New South Wales Supreme Court CITATION : Chalmers v Redwood Anti-Ageing Pty Ltd [2007] NSWSC 1186 HEARING DATE(S) : 16/10/07 JUDGMENT DATE : 23 October 2007 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : See paragraph [34] CATCHWORDS : CORPORATIONS - winding up - where creditor given leave to be heard on winding up application without becoming party - winding up order made by registrar - appeal to court constituted by judge - whether the creditor is party to or may be heard on the appeal Corporations Act 2001, ss.471A(1), 479(3) LEGISLATION CITED : Supreme Court Act 1970, s.101 Supreme Court (Corporations) Rules 1999, rules 2.13(1), 9.4(2) Uniform Civil Procedure Rules 2005, Part 21 Division 2, Part 49 Division 2, Division 3, rules 16.1, 16.2, 49.7A(a), 49.8(1), 49.1349.11(1), 49.13, Austral Brick Co Pty Ltd v Falgat Constructions Pty Ltd (1990) 21 NSWLR 389 Australian Securities Commission v Ampolex Ltd (1995) 38 NSWLR 504 Australian Securities and Investments Commission v Neolido Holdings Pty Ltd [2006] QCA 266 Gillooly v Gillooly [1950] 2 All ER 1118 R v Phan [2001] NSWCCA 29 CASES CITED : R v Radju (2001) 53 NSWLR 471 Re Evans [1893] 1 Ch 252 Re Rick Wilson Pty Ltd (1982) 7 ACLR 354 Rock Bottom Fashion Market Pty Ltd v HR & CE Griffiths Pty Ltd [2000] 2 Qd R 573 Scott-Young v Registrar of the Government & Related Employees Appeal Tribunal [2001] NSWCA 293 Strarch International Ltd v Loh (2005) 54 ACSR 481 Wu v The Queen (1999) 199 CLR 99 PARTIES : Matthew Chalmers - Plaintiff Redwood Anti-Ageing Pty Ltd - Defendant FILE NUMBER(S) : SC 2983/07 Mr R.G.H. Keller - Plaintiff COUNSEL : Mr G.A. Sirtes - Defendant Mr A.M. Combe - Supporting Creditor Adams Raves Marsh & Co - Plaintiff SOLICITORS : Morgan Lewis Attorneys - Defendant M.J. Lawyers - Supporting Creditor LOWER COURT JURISDICTION : Supreme Court LOWER COURT FILE NUMBER(S) : 2983/07 LOWER COURT JUDICIAL OFFICER : Senior Deputy Registrar Musgrave LOWER COURT DATE OF DECISION : 16/07/07 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J TUESDAY, 23 OCTOBER 2007 2983/07 MATTHEW CHALMERS v REDWOOD ANTI-AGEING PTY LTD JUDGMENT 1 I am dealing with questions for separate determination which have arisen in an appeal from a winding up order made by a registrar of the court. The questions concern the right, if any, of a particular creditor to participate in the appeal. 2 The questions raise a number of issues to which the Supreme Court (Corporations) Rules 1999 and the Uniform Civil Procedure Rules 2005 are relevant. Those rules of court and provisions of them will, for convenience, be designated by the letters "SCCR" and "UCPR" respectively. 3 On 16 July 2007, Senior Deputy Registrar Musgrave ("the Registrar") made on the application of Mr Chalmers an order that Redwood Anti-Ageing Pty Ltd ("Redwood") be wound up in insolvency, an order that Mr Whitton be appointed liquidator and a costs order. On the same day, the Registrar ordered that those orders be stayed for a period of 14 days (the stay was later renewed and continues until further order). All these orders were made in proceedings 2983 of 2007. There were two parties to those proceedings, namely, Mr Chalmers as plaintiff and Redwood as defendant. 4 On 1 August 2007, Redwood filed an interlocutory process in proceedings 2938 of 2007 by which it sought, among others, the following order: "The whole decision of Senior Deputy Registrar Musgrave delivered on 16 July 2007, winding up the defendant and appointing Robert Whitton of Lawler Partners as its liquidator and awarding costs to the plaintiff out of the assets of the defendant be set aside." 5 The sole respondent to the interlocutory process was named as Mr Chalmers. It is common ground that, by the interlocutory process, Redwood initiated an appeal from the winding up orders. 6 The interlocutory process filed on 1 August 2007 came before me for hearing on 16 October 2007. Also before the court on that occasion was an interlocutory process filed on 25 September 2007 by Redwood seeking an order setting aside a notice to produce dated 27 August 2007 issued by ASA Pharmaceutical Pty Ltd ("ASA"). 7 There arose for immediate consideration a threshold issue of some significance. It concerns the position of ASA and the question whether it had (and continues to have) the capacity to issue a notice to produce directed to Redwood, as well as the notice of contention it has purported to file in the appeal initiated by the interlocutory process of 1 August 2007. That threshold issue became the subject of an order for separate determination of the following questions: "1. Is ASA Pharmaceuticals Pty Limited ('ASA') entitled to be heard in the appeal in respect of the order of Senior Deputy Registrar Musgrave of 16 July 2007? 