BENANA PTY LTD v DEPUTY COMMISSIONER OF TAXATION SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, PRIESTLEY and HANDLEY JJA 23 April 1990, 26 April 1990 [1990] NSWCA 23 PRACTICE and PROCEDURE — Court of Appeal — removal of proceedings to — statement of questions to be decided or determined by — proper procedure for — order by Master that company be wound up — appeal by company to Judge of Division (Young J) — Judge purports to remove "the appeal" to the Court of Appeal — objection to competency of such removal — held: (1) The power of removal of the entire proceedings to the Court of Appeal under s51 is limited, in the case of appeals to appeals under Acts other than the Supreme Court Act, 1970; (2) Accordingly, as the appeal from the Master to the Judge was under that Act, the proceedings could not be removed in their entirety to the Court of Appeal pursuant to s51; (3) In the terms of the order made, Young J had not purported to state specified questions to be decided or determined by the Court of Appeal pursuant to Pt12 Rule 2 SCR; (4) Accordingly, the objection to competency was correct, the matter was not properly in the Court of Appeal and the proceedings should be returned to Young J; (5) In any case, as there were outstanding questions of fact to be determined, any reference to the Court of Appeal was premature. COMPANY LAW — winding up — creditor's petition states that company is indebted to him — whether affidavit deposing to that fact should be admitted pursuant to s82 Supreme Court Act 1970 — whether evidence should be rejected as on the issue critical for the proceedings — whether proceedings based on an overstatement in a notice under s364 Companies (New South Wales) Code invalid — Processed Sands Pty Limited vy Thiess Constructions Pty Limited [1983] 1 NSWLR 384; Re Fabo Pty Limited (1988) 14 ACLR 518 referred to — held: Proceedings not properly referred to the Court of Appeal — returned to Young J for determination of factual questions. EVIDENCE — rules of — relaxation of — when proper. LAW REFORM — Supreme Court Rules — power of single Judge to refer appeal from Master to Court of Appeal — whether power in s51 of the Supreme Court Act ought to be enlarged to permit. Companies (New South Wales) Code s364. Supreme Court Act 1970, s51, s82. Supreme Court Rules, Pt12 Rule 2. Kirby P , PRIESTLEY AND HANDLEY JJA. The question before the Court is what may and should be done in respect of certain proceedings which Young J referred to the Court of Appeal for determination. An Appeal from the Master is referred Master Windeyer, in the Supreme Court, ordered that Benana Pty Ltd (the appellant) be wound up. As appears from the reasons of Young J, he did so in proceedings commenced by the Deputy Commissioner of Taxation (the respondent). The respondent alleged that he was a creditor of the company which had failed to pay a stated debt after notice was served on the appellant pursuant to s364 of the Companies (New South Wales) Code. 2 UNREPORTED JUDGMENTS The appellant appealed from the Master's order. Pursuant to Pt60 Rule 10 of the Supreme Court Rules, that appeal lay to the "Court" meaning the Court constituted by a Judge. It was duly listed before Young J. Only in a number of specified cases does an appeal lie to the Court of Appeal from a decision of the Court in a Division constituted by a Master. See s101(2) and s101(4), s103 of the Supreme Court Act and Pt60 Rule 17 SCR. When the appellant's appeal came before Young J, as also appears from his Honour's reasons for the reference, it seems that one or possibly two matters appeared to his Honour to raise questions of principle sufficiently important to require that they be determined by this Court. We say it so appears, because his Honour did not expressly state any question to be decided or determined which, in the special circumstances, rendered it desirable to make the order of reference. Cf Pt12 Rule 2(1)(b) SCR. Nevertheless, in giving his reasons for what he proposed to do, Young J referred to an application made by counsel for the respondent. This was made pursuant to s82 of the Supreme Court Act 1970. It requested Young J to dispense with so much of the rules of evidence as would preclude the admission into evidence in the proceedings before his Honour of a contested paragraph in the affidavit of the respondent. That paragraph simply stated that the appellant was indebted to the respondent in the sum of $307,023.22. S82 of the Act, so far as relevant, provides: "82(1) The Court may at any stage of the proceedings (a) Dispense with the rules of evidence for proving any matter which is not bona fide in dispute, also with such rules as might cause expense and delay..." Young J referred to the fact that, as disclosed by the Supreme Court Practice, decisions in England and Queensland and in the Federal Court of Australia upon similar but not identical statutory provisions suggested that the Court could not, or should not use s82 of the Act to facilitate proof of the issue critical to the proceedings. See H v Schering Chemicals Ltd [1983] 1 WLR 143; Downs Irrigation Co-op Association