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[1997] HCA 20
High Court of Australia
1997-06-05
Brennan CJ, Kirby JJ, O'Loughlin J
Original judgment source is linked above.
High Court of Australia Brennan CJ Dawson, Toohey, Gaudron and Kirby JJ Emanuele v Australian Securities Commission [1997] HCA 20
The appellants were directors of a number of companies that were members of the Emanuel Group. Among that group were companies that, for the purposes of proceedings in the Full Court of the Federal Court, were identified as the "Group A Companies". They were insolvent at all relevant times. The Australian Taxation Office (the ATO) was owed a considerable amount by some of these companies and made an application for their winding up. After that application was made, a deed of company arrangement was entered into, binding the ATO. Accordingly, by force of s 444E(2)(b) of the Corporations Law (the Law), the ATO was unable to "proceed with such an application made before the deed became binding on [it]". The Australian Securities Commission (the ASC) had become a party to those proceedings by intervening therein in exercise of the power to do so conferred by s 1330 of the Law. It gave notice of an intention to apply for an order for the winding up of the companies in insolvency pursuant to s 459A of the Law which reads:
On an application under section 459P, the Court may order that an insolvent company be wound up in insolvency. The ASC was neither a creditor nor a contributory of any of the companies but, subject to the provisions of s 459P, it was competent to apply to the Court for a company to be wound up in insolvency. Section 459P reads as follows:
(1) Any one or more of the following may apply to the Court for a company to be wound up in insolvency:
(b) a creditor (even if the creditor is a secured creditor or is only a contingent or prospective creditor);
(e) a liquidator or provisional liquidator of the company;
(2) An application by any of the following, or by persons including any of the following, may only be made with the leave of the Court:
(a) a person who is a creditor only because of a contingent or prospective debt;
(3) The Court may give leave if satisfied that there is a prima facie case that the company is insolvent, but not otherwise.
(4) The Court may give leave subject to conditions.
(5) Except as permitted by this section, a person cannot apply for a company to be wound up in insolvency.
Before the trial judge (O'Loughlin J) in the Federal Court the ASC sought, and O'Loughlin J made, an order for the winding up in insolvency of the Group A Companies. This order was not made on the application made by the ATO. It was made in response to the motion of the ASC which purported to apply for the order pursuant to s 459P. However, the ASC did not seek and was not granted leave to apply for the winding up of the Group A Companies in insolvency. The present appellants, each of whom was a director of all or some of the Group A Companies, appealed to the Full Court of the Federal Court against the making of the winding up order. The Full Court noted the failure of the ASC to obtain a grant of leave to apply for the winding up of the companies in insolvency but, proof of insolvency being given, held that such leave could be granted by that Court nunc pro tunc. The Full Court made an order, purportedly pursuant to s 459P(2), amending the order of the primary judge by adding a paragraph granting leave nunc pro tunc to the ASC to apply to wind up the Group A Companies in insolvency. The appeal against the winding up order was dismissed.
An appeal against the Full Court's orders has been brought by special leave to this Court. The principal question is whether the Full Court's order dismissing the appeal to that Court is supportable on the ground that the grant of leave to apply nunc pro tunc satisfies the requirements of s 459P or otherwise avoids the consequences of the failure of the ASC to obtain a grant of leave before the winding up order was made.
We were favoured by the citation of authorities designed to show that the requirements of s 459P(2) are merely procedural and that non-compliance with procedural requirements relating to applications for winding up does not affect the jurisdiction of the court to make a winding up order [1] . In any event, so the argument ran, an order of the Federal Court, being a superior court of record, must be treated as valid and within jurisdiction unless and until it is amended or set aside [2] .