2. If the answer to question 1 is yes, is ASA entitled to file a Notice of Contention in respect of the decision of Senior Deputy Registrar Musgrave of 16 July 2007 and, further, to be a party to the appeal from that decision for the purposes of Part 49 Division 3 of the UCPR? 3. If the answer to questions 1 & 2 is yes, is ASA entitled to serve a Notice to Produce upon the Defendant?" 8 I begin by noting events disclosed by the transcript of the hearing of the winding up application by the Registrar on 16 July 2007. Mr Keller of counsel appeared for Mr Chalmers as plaintiff. Mr McKeough, solicitor, appeared for Redwood as defendant. Very soon after the start of the hearing the following occurred: "COMBE: Before the matter proceeds, my name is Combe, I seek leave under part 2 rule 13 of the relevant rules to appear as a supporting creditor. I have a notice of appearance in the name of ASA Pharmaceuticals Pty Limited. DEPUTY REGISTRAR: This is matter number 29, there's a notice of appearance being filed in court, thank you. Is there an application for a further adjournment?" 9 After being informed by Mr Combe of counsel, who had spoken on behalf of ASA, and by Mr McKeough that no adjournment was sought, the Registrar was handed by Mr McKeough an affidavit on which the defendant wished to rely. After hearing submissions by Mr McKeough and Mr Keller, the Registrar refused to allow the affidavit to be read. Mr McKeough then sought to tender certain documents, being bank statements of Redwood and a copy of a statement of claim in other proceedings. The tender of that material was objected to by Mr Keller who stated his reasons for the objection. Mr Combe then addressed the court: "Might I be heard in support of my friend's objection to the tender of the evidence that's sought to be adduced. With respect to the documents that my friend seeks to adduce, all that establishes is that as at 30 June 2007, two weeks ago, there was a balance. What you are lacking – it doesn't establish that there was money, but it moves onto the fact that there is a balance in an account somewhere two weeks ago. It does not establish the currency of that balance as of today. It does not establish the liabilities. In other words, it does not establish to the satisfaction of the authorities, the solvency of the defendant. It therefore runs the risk of creating a misleading or confusing impression, which section 135 of the Evidence Act was greatly – was actually introduced to prevent occurring. Might I also state that in respect of the established case law, Switz Pty Limited v Glowbind Pty Limited (2004) NSWLR 661. His Honour Justice Spigelman said that the law is specifically created to stop this sort of thing occurring. They had their time, they had their opportunity. Not only when the matter was heard two weeks ago, but also when the statutory demand was served and the 21 days started ticking. My submission is, that if the evidence is adduced now of the ING bank account, it will not discharge the onus that arises under section 459S. It may create a misleading or confusing impression, and the same can also be said for the statement of claim which my friend has referred to which is not in evidence before you, and which I object going in, because you do not also have the supporting evidence from the District Court, which may or may not discharge the onus, and which will offend section 135 of the Evidence Act. Those are my submissions." 10 The Registrar then said: "Thank you for that. I think that's of assistance. I'm not going to take the statement of claim, I am going to proceed. I will place the ING Direct material on the file. I'm satisfied in this matter that there is sufficient evidence to justify the winding up of the company and I am therefore going to make orders in terms of prayers one, two and three of the originating process, appointing Robert Whitton as official liquidator." 11 Mr McKeough then sought and was granted the stay to which I have referred. 12 The first issue I must address is whether, at the hearing on 18 July 2007, ASA was granted leave under SCCR 2.13(1). That rule is as follows: "The Court may grant leave to any person who is, or who claims to be: (a) a creditor, contributory or officer of a corporation, or (b) an officer of a creditor, or contributory, of a corporation, or (c) any other interested person, to be heard in a proceeding without becoming a party to the proceeding." Later sub-rules deal with joinder of defendants. 