FEDERAL COURT OF AUSTRALIA

Registrar of Aboriginal and Torres Strait Islander Corporations v Kerkhoffs (No 2) [2013] FCA 1446

THE COURT ORDERS THAT:

1.    The communication by email with the Court dated 19 November 2013 be deemed to be an application for re-opening under rule 39.04 of the Federal Court Rules 2001 (Cth).

2.    There be no variation to the orders made on 18 November 2013.

3.    There be no order as to costs.

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

REASONS FOR JUDGMENT

1    Earlier this week, I dealt with an application by the Registrar of Aboriginal and Torres Strait Islander Corporations for the granting of relief against the respondent, Mrs Leigh Lynette Kerkhoffs, under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act). These reasons for judgment must be read in conjunction with the earlier reasons for judgment, which I shall term the principal judgment. The orders that I made earlier this week were for the position of a pecuniary penalty in the amount of $50,000 in respect of various contraventions of the CATSI Act and for the disqualification of Ms Kerkhoffs from holding office as a director of a corporation under that Act for a period of five years. In addition, I made an order by way of compensation and an order in respect of costs.

2    Shortly after the pronouncing of those orders and the related principal judgment ex tempore, counsel for Mrs Kerkhoffs communicated to the Court and to counsel for the Registrar an error which he apprehended that he had made in respect of the consequential effect of a disqualification order under the CATSI Act. The basis upon which submissions had been made earlier this week was that there was not what one might term an automatic flow-on effect from a disqualification order under the CATSI Act. Regard to s 206B of the Corporations Act 2001 (Cth) (Corporations Act) discloses that, by virtue of s 206B(5), there is an automatic flow-on effect in respect of the disqualification of a person from holding office as a director of a corporation incorporated under the Corporations Act.

3    The error concerned is one which I would describe as a collective one in the sense that, whilst the submissions for Mrs Kerkhoffs were premised upon the absence of an automatic follow-on effect, that error was not corrected in submissions in reply nor, to my regret, did I detect that error at the time.

4    The application then, on behalf of Mrs Kerkhoffs, is for the varying or setting aside of the Court’s judgment before it has been entered. The authority for the making of that application is r 39.04 of the Federal Court Rules 2011 (Cth). I deem the communication with the Court, in respect of the error mentioned, to be an application for that variation.

5    The principles which attend whether there ought to be any variation have been stated by the Full Court in Davis v Insolvency and Trustee Service Australia (No 2) (2011) 190 FCR 437 (Davis v ITSA) by reference to an earlier judgment of the High Court: Autodesk Inc v Dyason (No 2) (1993) 176 CLR. The passage concerned in Davis v ITSA is:

The principles surrounding the Court’s power to review its own judgment before its perfection are clear: “[w]hat must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing.” (Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 303 per Mason CJ). Because of the importance of the public interest in the finality of litigation, it is a jurisdiction “to be exercised with great caution” (at 302). The onus is on the applicant to demonstrate that he or she has not been heard: Autodesk at 302 citing Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 at 684 per Mason ACJ, Wilson and Brennan JJ.

Here, there has been neither an entry of the orders pronounced earlier this week, which is the critical factor, nor for that matter has there been any uploading of those orders onto the Court’s “Case Track” system.

6    The error concerned, as I have said, is not what I would regard as solely referable to fault or neglect on the part of Mrs Kerkhoffs’ counsel. It is truly a collective error. The sentencing discretion which I exercised earlier this week proceeded on a false premise of law.

7    In England, the position may be the same as described in Davis v ITSA, although it is described in a more generic way, as one where the court before entry of a judgment may reopen in exceptional circumstances, see Robinson v Bird [2003] EWCA Civ 1820, The Times, 20 January 2004, Court of Appeal (Robinson v Bird). Here, exceptional circumstances can be found either in a particular error of fact or one of law subject to the caveat mentioned in Davis v ITSA.

8    As was stated in Robinson v Bird, it is unwise to try and give any greater statement as to the circumstances in which reopening would be permitted. Each case must turn on its particular facts. Here, I am satisfied that the case is apt for reopening.

9    The question is: should there be, as a matter of discretion, a different outcome? What particularly concerned me at the time when I pronounced reasons for judgment earlier this week was the continuum of conduct and that after there had been what one might term a near-death experience for the corporation, which has such important public responsibilities for the provision of housing for members of the Aboriginal community in Mount Isa. That “near-death experience” for the corporation was the Registrar’s earlier application for winding-up. The amount of the corporation’s indebtedness was significant and its financial administration was chaotic.

10    Another concern which I had was the impact on the administration of the corporation of real and genuine clan or tribal or wider familial loyalties. Whilst they might seem misplaced and are as a matter of their impact on prudent financial administration, they are, as I said in the principal judgment, genuine and real. There is a need for corporations incorporated under the CATSI Act to be administered in a financially responsible way, notwithstanding those genuine and real calls on a director’s value judgments.

11    In relation to Mrs Kerkhoffs, she did succumb, I am at least inferentially sure, to such calls on her value judgment in her capacity as chairman of the directors. Those same types of calls are not present in relation to Kerkhoffs Transport which, as I observed in the principal judgment, is conducting a business with some success.

12    Nonetheless, the case is one, I am quite sure, where disqualification is necessary in relation to corporations under the CATSI Act. Parliament has made a value judgment as to the consequence of that. It may be that there is a law reform issue in relation to automatic disqualification. There is an arbitrariness which attends such automatic consequences. It may be that it would have been better to leave the making of such a consequential order to the making of a judicial value judgment.

13    Even taking into account, though, the consequential quality, what remains is a person who I am quite sure needs to be disqualified from holding office under the CATSI Act for a period. As I mentioned in the principal judgment, there are also elements of general deterrence. There needs to be a message sent clearly to those who hold office under the CATSI Act that prudent financial management is just as important a consideration in relation to corporations incorporated under that Act as it is to those under the Corporations Act.

14    I have also reflected on whether I should, in reopening, change in any way the pecuniary penalty which I imposed earlier this week, having regard to the consequential effect. I have determined that I should not vary that pecuniary penalty. That is because the conduct concerned was sustained and involved serious contraventions. Such mercy as needs to be shown was shown, having regard to the timely confession of those contraventions and the cooperation and the administration of justice by making appropriate allowance for that in the amount of the pecuniary penalty.

15    The end result, then, is that, exercising afresh the discretion, having regard to the correct position in relation to flow-on disqualification, I am nonetheless of the view that there ought to be a disqualification order under the CATSI Act of the duration upon which I earlier settled and that that needs to be imposed as well as a pecuniary penalty.

16    The orders that I make, therefore, are to deem the communication by email with the court on behalf of Mrs Kerkhoffs by her counsel to be an application for reopening under r 39.04. The further order I make is to direct that there be no variation to the orders made on Monday. The third order that I make is that there be no order as to costs.

Associate:

Dated:    23 December 2013