Reported Decision : [2000] 18 ACLC 277 New South Wales Supreme Court CITATION : Amann Aviation Pty. Limited & Anor. v. Continental Venture Capital Limited & Ors. [1999] NSWSC 1212 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 1897/96 HEARING DATE(S) : 9th and 10th December 1999 JUDGMENT DATE : 10 December 1999 Amann Aviation Pty. Limited - 1st Plaintiff Martin Russell Brown (Liquidator)- 2nd Plaintiff Continental Venture Capital Limited - 1st Defendant CVC Investments Pty. Ltd. - 2nd Defendant CVC Investment Managers Ltd. - 3rd Defendant Vanda Russell Gould - 4th Defendant John Scott Leaver - 5th Defendant PARTIES : Joseph Paul Sclegeris - 6th Defendant Nigel Cameron Stokes - 7th Defendant Russell Vanda Gould - 8th Defendant Southsea Investments Pty. Ltd. - 9th Defendant Wenola Pty. Ltd. - 10th Defendant Penalton Pty. Ltd. - 11th Defendant Attorney-General for the Commonweath - Intervenor Attorney-General for the State of NSW - Intervenor JUDGMENT OF : Hodgson CJinEq at 1 S. Rares SC/ R. McHugh - Applicants/Defendants COUNSEL : S. Robb QC/M. Jones/J. Clarke - Respondents/Plaintiffs D. Bennett QC/M.Perry/C.Horan - Cwlth.A-G M. Sexton SC/L. Aitken - NSW A-G Nash O'Neill Tomko, Sydney for Plaintiffs SOLICITORS : Henry Davis York, Sydney for Defendants Australian Government Solicitor for Cwlth A-G Crown Solicitor's Office for NSW A-G CATCHWORDS : Corporations - Winding Up - Jurisdiction of Federal Court - Winding up order made without jurisdiction, but not set aside - Whether proceedings commenced by liquidator in NSW Supreme Court can continue. Procedure - Courts - Order by Federal Court that company "be wouind up by this Court" - Meaning and effect of order after lack of jurisdiction established but order not set aside. ACTS CITED : Corporations Law s.58AA Corporations (NSW) Act ss.44, 46 Re Wakim; Ex Parte McNally (1999) 73 ALJR 839 CASES CITED : Acton Engineering Pty. Ltd. v. Campbell (1991) 31 FCR 1 Ogilvie Grant v. East (1983) 7 ACLR 669 at 672. DECISION : Application dismissed with costs IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORAM: HODGSON, CJ in Eq. Friday 10th December 1999 NO. 1897 OF 1996 AMANN AVIATION PTY. LTD. & ANOR. V. CONTINENTAL VENTURE CAPITAL LIMITED & ORS. JUDGMENT HIS HONOUR: introduction 1 On 3 December 1992, the Federal Court of Australia made orders that the first plaintiff, Amann Aviation Pty Ltd, be wound up, and that the second plaintiff, Martin Russell Brown, be appointed liquidator. 2 On 19 April 1996, the plaintiffs filed a statement of claim in these proceedings against various defendants, including Mr Vanda Gould who was a director of the first plaintiff. 3 As a result of proceedings in the High Court in the case of Re Brown: Ex Parte Amann (1999) 73 ALJR 839, an order was made by the High Court on 17 June 1999, and amended on 19 August 1999, prohibiting Mr Brown and others from taking any further steps in the Federal Court under the order for winding up the first plaintiff. 4 I am dealing with a Notice of Motion filed by the defendants in these proceedings on 20 August 1999, seeking an order that these proceedings be dismissed, struck out, or permanently stayed. 5 This application raises two broad issues. Firstly, leaving aside any effect of the Federal Courts (State Jurisdiction) Act (1999) (NSW), does the decision and order of the High Court mean that Mr Brown either is prohibited from pursuing these proceedings or else has no standing to pursue them? Secondly, if yes to that question, is that position overcome by the Federal Courts (State Jurisdiction) Act (1999)? Notice has been given under Section 78B of the Judiciary Act to the Attorneys-General of the Commonwealth and States. There has been intervention by the Attorney General for the Commonwealth and the Attorney General for the State of New South Wales. 6 The only additional facts that I need to note are the following. 7 Amann Aviation Pty Ltd was incorporated in New South Wales and remains incorporated in New South Wales. 8 The actual terms of the relevant Federal Court orders made on 3 December 1992 were as follows: 1. Amann Aviation Pty. Ltd. be wound up by this Court under the provisions of the Corporations Law. 2. Mr. Martin Brown of Coopers & Lybrand, 580 George Street, Sydney, New South Wales, 2000, an official liquidator, be appointed the liquidator of the affairs of the said company. 