ACN 078 272 867 Pty Ltd ((in Liquidation)) (Formerly Advance Finances Pty Ltd) v Deputy Commissioner of Taxation

• Jurisdiction: Australia Federal only
• Judge: Heydon J
• Judgment Date: 02 November 2011
• Neutral Citation: 2011-1102 HCA A,[2011] HCA 46
• Date: 02 November 2011
• Court: High Court
• Docket Number: Matter No S167/2011

[2011] HCA 46

HIGH COURT OF AUSTRALIA

Heydon J

Matter No S167/2011

Matter No S210/2011

Acn 078 272 867 Pty Limited (In Liquidation)(Formerly Advance Finances Pty Limited) & Anor

Plaintiffs

and

Deputy Commissioner Of Taxation & Anor

Defendants

Gary Binetter

Plaintiffs

and

Deputy Commissioner Of Taxation & Anor

Defendants

Representation

R L Seiden with S Kaur-Bains and N Kulkarni for the plaintiffs (instructed by Signet Lawyers Pty Limited)

M L Brabazon SC with A J O'Brien for the first defendant in both matters (instructed by Australian Government Solicitor)

Submitting appearance for the second defendant in both matters

Corporations Act 2001 (Cth), ss 459A, 459P, 601AH(2), 601AH(5).

Corporations Law, s 574(1)(b).

ACN 078 272 867 Pty Limited (In liquidation) (Formerly Advance Finances Pty Limited) v Deputy Commissioner of Taxation

Binetter v Deputy Commissioner of Taxation

Corporations — Reinstatement to register — Winding up — Companies deregistered under Corporations Act 2001 (Cth) (‘Act’) — Federal Court made orders reinstating companies to register pursuant to s 601AH(2) of Act and thereupon winding them up — Companies and former director sought writs of certiorari, to quash winding-up orders made by Federal Court, mandamus and prohibition — Whether Federal Court had jurisdiction to wind up companies — Whether Federal Court wound up deregistered companies — Whether Federal Court ordered that winding up take effect from date when companies reinstated — Whether s 601AH(5) of Act requires that company, when reregistered, come back into existence in same form as on deregistration.

Procedural fairness — Whether companies should have been given opportunity to be heard before winding-up orders made — Discretionary nature of relief sought — Whether there was unfairness as matter of substance — Whether opportunity to be heard could have made difference to outcome.

Words and phrases — ‘company’, ‘jurisdictional error’.

ORDER

1. In each matter, application dismissed.

2. The plaintiff in S210/2011 to pay the costs of the first defendant in S210/2011 and in S167/2011.

1 Heydon J There are two proceedings before the Court: S167/2011 and S210/2011.

2 In S167/2011 the plaintiffs are two companies. The first company is ACN 078 272 867 Pty Ltd (in liq). It was formerly called Advance Finances Pty Ltd and will be referred to below as ‘Advance’. The second company is ACN 087 623 541 Pty Ltd (in liq). It was formerly called Civic Finance Pty Ltd and will be referred to below as ‘Civic’. The companies have filed an amended application for an order to show cause why writs of certiorari, mandamus and prohibition should not be issued to the Federal Court of Australia. The primary relief sought is certiorari to quash orders which Jagot J, a judge of that Court, made on 16 December 2010 1 and 11 March 2011 2.

3 The orders of 16 December were orders that Advance and Civic be reinstated to the register and thereupon placed into liquidation. The orders of 11 March 2011 were orders dismissing with costs an application by a former director of the two companies, Mr Gary Binetter, seeking to set aside the winding-up orders. In S210/2011, Mr Binetter has filed an amended application to show cause which is similar to that filed by the companies in S167/2011.

4 In each proceeding the second defendant, which is described as ‘The Federal Court of Australia and Judges thereof’, has filed a submitting appearance.

5 The background is as follows.

6 On 21 April 1997, Advance was incorporated. Mr Gary Binetter was appointed a director. On 17 May 1999, Civic was incorporated. Mr Gary Binetter was appointed a director. One of the other directors of both companies was Mr Emil Binetter, Mr Gary Binetter's father. The activities of the companies allegedly centred on borrowing money from banks in Israel, namely the Israel Discount Bank and Mercantile Discount Bank, and on-lending it to other entities.

7 The income tax returns for the two companies in the years from incorporation until 2006 showed nil taxable income. Those returns were said to be self-assessments prepared by accountants without source documents and in reliance on information provided by Mr Emil Binetter. Neither company paid any income tax. On 31 July 2006 and 8 September 2006, the Australian Taxation

Office (‘the ATO’) wrote to the then solicitors for Advance and Civic and stated that the ATO intended to audit a number of entities associated with Mr Emil Binetter.