13 As was pointed out before me by Mr Sirtes of counsel (who appeared for Redwood), the Registrar did not, in explicit terms, grant leave for ASA to be heard without becoming a party to the proceeding. I am satisfied, however, that there was a grant of such leave. Mr Combe's application (see [8] above) was expressed to be an application for "leave under part 2 rule 13 of the relevant rules". That was obviously an application for the leave for which SCCR 2.13 makes provision. In the context of a winding up application, the "relevant rules" were SCCR. With such an application before him, the Registrar noted that "there's a notice of appearance being filed in court" and thereby recognised the status of ASA as sought on its behalf by Mr Combe. Thereafter the Registrar entertained and acknowledged submissions made by Mr Combe on ASA's behalf (see [9] and [10] above). An order granting leave must be implied in the way discussed by me in Strarch International Ltd v Loh (2005) 54 ACSR 481 at [17] to [26] by reference to principles recognised in R v Radju (2001) 53 NSWLR 471, Wu v The Queen (1999) 199 CLR 99 and R v Phan [2001] NSWCCA 29. 14 Events before the Registrar thus caused ASA to have leave to be heard in the "proceeding" without becoming a party to the "proceeding". That raises the question of the delineation of the relevant "proceeding" and, in particular, the question whether the appeal initiated by means of Redwood's interlocutory process filed on 1 August 2007 forms part of the "proceeding" to which the grant of leave made on 17 July 2007 relates. 15 As I have said, it is common ground that the interlocutory process filed on 1 August 2007 is the means by which Redwood has initiated an appeal of the kind referred to in SCCR 16.1: "(1) An appeal shall lie to the Court from a winding up order made under the Corporations Act by a Registrar. (2) Part 49 Division 3 of the Uniform Civil Procedure Rules 2005 shall apply, making such changes as it is necessary to make, to an appeal under subrule (1). (3) For the purpose of the application of subrule (2), Part 49 Division 3 of the Uniform Civil Procedure Rules 2005 shall be read as if: (a) 'registrar' were substituted for 'Associate Judge' wherever occurring, and (b) except in rule 49.11 (3), 'rule 16.1 of the Supreme Court (Corporations) Rules 1999 ' were substituted for 'this Division' wherever occurring, and (c) in rule 49.8 (1), 'rule 16.1 of the Supreme Court (Corporations) Rules 1999 ' were substituted for 'rule 49.4', and (d) there were no reference to the District Court in rule 49.10 (2)." 16 Before considering the effect and operation of this rule, I should refer briefly to two preliminary matters. First, the question whether Redwood is capable of initiating and pursuing such an appeal at the behest of its directors following the making of the winding up order has not been raised: see, for example, Rock Bottom Fashion Market Pty Ltd v HR & CE Griffiths Pty Ltd [2000] 2 Qd R 573. I merely note that the stay now in place may mean that, in terms of s.471A(1) of the Corporations Act 2001 (Cth), Redwood is not, at the moment, "being wound up in insolvency", so that the result of the stay is as described at p.391 of the report of Austral Brick Co Pty Ltd v Falgat Constructions Pty Ltd (1990) 21 NSWLR 389, a case concerning earlier legislation. The second preliminary matter concerns the meaning of "the Court" in rule 16.1. The SCCR do not appear to contain a definition of "the Court"; but it seems to have been accepted by the parties that importation of Part 49 Division 3 of UCPR by SCCR 16.2 means that the reference to "the Court" should, in accordance with UCPR 49.7A(a), be construed as a reference to "the Supreme Court constituted by a Judge of the Supreme Court". I am content to proceed on that basis. 17 Having regard to SCCR 16.1(2), it is relevant to quote UCPR 49.8(1), one of the provisions in Part 49 Division 3 (which consists of UCPR 49.7A to 49.13): "An appeal from a decision of an associate Judge of the Supreme Court under rule 49.4 is to be instituted by filing a notice of motion." 18 In accordance with SCCR 16.1(2)(c), the reference here to "rule 49.4" is to be read as a reference to SCCR 16.1. Also, the reference to an appeal from a decision of an associate judge under rule 49.4 must be read as a reference to an appeal from a winding up order made by a registrar. Whether SCCR 16.1(2) also has the effect of requiring the reference in UCPR 49.8(1) to "a notice of motion" to be read in some modified way is a question that was not canvassed before me. It was not suggested that the interlocutory process filed on 1 August 2007 was not, for these purposes, a "notice of motion". 