Reported Decision : (2001) 37 ACSR 624 (2001) 19 ACLC 843 New South Wales Supreme Court CITATION : Newsnet v Raine & Horne [2001] NSWSC 310 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 5160/00 HEARING DATE(S) : 17 April 2001 JUDGMENT DATE : 18 April 2001 PARTIES : News Limited trading as Newsnet (P) International Property Investment Corporation Pty Ltd trading as Raine & Horne Investments (Qld) (D) JUDGMENT OF : Austin J COUNSEL : J T Johnson (P) SOLICITORS : Sally Nash & Co (P) CATCHWORDS : CORPORATIONS - winding up by Court - duplicate winding up orders made by different State Courts by mistake - later order set aside by Court that made it, and proceedings dismissed - whether that Court can order priority for costs of plaintiff in, and liquidator appointed under, proceedings now dismissed LEGISLATION CITED : Corporations Law ss 471, 471B, 466, 556 Corporations (Queensland) Act 1989 (Qld) s 42 R v Metal Trade Employees Association; ex parte Amalgamated Engineering Union (1951) 82 CLR 208 CASES CITED : Re Wakim (1999) 198 CLR 511 Signature Resorts Pty Limited v D H D Constructions Pty Limited (1995) 18 ACSR 627 DECISION : See paragraphs 18 and 20 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J WEDNESDAY 18 APRIL 2001 5160/00 - NEWS LIMITED T/AS NEWSNET v INTERNATIONAL PROPERTY INVESTMENT CORPORATION PTY LIMITED T/AS RAINE & HORNE INVESTMENTS (QLD) JUDGMENT (ex tempore; revised 20 April 2001) 1 HIS HONOUR: These proceedings were brought for the winding up of International Property Investment Corporation Ltd, a company incorporated in Queensland. They were instituted by an originating process filed in this Court on 22 December 2000. Also on 22 December 2000, a form of notification of a filing of an application for a winding up order was filed with the Australian Securities & Investments Commission. Prior to the commencement of the proceedings a company extract (prepared on 20 December 2000), was obtained, which indicates that at that stage no application for winding up had been made. 2 The Court made a winding up order on 12 March 2001. Mr Maxwell Prentice was appointed liquidator and the Court ordered the defendant to pay the plaintiff's costs. 3 However, an application for the winding up of the company was made in the Supreme Court of Queensland on 24 January 2001 and that Court made an order for the winding up of the company on 28 February 2001, appointing Paul Sweeney and Terry van der Velde as liquidators. In other words, in proceedings that began after the New South Wales proceedings, the Supreme Court of Queensland made an order for winding up and the appointment of liquidators before orders were made in the New South Wales proceedings. 4 Rule 2.4 of the Corporations Law Rules of Queensland and New South Wales provides, uniformly, for a search to be made prior to the filing of such an application. I presume that a search was made prior to the commencement of the Queensland proceedings, but that nothing emerged from the search which dissuaded the plaintiff in Queensland or the Queensland Court from proceeding with the winding up of the company. 5 In these circumstances, it appears that because of some unexplained and unfortunate mistake, duplicate orders have been made and two sets of liquidators have been appointed in the winding up of the company. This has occurred through no fault of the New South Wales plaintiff or its legal advisers, who clearly acted promptly and properly, and I presume it has occurred through no fault of the Queensland plaintiff and its legal advisers. 6 Once the Queensland order for winding up was made it operated, under s 471(1) of the Corporations Law, in favour of all of the creditors and contributories of the company as if it had been made on the joint application of all of the creditors and contributories. Consequently, as of the making of the Queensland order, the New South Wales plaintiff was treated in that fashion. Under s 471B, once the Queensland order was made, the New South Wales proceeding could not be continued except with the leave of the Court, and no such leave was sought or obtained. However, an order made by a superior Court such as the Supreme Court of New South Wales is effective until such time as it is brought to an end: R v Metal Trade Employees Association; ex parte Amalgamated Engineering Union (1951) 82 CLR 208, 240 per Latham CJ. 7 Consequently, notwithstanding the provisions of ss 471 and 471B, Mr Prentice had been validly appointed a liquidator pursuant to the order of this Court. What is obviously needed, however, and is applied for by the New South Wales plaintiff, by interlocutory process filed on 5 April 2001, is an order terminating or setting aside the orders of this Court made on 12 March 2001 and dismissing the originating process filed in this Court on 22 December 2000. There is ample power to set these orders aside under s 81 of the Supreme Court Act and also s 482 of the Corporations Law. I intend to make such orders. 8 The only issue which remains for consideration relates to the costs of the plaintiff in the New South Wales proceedings and of Mr Prentice incurred pursuant to orders of this Court. In its application filed on 5 April 2001 the plaintiff seeks, in addition to orders setting aside the previous orders of the Court, the following two orders: (3) the plaintiff's costs in these proceedings be costs in the liquidation in the same priority as if the winding up had been made in these proceedings; (4) the costs of Mr Prentice be costs in the winding up in the same priority as if a winding up order had been made in these proceedings. 9 If there were power for me to make those orders, I would be disposed to make them. As I have said, the plaintiff and its legal advisers acted promptly and properly, and the duplication of the winding up orders and orders for appointment of liquidators occurred through no fault of theirs. The question is whether the Corporations Law authorises me to make such orders. 10 There are two relevant provisions of the Corporations Law. First, s 466(1) provides that the persons, other than the company itself or the liquidator of the company, on whose application any winding up order is made shall, at their own cost, prosecute all proceedings in the winding up until a liquidator has been appointed under this Part. Then s 466(2) states that the liquidator shall, unless the Court orders otherwise, reimburse the applicant's taxed costs out of the property of the company. 