This latter argument does not afford a solution to the question raised by this appeal. If the requirements of s 459P(2) be procedural only so that non-compliance does not deny the propriety of the Court's proceeding to hear and determine an application made without leave, the absence of a prior grant to the ASC of leave to apply would not affect the validity of the order made to wind up the Group A Companies in insolvency. If the requirements of s 459P(2) be substantive so that the Court ought not proceed to the making of a winding up order on an application which has not been validly made, an order made on such an application is wrongly made and, although the order be valid until it is set aside, a party with sufficient interest is entitled as of right to have the order set aside. This conclusion follows from Cameron v Cole [3] . In that case, a bankruptcy petition was presented against the appellant who claimed the protection of a moratorium imposed by National Security Regulations [4] on proceedings taken against members of the Armed Forces "without leave of a court having jurisdiction in bankruptcy". Although the Regulations directed the court not to make an order invalidating proceedings taken in contravention of the Regulations if another person bona fide and without notice had acquired rights arising out of the proceeding [5] and although the Federal Court of Bankruptcy was a superior court, this Court held that the petition ought to have been dismissed if the appellant had proved himself to have been a member of the Armed Forces at the time when the petition was presented. Latham CJ said [6] :
It was the duty of the learned judge to apply reg 22 if he found as a fact that Cameron was a member of the forces at the time of the presentation of the petition. Where the court is actually dealing with and is in control of proceedings which have been taken in breach of such a regulation as reg 22, it is the duty of the court to apply the regulation, and not to act upon the basis that if, in spite of the regulation, the proceedings are completed and an order made, the failure to observe the regulation would not in itself invalidate the proceedings, though they might be invalidated under reg 33(2). The court should, the proceedings still being pending, have applied reg 22, and if it were found that Cameron was a member of the forces when the petition was presented, should not have proceeded with the hearing of the petition, and should have dismissed the petition. The question was not argued, but the terms of reg 22 appear to require leave for the presentation of a petition to be granted, where necessary, before the petition is presented. The High Court remitted the question of the appellant's status to the trial judge who found that the appellant had not discharged the onus of proving that he was a member of the Armed Forces at the relevant time. The High Court then proceeded to determine the other grounds of appeal. The other Justices who referred to the Regulations in their judgment were of the same opinion as Latham CJ [7] . Starke J stated [8] the position quite clearly: A bankruptcy notice or a petition presented contrary to the provisions of the Regulations is irregular, and a party is entitled ex debito justitiae to have it set aside or treated as ineffective. 1. (1944) 68 CLR 571. 2. National Security (War Service Moratorium) Regulations Cth, reg 22 of SR 1941 No 61. 3. reg 33(2) of SR 1941 No 61. 4. Cameron v Cole (1944) 68 CLR 571 at 580-581. 5. See Cameron v Cole (1944) 68 CLR 571 at 588, per Rich J; at 595-596, per Starke J; at 611-612, per Williams J; and cf at 596, per McTiernan J. 6. Cameron v Cole (1944) 68 CLR 571 at 596.
As Cameron v Cole shows, the question that is critical in this case is not whether the court which made the order is an inferior court whose order, if made in proceedings that are fundamentally irregular, might be treated as a nullity made without jurisdiction, or whether the court is a superior court whose order must be treated as valid unless and until it is set aside. If the court is a superior court - as the Federal Court is - the distinction to be drawn is, as Rich J stated [9] , "between irregularities so fundamental as to create an unconditional right, ex debito justitiae, to have the judgment set aside, and non-fundamental irregularities as to which the court has a discretion".
The nature of the requirements of s 459P(2) must be ascertained by construing its provisions in their context and having regard to the purpose which that sub-section is intended to serve. The Law distinguishes between applications for winding up in insolvency and applications for winding up on other grounds. The ground of insolvency is prescribed by s 459A. The several other grounds for winding up are prescribed by s 461. With some exceptions [10] , the categories of persons who are competent to apply for a winding up order on the ground of insolvency under s 459P(1) are the same as the categories of persons who are competent to apply for a winding up order on other grounds but leave to apply is required only when the application is on the ground of insolvency and only when the intending applicant is within one of the particular categories mentioned in s 459P(2). The reason for requiring leave to apply is not open to doubt. As the Court must first be satisfied that there is a prima facie case of insolvency, the Court's supervision affords companies a measure of protection against the commercial risks which are inevitably incurred by the making of an application to wind up in insolvency.