8 Five days after the last letter, on 13 September 2006, Advance and Civic each lodged an application with the Australian Securities and Investments Commission (‘ASIC’). Each application was an application for the relevant company to be deregistered administratively under the Corporations Act 2001 (Cth) (‘the Corporations Act’). ASIC was given no notice of the impending audits. The ATO was given no notice of the applications.

9 These applications for deregistration succeeded. In her judgment of 16 December 2010, Jagot J found that Civic was deregistered on 25 November 2006 and Advance on 26 November 2006 3.

10 From the respective dates of deregistration, Mr Gary Binetter ceased to be a director of the companies.

11 The ATO did not become aware of the deregistrations until Mr Emil Binetter was interviewed, pursuant to statutory power, on 27 April 2007.

12 By 2009 the ATO had formed the view that certain of the tax returns of the companies were incorrect and that but for the deregistrations tax would be owing once notices of assessment were served.

13 On 20 January 2010, the first defendant, the Deputy Commissioner of Taxation (‘the Commissioner’), filed an application and supporting affidavits in proceedings NSD41/2010 in the Federal Court of Australia. The Commissioner sought orders, inter alia, that ASIC reinstate Civic to the register pursuant to s 601AH(2) of the Corporations Act and that on reinstatement Civic be wound up and a liquidator appointed. The application and affidavits were served on the four persons who had been directors at the time Civic was deregistered, namely Gary Binetter, Emil Binetter, Lisa Michelle Binetter and Debbie Ann Binetter.

14 On 20 January 2010, similar documents were filed in proceedings relating to Advance in the Federal Court — NSD44/2010. They were served on the persons who had been directors at the time Advance was deregistered, namely the same four former directors of Civic.

15 Each of the proceedings was listed for directions on 12 February 2010. On 9 February 2010, the then solicitors for the former directors of Civic and of Advance informed the solicitors for the Commissioner that, on 12 February 2010, applications would be made for orders that the directors be joined or be heard. On 12 February 2010, District Registrar Wall, without opposition from the Commissioner, granted leave for Mr Gary Binetter to be heard. He was not joined as a party in either proceeding. Directions were made for the filing of evidence and outlines of submissions.

16 On 16 December 2010, Jagot J, after a hearing held between 30 November and 2 December 2010, made the orders requested by the Commissioner 4. At that hearing Mr Gary Binetter was represented by two counsel. He called what Jagot J described as ‘extensive’ evidence. He cross-examined witnesses called by the Commissioner. He put lengthy and sophisticated submissions opposing the reinstatement and the winding up of Advance and Civic.

17 On 17 December 2010, Jagot J stayed execution in order to enable Mr Gary Binetter to apply for leave to appeal or be joined as a party to any appeal.

18 On 4 March 2011, Perram J delivered two decisions.

19 In the first, Perram J held, after a hearing on 1 March 2011 at which Mr Gary Binetter was represented by two counsel, that leave should not be granted to him to appeal against Jagot J's orders of 16 December 2010 5. He concluded that Mr Gary Binetter had no standing to appeal. The risks posed to him as a former director arising from any investigations by the liquidator and possible proceedings against him were insufficient to make him aggrieved by the winding-up orders.

20 The second decision of 4 March 2011 concerned an application by counsel on behalf of Mr Gary Binetter for a continuation of the stay of Jagot J's orders pending an application for special leave to appeal to this Court 6. Perram J considered that no appeal lay to this Court from his decision refusing leave to appeal. He did this because his refusal to grant leave to appeal was an exercise of the jurisdiction described in s 25(2)(a) of the Federal Court of Australia Act 1976 (Cth) and s 33(4B)(a) of that Act provides that no appeal lies to the

High Court from a judgment of the Federal Court in the exercise of its appellate jurisdiction if the judgment is a determination of the kind mentioned in s 25(2). Hence, there was no available proceeding to which the stay application could be seen as incidental. The right to appeal is a creature of statute and that controversial statutory restriction on the right to apply for special leave to appeal to this Court has brought about these applications for constitutional writs in the original jurisdiction of the Court.

21 On 9 March 2011, Jagot J heard an application on behalf of Mr Gary Binetter which was presented by senior and junior counsel. The application was that the winding-up orders of 16 December 2010 be set aside on the ground that the companies should have been joined as parties to the winding-up proceedings. On 11 March 2011, Jagot J dismissed that application 7. She rejected the submission that there was a temporal gap between the operation of the orders for reinstatement and the operation of the winding-up orders. Thus it could not be said that in that interval there were existing companies, the rights of which would be affected by the winding-up orders.

22 On 11...