9 As I have already recorded, on 17 June 1999 the High Court gave its decision in Re Brown: Ex Parte Amann, which is in fact reported along with a number of cases then decided, under the name Re Wakim; Ex Parte McNally (1999) 73 ALJR 839. The only passage in the judgment of the High Court which has particular relevance to this application appears at paragraphs 164 and 165 of the joint judgment of Gummow and Hayne JJ: Mr. Amann's application for certiorari to quash are also out of time. But because he was not a party to the earlier litigation, he is not affected by the same considerations that touch Mr. Gould's application for extension of time. If the time for making Mr. Amann's applications for certiorari is not extended, the orders which it is sought to impugn will stand. But if prohibition goes to prohibit further steps under one of those orders - the order for winding up - a curious result would ensue: an order that the company be wound up by the court would stand, but no step could be taken in the Federal Court to give further effect to it. In our view, prohibition should issue to prohibit further steps in the Federal Court under the order for winding up. It was an order made without jurisdiction and further effect should not now be given to it by that Court. Nevertheless, the order for winding up should not be quashed. It is more than six years since the winding up order was made. During that time, Mr. Brown has acted as liquidator and has incurred expenses in the winding up, including, presumably, costs and expenses associated with this litigation. Of more significance, however, is the consideration that third parties may well have acquired rights that would be affected if the winding up order were now to be quashed. It not having been shown that third parties will not be adversely affected if the winding up order were to be quashed, the discretion to extend the time for applying for certiorari to quash the winding up order should be refused. The other judges of the majority agreed with those passages. 10 Order 3 made by the High Court on 17 June 1999 was in the following terms: On the application of the first-named applicant, order absolute in the first instance for a writ of prohibition prohibiting the respondents from taking any further steps in the winding up of Amann Aviation Pty. Limited (in liq.). 11 A Notice of Motion was brought under the slip rule to vary that order by adding, after the words "any further steps in the" and before the words "winding up of Amann Aviation Pty Limited (In Liq)", the words "Federal Court under the order for". That Notice of Motion was heard on 19 August 1999 by Gaudron J. In the course of hearing the Notice of Motion, her Honour made some remarks which I will set out later. Her Honour acceded to the application and, in the result, the relevant order ultimately made by the High Court was in the following terms: On the application of the first-named applicant, order absolute in the first instance for a writ of prohibition prohibiting the respondents from taking any further steps in the Federal Court under the order for winding up of Amann Aviation Pty. Limited (in liq.). 12 After hearing full argument on the first issue that I identified, I have come to a decision on that issue favourable to the plaintiffs. There has been no suggestion that the remedial Act to which I referred could take away the right and standing of the liquidator to bring these proceedings, if he otherwise had it. If it should turn out in an Appeal Court that I am in error on the first issue, plainly it will be open to an Appeal Court to consider the second issue, whether or not I come to any decision on it. It seems to me that a prompt resolution of this matter is desirable. 13 Mr Bennett QC, Solicitor General for the Commonwealth, and Mr Sexton SC, Solicitor General for the State of New South Wales, both supported the view that if I came to such a decision on the first issue, I need not proceed to consider the second issue. That was opposed by Mr Rares SC for the applicant and Mr Robb QC for the plaintiffs. However, I have come to the view that it is appropriate for me to decide the case on the first issue, without hearing further submissions on the second issue. 14 I have been provided with extensive written submissions by all parties, which I will leave with the papers. I will be brief in referring to oral submissions. 15 I find it convenient to divide the first issue up into three sub-issues. Firstly, what does the order of the Federal Court mean? Secondly, what would be the position now, with the Federal Court's lack of jurisdiction established, leaving aside the effect of the actual order made by the High Court? Thirdly, what is the effect on that position, if any, of the order of the High Court? INTERPRETATION OF FEDERAL COURT ORDER 16 There are two questions that arise in the interpretation of the Federal Court order. First, what is meant by the words "wound up by this Court"; and second, what is meant by the words "under the provisions of the Corporations Law"? 17 Dealing first with the second question, it seems to me plain that the Corporations Law there means the Corporations Law of New South Wales, because it is that Law which deals with the winding up of companies incorporated in New South Wales. 18 Coming to the first question, Mr Rares submitted that what it means is that the Federal Court ordered that the Federal Court itself should, by its officer the liquidator, carry out the ongoing process of winding up the company. He referred me to Ogilvie Grant v East (1983) 7 ACLR 669 at 672, where McPherson J said that it was established that the winding up of a company was an "administration conducted by the court". He also referred me to statements to somewhat similar effect in Franklins Self-Serve Pty Ltd v Federal Commissioner of Taxation (1970) 125 CLR 52 at 69-70 and Deloitte V Touche AG v Johnson (1999) 1 WLR 1605 at 161-162. 