19 A question of importance that was canvassed is whether the notice of motion contemplated by UCPR 49.8(1) is a notice of motion "in" the proceeding in which the winding up order was made by the registrar. I am of the opinion that that question must be answered in the affirmative. It is true that UCPR 49.8(1) does not say, in so many words, that the notice of motion is to be filed in the proceeding in which the decision at first instance was made. But that textual gap is filled by UCPR 49.11(1) dealing with a cross appeal: "Any party to proceedings the subject of an appeal under this Division may institute a cross-appeal by filing a notice of motion in the proceedings." 20 The first reference here to the "proceedings" is, in a case such as the present, a reference to the proceedings in which the winding up order was made. UCPR 49.11(1) recognises that it is those proceedings that are "the subject of" an appeal "under this Division", that is, an appeal of the kind referred to in UCPR 49.8(1). The "proceedings" mentioned at the end of UCPR 49.11(1) are also the proceedings in which the winding up order was made. It must therefore be intended that the notice of motion uinder UCPR 49.8(1) instituting the appeal itself is to be filed in those same proceedings. 21 It is to be noted, however, that UCPR 49.8(1) and 49.11(1) are concerned only with the method of initiating an appeal and cross-appeal. Once an appeal has been initiated, it will have its own parties. That is not only made plain by UCPR 49.13 (which speaks of "[a] party to an appeal under this Division") but consistent with the nature of an appeal as such. The parties to an appeal may or may not correspond with the parties at first instance. In a context such as the present where a winding up order is challenged, neither the Corporations Act nor the rules of court say who may initiate the appeal. In practical terms, the appellant is likely to be the company subjected to the order (assuming no obstacle under s.471A). But it cannot be said that that company – obviously a necessary party at first instance – is the only competent appellant. In Re Rick Wilson Pty Ltd (1982) 7 ACLR 354, McLelland J said (at p.355): "An appeal against a winding up order may be brought only by a party to the winding up proceedings, or with the leave of the appellate court, by a person, who, although not a party to the winding up proceedings, is bound or prejudicially affected by the winding up order." 22 The particular regime with which I am here concerned resembles that created by s.101 of the Supreme Court Act 1970 in that, as I have said, it makes provision for the initiation of an appeal but does not identify competent appellants. It is therefore pertinent to quote the following observation of Kirby P in Australian Securities Commission v Ampolex Ltd (1995) 38 NSWLR 504 at p.511: "Under the Supreme Court Act 1970, s 101, the right of appeal is not given to a party as such. The foundation of an appeal is the judgment or order of the Court in a Division, which is challenged. Ordinarily, the appellant will indeed be a party to the primary proceedings: see, eg, Sydney Legacy Appeals Fund v Tanna (1980) 48 LGRA 98 at 104. However, a person affected by an order has a right to be heard in respect of the order before it is made (see Annetts v McCann ( 1990) 170 CLR 596 at 598), or after it is made in that person's absence: see John Fairfax and Sons Limited v Police Tribunal of New South Wales (1986) 5 NSWLR 465 at 482. In circumstances where their interests are clearly affected, non-parties have standing to challenge orders having consequences for them: see, eg, John Fairfax & Sons Ltd v Police Tribunal (at 467, 470, 482); see also John Fairfax Group Pty Ltd (Receivers & Managers Appointed) v Local Court of New South Wales (1991) 26 NSWLR 131 at 153, 169; Robinson v Western Australian Museum (1977) 138 CLR 283. The effect of Rolfe J's decision that the existence of undertakings in current proceedings before a court afforded a 'reasonable excuse' for non-compliance with a notice under s 33 of the Australian Securities Commission Act (Cth), according to its terms, not only affected the Australian Securities Commission in the instant case. Unless set aside, it will, in this State at least and quite possibly in other States and Territories, continue to affect the Australian Securities Commission's interests and the conduct of a great many recipients of such notices and their advisers. The Court should not blinker itself against such realities." 