Testro Bros Pty Ltd v Tait [1963] HCA 29; (1963) 109 CLR 353 (16 August 1963)

HIGH COURT OF AUSTRALIA

TESTRO BROS. PTY. LTD. v. TAIT [1963] HCA 29; (1963) 109 CLR 353

Companies

High Court of Australia
McTiernan(1), Kitto(2), Taylor(1), Menzies(3) and Owen(1) JJ.

CATCHWORDS

Companies - Special investigation - Inspector - Whether required to act judicially - Right of company to appear and be heard - Legal effect of report - Companies Act 1961 (Vict.), ss. 171 (10)*, 173, 222 (1) (g)** - Companies Act 1963 (Vict.), s. 2.

HEARING

Melbourne, 1963, May 24, 27-29;
Sydney, 1963, August 16. 16:8:1963
APPEALS from the Supreme Court of Victoria.

DECISION

August 16.
The following written judgments were delivered:-
McTIERNAN, TAYLOR AND OWEN JJ. Each of these appeals is brought by special an order nisi for a writ of prohibition or mandamus. If the appeals are successful the only order that could be made by this Court would be one setting aside the orders appealed from and in lieu thereof directing that orders nisi be made returnable before the Full Court of the Supreme Court which would then have to decide whether or not the orders nisi should be made absolute. The submissions made to O'Bryan J. raised arguable questions of law and, for this reason, we think his Honour should have granted the applications, but the grounds on which special leave to appeal was granted by this Court covered a much wider field and raised questions affecting the administration of the Companies Acts in all the States of the Commonwealth. The refusal by O'Bryan J. of the applications for orders nisi was based upon the fact he was of opinion that the matters raised were concluded against the appellants by the decision of the Full Court of the Supreme Court of Victoria in the case of Reg. v. Coppel; Ex parte Viney Industries Pty. Ltd. (1962) VR 630 . The correctness of that decision is now called in question as is its application, in any event, to the present cases and it was for these reasons that special leave to appeal was granted. In these circumstances it seems right that we should deal with the substantial matters that have been debated before us rather than take a course which would merely lead to unnecessary and undesirable delays. (at p361)

2. The facts are that, pursuant to s. 173(1) of the Companies Act 1961 (Vict.) the respondent was appointed to investigate the affairs of a group of companies of which the appellant company was one. Section 173 is contained in Div. 4 of Pt VI of the Act and, by the combined effect of sub-s. (2) of that section and of s. 171(3), an inspector appointed under s. 173(1) may require any officer or agent of any corporation the affairs of which are being investigated to appear for examination on oath in relation to its business. In the exercise of this power the respondent required the appellant Rex Clifford Testro to appear before him for examination on oath. Testro was the chairman and managing director of the appellant company and was a director of each of the other companies whose affairs were being investigated. Counsel for Testro thereupon appeared before the respondent and asked leave to appear for the witness during his examination with liberty to examine him further at the conclusion of the examination by the respondent, should that appear necessary. The same counsel appearing for the appellant company also asked leave to be present for the company throughout the taking of evidence by the respondent with liberty to cross-examine witnesses and adduce evidence. Counsel further asked that the company be informed of all allegations made in the course of the investigation that reflected on the conduct or administration of its affairs and of any proposed findings critical of the company and its administration. In the alternative, he asked that the company be informed of the allegations above referred to and of all the evidence which seemed to the respondent to support such allegations and given a full opportunity of meeting such allegations by evidence or by submissions either oral or in writing. Each of these applications was refused by the respondent, who based his refusal on the decision in the Viney Industries Case (1962) VR 630 . (at p361)

3. With regard to the application that counsel be allowed to appear for Testro during his examination, counsel for the respondent told us that his client had misunderstood the nature of the application and that his instructions were to inform the Court that if the application was renewed the respondent would grant it. Had this been known when the application for special leave to appeal was made on behalf of Testro leave would no doubt have been refused, and now that the facts are known, the order giving special leave in the case of Testro should, in our opinion, be rescinded. (at p362)

4. Turning then to the appeal by the company, the broad submission made on its behalf is that an investigation of a company's affairs by an inspector appointed under Div. 4 of Pt VI of the Companies Act 1961 is in the nature of a judicial proceeding; that a report made by such an inspector upon the affairs of a company may prejudicially affect its rights; that in these circumstances the inspector is bound to conduct his investigation in accordance with the rules of natural justice and that, before he makes a report on the company's affairs, he is bound to give the company an opportunity of answering or explaining matters which, if unanswered or unexplained, might give rise to adverse findings or comment in the report. (at p362)

