A.S.C. v Marlborough Gold Mines Ltd

INTRODUCTION 1 Before the Court to be rendered operative retroactively, is a long approved scheme for reconstruction and amalgamation. Can this be done? Can the scheme and its consequential steps be saved from the consequences of an accidental non-fulfilment of a condition precedent? Or must everything start again, though everyone has acted upon the basis that the scheme was operative and the consequential reconstruction had followed? 2 The scheme affects six subsidiaries of the Australian Gas Light Company, five of whom were, pursuant to the scheme, purportedly dissolved over six years ago. It has recently come to light that the scheme never became operative, according to its terms. This is entirely contrary to the assumptions upon which everyone has acted since 1994. That was when orders approving it and the consequential reconstruction were first made (on 6 June 1994 "the 1994 orders"). The reason is that one of the scheme's preconditions, and an unwaived condition of the Court's approval, was never fulfilled. The non-fulfilment was technical in the extreme and entirely accidental. A particular notice effecting an important change in authorisation under the Gas Act 1986 (NSW) was delivered a few seconds too late; not as required before midnight on the specified day, but a moment or so after. Meanwhile, purportedly pursuant to the scheme, five subsidiaries of AGL were thereafter "reconstructed and amalgamated" with a sixth; that is, if those steps were legally effective. This was by a series of capital reductions (under the then s195 of the Corporations Law), dividend payments, transfers of assets and liabilities (under ss411 and 413) and finally the dissolution without winding-up of the five companies. 3 What now is to be done? Clearly no-one would be prejudiced if the scheme were able to be rendered operative, along with the consequential steps purportedly taken. If possible this should be retroactive, though that involves an element of retrospective fiction. Indeed if it were not possible to achieve that rectification and validation, prejudice would flow both for the AGL group of companies, and the many who have dealt with it on the assumption that the scheme was effective. 4 What this poses is whether the Court has power to do what self-evidently is in the public interest to bring about, namely an immediate and retroactive rectification and validation of the scheme, with its attendant or associated steps of capital reduction, amalgamation and reconstruction. The alternative of starting again, suggested by one line of authorities on s411 of the Corporations Law, would have serious, adverse consequences, both tax and commercial. Here however there is also the prospect of drawing upon the additional power to make further orders under s413 of the Corporations Law. It applies only to that species of s411 scheme involving reconstruction or amalgamation. As I explain, s413 is therefore available as a source of validating power, by enabling later orders now to be made. 5 There are also other sources of potential power for rectification. Thus one source of power depends on whether a scheme finds its efficacy and continued existence in the court orders approving it. If so, as Australian authority has held (see 43 and following), recourse may be had to the court's inherent and rule-conferred capacity to rectify deficient or inefficacious court orders, including by extending the time for their compliance. There is also the so-called "slip rule", with its retroactive effect for any curative orders. This rule may potentially be invoked in relation to the 1994 orders. This is because of the way the relevant condition was formulated and the circumstances of its non-fulfilment. These 1994 orders were made on the mistaken assumption that the amended Gas Act authorisation would be forthcoming just before midnight on the specified day, when a second after was what occurred, based on an apparent misconception. Apart from that, the formulation of that condition and in consequence the 1994 Court orders, was inherently circular in its terms. Thus fulfilment of the scheme condition depended on the scheme transfer of assets whilst the scheme transfer of assets depended on fulfilment of the scheme condition. On that basis, the 1994 orders read literally could never bring the scheme into effect. This was contrary to the expectation of all involved in the scheme process, including, it can be assumed, the judge's. 6 Nonetheless, however worthy or pragmatic the aim, the Court is constrained by statute and the scope of its jurisdiction, actual and inherent. The question is whether the Court's powers so derived extend far enough to rectify and validate what has occurred and if so, retroactively. Before answering that I need to record the background facts.