FEDERAL COURT OF AUSTRALIA

Binetter v Deputy Commissioner of Taxation [2011] FCA 184

THE COURT ORDERS THAT:

1.    The application for leave to appeal be dismissed.

2.    The applicant pay the first respondent’s costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1    This is an application for leave to appeal from orders made by Jagot J on 16 December 2010 that the registration of two deregistered corporations – Civic Finance Pty Ltd and Advance Finances Pty Ltd – be reinstated by the Australian Securities and Investments Commission (“ASIC”) and that they thereupon be wound up by an official liquidator. Other, presently irrelevant, machinery orders were also made.

2    In the two proceedings before Jagot J the parties were the Deputy Commissioner of Taxation, who sought the making of the orders, and ASIC, who maintains the register of companies. ASIC took no active role in the proceedings. Mr Binetter, who was a former director of both companies, was granted leave early in both proceedings pursuant to rule 2.13(1)(c) of the Federal Court (Corporations) Rules 2000 to be heard without becoming a party. A subsequent application to join him to the proceedings as a party pursuant to Order 6 rule 8 of the Federal Court Rules was refused. During the hearing, Mr Binetter was represented by counsel.

3    Her Honour concluded that the Deputy Commissioner of Taxation was a person aggrieved by the deregistration of the two companies (Deputy Commissioner of Taxation v Australian Securities & Investments Commission; in the matter of Civic Finance Pty Ltd (Deregistered) [2010] FCA 1411at [17]). That conclusion was material because it was only the application of such a person that could enliven the Court’s power under s 601AH(2) of the Corporations Act 2001 (Cth) to order ASIC to reinstate a corporation’s registration. Her Honour concluded that the Deputy Commissioner of Taxation was aggrieved because, putting it compendiously, the prior deregistration of the two companies was preventing him from perfecting the service of notices of assessment upon them and thereafter availing himself of insolvency procedures such as a liquidator’s investigation with the possibility of subsequent recovery proceedings including against the directors. Secondly, her Honour concluded that it would be just to restore the companies to life (at [29]). Since the companies would then be confronted with the notices of assessment and had no assets with which to meet them, her Honour concluded that they would thereupon be insolvent and accordingly ordered their winding up and the appointment of a liquidator.

4    Mr Binetter now seeks leave to appeal from those orders.

5    Before me both parties accepted that her Honour’s orders were final. Section 24 of the Federal Court of Australia Act 1976 (Cth) does not expressly deal with appeals to the Full Court by non-parties. Consequently, it has been held that it does not authorise a non-party, such as Mr Binetter, to appeal: Sen v The Queen (1991) 30 FCR 173 at 175 per Morling, Neaves and Foster JJ; Shields v Official Receiver in Bankruptcy (1996) 66 FCR 171 at 174 per Carr J, Black CJ and Kiefel J agreeing. Appellate authority in this Court, however, confines those decisions to appeals as of right and establishes that “s 24 picks up the long established practice that permits non-parties to appeal by leave”: Australian Industry Group v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2002) 125 FCR 529 at 553 [75] per Goldberg and Finkelstein JJ; Commonwealth v Construction, Forestry, Mining and Energy Union (2000) 98 FCR 31 at 37 [18] per Black CJ, Tamberlin and Sundberg JJ.

6    It appears to be accepted that leave of that kind will be given “as a rule” if the person applying might properly have been made a party below: Cuthbertson v Mayor, Alderman and Citizens of the City of Hobart (1921) 30 CLR 16 at 25 per Knox CJ and Starke J. But that is not an exhaustive statement of the standing requirements for a non-party seeking leave to appeal: Witness v Marsden (2000) 49 NSWLR 429 at 448 [81] per Heydon JA (with whom Mason P and Priestley JA agreed on this point). The standing requirement appears only to be that the non-party applicant be “aggrieved” or “sufficiently interested”: ibid.

7    At one time it was thought that the director of a company which had been ordered to be wound up (such as Mr Binetter) had an entitlement to appeal against that order in the name of the company: see, for example, Aetna Properties Ltd (in liq) v GA Listing and Maintenance Pty Ltd (1994) 13 ACSR 422. However, that principle has been somewhat affected by statute. Section 471A(1) of the Corporations Act 2001 (Cth) provides that during the pendency of a court ordered winding up “a person cannot perform or exercise, and must not purport to perform or exercise, a function or power as an officer of the company”. This does not, however, apply where the performance of the function occurs “with the approval of the Court”: s 471A(1A)(d). Consequently, a director may pursue an appeal against a winding up order in the name of a company if she first obtains leave under s 417A(1A)(d).

8    The requirements of s 471A led French J in HVAC Construction (Qld) Pty Ltd v Energy Equipment Engineering Pty Ltd (2002) 44 ACSR 169 at 179 [36] to the view that a director of a company could not appeal in the name of the company without first obtaining leave under s 471A, thereby supplanting the former practice. That view has been followed by a number of first instance judges and I regard myself as bound by it: Workers Compensation Nominal Insurer v Detailed Flooring Pty Ltd (2010) 80 ACSR 1 at 3 [5] per Barrett J; Deputy Commissioner of Taxation v Soiland Pty Ltd (in liq) [2010] FCA 168 at [9] per Barker J; Re; Menzies Haulage Pty Ltd [2009] FCA 1300 at [15] per Gordon J; Lightburn Pty Ltd v Kama Power Products Pty Ltd [2003] SASC 43 at [24] per Besanko J. It follows that I do not accept that Mr Binetter, simply by reason of his status as a director, may appeal in the companies’ names to the Full Court against the winding-up orders which have been made and I do not think that the orders in relation to re-registration stand any differently. This, however, is not what Mr Binetter is seeking to do. Instead, he brings the application for leave to appeal as a third party affected by the orders and, on that application, his status as a director is fortuitous and, one might have thought, irrelevant.

