Federal Court of Australia

Huber v CellOS Software Ltd (in liq) [2023] FCAFC 198

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    This is an appeal from a decision of McElwaine J refusing the appellant (Mr Huber) leave to proceed with an appeal against Beach J’s judgment on liability (delivered on 20 December 2018) and his Honour’s judgment and orders on relief made on 17 April 2020, and refusing Mr Huber’s application to stay the liquidation of the respondent (CellOS) pending his proposed appeal: Huber v CellOS Software Ltd (in liq) (No 2) [2023] FCA 459 (PJ). Pursuant to s 500(2) of the Corporations Act 2001 (Cth) (the Act), leave was required to proceed with the proposed appeal as CellOS went into liquidation on 19 April 2022.

2    The decision below, to refuse leave to proceed with the proposed appeal, is interlocutory and discretionary. Accordingly, leave to appeal is required.

3    The application proceeded based on a three page notice of appeal dated 3 August 2023, which Mr Huber supported with written and oral submissions. We will return below to the matters agitated by Mr Huber on the application.

4    For the reasons that follow, leave to appeal is refused.

relevant procedural background

Chronology of the proceedings

5    It is appropriate at this point to set out an abridged chronology of the proceedings below, to provide context for McElwaine J’s decision, and for the issues raised on appeal.

6    The orders made by Beach J on 17 April 2020 included declarations that Mr Huber had breached statutory and fiduciary duties owed to CellOS. The proceedings before Beach J were commenced by CellOS, and alleged that Mr Huber had carried out a scheme against it involving the buying and selling of CellOS shares through related off-shore companies controlled by Mr Huber. CellOS contended that, by this scheme, Mr Huber breached various statutory and fiduciary duties owed to CellOS, particularly the duties owed under ss 181, 182 and 183 of the Act.

7    A protracted trial on liability proceeded before Beach J in September 2017, and May and June 2018. His Honour published reasons on 20 December 2018 which determined the liability issues adversely to Mr Huber and associated corporations: CellOS Software Ltd v Huber (2018) 132 ACSR 468; [2018] FCA 2069 (liability judgment or LJ). The proceedings before Beach J resumed in October 2019 on the question of relief, and his Honour published reasons and made orders on 17 April 2020: CellOS Software Ltd v Huber (No 2) (2020) 144 ACSR 267; [2020] FCA 505 (remedies judgment).

8    After an initial unsuccessful attempt to file a notice of appeal against the remedies judgment, Mr Huber’s notice of appeal was accepted for filing on 25 May 2020, 10 days out of time. Consequently, he required an extension of time pursuant to s 25(2)(b) of the Federal Court of Australia Act 1976 (Cth) (FCA Act).

9    Mr Huber’s application was initially case managed by Davies J. Her Honour conducted several case management hearings, over which Mr Huber prepared multiple iterations of his notice of appeal. The final iteration was 45 pages long and appears to have been acceptable to Davies J. On 13 August 2021, her Honour set the matter down for a one day hearing.

10    The matter was then transferred to McElwaine J. As will be made clear later in these reasons, the case management of this matter by Davies J, and then McElwaine J, formed a focal point of Mr Huber’s submissions on the appeal to this Court. According to Mr Huber, McElwaine J then limited the notice of appeal to 10 pages, by an email sent from his Honour’s associate on 31 January 2022.

11    CellOS was voluntarily wound up pursuant to s 439C(c) of the Act on 19 April 2022. On 29 June 2022, McElwaine J determined, as a separate question in the proceeding, that absent a grant of leave pursuant to s 500(2) of the Act, Mr Huber could not proceed with his extension application: Huber v CellOS Software Ltd (in liq) [2022] FCA 744. No issue was taken with that decision before this Court.

12    Mr Huber then commenced two further sets of proceedings: on 12 August 2022, he commenced an application for leave to continue his proposed appeal against the liability judgment and the remedies judgment (VID 458 of 2022); and on 29 August 2022, he commenced an application seeking orders staying the liquidation of CellOS pending the determination of his proposed appeal (VID 545 of 2022).

13    One of the central premises of Mr Huber’s argument on appeal to this Court was that Davies J had “settled” his 45 page notice of appeal and set the matter down for hearing, and that, upon the proceeding being transferred to McElwaine J, his Honour then changed course and limited the notice of appeal to 10 pages. Mr Huber characterised their Honours’ directions as to the length of his notice of appeal as “conflicting” and “unfair”, and dedicated some paragraphs of his written submissions to explaining the chronology of the development of his notice of appeal.