23 A right of appeal may thus subsist in a person who was not a party at first instance. 24 Just as a person who was not a party at first instance may be a competent appellant in the way to which McLelland J and Kirby P referred, so too a person who was a party at first instance may not be a proper party to an appeal and a person who was not a party at first instance may be a proper – even necessary – party to the appeal. This last proposition is illustrated by the decision of the Court of Appeal in Scott-Young v Registrar of the Government & Related Employees Appeal Tribunal [2001] NSWCA 293. 25 In that case, a police officer ("A") applied for promotion to a particular position. The successful applicant was Baker. "A" appealed to the relevant tribunal. The Commissioner of Police was the only other party. The appeal was dismissed without "A" having been heard. Baker, although not a party to "A's" application to the tribunal, participated in the hearing, to the extent of asking that it proceed despite the absence of "A". After the tribunal dismissed his application, "A" appealed to the Court of Appeal. The only named respondents were the tribunal and the Commissioner. By the time the matter came before the court, the only respondent was the Commissioner who had indicated that a submitting stance would be adopted. The court was concerned about the absence of a contradictor and, more particularly, about the absence of Baker whose tenure could be affected by the outcome of the appeal. The court ordered that Baker be joined as a party to the appeal. Mason P referred (at [17]) to the court's "duty to ensure that procedural fairness is done to affected persons in a proper case". Giles JA said (at [23] – [24]): "[23] The appellant submitted that the appeal to this Court was properly constituted because the relevant parties before the Tribunal, that is, the appellant and the Commissioner of Police, were parties to the appeal. The premise was that within Pt 51 r9 the appellant and the Commissioner of Police were parties and the relevant parties before the Tribunal. Nothing in the Police Service Act or the Government and Related Employees Appeal Tribunal Act appears to talk of parties to proceedings before the Tribunal. Section 37 of the latter Act confers a right to be present and heard on, amongst others, the employee in the position of Sergeant Baker in the present case. Realistically Sergeant Baker was a party to the proceedings before the Tribunal even though not named as such in the formal record, and he did in fact appear and was heard. [24] It is, however, a rather sterile debate over the meaning of the word 'party', because in any event (as the President has said) this Court has a responsibility to ensure that persons affected in appropriate cases are heard in an appeal to it. For the reasons his Honour has given, the orders proposed should be made so that Sergeant Baker has that opportunity." 26 The initial parties to an appeal are the person or persons who initiate the appeal and the person or persons named as respondents in the initiating process and served with it: Re Evans [1893] 1 Ch 252 at p.264 per Lindley LJ; Gillooly v Gillooly [1950] 2 All ER 1118 at p.1119 per Bucknill LJ. There may be a question whether one or more of those persons is or is not a proper party but, unless and until the composition of the original group is changed, they remain the parties to the appeal. If an original party considers that he or she has been improperly joined (or some other party takes that view), the question whether the person should remain a party may be agitated before the court with a view to obtaining an order that the person no longer be a party. Likewise, if a person with a real interest in the appeal but not an original party considers himself or herself entitled to be a party (or some existing party considers that the person should be a party), an order for joinder as a party to the appeal may be sought. 27 The important points, for present purposes, are, first, that party status at first instance does not mean that party status also exists on appeal; second, that the initial parties to an appeal are the persons named as parties in, and served with, the process initiating the appeal; and, third, that questions of necessary and convenient joinder of parties (as well as questions of inconvenient joinder) arise independently at the appeal stage and are to be answered by reference to the issues arising on appeal, the relief sought on appeal and the interests of persons in the possible outcomes on appeal. 