11 On their face, s 466(1) and (2) mean that the costs of the plaintiff in the New South Wales proceedings and the costs of the liquidator appointed in those proceedings are to be borne by them rather than by the company, up until the making of the Queensland order on 28 February 2001. Once the Queensland order was made, Messrs Sweeney and van der Velde were ' the liquidators' for the purposes of s 466(1) and (2), and they had the duty under s 466(2) to reimburse ' the applicant'. For that purpose, the applicant was the Queensland plaintiff, not the New South Wales plaintiff. The fact that, through a mistake, another winding up order was made in New South Wales and Mr Prentice was appointed liquidator did not make Mr Prentice ' the liquidator' nor the New South Wales plaintiff ' the plaintiff' for the purposes of s 466(1) and (2), even though (the later order being an order of a superior court) Mr Prentice is a liquidator until the orders have been set aside. 12 Section 556 states that in a winding up of a company, debts and claims are to be paid in accordance with a list of priorities. The list includes: (b) if the Court ordered the winding up - next, the costs in respect of the application for the order (including the applicant's taxed costs payable under s 466); … (dd) next, any other expenses (except deferred expenses) properly incurred by a relevant authority; (de) next, the deferred expenses… . 13 'Deferred expenses' are defined in s 556(2) to mean expenses properly incurred by a relevant authority. The expression 'relevant authority' is defined in the same subsection to mean, inter alia, a liquidator of the company. While Mr Prentice is not 'the' liquidator of the company for the purposes of s 466(1) and (2), he is nevertheless 'a' liquidator and, therefore, a relevant authority for the purposes of s 556(2). Consequently, he is entitled to the priority in respect of his expenses accorded to a relevant authority by sub-paragraphs of s 566(1)(dd) in respect of expenses other than deferred expenses, and sub-paragraph 566(1)(de) in respect of deferred expenses. 14 I am prepared to make orders having the effect of acknowledging that Mr Prentice's expenses have that level of priority in the winding up of the company, which is proceeding pursuant to the orders of the Supreme Court of Queensland, subject to some observations I shall make about the cross-vesting provisions of the Corporations Law. 15 Unfortunately, however, the New South Wales plaintiff does not have the benefit of any protective provisions of s 556 or, so far as I can see, any other provisions of the Corporations Law as it currently stands. I have said that under s 466(1) the New South Wales plaintiff must bear its own costs because it is not the person on whose application the surviving winding up order, that is, the Queensland order, was made. The New South Wales plaintiff cannot, in my opinion, have the benefit of s 556(1)(b) because the costs incurred by it cannot be described as 'costs in respect of the application for the order', since the surviving order is the order of the Supreme Court of Queensland and the New South Wales plaintiff's costs cannot, by any stretch of language, be described as costs in respect of the application in Queensland for that order. None of the other sub-paragraphs of s 556(1) is relevant to the position of the New South Wales plaintiff. 16 Counsel for the New South Wales plaintiff drew my attention to the decision of Bryson J in Signature Resorts Pty Limited v D H D Constructions Pty Limited (1995) 18 ACSR 627. His Honour was dealing with the provision of the former Companies Code which is the approximate equivalent of the present s 556. However, there was a significant difference in wording. The sub-paragraph of the old s 441 which was approximately equivalent to s 556(1)(b) was sub-paragraph (a), which was in the following terms: '(a) first the costs, charges and expenses of the winding up including the taxed costs of any applicant payable pursuant to s 366, the remuneration of the liquidator and the costs of any order carried out under s 322'. 17 Bryson J decided that intervening creditors, who supported the applicant for winding up but were never substituted as plaintiffs, were entitled to the priority for their costs which that provision afforded. He did so on the ground that their costs were costs of the winding up for the purposes of the initial part of the old sub-paragraph (a) even though they were not, he held, costs of the applicant for winding up. 18 In the present case I doubt that I could find that the costs incurred by the New South Wales applicant in proceedings which I am about to dismiss, would be properly described as costs of the winding up. But even if I could, that would not be enough to give them any level of priority under the present s 556. This is because the relevant paragraph of s 556, namely s 556(1)(b), is confined to costs 'in respect of the application for the order', and (as I have said) the New South Wales plaintiff's costs cannot be so described. I think this is an unfortunate and unfair outcome, but I do not, so far as I can see, have any discretion to do anything about it. 19 Although the cross-vesting provisions of the Corporations Acts of the various States were successfully challenged in Re Wakim (1999) 198 CLR 511, to the extent that they purported to confer jurisdiction on a federal court with respect to matters arising under the Corporations Law of a State, there is no basis for doubting that the cross-vesting provisions are effective as between the Supreme Courts of the States. Under s 42 of the Corporations (Queensland) Act 1989 (Qld) this Court has the power to make orders with respect to civil matters with which a 'Court' can deal under the Corporations Law of Queensland. This Court is a 'Court' for the purposes of the Corporations Law of Queensland. 20 Relying on that power, I shall make an order declaring that the costs and expenses incurred by Mr Prentice with respect to his activities pursuant to and incidental to the order of this Court made on 12 March 2001 are, to the extent that they are not deferred expenses, within s 556(1)(dd) of the Corporations Law and, to the extent that they are deferred expenses, within s 566(1)(de). The only other orders I shall make are, first, an order that the orders made by the Court on 12 March 2001 be set aside, and second, an order that the originating process filed on 22 December 2001 be otherwise dismissed. * * * * * * * * * Last Modified: 05/02/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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