YY A Practice and Procedure - appeal against decision of judge of Northern Territory Supreme Court upon inquiry into liquidator's conduct - whether appeal which challenges court findings not included in formal order of the Court an appeal against a "judgment, decree or order" under s.24 of the Federal Court Act - consideration of nature of inquiry under sub-s.278(2) of Companies Act (N.T.) - whether adverse findings concerning conduct or credibility of a person neither a party nor a witness appealable - comments upon scope of appellate power of Federal Court generally Words and Phrases - "judaqment, decree or order" Federal Court of Australia Act 1976 ss.4, 24 Constitution, s.73 Companies Act (N.T.) s.278 LAURENCE CHEONG AH TOY v. REGISTRAR OF COMPANIES FOR THE NORTHERN TERRITORY No. NTG 1 of 1985 TOOHEY, MORLING & WILCOX Jd. PERTH 5 JULY 1985 IN THE FEDERAL COURT OF AUSTRALIA ' NORTHERN TERRITORY OF AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION JUDGES MAKING ORDER DATE OF ORDER WHERE MADE No. NTG 1 of 1985 ~~~ vy~r~e ON APPEAL FROM THE SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA IN THE MATTER of the Companies Act and IN THE MATTER of Day & Dent Constructions Pty. Ltd. (In Liquidation) and IN THE MATTER of a Report by the Registrar of Companies pursuant to Section 278 of the Companies Act of the Northern Territory (as amended) and LAURENCE CHEONG AH TOY Appellant and REGISTRAR OF COMPANIES FOR THE NORTHERN TERRITORY Respondent MINUTE OF ORDER Toohey, Morling & Wilcox JJ. 5 July 1985 Perth THE COURT ORDERS THAT: Sub-varaqraphs l(e), (f£), (a), (Ch), (k), (1), (m) and (n) of the supplementary notice of appeal be struck out as incompetent. The costs of the respondent's motion be reserved to the Full Court before whom the appeal is heard. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules IN THE FEDERAL COURT OF AUSTRALIA NORTHERN TERRITORY OF AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. NTG 1 of 1985 ON APPEAL FROM THE SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA IN THE MATTER of the Companies Act and IN THE MATTER of Day & Dent Constructions Pty. Ltd. (In Liquidation) and IN THE MATTER of a Report by the Registrar of Companies pursuant to Section 278 of the Companies Act of the Northern Territory (as amended) and LAURENCE CHEONG AH TOY Appellant and REGISTRAR OF COMPANIES FOR THE NORTHERN TERRITORY Respondent CORAM: TOOHEY, MORLING & WILCOX JJ. 5 JULY 1985 REASONS FOR JUDGMENT THE COURT The Court has before it a motion by the respondent to an appeal that the appeal be struck out as incompetent. The respondent has filed grounds of incompetency which read: 'l. The appeal 1s not an appeal from a judgment of the Court nor from the Supreme Court of a Territory. 2. The findings appealed from and referred to in paragraphs l(c), (d), (e), (f), (g), (hh), (i), (3), (kK), (nm) and (o) are not relevant to and nor do they form part of any judgment of the Supreme Court of the Northern Territory of Australia". The appeal to this Court arises from an inquiry conducted by the then Chief Justice of the Supreme Court of the Northern Territory, pursuant to s.278 of the Companies Act (N.T.), into the conduct of Laurence Cheong Ah Toy. Mr. Ah Toy was first provisional liquidator and thereafter liquidator of Day & Dent Constructions Pty. Ltd. The inquiry originated from a report to the Supreme Court by the Registrar of Companies containing matters which, in the Registrar's opinion, constituted misfeasances, neglects and omissions by Mr. Ah Toy in the course of the provisional liquidation and later in the liquidation of the company. On 27 November 1984 the Chief Justice delivered lengthy reasons for judgment in the course of which he made a number of findings adverse to Mr. Ah Toy. To give effect to the reasons of the Chief Justice the respondent extracted what was described as an order. The document contains a preface which begins "UPON INQUIRY" into the matter commenced bv summons filed by the Registrar of Companies, continues "AND UPON HEARING" with a reference to counsel and concludes with the words "IT IS ORDERED". There follow four paragraphs in these terms: "IT. THAT Ah Toy make aqood the loss to the estate of the company of $21,840.88 occasioned by taking the appeal with respect to the action aqainst North Australian Properties Pty. Ltd. to the Hiagh Court without the support of a firm opinion. 2. THAT Ah Toy make good the loss' to the estate of the company of $3,504.54 being the legal costs and liquidator's fees eccasioned by placing North Australian Properties Pty. Ltd. in provisional liquidation. 3. THAT Ah Toy make good the loss to the estate of the company of 6§20,554.69 being remuneration improperly paid to Price Waterhouse with respect to the work of the liquidation. 