Land and Environment Court New South Wales Medium Neutral Citation: Burwood Council v Pan Pac Investments Pty Ltd (No 2) [2019] NSWLEC 29 Hearing dates: 13 December 2018 and 18 December 2018 (further material) Decision date: 22 March 2019 Jurisdiction: Class 5 Before: Pain J Decision: See [21] of judgment Catchwords: PRACTICE & PROCEDURE – leave to continue criminal proceedings against a company in liquidation required by s 471B of Corporations Act 2001 (Cth) Legislation Cited: Companies Act 1961 (Vic) s 230 Companies Act 1962 (SA) s 263 Corporations Act 1989 (Cth) Corporations Act 2001 (Cth) ss 440D, 471B, 500 Environmental Planning and Assessment Act 1979 Liquor Licensing Act 1985 (SA) Roads Maintenance (Contribution) Act 1963 (SA) Cases Cited: Australian Securities Commission v Marlbourough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15 Burwood Council v Pan Pac Investments Pty Ltd [2018] NSWLEC 110 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 RA Ringwood Pty Ltd v Lower [1968] SASR 454 Re Timberland Ltd and Equitable Forestry Services Pty Ltd [1976] VR 790 SA Police v Temday Pty Ltd (1996) 184 LSJS 488 Tate v Aarjets Pty Ltd ATF The Jurgholme Trust & Anor [2010] QCA 243 Workcover Authority of NSW v Josef & Sons Contracting Pty Ltd (in liquidation) & Ors [2002] NSWIRComm 226 Texts Cited: A Keay, "Criminal Proceedings Against a Company in Liquidation: Is Leave of the Court Required?" (1999) 17 Company and Securities Law Journal 4 CCH Commentary: Australian Company Law Commentary Premium Ford, Austin and Ramsay's Principles of Corporations Law Halsbury's Laws of Australia McPherson's Law of Company Liquidation Robson's Annotated Corporations Legislation Category: Sentence Parties: Burwood Council (Prosecutor) Pan Pac Investments Pty Ltd (Defendant) Representation: COUNSEL: P English (Prosecutor) N/A (Defendant) SOLICITORS: Houston Dearn O'Connor (Prosecutor) N/A (Defendant) File Number(s): 17/67623, 17/67624, 17/67625 Judgment 1. In Burwood Council v Pan Pac Investments Pty Ltd [2018] NSWLEC 110 I found the Defendant company guilty of two charges of failing to comply with an order issued under the Environmental Planning and Assessment Act 1979 (EPA Act) and a charge of failing to provide information to officers of Burwood Council (the Council) as required by the EPA Act. It remains for the Defendant to be sentenced in all three matters. At the outset of the sentencing hearing the Prosecutor identified that the Defendant was in liquidation. The Defendant did not appear and was unrepresented. 2. A letter from the solicitors for the Defendant's liquidator to the Council's solicitors dated 27 November 2018 was tendered (exhibit A). It stated that: Dear Mr. Shneider, Pan Pac Investment Ply Ltd ACN 127 304 769 ats Burwood Council LEC Proceedings We act for Mark Roufeil in his capacity as Provisional Liquidator of Pan Pac Investment Pty Ltd (the Company), and have received from our client a copy of your letter dated 16 November 2018 addressed to his firm, PKF. The Company is the registered proprietor of property at 45 Cheltenham Road, Croydon (the Croydon Property), albeit in its capacity as the former Trustee for the Pan Pac Investment Trust. We are instructed to inform you that our client will not cause the Company to participate in the sentencing hearing to which you refer in your letter. ... Lastly, we respectfully point out that section 440D of the Corporations Act 2001 has no application in the present context. Section 471B applies, and it may require your client to obtain a grant of leave to proceed with the sentencing hearing, if the Land and Environment Court proceedings are "a proceeding" for the purpose of section 471B(a) of the Corporations Act 2001. 1. The issue arises of whether the sentencing hearings can proceed in the absence of an application to the Supreme Court or Federal Court for leave to proceed pursuant to s 471B of the Corporations Act 2001 (Cth). This issue does not appear to have arisen in the Court in the context of a provisional liquidator being appointed under the Corporations Act, the circumstance to which s 417B is directed. Corporations Act 2001 (Cth) 1. Relevant sections of the Corporations Act provide: Chapter 5—External administration … Part 5.3A—Administration of a company's affairs with a view to executing a deed of company arrangement … Division 6—Protection of company's property during administration … 440D Stay of proceedings (1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except: (a) with the administrator's written consent; or (b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes. (2) Subsection (1) does not apply to: (a) a criminal proceeding; or (b) a prescribed proceeding. ... Part 5.4B—Winding up in insolvency or by the Court … Division 1A—Effect of winding up order … 471B Stay of proceedings and suspension of enforcement process While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with: (a) a proceeding in a court against the company