19 These cases do plainly establish that winding up by a court is an administration pursuant to an elaborate statutory scheme, conducted under the supervision of the Court by a liquidator who is an officer of the Court; but in my opinion, it is a mistake to say that the whole process of winding up is literally conducted by the Court. 20 The Corporations Law uses the expression "winding up by the Court" in the headings of Part 5.4A and 5.4B. It provides that in certain circumstances, the Court may order a company to be wound up. It gives the Court an extensive role in the subsequent processes of winding up, in relation to such matters as the removal of liquidators, approval of compromises, giving directions to liquidators, staying or terminating the winding up, ordering the delivery of property, making calls on contributories, and fixing a day for proof of claims. There is also provision that some of these powers may (by rules) be given to the liquidator for exercise by the liquidator. 21 However, in my opinion, it is plain that the ongoing process of winding up is actually conducted by the liquidator. In my opinion, it is plain that the liquidator does not act as the Court's agent in doing this. To say that the liquidator is an officer of the Court is not the same as to say that the liquidator is the agent of the Court. Solicitors and barristers are said to be officers of the court in conducting cases in Court, but it would be absurd to say that they are therefore agents of the Court. 22 In this case, the Federal Court appointed a liquidator, and under that order it became the obligation of that liquidator to wind up the company under the supervision of the Court. That, in my opinion, is the effect of the Corporations Law, and the order of the Court was that the winding up be under the Corporations Law. It is for those reasons that I have said that the words "wound up by the Court" do not mean that the Court should actually conduct the process of winding up either by itself or by an agent. 23 The words of the order, "wound up by this Court", could mean that the Federal Court, and the Federal Court alone, is to carry out the Court's supervisory role to which I have referred. However, in the absence of any special reason to make such an order, such an order would plainly have been contrary to s.58AA of the Corporations Law, combined with various provisions of the Corporations (NSW) Act 1990, and in particular ss.44 and 46 of that Act. These sections are in the following terms: 58AA(1) Subject to subsection (3), in this Law: "court" means any court when exercising the jurisdiction of this jurisdiction; "Court" means any of the following courts when exercising the jurisdiction of this jurisdiction: (a) the Federal Court; (b) the Supreme Court of this or any other jurisdiction; (c) the Family Court of Australia' (d) a court to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act. (2) Except where there is a clear expression of a contrary intention (for example, by use of the expression "the Court"), proceedings in relation to a matter under this Law may, subject to the Acts mentioned in subsection (3), be brought in any court. (3) The jurisdiction that courts have in relation to a matter under this Law is dealt with in Part 9 of each of the following: (a) the Corporations Act 1989; (b) the Corporations (New South Wales) Act 1990 of New South Wales; (c) the Corporations (Victoria) Act 1990 of Victoria; (d) the Corporations (Queensland) Act 1990 of Queensland; (e) the Corporations (Western Australia) Act 1990 of Western Australia; (f) the Corporations (South Australia) Act 1990 of South Australia; (g) the Corporations (Tasmania) Act 1990 of Tasmania; (h) the Corporations (Northern Territory) Act 1990 of the Northern Territory. (4) The matters dealt with in those Parts of those Acts include the applicability of limits on the jurisdictional competence of courts. 44(1) This section applies to a proceeding with respect to a civil matter arising under the Corporations Law of New South Wales in a court having jurisdiction under section 42. 44(2) Where it appears to the court that, having regard to the interests of justice, it is more appropriate for the proceeding, or an application in the proceeding, to be determined by another court having jurisdiction in the matters for determination in the proceeding or application, the first-mentioned court may transfer the proceeding or application to that other court. .... 46. All courts having jurisdiction in civil matters arising under the Corporations Law of New South Wales and the officers of, or under the control of, those courts must severally act in aid of, and be auxiliary to, each other in all such matters. 24 It would also have been contrary to the decision of the Full Federal Court in Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1. Although the jurisdiction of the Federal Court asserted in that decision has now been authoritatively negatived by the High Court decision in Wakim, there was, of course, no suggestion that that was the case back in 1992. 