5. In the Viney Industries Case (1962) VR 630 , the questions decided by the Full Court were similar to those raised on this appeal and the first submission made to us by counsel for the appellant company is that that case was wrongly decided. The Act there in question was the Companies Act 1958, the relevant provisions of which were substantially similar to those of the Companies Act 1961 with which the present case is concerned. The latter Act does, however, contain some additional matter and the appellant's second submission is that, if that case was correctly decided, the reasoning upon which it was based has no application to an investigation made under the present Act. (at p362)

6. The relevant provisions of the Act of 1958 are set out in detail in the Viney Industries Case (1962) VR 630 and it is unnecessary to restate them. Each of them has its counterpart in the Act of 1961. The question for decision was whether an investigation by an inspector appointed under a provision in the earlier Act which corresponded to s. 173 of the present Act was a proceeding in which the inspector was, to use the well known phrase of Atkin L.J. in R. v. Electricity Commissioners (1924) 1 KB 171 , a person "having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially" (1924) 1 KB, at p 205 who was therefore bound to comply with the rules of natural justice and subject to control by the prerogative writs or whether such an investigation was administrative in its nature and not one required to be carried out by a process analogous to the judicial process, in which case the prerogative writs would not lie: Nakkuda Ali v. Jayaratne (1951) AC 66, at p 75 . The learned judges of the Full Court rightly took the view that the answer depended upon the legislative intention as expressed in the statutory provisions under which the investigation was made, and, having examined the provisions of the Act of 1958 in detail and discussed the authorities bearing upon the point, their Honours reached two conclusions. First, that the Act imposed no obligation upon an inspector to act judicially, as that phrase is used in the authorities, or to conduct his investigations by a process analogous to the judicial process. Secondly, that it could not be said that a report, made by an inspector as the result of his investigations, could of its own force prejudicially affect the rights of the company the affairs of which were the subject of the investigation. It followed, as their Honours pointed out, that the prerogative writs would not lie: R. v. Legislative Committee of the Church Assembly; Ex parte Haynes-Smith (1928) 1 KB 411, at p 415 : Nakkuda Ali v. Jayaratne (1951) AC 66, at p 75 . We agree, with respect, with these conclusions and the reasoning which led to them. (at p363)

7. It is necessary then to consider whether certain provisions which are to be found in the Act of 1961, and which did not appear in the earlier Act, justify the view that the Act of 1961 shows such a change of legislative intention that an investigation of a company's affairs by an inspector appointed under Div. 4 of Pt VI is now to be regarded as being in the nature of a judicial proceeding in which the rights of the company which is being investigated may be prejudicially affected by a report made to the Minister and in which the inspector was bound to accede to the application made to him on the appellant's behalf. (at p363)

8. The provisions in the Act of 1961 which are said to produce this result are two in number and are to be found in ss. 171(10) and 222(1)(g). Section 171(10) is in Div. 3 of Pt VI of the Act and, by s. 173(2), the provisions of that Division with certain exceptions are made applicable "with such adaptions as are necessary" in the case of an investigation under Div. 4. Section 171(10) provides that "a copy of the report of any inspector appointed under this Division certified as correct by the Minister shall be admissible in any legal proceeding as evidence of the opinion and of the facts upon which his opinion is based of the inspector in relation to any matter contained in the report". The sub-section may be compared with s. 146(9) of the Act of 1958 which read: "a copy of the report of any inspectors appointed under this Division certified as correct by the Attorney-General shall be admissible in any legal proceeding as evidence of the opinion of the inspectors in relation to any matter contained in the report". It should be added that s. 146(9) was in terms almost identical with s. 61 of the English Companies Act 1862 which was one of the provisions considered by the Court of Appeal in Re Grosvenor and West-End Railway Terminus Hotel Co. Ltd. (1897) 76 LT 337 . That decision, upon which the Full Court placed much weight, has, as the Full Court said, "stood for over sixty years and during this period has governed the nature of inspections under the English legislation and under Div. 3 of the Victorian Act" (1962) VR, at p 633 . (at p364)

9. From what has been said it will be seen that s. 171(10) of the Act of 1961 makes a copy of the report of an inspector admissible as evidence not only of his opinion as expressed in the report but also of the facts stated in the report upon which that opinion is based whereas the Act of 1958 made a copy of the report evidence only of the inspector's opinion as expressed therein. But we can see no sound reason for thinking that the fact that a copy of the report of an inspector is now made evidence - which means prima facie evidence - of the facts stated in it upon which the inspector's opinion is based as well as of the opinion itself justifies the conclusion that the Legislature intended to make such a fundamental change as is suggested in the character of an investigation under Div. 4 of the Act of 1961. We should add, in view of the submission to the contrary made on behalf of the appellants, that we are of opinion that the report of an inspector has no evidentiary value at all except where the fact of his opinion is a relevant issue in any particular proceedings. (at p364)

