Case: Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 ; (2004) 216 CLR 515
Outcome: distinguished
Bros argued that a number of judgments tended to suggest that, in analogous statutory contexts, courts had allowed companies involved in re-organisations or arrangements to stipulate that their creditors give releases to third parties. Lehman Bros argued that it will be necessary to consider the whole factual context in order to be able to come to a conclusion about whether, in the circumstances established at a trial, the impugned provisions could have been included in the deed. It referred to the caution expressed about separate questions by Gleeson CJ, Gummow, Hayne and Heydon JJ in Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 ; (2004) 216 CLR 515 at 524-525 [7] , noting that those remarks were made where all the parties had agreed to the use of the separate question, unlike the present case. Lehman Bros argued that there may be relevant facts, such as the existence of joint or joint and several liability on the part of one or more of the Lehman companies with Lehman Australia, that could affect how the Court would determine the extent of the power under Pt 5.3A to authorise the making of a deed to bind creditors in respect of their rights against third parties. Lehman Bros argued that because of the need to have regard to a variety of potential factual contexts, it was impractical to order a separation of issues concerning the ambit of the power in Pt 5.3A for a deed to bind creditors, in the absence of the full context of all of the circumstances. It contended that it wished to advance evidence to show a connection between, and justifying, the exercise of the power to make the impugned clauses and the circumstances of the case. Lehman Bros argued that that would involve a factual investigation into the degree of connection between the impugned provisions and the source of power in Pt 5.3A , not suitable for investigation in a separate question. It also contended that evidence could support the inclusion of the impugned provisions in relation to potential claims for contribution or indemnity that it or other Lehman entities might have against Lehman Australia were they sued by one of the plaintiffs or another dissenting creditor. The plaintiffs emphasised in reply that the only beneficiaries of the wider release in cl 11.5 were Lehman companies. They contended that the separate questions still had utility. They argued that the issue whether there was power under Pt 5.3A to give effect to the impugned clauses in the deed should be determined on the basis that if the Court came to the conclusion that further evidence than the deed itself and the relevant matrix of fact in which the creditors' meeting came to resolve that it be executed could affect the outcome, then those questions should not be answered. Nonetheless, the plaintiffs argued that the issue of power under Pt 5.3A was a stark one and that the questions were capable of receiving an affirmative answer. They argued that if there were no power, the onus to demonstrate that there was no prejudice would then be on any defendants who sought to uphold a validation of the deed or its amendment under the provisions in Pt 5.3A of the Act on which they had relied. In Woolcock Street 216 CLR at 524-525 [7] Gleeson CJ, Gummow, Hayne and Heydon JJ stressed the importance of recognising that there may be difficulties in using procedures for separate issues in cases in which it is necessary to consider developing, as distinct from applying, common law principles and continued: "The dangers of developing common law principle against an artificially constricted body of fact are self-evident. That is why, in some cases, even if the parties join in asking a court to determine a question separate from trial of the facts, it may be prudent for the court to decline to answer the question presented as being one which it is inappropriate to answer ( Bass v Permanent Trustee Co Ltd [1999] HCA 9 ; (1999) 198 CLR 334 at 357-358 [51] - [53] ). Indeed, as Bass v Permanent Trustee Co Ltd illustrates ( Bass [1999] HCA 9 ; (1999) 198 CLR 334 at 359 [56] . See also Malika Holdings Pty Ltd v Stretton [2001] HCA 14 ; (2001) 204 CLR 290 at 308-309 [61] .), in some circumstances to answer a question may be contrary to the judicial process. If the question is answered, it is important to identify any limitations which the procedure adopted may impose on the breadth of any principle that is to be identified as having been established or applied."