25 In that case, a company had been ordered to be wound up by the Supreme Court of Queensland. A creditor applied to the Federal Court for leave to bring proceedings against the company, and also appealed to the Federal Court against a decision of the liquidator. The Full Federal Court held that the Federal Court did have jurisdiction to deal with these applications. Lockhart J, with whom Black CJ and Davies J agreed, held in substance that under the national system put in place in 1989 and 1990, the powers of the Court in respect to a winding up could be exercised by any court with jurisdiction in such matters, not just by the court that made the winding up order. 26 As I noted, it is now established that that decision was wrong in relation to the jurisdiction of the Federal Court, but as I have also said, that was not established then, and the decision remains, in other respects, at the very least, very highly persuasive. If there is any other reasonable interpretation that can be given to the words "wound up by this Court", I would lean very strongly against interpreting an order made by a single judge or registrar as being contrary to the statutory provisions and to a clear decision of the Full Federal Court. 27 The other possible interpretation is that the order simply means that the winding up process is initiated by the Federal Court. That would make the words something of a tautology, but tautologies of that nature are not uncommon. For example, one sometimes finds orders along the lines of order that the company "hereby be wound up" or words to that effect. Given the choice between tautology and error, in this case I would prefer tautology. 28 For those reasons, in my opinion, on its proper construction, the order means no more than the winding up process is initiated by the Federal Court. EFFECT OF LACK OF JURISDICTION 29 The second question is, what the position would now be, with the Federal Court's lack of jurisdiction established but leaving aside the actual order made by the High Court. 30 It is common ground that, although the High Court decision in Re Wakim means that the Federal Court had no jurisdiction to make its order, the Federal Court is a superior court of record, so its order is valid and binding until set aside or quashed. So the situation is, leaving aside the actual High Court order, that this is a valid and binding order that the company be wound up, and a valid and binding order appointing Mr Brown liquidator. The inability of the Federal Court to take any further role in the winding up is now clear, because its lack of jurisdiction has been established. 31 Prima facie in those circumstances, the national scheme and the decision in Acton would suggest that, in relation to a New South Wales company, it would be entirely appropriate that the New South Wales Supreme Court could continue whatever supervisory role was required in the winding up. 32 Mr Rares submitted that the decision in Acton was wrong, and that anyway it cannot apply because the national scheme, including in particular s.46 of the Corporations (NSW) Act 1990. does not apply to the Federal Court. 33 As I have already indicated, it is clear that Acton was wrong in relation to the jurisdiction of the Federal Court; and I accept that the national scheme, including s.46, can no longer be considered as applying to the Federal Court. However, Acton is still at least a highly persuasive authority as to the effect of the scheme as between State courts, and also for the general proposition that a liquidator is not to be considered as an officer exclusively of the Court which made the winding up order. Not only is Acton a persuasive authority on those matters, but I myself respectfully agree with it. 34 The situation, apart from the High Court order, is that there is here a company ordered to be wound up under the New South Wales Corporations Law. A liquidator has been appointed. The powers of the directors are suspended. The winding up is not completed. The Federal Court is precluded by its lack of jurisdiction from continuing any supervisory role, so that there could not conceivably be any inference with the jurisdiction of the Federal Court or any indication of lack of comity for the Supreme Court of New South Wales to take over the supervisory role. 35 There is in place a national scheme where a winding up ordered by the Supreme Court of one State can, in appropriate circumstances, be supervised by the Supreme Court of another State; so that as I have indicated, the liquidator plainly is not to be considered an officer exclusively of the Court that made the winding up order. 