10. The remaining additional matter in the Act of 1961 which was not in the earlier Act is to be found in s. 222(1)(g). It sets out two grounds upon which a winding-up order may be made by the Court. The first (s. 222(1)(g)(i)) is that an inspector has reported that he is of opinion that the company cannot pay its debts and should be wound up and this ground appeared in s. 160(1)(h) of the Act of 1958. The second (s. 222(1)(g)(ii)) is that an inspector has reported that he is of opinion that it is in the interests of the public or of the shareholders or of the creditors that the company should be wound up and this was not in the Act of 1958. As originally enacted s. 222(1)(g) applied where the report was made by an inspector appointed under s. 169 or s. 170 of the Act and had no application where the report was made by an inspector appointed under s. 173. But by Act No. 6985 which was deemed to have come into operation on 1st July 1962, the commencing date of the Act of 1961, s. 222(1)(g) was amended by adding the words "or section one hundred and seventy three" after the references to ss. 169 and 170. Here again we cannot accept the argument that the introduction of this additional ground for making a winding-up order has changed the nature of an investigation made by an inspector into a company's affairs. What was said by the Court in the Viney Industries Case (1962) VR 630 in dealing with the arguments based upon s. 160 (1) (h) of the Act of 1958 applies with equal force to the submissions made to us as to the effect of s. 222 (1) (g) (ii) of the present Act. (at p365)

11. In our opinion the appeal by the company should be dismissed and in the case of the appeal by Testro, special leave to appeal should be rescinded. (at p365)

KITTO J.

Testro Bros. Pty. Ltd. v. Tait

This is an appeal by special leave against the refusal of an order nisi for prohibition or mandamus which the appellant sought to obtain against the respondent. The parties having consented to our deciding not only whether the order nisi should have been granted but also whether the appellant is entitled to the relief of a prerogative writ, full argument has been heard and we are in a position to deal with the question of substance. (at p365)

2. The appellant's contention, stated broadly, is that the respondent, having been appointed under Div. 4 of Pt VI of the Companies Act 1961 (Vict.) as an inspector to investigate the affairs of the appellant, is in law bound, before making his report, to give the appellant an adequate opportunity by being heard in opposition to the making of any finding of fact, or the forming of any opinion, the expression of which in the report would operate in law to the appellant's prejudice. The Act itself makes no provision on the point, and the contention is based solely upon the general rule of law which finds in the nature of some statutory powers a sufficient ground for inferring that the powers, though not judicial in the sense of being reposed in judges, are to be exercised with judicial fairness, in accordance with what Lord Selborne called "the substantial requirements of justice" : Spackman v. Plumstead Board of Works (1885) 10 App Cas 229, at p 240 , Lindley L.J. "an Englishman's standard of justice" : In re King & Co.'s Trade Mark (1892) 2 Ch 462, at p 482 , and O'Connor J. "the fundamental principles of common justice" : Dickason v. Edwards (1910) 10 CLR 243, at p 255 . Where the rule applies, the manner of its application depends very much upon the circumstances of the particular case : University of Ceylon v. Fernando (1960) 1 WLR 223, at p 231; (1960) 1 All ER 631, at p 637 . Before the inspector, the appellant put in various forms its claim to appear and be heard, but as the argument in this Court developed it became clear that all we need decide is whether the appellant has a right to a reasonable opportunity of being heard. If so, it seems likely that all remaining questions will be properly resolved as the inquiry proceeds. (at p366)

3. The answer to the question must depend upon the legal character of the report of an inspector appointed under Div. 4. If, like the report of a Royal Commission, it is a report and nothing more, so that whatever its terms it cannot affect the legal situation of the company to the affairs of which it relates, the inspector is not engaged upon a proceeding to which the principle here invoked applies. If authority be needed, it is provided by the case of Re Grosvenor and West-End Railway Terminus Hotel Co. Ltd. (1897) 76 LT 337 , a case decided under the investigation sections of the Companies Act, 1862 (U.K.), 25 & 26 Vict. c. 89. But the relevant provisions of the Victorian Act of 1961, unlike any to be found in English company legislation, give the report special characteristics to which it is necessary to advert. (at p366)