9    However, there may be reason to doubt that conclusion. In HVAC, French J went on to say:

I do not exclude the possibility that the directors of a company may themselves have standing to appeal against a winding-up order in their own names although the observations of Callinan J in Dooney v Henry seem inimical to that proposition.

10    In Dooney v Henry (2000) 174 ALR 41 at 50 [26] Callinan J said:

The action has been brought by a natural person, a director, in order to seek relief in favour of, that is, effectively on behalf of, a company in liquidation. A director is not a proper party in any such proceedings. If there is to be a challenge to the winding-up order it must be made by the company itself with leave pursuant to s 471A of the Corporation Law.

11    I am not bound by what Callinan J said since he was sitting at first instance. And, indeed, the Commissioner did not submit that Dooney v Henry was a reason for the present application to fail. This being so I do not need to determine whether it should be followed. However, as a statement about who has statutory standing to challenge a winding up order it has its difficulties for it may overlook s 482(1A)(a) of the Corporations Act which permits a creditor or contributory to apply to stay or terminate a winding up (a matter commented upon by Barrett J in Detailed Flooring at [8]). It may be an unusual reading of the statute which gives parties of that kind the right to apply to end the winding up the moment after it has been ordered but denies the possibility of their ever having standing to appeal the making of the order in the first place. That, in turn, may well reduce any capacity of s 471A to operate to exclude the general law applying to third party appeals. However, for the reasons already given this question does not presently need to be decided.

12    What does need to be decided is whether Mr Binetter has standing to appeal as a third party and, hence, whether he is aggrieved or sufficiently interested. Before me it was submitted that he was aggrieved because of the risks posed to him by reason of any investigation by the liquidator and any possible proceedings against him thereafter. The weight of that interest was said to be buttressed by some further observations:

(a)    Mr Binetter had been heard as a non-party below and had taken a full part in the proceeding;

(b)    the only party who could appeal, ASIC, plainly was not going to do so;

(c)    he was entitled to apply for Court approval to appeal the winding up order under s 471A;

(d)    Jagot J made a costs order against him; and

(e)    he had formerly been a director of both companies the subject of the orders.

13    I do not think any of these matters bears upon the standing question. Matters (a)-(c) do not alter the question of whether Mr Binetter is aggrieved by the winding up order although, should he have standing, they may be relevant to whether leave ought be granted. Matter (d) (the adverse costs order below) makes Mr Binetter a person aggrieved by the costs order, but that does not entail that he is aggrieved by the winding up or re-registration orders. Matter (e) does not advance the argument for it is clear that being a director, simpliciter, does not generate third party standing. Viewed from the individual director’s personal perspective, the fact that he is a director of a company does not engage, by itself, any particular interest in the question of whether the company is wound up. Of course, he does have the function of appealing in the company’s name against a winding up order, but this function is not a personal interest generating standing. Rather, it is a representative function regulated by s 471A.

14    It follows, in those circumstances, that it is merely the possibility that Mr Binetter may become involved in a liquidator’s investigation and its downstream consequences that is said to aggrieve him.

15    I do not think that such an interest suffices. Granted the breadth of the concept of aggrievement, this interest is too remote. If it were sufficient, it would mean that any person who might be examined by a liquidator or subject to such a liquidator’s investigation would have standing to seek leave to appeal against a winding up order. The potential for a winding up order to be exposed to such a broad range of putative appellants and the obvious risk that this would pose to the orderly conduct of the winding up mean that mere membership of the class of the potentially investigated cannot suffice for standing purposes. In that circumstance, I do not accept that Mr Binetter has standing to seek leave to appeal.

16    After I reserved judgment, an application was made to add Lygon 159 Pty Ltd as a party to the application. That company is, so I was told, the sole shareholder in both companies and, hence, a contributory. I do not think it is appropriate to accede to that application. The explanation proffered for the delay in the application’s making was, in effect, that its relevance had only emerged during the course of the hearing. That may be so. The Deputy Commissioner, however, submitted that he had had no chance properly to consider the issue and that that was a sufficient reason in itself to refuse the application. I agree. The entire application for leave to appeal was conducted on the basis that the person aggrieved was Mr Binetter. The written submissions were prepared on that basis and the oral argument proceeded similarly. The matter had been reserved. I am not prepared to permit the case to be argued on an entirely new basis after its full argument and the reserving of judgment. Since Lygon 159 Pty Ltd is a contributory it would have been necessary to consider in detail, and with the benefit of submissions, the status of contributories as interested parties which would have required some, but not major, delay in the proceeding. Another factor relevant to the exercise of this discretion is the ability of Lygon 159 Pty Ltd as a contributory to apply in a separate proceeding for leave to appeal (albeit out of time). That, of course, would raise squarely the Dooney v Henry question adverted to above and which has not been the subject of any argument before me. In that circumstance, I do not grant Lygon 159 Pty Ltd leave to be joined into the application.

17    Having concluded that Mr Binetter has no standing, it is not necessary to consider the merits of the leave application.

18    The application is dismissed with costs.

Associate:

Dated:    4 March 2011