The risks to a company consequent on the making of an application to wind up in insolvency flow from, inter alia, the necessity to advertise the making of the application in newspapers and the Gazette [11] . The advertising, or even the making, of such an application might affect the financial rights or obligations of the company and prejudice its business or commercial relations. The right of the company itself, of creditors whose debts are not only contingent or prospective and of prescribed agencies to apply for a winding up in insolvency is not restricted. The Court's satisfaction that there is a prima facie case of insolvency is required only where the intending applicant is a creditor whose debt is contingent or prospective, a contributory, a director or the ASC. The Court's supervision of the making of applications for the winding up in insolvency by persons in these categories conforms with the recommendation in the Report of the Australian Law Reform Commission (the Harmer Report) [12] . The Commission in its final Report [13] adhered to a proposal advanced in a discussion paper earlier issued:
As regards an application by a member or a director of a company (in those respective capacities) and the NCSC, it was proposed that the right to make an application require leave of the court. This was considered necessary in the case of a member or a director to prevent mischievous and possible harmful applications. However, despite the limitation, the circumstances under which the NCSC may apply will be broader than at present (it is under existing legislation restricted to applying only after a statutory investigation has occurred). It was further proposed that a creditor who relies upon a contingent or prospective debt should also be able to apply but only with leave of the court. Leave of the court in such cases should only be granted if the court is satisfied that a prima facie case has been established that the company is unable to pay its debts. 1. s 465A and the Federal Court Rules, O 71, rr 37(9), 104. 2. General Insolvency Inquiry , Report No 45, vol 1, pars 142, 143; vol 2 s WU5, p 38. 3. General Insolvency Inquiry , Report No 45, vol 1, par 142.
The capacity of the ASC to apply for a winding up order depends on the ground on which it seeks the order. It is capable of applying on any of the grounds prescribed by s 461 but only where it is investigating or has investigated the affairs of the company or matters connected with the affairs of the company: s 462(2)(e), 464. In that situation the ASC would presumably have acquired knowledge of the facts that establish the ground of winding up on which the ASC relies. But the Commission is capable of applying on the ground of insolvency only on satisfying the Court that there is a prima facie case of insolvency and obtaining a grant of leave: ss 459P(2)(d), (3) and (5). Leave is required in the latter case because, as the Harmer Report shows, the ASC (the successor in function to the NCSC) was to be given a capacity to apply in circumstances where no statutory investigation had taken place. But it was not to be sufficient for the ASC, which might not have conducted an investigation, to seek a winding up on the ground of the company's insolvency without first satisfying the Court of a prima facie case of insolvency. Only then was the ASC to be permitted to take the serious and perhaps commercially destructive step of applications for winding up in insolvency.
The requirement of leave cannot be regarded, in my respectful opinion, as being merely procedural. It is not imposed as a regime for the conduct of proceedings properly pending in the Court. It is imposed to prevent the taking of a step that would commence proceedings in circumstances where the company is entitled, before the commencing step is taken, to protection by the Court's examination of the case to be presented in proof of the company's insolvency. If the requirements of s 459P(2) are treated as merely procedural, the purpose of s 459P(3) and (5) is frustrated.
In my respectful opinion, the mandatory terms in which sub-s (5) is drawn do not admit of any other interpretation. If a person falling within a category mentioned in sub-s (2) does not have leave, that person "cannot apply for a company to be wound up in insolvency" (s 459P(5)). If leave could be given nunc pro tunc, an application to wind up a company in insolvency could be made and would be effective to commence proceedings in the Court subject to the obtaining of a grant of leave subsequently [14] . That result is inconsistent with the statutory proscription of the commencement of proceedings without leave.