4. In the first place, the Act contains a provision, in s. 171 (10), that a copy of the report of an inspector appointed under Div. 3, certified as correct by the Minister, shall be admissible "in any legal proceeding" as evidence of the opinion, and of the facts upon which his opinion is based, of the inspector in relation to any matter contained in the report ; and by s. 173 (2) this provision applies, with necessary adaptations, to the report of an inspector appointed under Div. 4. In the last preceding Companies consolidation in Victoria, the Act of 1958, the corresponding provision, s. 146 (9), stopped short at making the report evidence of the inspector's opinion. To make it evidence of the facts upon which the opinion is based, and in any legal proceeding whatever, was no minor alteration. In the course of argument in the present case a suggestion was made that the report would not be evidence of the facts upon which the opinion was based, except in proceedings in which the opinion itself was admissible. I see no ground for so construing the provision. It does not say that the report is evidence of the facts as being those upon which the opinion is based. Its literal meaning, and in my opinion its true meaning, is that any facts stated in the report, and forming part of those upon which any opinion expressed in the report is based, may be proved prima facie, in any proceeding, whether under the Act or not, by production of the report. (at p366)

5. Secondly, there is a provision in s. 222 (1) (g), as amended in 1963, making it a ground upon which the Court may order the winding-up of a company that an inspector appointed under s.173 (in Div. 4) has reported that he is of opinion - (i) that the company cannot pay its debts and should be wound up ; or (ii) that it is in the interests of the public or of the shareholders or of the creditors that the company should be wound up. (at p367)

6. And, thirdly, s. 175 enables the Minister to petition the Court for a winding-up at any time after a report has been made in respect of the company by an inspector appointed under Div. 4, and provides that thereupon the provisions of the Act apply, with such adaptations as are necessary, as if a winding-up petition had been presented by the company. (at p367)

7. It seems to me clear, from the mere statement that these provisions exist in the Act, that an investigation of the affairs of a company under Div. 4 is a proceeding the outcome of which may seriously prejudice the legal situation of the company. The most important of the provisions is par. (g) of s. 222 (1), and I shall confine what I have to say to that provision. It may be considered against the background of pars. (e) and (h) of the same sub-section, these being the paragraphs which specify as grounds for winding-up by the Court (e) the fact that the company cannot pay its debts and (h) the fact that the Court is of opinion that it is just and equitable that the company should be wound up. A petitioner asserting the company's inability to pay its debts must satisfy the Court of the fact. A petitioner relying upon the just and equitable ground must satisfy the Court on the point. But if an inspector under Div. 4 has reported that the company cannot pay its debts and should be wound up, or that in his opinion it is in the interests of the public, the shareholders or the creditors that the company should be wound up, a competent petitioner need prove nothing but the report in order to make a prima facie case for a winding-up order. It is true that the Court has nevertheless a discretion to dismiss the petition : s. 225, Reg. v. Coppel ; Ex parte Viney Industries Pty. Ltd. (1962) VR 630, at p 633 , but it is a judicial discretion, and accordingly its exercise must be according to "the rules of reason and justice, not according to private opinion ; according to law, not humour" : Sharp v. Wakefield (1891) AC 173, at p 179 . The fact remains that the making of a report which expresses either of the opinions referred to in par. (g) creates against the company concerned a ground of liability to be compulsorily wound up which otherwise would not exist. (at p367)