4. THAT there be liberty to each of the Registrar and Ah Toy to apply to bring the enquiry on again on seven days notice to the other". There was some correspondence between the solicitors for the appellant and the Master of the Supreme Court concerning the form of the order: it is apparent that the solicitors, having in mind an appeal, were concerned that the document should be described as a judgment. Since s.4 of the Federal Court of Australia Act 1976 defines "judgment" to mean "a judgment, decree or order, whether final or interlocutory, or a sentence", nothing would seem to turn on whether the document extracted is described as an order or a judgment. By reason of s.24 of the Federal Court Act, this Court has jurisdiction to hear and determine: "€a) appeals from judgments of the Court constituted by a single Judge; (b) appeals from judgments of the Supreme Court of a Territory; and (Cc) ween It 1s clear that there can be no appeal in the present Matter except from a judgment of the Supreme Court of the Northern Territory. Section 278 of the Companies Act contemplates that the Court will inquire into the conduct of the liquidator but it is apparent from sub-s.278(2) that the Court may do more than make findings. The sub-section empowers the Court to "order the liquidator to make good any loss which the estate of the company has sustained thereby" i.e. by reason of any misfeasance, neglect or omission. It further empowers the Court to make "such other order as it thinks fit". The Chief Justice viewed the proceedings before him as adversary proceedings between the Registrar and Mr. Ah Toy. He did so notwithstanding that s.278 speaks of an inquiry. A similar view was taken in Commissioner for Corporate Affairs v. Harvey C1980] V.R. 669. At p.686 Marks J. said: "On a superficial reading, s.278 appears to place a unique responsibility on the Court arquably analogous to that which prevails in the courts of Europe. But I do not think it does. 'Inquiries' are commonly held in our courts, although rarely directed to be initiated and conducted by 'the Court'. Nevertheless I think that 1f the legislature intended any fundamental departure from our entrenched fact finding process, via the 'adversary' system, it might be expected to have used clear words to that effect. Section 278 does not". We see no reason to differ with that approach. The notice of motion seeks an order that the appeal be struck out as incompetent and draws no distinction between particular parts of the notice of appeal. That distinction is drawn only in the grounds of incompetency to which we shail refer later in these reasons. Expressed in a summary way, the findings referred to in the notice of appeal are as follows: (a) It was negligent of Mr. Ah Toy as liquidator to appeal to the High Court in a matter relating to Day & Dent Constructions Pty. Ltd. and the company thereby suffered a loss of $21,840.88. (b) It was wrong and unnecessary of Mr. Ah Toy as liquidator to place North Australian Properties Pty. Ltd. into liquidation and Day & Dent Constructions Pty. Ltd. thereby suffered a loss of $3504.54. (c) No power was given in the order appointing Mr. Ah Toy as provisional liquidator to appoint Price Waterhouse, chartered accountants, as his agent. (d) It was wrong of Mr. Ah Toy as liquidator to appoint Price Waterhouse as his agent. (e) There was an attempted fraud on the creditors of Day & Dent Constructions by Mr. Barber or Mr. Webb (who were both employees of Price Waterhouse) in the sum of $489. (f) Fees amounting to $7,343.80, appropriated by Price Waterhouse, were appropriated during the course of the provisional liquidation without the remuneration of the provisional liquidator having been determined by the Court. (qa) Only §7,000 with interest had been repaid by Price Waterhouse so there was a loss to the estate of the company. (h) Mr. Webb be censured for failing to give reasons in writing for the rejection of a proof of debt. (1) In charging the estate of the company with $127 for penalty fees for late filing of statutory returns, Mr. Ah Toy as liquidator committed a fraud on creditors of the company. (j) Mr. Ah Toy, as liquidator, should have sought legal advice as to possible claims against Mr. and Mrs. Day with respect to shares held by the company in the issued capital of North Australian Properties Pty. Ltd. (k) Mr. Gort, also an employee of Price Waterhouse, be censured. (1) Remuneration of $20,554.69 was improperly paid to Price Waterhouse for work done in the liquidation. {m) There was an impermissible loss to the estate of the company of $20,554.69. (n) The Supreme Court make recommendations and give advice, opinions and directions to the Attorney General of the Northern Territory of Australia concerning Mr. Ah Toy, Mr. Barber and Mr. Webb. (o) Mr. Ah Toy, as liquidator, was guilty of misfeasance, neglect or omission within the meaning of s.278 of the Companies Act. The grounds of incompetency attack the appeal in its entirety. It is apparent from submissions made by counsel for the respondent that the basis of this attack is that the notice of appeal does no more than challenge findings made by the Chief Justice which, 1t 1s said, were mo more than steps in his reasons for judgment. The respondent conceded that the orders made by the Chief Justice directing the appellant to make good specified eh Fal este wate a te oe : Nha pn A en ent tt a a on "I loxses wer? amenanie to challenaqe bv way of appeal in this Court. But the respondent''s argument was that the appellant had not challenqed