The cases in which questions of a similar kind have been considered are not to be reconciled. A clear conflict appears between Re Excelsior Textile Supply Pty Ltd [15] and Re Testro Bros Consolidated Ltd [16] , both of which were concerned with the effect of s 199 of the Companies Act 1961 Vic. That section required [17] a petitioner for the winding up of a company to obtain the leave of the court to present the petition if the company was under official management or notices calling a meeting for the purpose of placing the company under official management had been served. In the former case, Gillard J held that no leave could be given after the purported commencement of proceedings by a petitioner who had not been given leave. His Honour was of the view that the purpose of the statutory prohibition - the preservation of the status quo while the creditors considered the position - would be frustrated if a petition that might wreck the company could be effectively presented [18] . In the latter case, however, Sholl J said [19] :
If the Court is of opinion that leave, had it been applied for, would have been given, why should it not decide, if it wishes, to treat as regular and effective, proceedings over which ex concessis it has jurisdiction, and dispense with the need merely to repeat them? If the Court can stay the current proceedings, and yet grant leave to bring them all over again, it seems to me that it must be able to achieve a similar result by treating the current proceedings as if brought with leave, whether it calls what it does giving leave nunc pro tunc, or not. There may be cases where it would be unjust to do that, as, eg, where the validation of a winding-up petition may affect transactions which would not be affected by a later petition. With respect, the question is not one of convenience but of giving effect to the statutory language and purpose. I would agree with the approach of Gillard J. The cases which have followed Re Testro in preference to Re Excelsior have focused on the effect which an order granting leave nunc pro tunc might have on the creditors of the particular company. That approach assumes that there is a discretionary power to relieve against the statutory prohibition against the commencing of the proceedings. The existence of such a power must depend, however, on the true construction of the provision which enacts the prohibition. 1. [1964] VR 574. 2. [1965] VR 18. 3. See Re Excelsior [1964] VR 574 at 577 fn. 4. See Re Excelsior [1964] VR 574 at 580-581. 5. Re Testro Bros [1965] VR 18 at 34-35.
It is erroneous to approach the construction of a provision imposing a prohibition on commencing of proceedings by observing that a superior court has jurisdiction to make an order in particular proceedings that are irregularly commenced and thereby to conclude that the irregularity can be cured by an order made in those proceedings nunc pro tunc. The correct approach is to ascertain whether the irregularity, where it arises from statute, is a fundamental irregularity. In the present context, the question is whether the statute on its true construction contemplates the lifting of the prohibition on the commencement of proceedings without leave by the making of an order after the application for winding up in insolvency is made. When the prohibition is designed to protect the interests of a particular person - a member of the Armed Forces in Cameron v Cole; creditors considering the placing of a company in official management in Re Excelsior ; the company itself in the present case - and a contravention of the prohibition would or might prejudice that person's interests, the contravention is a fundamental irregularity. The purpose and effect of the provision would be undermined if the absolute protection which the provision is expressed to confer were transformed into a discretionary bar that could be relieved by a curial order.
One further point should be made. It is a false dichotomy to divide all statutory provisions affecting the commencement of legal proceedings into provisions that deny jurisdiction and provisions that are procedural [20] . Whatever may be the position in courts of inferior jurisdiction, it is not the true dichotomy in courts of superior jurisdiction where an order made in proceedings irregularly commenced or conducted will not be held to be a nullity though it might be set aside ex debito justitiae on the application of a person with a sufficient interest.
This conclusion leads to the allowing of the appeal and the dismissal of the cross-appeal which the ASC argued in defence of the order if this Court should hold that the requirements of s 459P(2) were more than procedural. The appellants gave an undertaking that would suffice to give effect to the rights of the persons interested in the assets of the Group A Companies if the appeal should be allowed. However, as this is a dissenting judgment, it is not necessary to formulate the terms of the final order I would make. It is sufficient that I would allow the appeal and dismiss the cross-appeal.