The hearing before McElwaine J

14    As set out above, Mr Huber considered McElwaine J had limited his notice of appeal to 10 pages. Mr Huber prepared a 10 page notice of appeal setting out his nine proposed grounds of appeal, but, as he considered he could not fit everything he wanted to into those 10 pages, he also prepared a 30 page, more fulsome, notice of appeal.

15    As his Honour recorded (PJ [41]–[42], [44]–[46]), Mr Huber also provided a “Chapters” document, which was titled “Appeal Book Chapters 1–9”. The Chapters document was over 800 pages in length, included multiple annexures, and was described by his Honour as “a prolix and impenetrable litany of rambling complaints which, in large measure, regurgitate evidence and arguments that Mr Huber put to Beach J which his Honour comprehensively rejected”: PJ [69].

16    The application for leave to proceed with the appeal and for the stay were heard by McElwaine J over a full day. As explained by Mr Huber, over the course of the afternoon, he went over both the 10 page notice of appeal and the 30 page notice of appeal with McElwaine J, taking his Honour to each of the grounds of appeal, with his Honour asking Mr Huber about the grounds. Mr Huber also explained that he incorporated references to the Chapters document in his submissions before McElwaine J, saying that he pointed out the paragraphs in the 30 page notice of appeal, and then also “pointed out the chapter that dealt with that ground as well”. Mr Huber explained that McElwaine J then asked Mr Huber questions on that ground, and, following discussion, they would then move on to the next ground.

17    In his Honour’s reasons addressing Mr Huber’s leave to proceed, and stay, applications, McElwaine J stated (PJ [63]) that he was confining his analysis to the nine grounds set out in the proposed notice of appeal and was not proceeding on the basis that that document was informed by, or incorporated, the Chapters document. In addressing the grounds of appeal set out in the 10 page proposed notice of appeal, McElwaine J did not make reference to Mr Huber’s fuller statement in his 30 page notice of appeal.

the points raised by mr huber on the appeal/application for leave to appeal

18    The notice of appeal relied on by Mr Huber in this Court was dated 3 August 2023, and was accepted for filing on 7 August 2023 (an earlier notice of appeal dated 6 June 2023 was struck out by the judge case managing the appeal). The notice of appeal did not set out “grounds” as such, but advanced the following complaints:

(1)    McElwaine J went back on, or unfairly changed, the order of Davies J, which had allowed Mr Huber to rely on a 45 page notice of appeal and ordered a one day hearing. McElwaine J required that Mr Huber’s notice of appeal be limited to 10 pages, which was an impossible task.

(2)    If McElwaine J considered that Mr Huber’s further 30 page notice of appeal was not permissible, he should not have engaged with Mr Huber on the material in the 30 page notice of appeal during the hearing, only to confine his consideration, in his published reasons, to the 10 page version.

(3)    In his reasons, McElwaine J ignored both the 30 page notice of appeal and the Chapters document, “because he did not like that Mr Huber had been able to show that Justice Beach … reached the wrong conclusions”.

19    Mr Huber also filed written submissions dated 20 October 2023, which set out some background on the proceedings being appealed, agitated the complaints referred to above, and rehearsed the grounds of appeal that Mr Huber sought to advance against the decisions of Beach J, referring again to the 30 page version of his notice of appeal and the Chapters document.

20    It is important to observe that nowhere in the notice of appeal, or in his written submissions in support, did Mr Huber:

(a)    contend that McElwaine J applied any incorrect principle in determining the applications before his Honour; or

(b)    identify any errors (let alone an error of the kind set out by the High Court in House v The King (1936) 55 CLR 499 (House v The King) at 505 (Dixon, Evatt and McTiernan JJ)) in McElwaine J’s reasons.

21    Rather, Mr Huber’s fundamental complaint was procedural: namely, that his notice of appeal was limited to 10 pages, inconsistently with the previous order of Davies J, and that, despite going over the 30 page notice of appeal and the Chapters document with him in the hearing, McElwaine J decided the applications based only on the 10 page notice of appeal, disregarding both the 30 page document and the Chapters document.

22    Mr Huber confirmed that this was the real nature of his appeal in his oral submissions before the Full Court, accepting, in response to questions from the bench, that the principal error and ground he was relying on was that McElwaine J had disregarded his 30 page notice of appeal and 800 page Chapters document.