or in relation to property of the company; or (b) enforcement process in relation to such property; except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. … Part 5.5—Voluntary winding up … Division 3—Creditors' voluntary winding up … 500 Execution and civil proceedings … (2) After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. … 1. The wording in s 471B is broad in referring to proceeding simpliciter in the case of a company that is wound up by a court so that on its face the section is not limited to civil proceedings. By way of contrast, s 500(2) concerns companies in voluntary liquidation and states that no action or other civil proceeding is to proceed without leave of the Federal Court. Section 440D concerning the administration of a company states expressly in subs (2) that subs (1) does not apply to criminal proceedings. 2. The Council referred to Robson's Annotated Corporations Legislation at [471B.55] which states that s 471B has no application to criminal proceedings citing Tate v Aarjets Pty Ltd ATF The Jurgholme Trust & Anor [2010] QCA 243 (Tate) at [4] and RA Ringwood Pty Ltd v Lower [1968] SASR 454 (Ringwood). In Tate McMurdo P of the Queensland Court of Appeal (Muir JA and Fraser JA agreeing at [36] and [37] respectively) citing Ringwood stated at [4] that s 471B of the Corporations Act had no application to the relevant criminal proceedings so that a charge concerning liquor licensing did not require the consent of a court. 3. In Ringwood the Full Court of the Supreme Court of South Australia was dealing with offences under the Roads Maintenance (Contribution) Act 1963 (SA) and considered s 263(2) of the Companies Act 1962 (SA). Section 263(2) stated: Part X— Winding up … Division III—Voluntary winding up … Subdivision (3)—Provisions applicable only to creditors' voluntary winding up … 263. Property and proceedings … (2) After the commencement of the winding up no action or proceedings shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. 1. Walters J (Mitchell J agreeing) concluded at 464-5 that s 263(2) did not require leave to proceed with criminal proceedings. Walters J stated at 465 that s 263(2) was introduced to prevent unfair proceedings being taken by one creditor to enforce their rights against the company's assets to the detriment of other creditors. Therefore the provision "must be construed as favouring the assumption that the legislature intended that civil, rather than criminal, proceedings are to be the subject of the restraints imposed by the section". 2. The majority in Ringwood was followed by Dunn J of the Supreme Court of Victoria in Re Timberland Ltd and Equitable Forestry Services Pty Ltd [1976] VR 790 (Timberland). Timberland concerned an application for leave pursuant to s 230(3) of the Companies Act 1961 (Vic) to permit the Commissioner for Corporate Affairs to issue and prosecute an information against companies in respect of which winding up orders had been made. Section 230(3) was in similar terms to the legislation considered in Ringwood. Dunn J concluded at 792 that the construction adopted in Ringwood was supported by other provisions of the Companies Act. In respect of offences against the provisions of the Companies Act, the right to take proceedings was specifically limited to the Commissioner of Corporate Affairs. Dunn J held that it would be most unlikely that in the case of a company to which s 230(3) applied the legislature would have intended the further requirement of obtaining leave from the court. 3. Ringwood was also followed by Perry J of the Supreme Court of South Australia in SA Police v Temday Pty Ltd (1996) 184 LSJS 488 (Temday). This was an appeal against the dismissal of a complaint laid in the Magistrates Court alleging that the respondents were in breach of certain provisions of the Liquor Licensing Act 1985 (SA). Following the hearing of the complaint the respondent entered into liquidation. Applying Ringwood, Perry J stated at 489-90 that since the hearing and determination of the complaint itself did not require leave under s 471B of the Corporations Law within the Corporations Act 1989 (Cth) the hearing of an appeal against a dismissal of the complaint did not require such leave. The issue before Perry J was whether there was a need for leave before the appeal could be heard. There was existing authority for the contention that leave is not needed for appeals. 4. According to McPherson's Law of Company Liquidation at [7.920] the opinion of Perry J in Temday is obiter in relation to whether criminal proceedings fall within s 471B because his Honour did not need to decide that issue. The complaint in the case before him was heard and determined prior to the liquidation of the company. 