I agree with Toohey J, for the reasons given by him, that the appeal and cross-appeal should be dismissed. The short point in the appeal is whether the Full Court of the Federal Court lacked jurisdiction to make a winding up order against a number of companies when it did so on the application of the Australian Securities Commission (the Commission) without leave to make the application having been obtained by that body as required by s 459P(2) of the Corporations Law. Section 459P does not confer jurisdiction on the Federal Court to make a winding up order; it does no more than identify the parties who may make an application, requiring leave to be obtained in the case of some of them including the Commission. Jurisdiction is conferred on the Federal Court by s 459A of the Corporations Law in conjunction with s 42(3) of the Corporations (South Australia) Act 1990 SA. The failure to obtain leave was a mere defect or irregularity in the exercise of that jurisdiction. It did not affect the validity of the order made, although it may have provided a ground for staying it or setting it aside [21] .
Since the failure to obtain leave was procedural and did not go to jurisdiction, there was no reason why the Full Court of the Federal Court should not have cured the defect or irregularity by granting leave nunc pro tunc. There is ample authority, which is examined by Sholl J in Re Testro Bros Consolidated Ltd [22] , for its having taken that course.
By this appeal the appellants challenge part of an order made by the Full Court of the Federal Court that the Australian Securities Commission (the Commission), the first respondent,
have leave nunc pro tunc pursuant to s 459P(2) of the Corporations Law to apply to wind up in insolvency the Group A Companies, and the Companies (as defined in paragraph 4 of the order) .The reference to "the Companies (as defined in paragraph 4 of the order)" is to the order made by the primary judge, O'Loughlin J, referring to companies identified in annexures to that order. It is only that part of the order relating to the Group A companies with which this appeal is concerned.
To understand the order made by the primary judge, the order made by the Full Court and the challenge raised by the present appeal, some reference to the background facts is called for.
The appellants are two of the directors of companies which constitute the Emanuel Group [23] . Sixteen of these companies comprise the Group A companies. On 19 June 1995 the Commonwealth of Australia, the third respondent, acting on behalf of the Australian Taxation Office (the ATO), lodged a notice of motion in the Federal Court seeking various orders including an order that the Group A companies be wound up. On 27 June 1995 that notice of motion was superseded by an amended notice of motion which, relevantly, sought the same relief. On 29 August 1995 the Commission lodged a notice of motion in the Federal Court under s 459P(1)(f) of the Corporations Law which sought an order, pursuant to s 459A, that the Group A companies "be wound up in insolvency".
The existence of more than one notice of motion and the roles of the ATO and the Commission need some explanation. Part 5.3A of the Corporations Law relates to " Administration of a Company's Affairs With a View to Executing a Deed of Company Arrangement ". Part 5.4 relates to " Winding up in Insolvency ". A meeting of creditors of the Group A companies was convened pursuant to s 439A of the Corporations Law. Section 439A is in Pt 5.3A. The ATO challenged the validity of that meeting and an order was made by O'Loughlin J adjourning it. The ATO also challenged deeds of arrangement made by the Group A companies and the appointment of an administrator pursuant to the deeds. Finally, it sought orders for the winding up of those companies. Those orders were sought under Pt 5.3A Div 13 - "Powers of Court".
There is no dispute as to the standing of the ATO to seek the orders it did. But in the end an order for the winding up of the Group A companies was made on 30 August 1995 by O'Loughlin J at the instance of the Commission. That order was made pursuant to Pt 5.4 by reason of the insolvency of the companies concerned: s 459A. The Commission took this course because the ATO was precluded from obtaining a winding up order while the deeds of company arrangement were in force: s 444E(2). Section 1330(1) empowers the Commission to "intervene in any proceeding relating to a matter arising under this Law". Where the Commission does intervene it is "deemed to be a party to the proceeding": s 1330(2).