Limited v National Bank of Australasia Limited (No 2) [1983] 1 Qd R 475 and Pearce v Button (1986) 65 ALR 83, 90. His Honour expressed a tentative conclusion: "My feeling is that I should apply s82 in this case and admit para 4. But as it is a matter of great public importance and as decisions in England, Queensland and the Federal Court have gone the other way, it seems to me appropriate to refer this matter to the decision of the Court of Appeal so that the law will be clear, not only for these parties, but for everyone." A second controversy then arose before Young J which his Honour then proceeded to recount. It related to the amount of the debt allegedly owing by the appellant to the respondent. It was asserted that the amount was overstated in the notice served pursuant to s364 of the Companies Code. His Honour recorded the appellant's submission that, if the debt were overstated, it was bad. Reliance was placed on the decision of the Supreme Court in Processed Sands Pty Limited v Thiess Constructions Pty Limited [1983] 1 NSWLR 384. However, his Honour acknowledged that the decision in Processed Sands had been expressly not followed in the Supreme Court of Tasmania (see Re Pardoo Nominees Pty Limited (1987) 11 ACLR 573) and in the Full Court of the Supreme Court of Victoria (see Re Fabo Pty Limited (1988) 14 ACLR 518). He expressed the view that, in the area of company law in particular, with common legislation throughout Australia, it was important to seek uniformity of law. This could best be achieved if the "matter" were left to the Court of Appeal "to decide as a matter of principle". URJ — BENANA PTY LTD v DEPUTY COMMISSIONER OF TAXATION (Kirby P) 3 Young J then recorded that, in order that there should be "no misapprehension as to what is happening" that "the whole of the appeal is referred to the Court of Appeal". He concluded: "The only order I make is that in the special circumstances I refer the appeal to the Court of Appeal for determination". Young J directed the respondent to take out a motion for directions in this Court. This was done. The matter came before Mahoney JA, sitting alone, on 9 April 1990. It was then that counsel for the respondent sought leave to file two affidavits in the proceedings relevant to "the substance of the matter". He also foreshadowed a call upon subpoenas returnable in the Court, presumably to secure documentary evidence to be tendered in the appeal from the Master's decision taken to have been referred to the Court of Appeal by Young J. Objection to competency of reference Mahoney JA adjourned the proceedings to 23 April 1990. They then came before the Court as presently constituted. An objection to the competency of the proceedings before the Court was then raised by counsel for the appellant. He said that, in the circumstances shown, Young J did not have the power (at least in the terms in which he acted) to refer the matter to the Court of Appeal. Because the respondent foreshadowed the application to file further evidence and to call for the return of subpoenas, the Court was of the firm view that it was premature for it to embark upon the proceedings referred to it by Young J. If, for example, the respondent were able to place before the Court clear evidence that the appellant was indebted to him and in the precise sum alleged in the notice served pursuant to s364 of the Companies Code, the matters of law and principle which were troubling Young J would evaporate. If the evidence concerned other factual questions, otherwise relevant to the order of the Master under appeal, it was clearly desirable that those factual issues should be decided before this Court embarked upon an exploration of any issues of principle and law then remaining. Certain factual matters had been canvassed before Young J and apparently determined by his Honour on the then evidence. But the respondent wishes now to enlarge that evidence. Subject to the rules governing the admission of fresh evidence on an appeal, the respondent would be entitled to have rulings upon the admissibility of the evidence which he proposes to proffer. It was this state of the evidence which persuaded the Court that it was premature for it to embark upon hearing of the appeal by reference, even if it had power to do so. In other words, even if the objection to competency were overruled and the matter, either on the reference or otherwise, were properly before the Court of Appeal, the Court was of the view that the factual bases of the appeal should first be determined to see whether they removed (or otherwise affected) the issues of principle and law which had moved Young J to make the reference. In these circumstances, it would have been simple for the Court to reject the reference to send the matter back to the Division. However, the objection to the competency of the reference needs to be determined in order to resolve the question of the appropriate order to be made by this Court when returning the matter. This is so because, if the reference by 'Young J was not competent (at least in the terms expressed) his Honour's purported reference was