8. That this is such a prejudice to the legal rights of the company as attracts the salutary principle of law to which I have referred I find myself unable to doubt. It is not as great a prejudice, of course, as the actual making of a winding-up order would be, but it is none the less a real prejudice in a legal respect, and that in my opinion is enough. The foundation of the rule, after all, is the recognition that where a legislature or other body is found entrusting to a person a power to alter for the worse another's legal situation in virtue of a judgment formed after inquiry, it should be credited, unless it otherwise indicates, with an intention to be understood as speaking in the context of generally accepted ideas of decency in adjudication. It is not an artificial rule, and to state it in terms which would leave a case like the present outside its application would be, in my opinion, to overlook the broad basis of reason on which it rests. If analogy be sought, it may, I think, be found in the case of Smith v. The Queen (1878) 3 App Cas 614 . A statute empowered the Governor of Queensland to declare a lease forfeited if it should be proved to the satisfaction of a Commissioner that the lessee had abandoned his selection and failed to perform conditions of residence. It was held that the function of the Commissioner was of a nature to require that the lessee be given a hearing "in the sense required by the elementary principles of natural justice" (1878) 3 App Cas, at p 625 . A Commissioner certified that in a particular case the abandonment and failure to perform conditions had been proved to his satisfaction ; but he had not given the lessee any but an illusory opportunity to meet the case against him, for though the lessee had been summoned to answer general charges of non-residence and abandonment the evidence in support of the charges had been withheld from him. For that reason it was held that a purported forfeiture of his selection, made by the Governor on the footing of the Commissioner's certificate, was void. The general conclusion seems justified that an inquiry may be of the character that implies a necessity to allow a person affected a fair opportunity to be heard, notwithstanding that an adverse report will do no more than expose him to a possibility not previously existing of a deprivation of rights by the exercise of a discretionary power by another authority. The reason is that the report itself prejudices the rights by placing them in a new jeopardy ; it involves "civil consequences" to an individual, as Kelly C.B. expressed it in Wood v. Woad (1874) LR 9 Exch 190, at p 196 in a passage approved by the Privy Council in Lapointe v. L'Association de Bienfaisance (1906) AC 535, at pp 539, 540 . That is the case here. "What is required by our notions of justice," said Lindley L.J. in In re King & Co.'s Trade Mark (1892) 2 Ch 462 , "is that no man shall have his case disposed of, or be aggrieved or interfered with, without ample notice to him, and an ample opportunity of showing cause against it" (1892) 2 Ch, at p 482 . (at p369)

9. Of course it is not every statutory power to do an act to the prejudice of another which is quasi-judicial. (It is convenient to use that somewhat loose expression while not disagreeing with the warnings which it evoked from Lord Greene M.R. in Johnson & Co. v. Minister of Health (1947) 2 All ER 395, at p 400 .) The statute may show by its terms a contrary intention, as in Cheetham v. Manchester Corporation (1875) LR 10 CP 249 ; or the power may be quasi-legislative (an expression of Palles C.B. mentioned by Bankes L.J. in R. v. Electricity Commissioners (1924) 1 KB 171, at p 197 ), as was the case in Reg. v. Wright; Ex parte Waterside Workers' Federation [1955] HCA 35; (1955) 93 CLR 528 ; or the relevant statute may give a completely unfettered discretion, the power being purely administrative or executive in character, as in Meat Industry Board v. Finlayson [1916] HCA 77; (1916) 22 CLR 340 and Laffer v. Gillen (1927) AC 886 . The case of R. v. Macfarlane; Ex parte O'Flanagan and O'Kelly (1923) 32 CLR 518 is, I think, to be assigned to this category. Even if an otherwise unfettered discretion is subject to the condition that the repository has reasonable ground for a belief, the power is nevertheless executive and no obligation to act judicially attaches to it: Liversidge v. Anderson [1941] UKHL 1; (1942) AC 206 ; Nakkuda Ali v. Jayaratne (1951) AC 66 ; Boucaut Bay Co. Ltd. (In Liquidation) v. The Commonwealth [1927] HCA 59; (1927) 40 CLR 98 . The reason is that there is no duty to decide anything upon inquiry. It is the duty of antecedent decision upon some question that makes the analogy of judicial powers at once appropriate and compelling. "They must act in good faith and fairly listen to both sides, for that is a duty lying upon every one who decides anything", said Lord Loreburn L.C. in a well-known passage of his judgment in Board of Education v. Rice (1911) AC 179, at p 182 . The kind of decision here referred to is not a mere decision to act; it is a decision upon a question which is posed by the relevant statute as requiring investigation before the act may be done; for, by contrast, the mark of a purely executive power is its independence of any preliminary necessity to decide whether a particular state of things exists. "A power to determine and decide" was the form of words by which Salter J. expressed the idea in a passage approved by Lord Reid in Ridge v. Baldwin [1963] UKHL 2; (1963) 2 WLR 935, at p 948 . The subject is somewhat embarrassed by the difference of opinion between, on the one side, Lord Hewart in R. v. Legislative Committee of the Church Assembly; Ex parte Haynes-Smith (1928) 1 KB 411, at p 415 and Lord Radcliffe in Nakkuda Ali's Case (1951) AC 66, at p 78 and, on the other side, Lord Reid in Ridge v. Baldwin [1963] UKHL 2; (1963) 2 WLR 935, at pp 947-952 as to the meaning of the passage in the judgment of Atkin L.J. in R. v. Electricity Commissioners; Ex parte London Electricity Joint Committee Co. (1924) 1 KB 171 in which his Lordship said: "wherever any body of persons having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially, act in excess of their legal authority they are subject to the controlling jurisdiction of the King's Bench Division exercised in these (the prerogative) writs" (1924) 1 KB, at p 205 . But it may, I think, be accepted that a legal authority to make an "inquiry, and a judgment as the result of that inquiry . . . which is to affect him in his character and his property" (to use Lord Lyndhurst's language in Capel v. Child (1832) 2 C & J 558, at p 573 [1832] EngR 40; (149 ER 235, at p 242) as quoted in Smith v. The Queen (1878) 3 App Cas 614, at p 624 - in particular, to affect him either by directly curtailing or destroying rights of his or by subjecting them to a new hazard - is prima facie an authority from the nature of which the law implies a necessity to observe the recognized standards of judicial fairness. This I understand to be the principle of Cooper v. Wandsworth District Board of Works [1863] EngR 424; (1863) 14 CB (NS) 180 (143 ER 414) which this Court applied in Sydney Corporation v. Harris [1912] HCA 11; (1912) 14 CLR 1 ; Delta Properties Pty. Ltd. v. Brisbane City Council [1955] HCA 51; (1955) 95 CLR 11 and The Commissioner of Police v. Tanos [1958] HCA 6; (1958) 98 CLR 383 . (at p370)