23    During the hearing, Mr Huber submitted that he also took issue with PJ [69], at which his Honour said:

Mr Huber submitted to me that a reason for preparing his Chapters document is that Davies J limited his notice of appeal to 10 pages. The proposed notice of appeal pressed before me is so limited. As Davies J repeatedly explained to Mr Huber, it is the notice of appeal which must set out the appeal grounds in a way that identifies error on the part of a primary judge. What is apparent is that Mr Huber relies on the Chapters document as a means of avoiding the 10 page limit. The Chapters document is a prolix and impenetrable litany of rambling complaints which, in large measure, regurgitate evidence and arguments that Mr Huber put to Beach J which his Honour comprehensively rejected.

24    Mr Huber submitted that McElwaine J’s characterisation of the Chapters document was inaccurate, and in his view reflected that his Honour had not put in the effort to study the Chapters document.

25    Mr Huber also accepted that his notice of appeal filed on 7 August 2023 did not directly challenge the findings made by McElwaine J in respect of his grounds of appeal he sought to advance below. We note that Mr Huber stated that his initial notice of appeal in this proceeding was 60 pages, but, following case management by Moshinsky J, it was reduced to three pages, and that in those three pages he only had space to specify the inconsistency in the orders of Davies J and McElwaine J. Mr Huber then offered to provide the 60 page notice of appeal to the bench. That offer was declined. The case management order made by Moshinsky J striking out the 60 page notice of appeal was appropriate. A notice of appeal ought to set out, precisely and succinctly, the errors contended for. Not accepting a 60 page notice of appeal (which would have been longer than the reasons appealed from) did not deprive Mr Huber of a fair opportunity to identify any errors for which he wished to contend. Further, Mr Huber had the opportunity in written submissions to expand on any errors contended for.

disposition

Leave to appeal is required

26    As noted at the outset, we consider Mr Huber requires leave to appeal from the primary judgment. Leave is required to appeal from an interlocutory judgment of the Court: s 24(1A) of the FCA Act.

27    A decision regarding leave to proceed against a company in liquidation is an interlocutory judgment requiring leave to appeal: see Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 at 552 (Wilcox, Burchett and Beazley JJ), in respect of s 371(2) of the Companies (New South Wales) Code, which concerned companies wound up by Court order. An application under s 500(2) of the Act, concerning voluntary windings up, is, in our view, likewise interlocutory. We note that in Phoenix Institute of Australia Pty Ltd v Australian Competition and Consumer Commission [2017] FCAFC 155, Perram, Yates and Wigney JJ treated a decision by the primary judge granting leave to proceed against companies subject to a deed of company arrangement under s 444E(3)(c) of the Act as interlocutory and therefore requiring leave to appeal: at [43].

28    A decision of granting or refusing leave to proceed against a corporation in liquidation is discretionary: HFPS Pty Ltd v Tamaya Resources Ltd (in liq) (No 1) [2016] FCA 442 at [18] (Foster J), which referred to and adopted the summary of McPherson J (with whom Campbell CJ and Sheahan J agreed) sitting as a judge of the Full Court of the Supreme Court of Queensland in Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314 at 315–7. As a result, in order for any appeal to succeed, the Court must be satisfied that the primary judge made an error of the kind set out by the High Court in House v The King.

Whether leave ought be granted

29    Mr Huber’s contention, broadly, was that McElwaine J had not sufficiently considered his case, by disregarding both the 30 page notice of appeal and the Chapters document.

30    However, in our view it is clear that McElwaine J engaged closely and at length with the matters that Mr Huber wished to advance on appeal against Beach J’s decision. On Mr Huber’s own account, his Honour spent an entire afternoon going over each of Mr Huber’s proposed grounds of appeal with him, including asking questions and entering into dialogue with Mr Huber on each of the grounds of appeal. During the hearing, Mr Huber referred his Honour not only to his 10 page notice of appeal, but also to the relevant paragraphs of his 30 page notice of appeal and the Chapters document that elaborated on each ground.