invalid. Notwithstanding his protest to the contrary, his Honour would therefore be, in point of law, still part-heard in the proceedings. In that event, the matter would need to be returned to him in order to complete his function and, if he so determined, properly to refer any question arising to this 4 UNREPORTED JUDGMENTS Court. If, on the other hand, the matter had been properly referred, and the objection to competency of the reference were overruled, the vehicle for return of the proceedings to the Equity Division would acknowledge that Young J had concluded his part in the proceedings. This Court would then simply return the matter to the Equity Division for reassignment by it. What then is the correct position? Grounds of objection and resolution The appellant's argument ran this way. The normal assignment of the appeal, under the rules was, as has been demonstrated, to a single Judge in a Division. It could therefore only properly come before the Court of Appeal by an order exceptionally made pursuant to other provisions of the Supreme Court Act or Rules. The provisions of the Act for removal and remission are found in s51. The subsection relied upon by the respondent, to uphold his Honour's reference of the whole proceedings to the Court of Appeal, was s51(5). That subsection provides: "51(5) Where proceedings by way of appeal or otherwise under any Act other than this Act or proceedings on a stated case, other than a case stated by the Court in a Division, are commenced in a Division - (a) The Court in the Division in which the proceedings are pending, if satisfied that special circumstances exist which render it desirable so to do, may, on application by a - party or of its own motion, order that the proceedings be removed into the Court of Appeal; and (b) Upon an order being made under paragraph (a) the proceedings may be continued and disposed of in the Court of Appeal." Many of the preconditions to the application of the subsection clearly exist in the present case. However, the objection of the appellant relates to the opening words of the subsection. It says that the structure of the subsection contemplates that appeals or other proceedings under the Supreme Court Act must follow the course envisaged by that Act. Only in the case of appeals or other proceedings under Acts other than the Supreme Court Act may such a reference be made. It was argued for the respondent that, in effect, a comma should be placed after the word "appeal" where first appearing in s51(5). If this were done, proceedings by way of appeal were certainly commenced in a Division and so could validly be removed into the Court of Appeal. However, this argument does not bear scrutiny. The subsection proceeds to exclude from the possibility of a reference to the Court of Appeal of a case stated "by the Court in a Division". Thus the structure of the subsection suggests that in respect of proceedings in the Supreme Court, the normal provisions of the Supreme Court Act and Rules should be followed. No doubt this procedure is insisted upon out of deference to the members of the Supreme Court, whether Judges or Masters. It is only in the case of proceedings, by appeal or otherwise or by stated case, commenced otherwise than under the Supreme Court Act, that a fast-track procedure is provided to allow reference to the Court of Appeal. In our view the noun "proceedings" is qualified by the adjectival phrase "by way of appeal or otherwise'. Accordingly, to qualify for reference under s51(5) of the Supreme Court Act, it is necessary to show that the proceedings concerned satisfy the description that they are "under any Act other than [the Supreme Court] Act'. The instant appeal does not satisfy that description. It is an appeal under the Supreme Court Act. It must therefore, subject to what appears below, follow the procedures laid down by that Act and the Rules made pursuant to the Act. That means it must first be completed in a Division before it comes to the Court of Appeal by way of further appeal and then subject to the terms of s101 and s104 of the Supreme Court Act. URJ — BENANA PTY LTD v DEPUTY COMMISSIONER OF TAXATION (Kirby P) 5 There is, a valid way by which proceedings may be removed to the Court of Appeal from a Judge in a Division. S51(8) provides: "51(8) This section does not limit the provision which may be made by the Rules for removal or omission of proceedings." The Rules of the Supreme Court have so provided. By Pt12 R2 it is provided: "2(1) Where any proceedings are commenced in a Division, the Court in the Division in which the proceedings are pending may - (a) In case where the Court makes any order under Pt31 Rule 2 for the decision on a question of law; or (b) In any other case, where the Court states the question to be decided or determined and is satisfied that special circumstances exist which render it desirable to make an order under this subrule, on application by a party (sic) of its own motion, make an order that the proceedings be removed into the Court of Appeal. The appellant contended that Young J had not acted pursuant to this subrule at all. He did not mention it; although that cannot be determinative. Nor did his Honour state "the question to be decided". It is true that his Honour did not formulate, in a way that would be appropriate, the precise "question to be decided". But with a little surgery on his Honour's reasons for judgment such questions might be extracted. They might, for example be: 1. In the circumstances proved, may an order be made under s82 of the Supreme Court Act 1970 to admit into evidence para 4 of the affidavit of Mr Cortese by which it is stated that the appellant is indebted to the respondent in the stated sum even though that evidence is the critical issue in contest in the proceedings? 