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District Court 16 May 2019

Orr v LakeCoal Pty Limited

[2019] NSWDC 178

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CORPORATIONS

Citation: Orr v LakeCoal Pty Limited [2019] NSWDC 178
Court: District Court of New South Wales
Date: 16 May 2019
Judge: Russell SC DCJ

Background

The defendant company was the subject of a criminal prosecution under the Work Health and Safety Act 2011 (NSW), with an undefended hearing listed for 3 June 2019. Before the hearing commenced, senior counsel for the prosecutor appeared to resolve two preparatory issues: whether leave was required to continue the prosecution given a change in the company's corporate status, and directions for the presentation of evidence at an undefended hearing.

Prior to 5 March 2019, the defendant was under voluntary administration. On that date, the creditors passed a special resolution to wind up the company under s 439C(c) of the Corporations Act 2001 (Cth), appointing the administrator as liquidator. From that point, the defendant was subject to a creditors' voluntary winding up.

The central preliminary question was whether the prosecutor needed to obtain leave of the court before continuing the criminal prosecution against the now-liquidating company.

  • Whether a prosecutor requires leave under s 500(2) of the Corporations Act 2001 (Cth) to continue a criminal prosecution against a company undergoing a creditors' voluntary winding up.
  • Whether s 471B of the Corporations Act 2001 (Cth), which applies to companies wound up in insolvency or by the court, extended to criminal proceedings in a different winding up context.
  • What procedural directions were appropriate for an undefended hearing involving multiple expert witnesses and inspectors.

Decision

The court focused on the distinction between two provisions of the Corporations Act 2001 (Cth). Section 471B, which applies to insolvent or court-ordered windings up, uses broad language prohibiting the commencement or continuation of "a proceeding in a court" without leave. That language is wide enough to capture both civil and criminal proceedings. The Western Australian Supreme Court reached exactly that conclusion in Worksafe Western Australia Commissioner v Australian Countertop Pty Limited (In Liquidation) [2014] WASC 413.

Section 500(2), by contrast, applies specifically to creditors' voluntary windings up. It restricts only "action or other civil proceeding," a phrase that on its plain reading confines the leave requirement to proceedings of a civil nature. Russell SC DCJ agreed with Justice Schmidt's reasoning in WorkCover Authority of New South Wales (Inspector Maltby) v Josef & Sons Contracting Pty Ltd (In Liquidation) [2002] NSWIRComm 226, which drew precisely this distinction and held that s 500(2) does not require leave to continue criminal proceedings.

Because the defendant was in creditors' voluntary winding up (governed by s 500(2)) rather than being wound up in insolvency or by the court (governed by s 471B), the court found that no leave was required for the prosecution to proceed.

On directions, the court accepted the prosecutor's proposed short minutes of order as appropriate for an undefended hearing and granted leave for expert reports and inspector affidavits to stand as evidence-in-chief.

Orders Made

  • The prosecutor does not require leave to continue the prosecution.
  • Leave granted under r 53.28 of the District Court Rules 1973 to tender four expert reports as evidence-in-chief:
  • Report of Jason Wagstaffe (engineer and workplace safety risk management expert), dated 3 July 2018
  • Report of Martin Burns (registered land surveyor), finalised 3 December 2018
  • Report of Judy Turnbull (metallurgist), dated 7 December 2018
  • Report of Tim White (forensic mechanical engineer), dated 7 December 2018
  • Leave granted under r 53.28 of the District Court Rules 1973 for affidavits of four inspectors (Delmenico, Bath, Tull, and Flowers) to be filed and tendered as evidence-in-chief.
  • Prosecutor to provide a hearing plan setting out the proposed order of witnesses by 28 May 2019.
  • Liberty to apply on three days' notice.

Key Takeaways

  • Under s 500(2) of the Corporations Act 2001 (Cth), the restriction on proceeding without leave applies only to civil actions and civil proceedings, not to criminal prosecutions, because the section's language expressly confines itself to "action or other civil proceeding."
  • Section 471B imposes a broader leave requirement that extends to any proceeding, including criminal proceedings, but it applies only where a company is being wound up in insolvency or by order of the court, not in a creditors' voluntary winding up.
  • The District Court followed the earlier reasoning of Justice Schmidt in WorkCover v Josef & Sons Contracting [2002] NSWIRComm 226, confirming that this distinction between ss 471B and 500(2) has been consistently applied in the Work Health and Safety prosecution context.
  • A company's transition from voluntary administration to creditors' voluntary winding up is the critical moment that shifts the relevant Corporations Act provision from s 440D (which expressly excludes criminal proceedings from the leave requirement during administration) to s 500(2).
  • Where a criminal prosecution is brought against a company in creditors' voluntary winding up, the absence of a leave requirement under s 500(2) means the prosecution may continue without court approval to do so.

Legislation and Cases Referenced

Legislation
- Corporations Act 2001 (Cth), ss 439C, 440D, 446A, 471B, 500(2)
- Work Health and Safety Act 2011 (NSW)
- District Court Rules 1973 (NSW), r 53.28
- Occupational Safety and Health Act 1984 (WA)

Cases
- WorkCover Authority of New South Wales (Inspector Maltby) v Josef & Sons Contracting Pty Ltd (In Liquidation) [2002] NSWIRComm 226
- Worksafe Western Australia Commissioner v Australian Countertop Pty Limited (In Liquidation) [2014] WASC 413