5. The provisions considered in Ringwood and Timberland were not in identical terms to s 471B. 6. In Workcover Authority of NSW v Josef & Sons Contracting Pty Ltd (in liquidation) & Ors [2002] NSWIRComm 226 (Workcover) Schmidt J considered whether criminal proceedings against a company the subject of voluntary winding up should be stayed due to the application of s 500(2) of the Corporations Act. At issue was whether the phrase in s 500(2) "action or other civil proceeding" limited the application of s 500(2) to civil proceedings. Her Honour contrasted the phrase "action or other civil proceeding" with the more general phrase "a proceeding in a court" in s 471B of the Corporations Act. In this context, Schmidt J concluded at [18] that the legislature intended to make different provision in s 500(2) to s 471B. It followed from the general phrase "a proceeding in a court" in s 471B that leave to pursue both civil and criminal proceedings is required in the circumstances to which that section is directed, namely involuntary liquidation. This construction was supported by s 440D which states that a "proceeding in a court" against a company during administration must be stayed except with the leave of the court. Section 440D expressly states that a "proceeding" does not include criminal proceedings. Her Honour observed that s 471B does not contain that qualification which supports the above construction of s 500(2). It was also relevant that the immediate predecessor to s 471B, s 471(2) of the Corporations Law within the Corporations Act 1989, included the phrase "action or other civil proceeding" which is now located in s 500(2). Schmidt J concluded at [30] that it must be assumed that the change in s 471B, with the omission of any reference to civil proceedings, was deliberate and designed to bring about a different result than that now provided for in s 500. There is substantial merit in Her Honour's reasoning. While strictly obiter her findings about s 471B are an important part of her reasoning. 7. The Queensland Court of Appeal in Tate expressly addressed s 471B. As next identified, I am bound to follow appellate courts of other states where appropriate. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22, the High Court stated at [135]: Intermediate appellate courts and trial judges in Australia should not depart from decisions in intermediate appellate courts in another jurisdiction on the interpretation of Commonwealth legislation or uniform national legislation unless they are convinced that the interpretation is plainly wrong. 1. This principle applies not only to the ratio of decisions of intermediate appellate courts but also to dicta per Australian Securities Commission v Marlbourough Gold Mines Ltd (1993) 177 CLR 485; [1993] HCA 15 at 492 (the Court). 2. Interestingly there is a diversity of views expressed in commentaries in relation to s 471B of the Corporations Act. As already identified above in [6] Robson's Annotated Corporations Legislation at [471B.55] states that s 471B has no application to criminal proceedings citing Tate at [4] and Ringwood. This construction also appears in Halsbury's Laws of Australia, vol 120, at [14625] which states that s 471B only applies to civil causes and enforcement of civil rights citing Timberland. 3. In contrast, Ford, Austin and Ramsay's Principles of Corporations Law at [27.103] refers to A Keay, "Criminal Proceedings Against a Company in Liquidation: Is Leave of the Court Required?" (1999) 17 Company and Securities Law Journal 4 which argues that leave is required for criminal proceedings as well as civil. The same approach is taken in McPherson's Law of Company Liquidation at [7.920]. 4. CCH Commentary: Australian Company Law Commentary Premium at [146-060] states that: It would appear that s 471B applies to both criminal and civil proceedings. The predecessor of s 471B referred to "no action or other civil proceedings", making it clear that the prosecution of criminal offences was not affected by the stay of proceedings. However, these words do not appear in s 471B. The provisions of s 471B are to be contrasted with s 440D which contains almost identical wording but relates to a stay of proceedings while a company is under administration … Section 440D(1) also refers to "a proceeding in a court" but s 440D(2) specifically excludes a criminal proceeding and a prescribed proceeding from the ambit of s 440D(1) … 1. The approach adopted by CCH Commentary and Ford, Austin and Ramsay's and McPherson's is essentially the approach taken by Schmidt J in Workcover set out above in [13]. 2. I consider the reasoning of Schmidt J in Workcover is sound given the terms of s 471B of the Corporations Act. While Tate adopted Ringwood no reasoning was provided by the Queensland Court of Appeal in doing so. As already identified the provision considered in Ringwood was not the same as s 471B. On this occasion it is not appropriate to apply Tate. 3. I find that s 471B does apply to criminal as well as civil proceedings. Accordingly, leave of the Supreme Court or Federal Court is required for the sentencing of the Defendant for the three offences. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 March 2019