2. In the event that it is shown that the amount of the debt owing to the respondent by the appellant is in a sum different from that stated in the notice which the respondent caused to be served upon the appellant pursuant to s364 of the Companies (New South Wales) Code, is the notice bad and are the proceedings brought pursuant to the notice thereby invalidated? The Court has said on a number of occasions in relation to the isolation of separate questions to be determined pursuant to an order under Pt31 that the question should be formulated with precision. It is equally desirable that this should be done in the case of questions stated and referred to the Court of Appeal under Ptl2 Rule 2(1)(b). The requirement that a question should be so stated evidences the intention of the Rules that the Court of Appeal should normally play a limited role in the proceedings lawfully commenced in a Division of the Supreme Court. It should normally simply state its answer to the question(s). In many cases it will then take the course contemplated by Part 12 R2(2)(a) and remit the proceedings to the Division "for the determination by trial or otherwise of the proceedings or any question ar_sing in the proceedings". The appellant suggested that Young J had not acted as Pt12 Rule 2 envisages but had concluded the proceedings before him and without the authority of s51 of the Act had removed the proceedings into the Court of Appeal, in their entirety. There is force in this submission. At the conclusion of his reasons, Young J made it plain that it was "the whole of the appeal" which was referred to the Court of Appeal. When he came to make his order, that is what he referred "for determination". He did not purport to refer particular question(s) to be decided or determined. Accordingly, from the language which his Honour used, he appears to have been acting not under Ptl2 Rule 2 but under s51. This conclusion is reinforced by the absence of the specification of particular questions to be decided by this Court. 6 UNREPORTED JUDGMENTS Therefore, whilst we would otherwise have been prepared to formulate those questions from the issues adequately identified in his Honour's reasons, the consideration of the formal orders made by his Honour demonstrate that this will not overcome the difficulty to which the appellant takes objection. Conclusions and orders Young J purported to refer the proceedings to this Court in their entirety. He could only do so pursuant to s51 of the Act. But, as we have shown, that section does not apply to proceedings before a single Judge of the Supreme Court by way of appeal from a Master of the Supreme Court. In such a case only specified questions may be referred pursuant to Pt12 Rule 2. It is possible that the rules should be enlarged so that pursuant to s51(8) a Judge in the position of Young J might refer the whole proceedings. But under the present rules a Judge can only refer questions, and this Young J did not purport to do. Accordingly, the purported reference to the Court of Appeal in the terms expressed by Young J was incompetent. The objection to the competency of the reference must therefore be upheld. The matter, thus, technically remains part-heard before Young J. It should be returned to his Honour to conclude the proceedings commenced before him. It can then safely be left to his Honour to dispose of the factual questions lately raised by the projected application of the respondent to tender fresh evidence and to call on the return of subpoenas. If, at the conclusion of all of the evidence, Young J is still of the opinion that specified questions need to be referred to the Court of Appeal, his Honour may then proceed as Pt12 Rule 2 provides. It may perhaps be worth noting that on 22 May 1990 the Court has listed an appeal in Wichita Pty Ltd v Elders IXL Limited trading as Elders Pastoral Company. That appeal will involve the Court in a consideration of the authority of Processed Sands. As was agreed at the hearing, the costs of the proceedings in the Court of Appeal should be costs in the proceedings before Young J. The orders of the Court are therefore: 1. Return the proceedings to Young J; and 2. The costs of the proceedings in the Court of Appeal to be costs in the proceedings before Young J. Counsel for Applicant: PP STRASSER Solicitor for Applicant: WEISS AND COMPANY Counsel for Opponent: MI BRABAZON Solicitor for Opponent: AUSTRALIAN GOVERNMENT SOLICITOR