Australasian Memory Pty Ltd v Brien

[1] PanBio Pty Ltd ("PanBio"), a proprietary company limited by shares, specializes in the manufacture and distribution of kits used in the diagnosis of human diseases. PanBio wishes to raise $20 million to fund expansion of its business, both domestically and overseas, by listing its shares on the Australian Stock Exchange. And so it must convert to a public company limited by shares.

[2] Part 2B.7 of Chapter 2B of the Corporations Law, which became effective on 1 July 1998, now prescribes the requirements to "change to a company of a different type".[1] First, the "company must lodge an application with ASIC"[2] accompanied by the prescribed particulars.[3] Then, by s 164(1) of the Law, to change PanBio's status:

"ASIC must give notice under subsection (3) that it intends to alter the details of the company's registration if:

"The notice that ASIC intends to alter the details of the company's registration must be:

The notice must also state that ASIC will alter the details of the company's registration 1 month after the notice has been published in the Gazette unless an order by a court or the Administrative Appeals Tribunal prevents it from doing so."

"(4) Subject to an order made by a court or the Administrative Appeals Tribunal within that month, after that month has passed ASIC must alter the details of the company's registration to reflect the company's new type.

(7) If ASIC alters the details of a company's registration under subsection (4), a court is not to make an order reversing the alteration of the details of the company's registration."

[5] The Explanatory Memorandum that accompanied the Company Law Review Bill 1997 which proposed Part 2B.7 of Chapter 2B, explains the objects of that new regime:

"3.3 Companies limited by guarantee will be able to convert into companies limited by shares. This will be of particular importance for mutual companies (often companies limited by guarantee) converting into companies limited by shares. The other types of conversion will be retained ... Members will be able to use the oppression remedy and creditors will be able to seek review of the ASC's decision to register the change of a company's status. If a decision of the ASC to change the status of a company is not challenged within 1 month, the ASC's registration of the change of type will be conclusive, although this will not restrict the availability of other remedies (for example, damages). ...

8.49 ... The ASC must give 1 month's notice on its database and in the Commonwealth of Australia Gazette before registering the change. This requirement will provide a reasonable opportunity for interested persons to challenge the change (Bill s 164).

8.50 After the month has passed the ASC must amend the details of the company's registration to reflect the change of status, unless the decision has been challenged in the Administrative Appeals Tribunal (the AAT) or a court. Once the ASC does this, the AAT cannot review the change and a court cannot make an order reversing the change (Bill s 164(7)). A court could grant other remedies to a person aggrieved by a change of company type (such as damages). This will facilitate commercial certainty for companies changing type (for example, a mutual company converting to a company limited by shares)."

[6] PanBio's directors perceive that the capital raising will be put at risk by the delay in stock exchange list that will attend compliance with the one month notice prescription before the ASIC is to register PanBio's conversion to a public company. Hence this application, which is for orders pursuant to s 1322(4) of the Law to abridge the one month period which, by s 164(4), is to elapse between notification (in the Gazette and ASIC database) and ASIC's registration of the change, and for consequential orders requiring a correspondingly brief period to be stated in the s 163(3) notice.

"Subject to the following provisions of this section but without limiting the generality of any other provision of this Law, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:

(d) an order extending the period for doing any act, matter or thing ... under this Law ... (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing ...

and may make such consequential or ancillary orders as the Court thinks fit.

(6) The Court shall not make an order under this section unless it is satisfied:

(c) ... that no substantial injustice has been or is likely to be caused to any person"

[8] If the relief sought under s 1322(4) may be granted, it should be. All directors support the initiative to change the type of company. The shareholders, all of whose shares are fully paid, unanimously resolved to effect the change. And there is no reason to suppose that anyone else, including creditors, may be adversely affected by the change.[4] But it is a question whether s 1322(4) suffices to sustain the abridgements.

[9] Section 1322(4) forms part of an important, remedial provision of broad application to be liberally applied[5].

"All along its purpose has been to provide the Court with power in appropriate cases to relieve parties from compliance with the Law no matter in what part of the legislation the requirements are to be found. There will, of course, always be an initial question whether an order is empowered because of the terms in which the provision is expressed, its purpose having regard to the context in which it appears in the statute, and the legislative intention, in the circumstances of a given case, as to whether s 1322 was intended to be applicable." [6]

[10] There are, however, reasons emerging from the text and objects of Part 2B.7 for supposing that the Parliament did not intend s 1322(4) to extend to it.

[11] As the Explanatory Memorandum emphasises, a significant feature of the new regime is the certainty that s 164(7) introduces. Once the conversion is duly registered, it is immune from challenge. Section 164(7) must therefore inferentially exclude at least so much of s 1322(4) as would otherwise allow a time prescribed by the Law to be extended by an order made after the time has expired. Otherwise, the protection s 164(7) affords would be in peril. Similar considerations may be thought to indicate that the kind of abridgement sought by PanBio is difficult to reconcile with the legislative scheme - a regime that limits the opportunity for curial or AAT intervention to halt a change of company type to obtaining an order within the one month notified by ASIC as available for that purpose. It therefore seems at least distinctly arguable that the legislature requires a price to be paid for the benefit s 164(7) secures: that interested persons have one month, and no more, after the s 164(3) notice is given to obtain an order intercepting the change that will otherwise occur by the action of the ASIC on the passing of that month. That would afford adequate grounds for deciding that Part 2B.7 is to be interpreted as impliedly excluding the operation of s 1322(4). As it happens, however, it is not necessary to form a concluded view about this.

[12] In Re Infomedia Pty Ltd, [7] Young J held that s 1322(4)(d) does not authorize an abridgement of the times fixed by s 164; and Owen J has recently followed that decision in Sentron Pty Ltd v. Australian Securities and Investments Commission.[8] It is undesirable that there be conflicting decisions, even of single judges, upon such a point of interpretation of the Law.[9] And it will be apparent that I am not persuaded that the construction of Part 2B.7 arrived at in those cases is untenable.

[4] Among other things, by s 166 of the Law, the change of type of company does not affect the company's existing obligations.

[5] cf Re Pembury Ltd [1993] 1 Qd R 125, 126-127; NRMA v Gould (1995) 18 ACSR 290, 292; Village Road Show Broadcasting Pty Ltd v Austereo Ltd (1997) 24 ACSR 185, 188.

[6] per Sheppard A-JA in Australasian Memory Pty Ltd v Brien (1998) 45 NSWLR 111, 155-156, Meagher JA concurring; appeal dismissed [2000] HCA 30, (2000) 74 ALJR 991.

[7] [2000] NSWSC 649, (2000) 34 ASCR 682.

[8] COR 253 of 2000, 28 September 2000, Supreme Court of Western Australia.

[9] cf Macquarie Bank Ltd v Fociri Pty Ltd (1992) 27 NSWLR 203, 217; Commonwealth of Australia v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662, 672. Perhaps the considerations are not as compelling as with decisions of appellate courts; cf Walker v Midlink Nominees Pty Ltd [2000] WASC 112, par 23; Commercial Banking Co of Sydney Ltd v Federal Commissioner of Taxation (1983) 14 ATR 142, 152. However, I am inclined to agree with Hayne J that, sitting alone, "I should be very slow indeed to depart from the decision of a single judge in relation to the Corporations Law...":Re Brashs Pty Ltd (1994) 15 ACSR 477, 483.