10. So long as company legislation providing for investigations adhered to the example of the English Act under which the Grosvenor and West-End Case (1897) 76 LT 337 was decided, and refrained from attaching to the resulting report such legal consequences as the present Victorian Act provides, there was nothing in the nature of the investigations to attract the rule of law which the appellant here invokes. But the example has not been adhered to. The Victorian Parliament has seen fit to make the inspector's report more than a report: to make it to an extent a decision, or a number of decisions, having a legal operation adverse to the interests of the company to which it relates. With the wisdom of that course the courts have no concern. But to ascertain and declare the legal consequences of its adoption is their concern and their responsibility. In my opinion the character of the investigation has been so altered that as the Act now stands the inspector does not perform his function in accordance with law if he omits to give the company a full and fair opportunity of being heard upon the matters to which he directs his investigation. (at p371)

11. I need hardly say that before reaching this conclusion I have given the fullest consideration to the case in the Supreme Court of Victoria of Reg. v. Coppel; Ex parte Viney Industries Pty. Ltd. (1962) VR 630 but with the greatest respect I must say that I cannot think it was correctly decided. The case arose under an Act which in relevant respects was not indentical with the Companies Act 1961, but it did contain the provision now found in s. 222(1)(g)(i). In my view, that was enough to produce the result which the Supreme Court there rejected. Their Honours relied to some extent upon the case of Hearts of Oak Assurance Co. Ltd. v. Attorney-General (1932) AC 392 , but I have not found anything in that case to assist me. (at p371)

12. In my opinion the appeal should be allowed.

Testro v. Tait. (at p371)

13. The object of the proceedings out of which this appeal arises was to obtain a decision as to whether the appellant, having been required to give evidence as a witness before an inspector appointed under s. 173 of the Companies Act 1961 (Vict.), was entitled to have counsel present throughout his examination before the inspector, so that he might have the protection of any proper submissions and that he might be asked by his counsel any questions directed to clarifying his evidence or amplifying or supplementing it in respects relevant to the inquiry. (at p371)

14. The inspector, the respondent to the appeal, has informed the Court by his counsel that a misunderstanding has occurred. He says that he will allow the appellant's counsel to be present for the purposes mentioned and had not intended otherwise. The question whether and to what extent the appellant is in law entitled to the assistance of counsel is therefore academic in this case, at least at the present stage. Special leave to appeal would not have been granted if the inspector's attitude had been known to the Court at the time of the application. The proper course now seems to be to rescind the special leave. (at p371)

MENZIES J.

Testro Bros. Pty. Ltd. v. Tait.

When an inspector appointed under s. 173 of the Victorian Companies Act 1961 to make a special investigation of a declared company reports to the Minister that he is of opinion either that the company cannot pay its debts and should be wound up, that it is in the interests of the public or the shareholders or the creditors that the company should be wound up, the Court may order the winding up of the company (Companies Act, s. 222(1)(g) as amended by s. 2 of the Companies Act 1963) and may do so upon a petition of the Minister (s. 175 as applied by s. 173(2)) or upon the petition of any person qualified under s. 221 to present a petition. The ground for winding up is simply the inspector's reported opinion so that, for instance, whereas a company may be wound up under s. 222(1)(e) only when the Court decides that it is unable to pay its debts, it may be wound up under s. 222(1)(g) if an inspector has reported that he is of opinion that it cannot pay its debts and should be wound up. Furthermore, by virtue of s. 171(10) as applied by s. 173(2), "a copy of the report of any inspector . . . certified as correct by the Minister shall be admissible in any legal proceeding as evidence of the opinion and of the facts upon which his opinion is based of the inspector in relation to any matter contained in the report". This is of general application and would apply to winding up proceedings under s. 222(1)(g). (at p372)