31    His Honour’s reasons for judgment also demonstrate the close attention his Honour paid to Mr Huber’s contentions. First, McElwaine J set out Mr Huber’s proposed appeal grounds in full: PJ [43]. At PJ [70]ff, his Honour then addressed each of the proposed grounds in detail. For example, Mr Huber’s first ground, as set out in the 10 page notice of appeal, contended that Beach J had erred in:

1.     failing to objectively consider that the allegations made against the Appellant were so serious and had such serious consequences see Appeal Book Chapter1 Para16 that the evidence and issues presented in the case were required to be considered by application of the Briginshaw standard. This provision reflects Dixon J’s discussion of the quality of persuasion required for this purpose in Briginshaw v Briginshaw [1938] HCA 34; [1938] 60 CLR336 at 361-2; [1938] HCA 34; [1938] ALR 334 at 342 (Briginshaw).

1.1     The Learned Judge ought to have recognised the seriousness of the allegations against the Appellant as Gzell J. did in Australian Securities and Investments Commission v Macdonald [No 11] [2009] NSWSC 287; [2009] 71 ACSR 368, [2009] 230 FLR1, and the potential consequences of civil penalty proceedings demanded the application of the Briginshaw standard. His Honour explained (at [182]–[186]) that: Section 140 of the Evidence Act 1995 prescribes the standard of proof in civil proceedings as the balance of probabilities and provides that the court may take into account in deciding whether it is so satisfied, the nature of the cause of action or defence, the nature of the subject matter of the proceedings and the gravity of the matters alleged.

1.2     the Learned Judge ought to have proceeded upon the basis that the Briginshaw standard applied following the recognition of the serious consequences, see appeal book Chapter1 Para similar to the decision by Spigelman CJ, Beazley and Giles JJA, in the Court of Appeal decision of Morley v Australian Securities and Investments Commission (2010) 274 ALR 205; [2010] NSWCA 331; Their Honours confirmed that that standard finds its modern expression in the terms of Section 140 of the Evidence Act 1995 (Cth) (‘The Evidence Act’) and that the Briginshaw standard is routinely applied in civil penalty proceedings.

1.3     applying the Briginshaw standard to the facts of the case which involved detailed accounting statements, required that he consider all of the information before him objectively. Instead, the Learned Judge applied a subjective standard where he preferred the statements proffered by the Respondent over those of the Appellant based on his incorrect assessment of relative credibility of the witnesses. as follows: See Appeal Book Chapter1 paragraph10 to 15

(emphasis in original).

32    Justice McElwaine addressed the ground as follows (PJ [70]–[72]):

70     Ground 1 on its face is of no merit and has no prospect of success. It is inconceivable that Beach J was not cognisant of the fact that serious allegations were made against and by Mr Huber. His Honour clearly understood that it was a case of significant broad scale and complex fraud and said so on multiple occasions: for example, LJ [15], [17] and [23]. It is quite wrong to imply, as this ground does, that his Honour did not mention Briginshaw v Briginshaw (1938) 60 CLR 336 (Briginshaw) at 362, per Dixon J. He did (at LJ [834]) in the context of satisfaction that fraud is a serious allegation. Moreover, plainly his Honour did not make findings of fact based on “inexact proofs, indefinite testimony, or indirect inferences”: Briginshaw at 362. Rather, he proceeded in accordance with the oral testimony of many witnesses, who he found to be honest, and by a meticulous examination of the contemporaneous documents. At LJ [181] his Honour explained that he had no intention of listing every share transaction to or from the Huber entities; instead he focused on “some particularly relevant or large transactions”. The findings of fact that his Honour made relating to those share transfers were based on the documents adduced in evidence at the trial.

71     The assertion that his Honour did not objectively assess the evidence to make findings of fact is devoid of any merit and contrary to the detailed and extensive evidentiary analysis and factual findings as set out in the liability judgment and the relief judgment.

72     The jumble of authorities referenced in this ground which have applied the Briginshaw analysis do not assist in identifying where and in what respects his Honour erred in misunderstanding the quality of the evidence required to make out the fraud allegations. Expressed at a level of generality that fails to reveal error, Mr Huber contends that his Honour made an incorrect assessment of the credibility of unidentified witnesses. On one view, this may be taken to include a reference to paragraph [39] of the liability judgment where his Honour summarised his overall conclusion that he did not have confidence in the reliability of Mr Huber’s evidence generally or the weight that should be afforded to it. The paragraph concludes with the finding that Mr Huber’s evidence was given little weight except where independently corroborated or adverse to interest. This ground is hopeless.