28 My conclusion with respect to ASA in the context of the appeal initiated by Redwood from the winding up order made by the Registrar on 16 July 2007 is that it is not, at this point, a party to the appeal. It is not named as a party in the interlocutory process filed on 1 August 2007. Nor is it suggested that that interlocutory process was served on ASA. 29 I am further of the opinion that the leave granted under SCCR 2.13(1) by the order impliedly made by the Registrar on 16 July 2007 does not entail for ASA the same entitlement to be heard "without being a party to the proceeding" as was enjoyed by ASA before the Registrar when the winding up application was heard. Because an appeal potentially involves different parties, questions of who might be heard on the appeal can only be determined in the light of the way in which the appeal is constituted. The appeal must, in my view, be regarded as a "proceeding" distinct, in the relevant sense, from that in which the winding up order was made, even though, as I have said, the means of initiating it is the filing of a notice of motion in the proceeding in which the winding up order was made. Plaint numbers and file numbers cannot be determinants of the borders of a "proceeding". 30 In relation to this last point, it is commonplace for applications arising in the course of a winding up by the court to be made "in" the winding up proceeding. A liquidator's application for directions under s.479(3) of the Corporations Act is an example. It could not be suggested, in my view, that a person given leave under SCCR 2.13(1) in connection with the hearing of the winding up application retained a right to be heard upon such an application subsequently made by the liquidator. Another and perhaps clearer example arises under SCCR 9.4(2) which expressly requires that a liquidator's application for determination of remuneration be "made by interlocutory process in the winding up proceeding". Again, it could not be suggested that a creditor who, on the hearing of the winding up application, had been granted leave to be heard in the winding up proceedings should, at the potentially much later stage of an application for the fixing of remuneration, enjoy a right of audience superior to that of every other creditor. There is, in my view, a fairly clearly recognised concept of, as it were, a "proceeding within a proceeding". 31 Having reached the conclusion, with respect to ASA, that the right to be heard granted on 16 July 2007 does not extend to the pending appeal, I need not consider precisely what such a right carries with it – for example, whether it carries a right to lead evidence: see Australian Securities and Investments Commission v Neolido Holdings Pty Ltd [2006] QCA 266 at [60]. 32 Whether ASA would appropriately be made a party to, or given leave to participate in, the appeal initiated by Redwood is a distinct question not presently before the court. As a creditor which appeared to support the winding up application, ASA might be regarded as having an interest in the appeal sufficient to warrant its joinder as a party to the appeal or its being heard on the appeal without becoming a party. That would be a question for the court to address in response to an application made to it. At this stage, neither ASA nor the plaintiff on whose application the winding up order was made has seen fit to seek an order affording ASA such a position in relation to the appeal. I therefore say no more about that matter. 33 I should add, in conclusion, that the finding that ASA is not a party to the appeal disposes of the question whether it may file a notice of contention and issue a notice to produce. Status as a party governs entitlement to file a notice of contention in an appeal of this kind, a matter dealt with by UCPR 49.13 (which, as modified by SCCR 16.1(3)(b), says, "A party to an appeal under rule 16.1 of the Supreme Court (Corporations) Rules 1999 who wishes to contend … must file notice of that contention …). Status as a party also governs the right to serve a notice to produce: see UCPR Part 21 Division 2 and its references to "party A" and "party B". 34 As things currently stand, the answers to the questions for separate determination are as follows: Question 1: No. Question 2: Does not arise. Question 3: Does not arise. 35 The answers to Questions 2 and 3 must be read in the light of [33] above. ********** 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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