2. The fundamental question with which this Court is concerned upon this appeal is whether an inspector appointed under s. 173 to make an investigation into a declared company is under a common law duty to act judicially, although the particular question is whether an inspector is bound to give the company he is investigating an opportunity to be heard. If an inspector is bound to act judicially he could, in accordance with traditional law, be prohibited from reporting an opinion that a company cannot pay its debts and should be wound up or that it is in the interests of the public or of the shareholders or of the creditors that a company should be wound up without first giving the company a fair opportunity of dealing with prejudicial matters which, if not answered or explained, would support such an opinion. Prohibition or mandamus would also lie at an earlier stage to secure a hearing for a company under investigation. If, on the other hand, an inspector is under no obligation to act judicially, a company under investigation would have no remedy even in the extreme case of an enquiry by a prejudiced inspector and bias itself would not deprive an inspector's reported opinion of its legal effect. (at p372)

3. Parliament has not in terms provided how far a company which is being investigated should be given the opportunity of being heard and accordingly it is only by ascertaining the character of the inspector's duties and the legal consequences which attach to his report that this can be determined in accordance with established legal principles. (at p373)

4. The first duty of an inspector is to investigate the affairs of a declared company (ss. 172 and 173). To do this he is given power by notice to require any one of a very wide description of personswho are not very appropriately described as "officers or agents" (see ss. 172(1) and 168(2))- to appear for examination on oath or affirmation in relation to the company's business and to produce all books and documents in his custody or under his control. Any so-called officer or agent failing to comply with the requirements of the notice or to answer material questions put to him by an inspector is liable to punishment (s. 171 sub-ss. (3) and (4) as applied by s. 173(2)). An officer or agent may be required to answer incriminating questions and the inspector may cause depositions to be taken and signed which, except for incriminating answers, may be used in evidence in any legal proceedings against the witness (s. 171 sub-ss. (5) and (7) as applied by s. 173(2)). The inspector is authorized to employ other persons to do anything he could himself do except examine on oath or affirmation (s. 173(4)). (at p373)

5. The second duty of an inspector is, having investigated, to make a report to the Minister of his opinions concerning the affairs of the company and the facts upon which those opinions are based (ss. 173 and 169(3) as applied by s. 173(2)). (at p373)

6. It is apparent that one of the principal objects of instituting a special investigation is to obtain for the Minister information upon which he may base his decisions and actions and, were this all, the intervention of the Court could not be invoked to control the investigation, no matter how authoritative its procedures, how searching its probing and how likely it might be in the circumstances to lead unjustly to loss of business, loss of reputation or adverse proceedings against the company. This was in substance established sixty-six years ago in Re Grosvenor and West-End Railway Terminus Hotel Co. Ltd. (1897) 76 LT 337 by a decision of the Court of Appeal. An enquiry of such a nature is outside the law but, as soon as findings or opinions are given legal consequences and are made the foundation in law for further proceedings in relation to the company, then the position changes and well-established principles require that the enquiry be subject to the control of the law to prevent departures from those basic principles of justice which are commonly described as natural justice and which include giving a person upon whom a legal detriment may be inflicted the opportunity of being heard. Once legal consequences have been attached to a report it can no longer be said, as Chitty L.J. accurately said in Re Grosvenor and West-End Railway Terminus Hotel Co. Ltd. (1897) 76 LT 337, at p 339 , that "the beginning and the end of the duty of an inspector . . . is to examine and report . . . As has been pointed out, the business begins and ends with the enquiry and report. The report cannot be made the foundation of any subsequent action, it is merely evidence of the opinion of the inspector". (at p374)