those orders: instead he had challenged only findings made in the course of the reasons for judgment. The second ground of incompetency, which the Court was asked to regard as distinct from and as an alternative to the first ground, excludes from its attack paras (a), (b), (1) and (m) of the notice of appeal. The reason for their omission is that they relate to the money sums which form part of the Chief Justice's order. During the course of submissions the Court asked counsel for the appellant why the orders made by the Chief Justice were not the subject of direct challenge in the notice of appeal rather than findings which led to the making of those orders. While not conceding that the notice of appeal was defective, counsel sought leave to amend the notice by including a challenge to orders 1, 2 and 3 made by the Chief Justice. In those circumstances 1t might be expected that the appellant would at the same time seek to delete from the notice of appeal paras (a), (b), (1) and (m) since they would add nothing to the challenge made to the orders themselves. However this was not done. Counsel for the respondent did not object to the amendments sought as such but he was concerned lest in some way the retention of paras (a), (b), (1) and (m) might stand in the way of his attack on the competency of the appeal generally. In our view the amendments sought by the appellant should be allowed. It cannot be said that they take the <u respondent bv surprise for they do no more than make a direct challenge to orders made by the Chief Justice where findings which form the basis of those orders are already the subject of appeal. The amendments do no more than make clear what might otherwise be obscure. In qranting leave we reserve to the Full Court before whom the appeal is heard the question of any costs arising from the amendments. There can be no doubt as to the appellant's entitlement to challenge orders 1, 2 and 3 of the orders made by the Chief Justice. To that extent then the appeal is competent. A question arises whether in that event this Court should at this stage concern itself with particular paragraphs of the notice of appeal or whether it should leave arguments as to the competency to the Court by whom the appeal is heard. There is nothing to be gained by spending time on a consideration of paras (a), (b), (1) and (m) for these may be regarded as subordinate to the challenge introduced by the amendments. However that leaves a number of paragraphs, some of which relate directly to the appellant as liquidator and some of which do not. The Court was invited to examine the competency of paras. (c), (dad), (e), (£), (g), (h), (i), (3), (K), (nm) and (0) of the grounds of appeal. Counsel for both parties submitted that, 1f all or some of these grounds were held to be incompetent, the time taken in the hearing of the appeal would be considerably shortened with a consequent saving of expense. We have decided, with some misgivings, to accede to this request though, as we Pointea out to sounsel, special Leave to appe may be sought against our decision in which the substantive appeal will he delaved. al to the High Court event the hearing of Sub-section 278(1) of the Companies Act is in terms that the Court: ".,» shall take cognizance of liquidators and, if a laiqui faithfully perform his duties prescribed requirements, the the rules or the requirements if any complaint is made to t creditor or contributory or b regard thereto, the Court sha the matter and take such acti fit". Sub-section 278(2) reads: "(2) The Registrar or the Boar the Court any matter whic the conduct of dator does not and observe the requirements of of the Court or he Court by any y the Board in 11 enquire into on as it thinks d may report to h in his or its opinion is a misfeasance, neglect or omission on the part of and the Court may order the liquidator the liquidator to make good any loss which the estate of the company has sustai make such other orders fit". The scope of the inquiry and of the ned thereby and as it thinks orders a court may make are wide. We see no reason to disagree with the remarks of Marks J. in Commissioner for Corporate Affairs "Tt is clear that the inquiry to matters raised inthe re v. Harvey at 688: is not confined port or in any affidavit supportive of an application. I think that where other aspects of the liquidator's conduct emerge in the course of an inquiry then any embarrass be met in the usual way by ment to him can permitting any necessary adjournments and giving of directions". le. Again, we agree with Marks J. at p.689 of his tudagment: "It follows that once the Court is apprised of any matter bearing on the conduct of a liquidator 1t has odurisdiction to inquire unto that conduct and the ambit of inquiry 1s for the Court to determine. That ambit may well include, if the Court considers it prudent to do so, inquiry into other liquidations, current or complete, with which the liquidator is or has been concerned". Nevertheless 1t is important not to lose sight of the fact that 1t is the conduct of the liquidator with which the Court is concerned and the power of the Court to make "such other order