) has been cancelled or suspended, other than in compliance with a written request by the person to cancel or suspend the registration: ss 40-25(1)(c), 40-30(1)(c); or (3) if the Court has made an order under s 90-15 of the Corporations Act that the person repay remuneration and the person has failed to repay the remuneration: ss 40-25(1)(d), 40-30(1)(d); or (4) the person has been convicted of an offence involving fraud or dishonesty: ss 40-25(1)(e), 40-30(1)(e); or (5) the person lodges a request with ASIC in the approved form to have the registration suspended (s 40-25(1)(f)) or cancelled (s 40-30(1)(f)); or (6) in the case of a person who is a leviable entity (within the meaning of the ASIC Supervisory Cost Recovery Levy Act 2017 (Cth)), the following have not been paid in full at least 12 months after the due date for payment: (a) an amount of levy (if any) payable in respect of the person; (b) an amount of late payment penalty payable (if any) in relation to the levy; (c) an amount of shortfall penalty payable (if any) in relation to the levy. 21 Where ASIC decides under s 40-25 or s 40-30 to suspend or cancel the registration of a person as a liquidator it must provide to that person, within 10 business days after making the decision, a written notice setting out the decision, and the reasons for it: s 40-35(2). The decision comes into effect on the day after the notice is given to the person: s 40-35(3). 22 ASIC may also give a show-cause notice to a registered liquidator. Section 40-40 provides that "ASIC may give a registered liquidator notice in writing asking the liquidator to give ASIC a written explanation why the liquidator should continue to be registered", if ASIC believes, among a variety of other things, that "the liquidator has breached a current condition imposed on the liquidator": s 40-40(1)(e). ASIC does not have the power to suspend or cancel the registration of a person as a liquidator if it believes that he or she has breached a current condition imposed upon the liquidator, without complying with the show-cause notice provisions, contained in ss 40-45, 40-50, 40-55, 40-60 and 40-65. Section 40-45 provides that ASIC may convene a committee to make a decision under s 40-55 whether, among other things, the liquidator should continue to be registered (s 40-55(1)(a)), whether the registration should be suspended or cancelled (s 40-55(1)(b) and (c)), whether the liquidator should be publicly admonished or reprimanded (s 40-55(1)(e)) or whether conditions should be imposed (s 40-55(1)(f) and (g)). If the committee is convened and the matter is referred to it, the committee must report to ASIC its decision in relation to the liquidator (s 40-60) and ASIC must give effect to the committee's decision (s 40-65). 23 Subdivision F of Div 40 permits a person whose registration as a liquidator has been suspended to apply to ASIC for the suspension to be lifted or for the period of suspension to be shortened. Such applications may in turn be considered by a committee, which must then report its decision to ASIC. 24 The consequence of an old Act registrant accepting further appointments after his or her registration expires depends upon the circumstances of each case. What is clear, and critical for current purposes, is that an alleged breach of a current condition imposed on a liquidator, which includes "a condition that he or she must not accept any further appointments as external administrator of a company" within the meaning of s 1560(2), if it is to be the subject of any action by ASIC, must be dealt with by following the show-cause provisions contained in Sch 2: s 40-40(1)(f). Obviously enough, the severity of the penalty, if any is to be imposed, will depend upon the individual circumstances of each case, including any explanation given by the liquidator as to why he or she did accept further appointments as external administrator of a company in circumstances where it was a current condition of their registration under s 1560 that they not do so. 25 As I explained in my reasons for extending the convening period (see Deppeler, in the matter of Deppeler [2017] FCA 768 at [22]), Mr Deppeler and Mr Cooper: (1) made their applications for an extension of time to this Court to apply to have their registrations as liquidators renewed only days after becoming aware of the expiry of their respective registrations; (2) provided a frank explanation of the circumstances giving rise to the need for an extension, which included that, unlike at least one of their partners, they did not receive a reminder or notice in the form that had apparently been provided by ASIC to other liquidators; and (3) are experienced liquidators who had satisfied all of the relevant continuing professional development requirements, had not been the subject of any ethical or related complaints and had all the adequate and appropriate professional indemnity and fidelity insurance. 26 It seems to me, having had the benefit of very helpful submissions from ASIC on the point, that, properly construed, s 1560 does not operate in such a way that the accepting of further appointments as external administrator of a company by an old Act registrant means that the mere acceptance of those appointments has the consequences that he or she is "not taken to be registered as a liquidator". 27 Ultimately, however, ASIC did not oppose the making of the declarations set out at [6] above - which, if I may say so, was very sensible, given that Mr Deppeler and Mr Cooper were the first liquidators who found themselves in this position, that they brought an application seeking to regularise things as soon as they could, and that issues of statutory construction arose for decision. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Callaghan.