7. The character of the consequences now by law attached to the inspector's reported opinions can, I think, be most clearly demonstrated by looking at s. 222(1)(e) and (1)(g) together. A company cannot be wound up under s. 222(1)(e) unless the Court decides that it is unable to pay its debts. What s. 222(1)(g) does is to constitute the opinion of an inspector that a company is unable to pay its debts and should be wound up the virtual equivalent of a decision of the Court that the company is unable to pay its debts. A more illuminating parallel could be obtained by supposing that the words "and should be wound up" were omitted from s. 222(1)(g)(i) - a variation that could itself have no bearing on the problem under discussion - so the determination by the Court and the inspector would be the same, viz. that the company is unable to pay its debts. Such a finding in the form of an inspector's reported opinion would affect the company in precisely the same way as would a finding by the Court itself in winding up proceedings. An investigation which could result in a report having such consequences is in my opinion one at which the company, in the absence of any expression of legislative intention to the contrary, is entitled to a fair hearing. It seems to me that a large principle is at stake and that, except where the legislature otherwise indicates, the courts must maintain control over enquiries which may lead to determinations that carry immediate legal consequences, notwithstanding that those determinations are described as opinions. (at p374)

8. The Victorian Companies Act has been changed materially since Reg. v. Coppel; Ex parte Viney Industries Pty. Ltd. (1962) VR 630 was decided. It was in reliance upon that decision that O'Bryan J. refused to grant an order nisi for prohibition or mandamus in this case and because of intervening amendments it is not perhaps strictly necessary to express an opinion whether or not that case was correctly decided. I have, however, reached the conclusion that I should do so because I think the essential character of the legislation concerning special investigations was the same in 1962 as it is to-day. I cannot regard Reg. v. Coppel (2) as an application of the decisions in Re Grosvenor and West-End Railway Terminus Hotel Co. Ltd. (1897) 76 LT 337 and Hearts of Oak Assurance Co. Ltd. v. Attorney-General (1932) AC 392 . In each of those cases the enquiry with which the courts were concerned had been simply to "recover information as to the company's affairs", to use the language of Lord Thankerton in the latter case (1932) AC, at p 396 . This could not be said with any approach to accuracy of an inspector's investigation pursuant to s. 173 of the Victorian Companies Act as it stood in June 1962 and this the Supreme Court recognized. Its decision that an inspector is not required to act judicially rests, I think, upon twin grounds: first, that notwithstanding that a reported opinion of an inspector that a company cannot pay its debts and should be wound up had been introduced as a ground for winding-up the company, a survey of the Act revealed an absence of features to indicate an intention on the part of the legislature that the inspector conducting the investigation should act judically; second, that it is not the report itself but only action upon it to obtain a winding-up order that would affect the legal position of the company, for it is said: " . . . it is not the report or the opinion of the inspector expressed in it, but action which others may or may not decide to take, that will affect the position of the company" (1962) VR, at p 636 . As to this latter point I have already stated my conclusion that a reported adverse opinion is an incontrovertible finding against the company which must be accepted by the Court upon a petition for winding up as establishing a ground for making an order and I now add that to my mind such a finding would itself affect the legal position of the company. Because of it the company may be wound up in just the same way as the estate of an individual may be sequestrated because an act of bankruptcy has been established against him. It seems to me that a company liable to be wound up upon an established ground and an individual liable to be made bankrupt upon an established act of bankruptcy are in a different and less secure legal position than is a company or person against which or whom no such ground or act has been established. Starting from my conclusion that a report containing an opinion of the kind under consideration against a company would itself adversely affect its rights, I do not find the difficulty that the Supreme Court did arising from the absence of some positive legislative indication that an inspector is bound to act judicially. Once it appears that an inspector is given power by his report to affect the legal position of the company whose affairs he is required to investigate, the intention ought, in the absence of some different indication, to be inferred that the enquiry is to be carried on in accordance with the root principles of justice. This principle has often been accepted. One of the cases that is clear and authoritative is Delta Properties Pty. Ltd. v. Brisbane City Council [1955] HCA 51; (1955) 95 CLR 11 where, the Council having declared its opinion that certain land belonging to the company was so situate as to be incapable of being drained, this Court said:- "In such a situation the law insists, according to long-established doctrine, that the step which will have that prejudicial effect, namely the formation and expression of the opinion, requires for its efficacy the prior observance of the fundamental principles of natural justice. In particular it is essential that the person whose property is in question must be given a full and fair opportunity of placing before the council his case against the formation of the opinion" (1955) 95 CLR, at p 18 . In the Victorian Companies Act there is no contrary provision and I have not found any indication of a contrary intention. (at p376)

9. For the foregoing reasons I would allow the appeal but in the circumstances it is not necessary to formulate any order to give effect to my opinion.

Testro v. Tait. (at p376)

10. I agree that the special leave granted in this matter should be rescinded. (at p376)

ORDER

Testro Bros. Pty. Ltd. v. Tait:

Appeal dismissed with costs.

Testro v. Tait:

Special leave to appeal rescinded.