as it thinks fit" must relate to the conduct of the liquidator. An inquiry under s.278 is something of a hybrid since it may result in orders against a liquidator to make good any loss which the company has sustained by reason of his misfeasance, neglect or omission. But the starting point for a consideration of the competency of this appeal must be, not' s.278, but s.24 of the Federal Court Act. Unless there is a "judgment, decree or order", there 1s nothing against which an appeal may be brought. Section 24 is "the substantive section conferring upon this court jurisdiction to hear appeals from the Supreme Court of a Territory ..." Kovac v. R. (1977) 15 ALR 637 at 643. It 1s accepted that the expression "judgment, decree or order" bears the meaning which the words "all judgments, decrees, orders ..." have in s.73 of the Constitution. Moller v. Roy (1975) 132 CLR 622 per Barwick C.J. at 625. In that case Mason J., speaking of s.46 of the Northern Territory Supreme Court Act 1961, said at 639: "However, I see no alternative but to give the word 'judgment' as i1t appears in 5.46 its accepted legal meaning, that is, the formal order made by a court which disposes of, or deals with. the proceeding then before it - see Reg. v. Ireland (1970) 126 CLR 321 at 330; Lake v. Lake £19551 P.366 at 343-344, Any other view would, I think, disregard the Slmilarity between the provisions of s.46 and those of s.35 of the Judiciary Act which are so obviously based on the provisions of s.73 of the Constitution where the word 'judgments' is used in the same sense". It is helpful to refer to some other dicta dealing with the meaning of "judgment". Thus: "In a proper use of terms, the only judgment given by a court is the order it makes. The reasons for judgment are not' themselves judgments though they may furnish the Court's reason for decision and thus form a precedent". (Barwick C.J. in Req v. Ireland (1970) 126 CLR 321 at 330) "The word 'judgments' in this connexion Ca reference to s.73 of the Constitution] refers only to operative judicial acts, and is not used, as it often is in other contexts, asa convenient abbreviation for reasons for judgment". (Barwick C.J. and Kitto J. in Driclad Pty. Ltd. v. Federal Commissioner of Taxation (1968) 121 CLR 45 at 64). "It is of the essence of a judgment within the meaning of the Constitution that it is binding upon parties and definitive of legal rights. It is not enough that the judge or Court exercises a jurisdiction of the Supreme Court in a matter judicial in its substance. The judqe or Court must authorizedly give a binding judqment which determines or settles rights". (Barwick C.J. in Minister for Works (W.A.) ve. Civil and Civic Pty. Ltd. (1966-1967) 116 CLR 273 at 277). - - - es - : met era awe "Nothing which Mr. Laughton-Scott brought to our attention from the cases which he mentioned persuades me that by the words 'judgment or order' inthe rule, or where they occur in the Judicature Act, 1925, is meant anything other than the formal judgment or order which 1s drawn up and disposes of the proceedings, and which, in appropriate cases, the successful party is entitled to enforce or execute. In other words, I think there is no warrant for the view that there has by statute been conferred any right upon an unsuccessful party, even if this wife can be so described, to appeal from some finding or statement - I suppose it would include some expression or view about the law - which may be found in the reasons given by the judge for the conclusion at which he eventually arrives, disposing of the proceeding". (Evershed M.R. in Lake v.Lake C1955] P.336 at 343-344) In Lake v. Lake a husband petitioned for divorce on the grounds of his wife's cruelty and adultery. By her answer the wife denied both charges, pleading in the alternative that if she had committed adultery it had been condoned. She cross-petitioned for a decree of judicial separation on the ground of her husband's cruelty. The commissioner dismissed the petition, pronouncing in his formal order that the charges were not sufficiently proved and that the wife had not sufficiently proved the contents of her answer. The Court of Appeal held as incompetent an appeal by the wife against a finding which she alleged the commissioner had made, in giving the reasons for his judgment, that she had committed adultery. These dicta make it clear that reasons for judgment are not of themselves judgments, that a judgment must be binding upon parties and definitive of their leaal rights and that a judgment is the formai order whereby a court disposes of the matter before ut. It 1s not enough that, in conducting an inquiry under s.278 of the Companies Act, the Chief Justice was exercising judicial powers; it mav be accepted that he was doing so. The question rather is whether what the appellant seeks to appeal against, in the various paragraphs of his notice of appeal, is a judgment of the Supreme Court of the Northern Territory. Applying these principles to the case in hand, we are of the opinion that those findings in the notice of appeal relating, not to the liquidator, but to others do not constitute part of the judgment