36 The New South Wales Supreme Court is a court of unlimited jurisdiction, and s.23 of the Supreme Court Act confirms that it has all the jurisdiction necessary to the administration of justice in New South Wales. Plainly, the New South Wales Supreme Court has jurisdiction to carry out all the functions given to the Court by the New South Wales Corporations Law in relation to this winding up. 37 Mr Rares made the further submission that, before the winding up could continue in any way, there would need to be an application made by the liquidator to the Supreme Court whereby in effect the Supreme Court takes over the supervision of the liquidation. In my opinion, that is not necessary. There is nothing to stop the liquidator going ahead with the winding up. He has duties under the Corporations Law which should continue to be fulfilled. If and when it becomes necessary for supervision to be exercised, the jurisdiction of the New South Wales Supreme Court could be invoked and the liquidator would then plainly be treated as an officer of the New South Wales Supreme Court. I would add that, even if an application of that kind were necessary, the other reasons I have given would plainly make it inappropriate to stay or dismiss these proceedings. 38 I might also add that it seems to me that the situation as I have outlined it will in fact be the situation in relation to the generality of winding up orders made by the Federal Court, unless and until they are set aside. If anything remains to be done under such an order, in my opinion it can be done under the supervision of the Supreme Court of the State in which the relevant company was incorporated. EFFECT OF HIGH COURT ORDER 39 I come now to the third question, namely, does the High Court order make any difference to this position? 40 I have already mentioned that it is common ground that, although it is established that the Federal Court had no jurisdiction, that still leaves the Federal Court order as an order of a superior court of record, and thus as a valid and binding order. It also seems plain that the High Court has not done anything which would set aside or quash the order itself, so that the order remains valid and binding. 41 There was some discussion during submissions as to whether the actual order made by the High Court could operate in the same way as a stay of a winding up order. It seems clear that a stay of a winding up order has the effect that the winding up order is itself deprived of continuing effect, so that the appointment of the liquidator is no longer sustained and control of the company returns to the directors: see Austral Brick Co Pty Ltd v Falgat Constructions Pty Ltd (1990) 21 NSWLR 389. As one alternative submission, Mr Rares put that the High Court order had a similar effect. In my opinion it is clear that it does not. All it does is to prohibit identified persons from taking any step in the Federal Court. In my opinion, that could not be considered as having the effect of returning the control of the company to the directors. 42 Mr Rares' principal submission was that the High Court order meant that nothing more could be done in the winding up, because to do anything more in the winding up would involve taking steps in the Federal Court contrary to the High Court's order. As I understand it, it was put in two ways. 43 Firstly it was put that, because the Federal Court ordered that the winding up be by the Federal Court, and because the liquidator was an officer of the Federal Court, therefore anything that the liquidator does in pursuance of the winding up is done by the Federal Court and in the Federal Court. That submission depends upon a construction of the Federal Court order which, for reasons I have given, I do not accept. 44 The second way Mr Rares put the submission was that the Federal Court order meant that the winding up was to be pursued by the liquidator as an officer of the Federal Court, and under the supervision of the Federal Court. Since the High Court order precludes the exercise of that supervision and therefore also precludes the liquidator acting as an officer of the Federal Court, and this in turn precludes him from pursuing the winding up. This is because either he has no standing on behalf of the company, or it would be an abuse of process to continue with any aspect of the winding up. Again, in my opinion, that submission depends upon a construction of the Federal Court order which I have rejected. For the reasons I have already given, in my opinion the winding up can be pursued without steps being taken in the Federal Court. 45 (I would add to my reasons given orally the point that, even if my view on the construction of the Federal Court's order were incorrect, the same result would follow. If the Federal Court's order on its true construction required that for the future the Federal Court and the Federal Court alone should supervise the winding up, it would be requiring what is now demonstrated to be a legal impossibility. Even an order of a superior court which has not been set aside cannot validly require a legal impossibility to occur in the future: in that respect, there would be a distinction between so much of the order as ordered that the company be wound up, which was not a legal impossibility, and so much of it as required that for the future the Federal Court supervise the winding up, which is, and is now known to be, a legal impossibility. It would be as if the court had ordered a person to draw a rectangle and also to draw a square circle: even a superior