33    His Honour’s consideration of this ground does not disclose any lack of engagement with Mr Huber’s complaint. Rather, the above extract demonstrates that McElwaine J considered every aspect of the ground:

(1)    the broad contention that Beach J did not consider that the allegations against Mr Huber were serious, which is addressed in detail at PJ [71];

(2)    the contention that Beach J should have proceeded upon the basis that the “Briginshaw standard” applied, based on the seriousness of the allegations, also addressed at PJ [71]; and

(3)    the contention that Beach J had incorrectly assessed witnesses’ credibility, and had applied a subjective rather than objective standard to considering the information before him, addressed at PJ [72] and [73].

34    His Honour’s consideration of the remaining grounds followed the same, thorough approach.

35    It is true that McElwaine J did not refer to the Chapters document or the 30 page notice of appeal in his Honour’s consideration of the proposed grounds of appeal. His Honour said (at PJ [63]): “I confine my analysis to the nine grounds as set out in the proposed notice of appeal. I do not read that document as informed by or incorporating the corresponding Chapters document”. The primary judgment also does not refer at all to the supplementary 30 page notice of appeal provided by Mr Huber. Nevertheless, there is no injustice to Mr Huber in what occurred. As Mr Huber explained, his Honour engaged, at length, and in detail, with Mr Huber at the hearing in relation to the Chapters document and the longer version of the notice of appeal. It was open to McElwaine J to determine the applications before him based on the 10 page notice of appeal, notwithstanding that his Honour permitted Mr Huber to conduct his argument by referring to his other documents, namely the 30 page notice of appeal and the Chapters document. In this context, in confining his dispositive reasoning to the grounds as set out in the 10 page notice of appeal, McElwaine J did so having been taken to, and being aware of, the wider canvass of Mr Huber’s contentions. While Mr Huber may feel his time was, in retrospect, wasted in having traversed aspects of the Chapters document and the longer notice of appeal with McElwaine J, there was no procedural unfairness to him as a result. If anything, there was a procedural indulgence.

36    In any event, the 10 page notice of appeal identified nine substantive grounds of appeal. Justice McElwaine engaged closely with each of these grounds, having clearly read and carefully considered the reasons of Beach J. As explained above, no error was alleged in the manner in which McElwaine J addressed those nine proposed grounds, or in his Honour’s conclusions that none had merit (besides an unfounded allegation of bias in the notice of appeal before this Court, which was not pursued in oral submissions).

37    To the extent that Mr Huber complained of McElwaine J having reduced the page limit for his notice of appeal to 10 pages, in circumstances where his Honour closely considered Mr Huber’s complaints against Beach J, by engaging with each of his nine proposed grounds of appeal in the manner we have outlined above, we do not consider Mr Huber was denied any procedural fairness or an adequate opportunity to advance his case. Further, it is unclear to what extent this complaint accurately characterised the directions of either McElwaine J or Davies J. In his Honour’s reasons, McElwaine J recorded (at PJ [69]) that Mr Huber submitted to his Honour “that a reason for preparing his Chapters document is that Davies J limited his notice of appeal to 10 pages”. That submission is inconsistent with the submission advanced before this Court (namely that McElwaine J backtracked on Davies J having permitted, and accepted, a 45 page notice of appeal).

38    Furthermore, in the affidavit material before this Court, Mr Huber set out his basis for contending that McElwaine J had made an “illogical and unjust order limiting the proposed notice of appeal” as an email from his Honour’s associate, which (as quoted by Mr Huber) included the line: “The filing of written submissions by the parties, which his Honour considers should be strictly limited to a maximum of 10 pages, minimum 12 point type face and one and one half line spacing” (emphasis in original). On its face, the extract quoted by Mr Huber does not concern any page limits for his notice of appeal. Rather, it concerned written submissions.

39    In any case, McElwaine J’s reasons closely engaged with Mr Huber’s application for leave to proceed with his appeal (with the application for a stay of the liquidation following in the wake of that larger issue). We do not consider that his Honour’s reasons are attended by sufficient doubt to warrant the grant of leave to appeal. On the contrary, the complaints raised before us lack merit, and we would reject them even if leave to appeal were not required. Further, to succeed in his application, Mr Huber needed to identify House v The King errors. No such errors were identified. Indeed, as we have said, Mr Huber has not advanced any substantive complaints concerning his Honour’s judgment, but, rather, has only identified procedural complaints, which we have rejected.

40    The application for leave to appeal McElwaine J’s judgment refusing leave to proceed with the proposed appeal is dismissed. It follows that the separate issue in relation to Mr Huber’s application to stay the liquidation pending the proposed appeal does not arise for determination.

Associate:

Dated:    13 December 2023