of the Court. Those findings are expressed in paras (e), (£), (gq), (h), (k), (1), (m) and in part of (n). It 1s not uncommon for a judge, in the course of his reasons for judgment, to comment adversely on the actions of someone who is not a party to the proceedings or to comment adversely on the conduct and credibility of a witness who is not a party. Where the person concerned 1s neither party nor witness, any such criticism must be expressed with restraint and only to the extent that it is necessary in the course of making relevant findings, for sucha person has no right to defend himself. In the present case the findings to which we have just referred constitute a serious criticism of Price Waterhouse and of its employees Messrs. Barber, Webb and Gort. Indeed, 1n the case of Messrs. Webb and Gort, his Honour seems formally to have censured them ina way that goes beyond mere criticism of their conduct. Nevertheless those findings are not part of the orders made by the Court and they are not findinas which are definitive of legal rights. The findings in paras (c). (d), (1), (3), (n) an part, and (0) concern the appellant as liquidator. While those findinags have not been incorporated in the formal judgment of the Court, they are all, with the exception of (n), matters that might fairly be the subiect of declaratory relief and in truth this is the part thev have played in his Honour's reasons for judgment. It was the conduct of the appellant as liquidator that was the subject of the inquiry and it was the conduct of the appellant as liquidator that constituted a number of findings of the Chief Justice. In our view those findings purported to determine the rights and obligations of the liquidator who was undoubtedly a party to the inquiry. In our further view the notice of appeal, so far as it attacks those findings, attacks the judgment of the Court. Paragraph (n), even in its relation to the appellant, is inchoate and we assume that no action will be taken under the paragraph without notice to the appellant. At a late stage of the hearing of the appeal, counsel for the appellant sought to add a further ground of appeal, that in making the findings in paras (e), (f), (9g), (nh), (kK) , (1), (m) and (n) "The learned Trial Judge exceeded his jurisdiction". The application was made following some discussion between the bench and counsel as to the difficulties of challenging on appeal findings adverse to a witness who was not a party to the proceedings in question. The application was opposed by counsel for the respondent. The pasis for attacking these findinas as bevond jurisdiction was said to be the judqment of thrs Court in Duralla Pty. Ltd. v. Plant (1984) 2 FCR 342 and the decisions of the High Court 1n Ah Yick v. Lehmert (1905) 2 CLR 593 and Chamberlain v. The Queen (1984) 58 ALJR 133. In Duralla Pty. Ltd. v. Plant at 350 Smithers 7., with whom Northrop and Beaumont JJ. agreed, said in relation to para.24(1)(b) of the Federal Court Act that the grant of a general appeal "was intended to enable the Full Court of the Federal Court to 'entertain any matter, however arising, which shows that the decision of the court appealed from is erroneous' ". The words quoted by Smithers J. were words used by Griffiths C.J. in Ah Yick v. Lehmert at 601 and adopted by Gibbs C.J. and Mason J. in Chamberlain v. The Queen at 137. Griffiths C.J. continued in Ah Yick v. Lehmert with these words: "The error may consist in a wrong determination of a matter properly before the Court for its decision, or 1t may consist in an assertion by that Court of a jurisdiction which it does mot possess, or it may consist in a refusal of that Court to exercise a jurisdiction which it possesses". In our view the criticism by the Chief Justice of Price Waterhouse and of Messrs. Barber. Webb and Gort was not an exercise of jurisdiction that he did not possess for it was not an exercise of jurisdiction at all. While it seems that his Honour attached some significance to his formal censuring of Messrs. Webb and 'jo%t, We are not able te reqard the cersureées as an exercise ar Jurisdiction; thev are tindinags adverse to those gentleman but which do not arfect their legal rights. In saying this we are conscious of the implication that such findings mav have for their qeneral reputation and in particular their reputation as accountants. This 1% unfortunate and it 1s hardlv necessarv to add that nothing in the reasons tor iudgment of this Court affirms or in any wav comments upon the correctness of his MHonour's findinas. Those matters are not before this Court on the present application. We therefore think that we should not accede to the application to add the further ground of appeal that the learned trial judge exceeded his jurisdiction. It 1s a consequence of these reasons for judgment that sub-paras l(e), (f), (9g), (nh), (k), (1), (m) and (n) of the notice of appeal are incompetent and should be struck out. I certify that this and the fifteen preceding pages are a true copy of the joint reasons for judgment herein of their Honours Mr, Justice Toohey, Mr. Justice Morling and Mr, Justice Wilcox, ae Associate Dated: 9 vedly , 1985