court cannot effectively require the latter. This argument applies a fortiori to the present case, because even if the Federal Court order could otherwise have effectively required that for the future the Federal Court and the Federal Court alone supervise the winding up, the High Court order in this case would override it.) 46 The final matter raised concerning the effect of the High Court order relates to the statements made by justices of the High Court themselves in relation to the matter. I have quoted the relevant parts of the judgments in Re Wakim, and as I understand it, there was no significant submission on either side that they really assisted very much in determining the questions before this Court. However, at the hearing before Gaudron J, there were some exchanges which might be thought to have some bearing on the question. 47 Firstly, there was an exchange between Mr Rares and Gaudron J in the following terms: MR. RARES: The legislation clearly sets out a statutory scheme for winding up by the court and once there is prohibition to be issued, we submit that the formulation of the order by the Court as in the pamphlet, without the assistance of the Australian or other law reports, is correct, that really what the Court is ordering is that there be no further steps pursuant to an order made without jurisdiction, by either of the relevant respondents for whom my learned friend appears. That is perfectly in conformity with the reasons and --- HER HONOUR: It may mean that there is no difference, in effect. MR. RARES: It may, but we are cautious that our learned friends are seeking to take some point about it. HER HONOUR: They are seeking to preserve their rights to proceed elsewhere in the event of remedial legislation which I should have thought was what the judgment was at least hypothesising - which possibility was being hypothesised in what was said. 48 A little later, in response to a submission by Mr Rares that further steps could not be taken in the winding up anywhere else other than the Federal Court, her Honour said "at the moment". This suggests that her Honour was directing her mind, in acceding to the application to amend the order, to the limitation that might be placed by the unamended order in the event that there were to be remedial legislation which would somehow enable the liquidator to take action. 49 However, in my opinion, nothing in those exchanges suggests anything like a considered view that, without the remedial legislation, the liquidator could not take steps anywhere else other than the Federal Court. I do not consider those exchanges sufficient to affect the views I have already expressed. 50 For those reasons, in my opinion, the application should be dismissed with costs. 51 Mr Rares has submitted that I did not deal with submissions that he made about the effect of the passages which I quoted from the joint judgment of Gummow and Hayne JJ in Re Wakim. He submitted that they disclosed an intention that nothing more be done in the future under the winding up order, and that this was reinforced by the circumstance that the High Court set aside examination orders that had been made by the Federal Court in relation to the winding up. 52 Dealing with the latter aspect first, the examination orders were set aside because, irrespective of the validity or invalidity of the original winding up order, the Federal Court did not have jurisdiction to make the examination orders. The High Court considered it was appropriate, in circumstances where the examinations had been completed, to set aside the orders, so that the question of what was to be done about information obtained from those examinations could be appropriately considered if and when it arises. 53 As regard the intention that nothing more be done in the winding up, Mr Rares pointed to the reference to "a curious result" in paragraph 164, and submitted that, if another court could simply take over the winding up as I have suggested, the result would not really be so curious. Secondly, he pointed to the circumstance that the reason given for not setting aside the winding up order was primarily related to incurring of expenses and rights of third parties that may have arisen in the past. In those ways, he submitted, the judgment manifested a plain intention that nothing more should happen in the future. 54 There is some force in that submission, but in my opinion, there is nothing in the passages to suggest that their Honours considered the question whether another court could, in effect, take over the supervision of the winding up, or come to any conclusion on this question. It seems to me therefore that this matter does not really affect the reasons I have previously given. 55 I order that the Notice of Motion filed 20 August 1999 be dismissed. 56 I order that the applicant pay the respondents' costs of the Notice of Motion but not the cost of the intervenors. 57 I will stand this matter over to the registrar's list on 17 March 2000. 58 I extend the time for the filing of a defence until 24 March 2000. 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