Section 459P identifies those who may apply for an order under s 459A. The scheme of the section is to list in s 459P(1) those who may apply:
(e) a liquidator or provisional liquidator of the company;
Sub-section (2) then identifies those whose application "may only be made with the leave of the Court". One of those so identified is "the Commission": s 459P(2)(d).
The Commission did not apply for leave at any time before the order for winding up of the Group A companies was made by O'Loughlin J. In the course of making his order his Honour said that he would "dispense with compliance with the rules so far as the ASC is concerned". In doing so, he made no reference to s 459P(2) or indeed to any particular rule. The order of 30 August 1995 does dispense with the notice requirements of s 465A but that is not relevant to the appeal.
On appeal by the present appellants against the order made by O'Loughlin J, the Full Court made the nunc pro tunc order referred to at the outset of these reasons. The appellants challenge that order on the footing that the Full Court
erred in finding that the requirement under Section 459P(2) of the Corporations Law that the Australian Securities Commission have leave to apply for an order winding up a company on the grounds of insolvency was procedural in nature, and that it did not impose a condition precedent to the jurisdiction of the Court .
After an examination of a number of Australian decisions, the Full Court concluded [24] :
[T]his Court should follow the long line of authority and hold that the requirement to obtain leave in s 459P(2) does not impose a condition precedent to the jurisdiction of the Court and that a failure to obtain leave can be cured by an order nunc pro tunc. The Court added that it would have been open to O'Loughlin J, even after the order of 30 August 1995 had been sealed, to have amended the order under O 35, r 7(3) of the Federal Court Rules [25] . Whether the sub-rule would have been available to O'Loughlin J is debatable, notwithstanding the decision of the Full Court of the Federal Court in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd [26] . But it is unnecessary to pursue that matter or related arguments based on ss 467(3)(b) and 467A of the Corporations Law because, in my view, the Full Court had authority to make the order it did and it was appropriate to make the order. 1. Emanuele v Australian Securities Commission (1995) 63 FCR 54 at 67. 2. The sub-rule reads: "A clerical mistake in a judgment or order, or an error arising in a judgment or order from an accidental slip or omission, may at any time be corrected by the Court." 3. (1995) 61 FCR 385.
The language of s 459P(2) is simple: an application by the Commission for a company to be wound up in insolvency "may only be made with the leave of the Court". Does this provision condition the Court's jurisdiction?
There is to be found in the authorities, in some respects a conflict but also a difference of approach to such a provision. This is to some extent explained by the particular language with which the courts have had to grapple. As a starting point it must be noted that the jurisdiction of the Federal Court under the Corporations Law is conferred by State legislation. Section 42(3) of the Corporations (South Australia) Act 1990 SA reads:
Jurisdiction is conferred on the Federal Court with respect to civil matters arising under the Corporations Law of South Australia. Not only is s 459P(2) not a jurisdiction conferring provision, it does not create a cause of action or go to the relief that may be granted. It is s 459A that empowers the Court to order that an insolvent company be wound up in insolvency. That provision, read with s 42(3) of the Corporations (South Australia) Act is, relevantly, the source of the Federal Court's jurisdiction.
In Ceric v C E Heath Underwriting & Insurance (Australia) Pty Ltd [27] , Gallop A-CJ and Morling A-J said of a statutory requirement that an action not be commenced except with the leave of the court: "We find it difficult to describe a proceeding commenced in a court which has jurisdiction to entertain the proceeding as a nullity."
Earlier, in Re Testro Bros Consolidated Ltd [28] , Sholl J was concerned with s 199 of the Companies Act 1961 Vic which provided that, except with the leave of the Court, no action or proceeding shall be proceeded with or commenced against a company under the control of an official manager. His Honour examined a number of authorities and concluded [29] :
There is a uniform set of authorities in Australia, extending over seventy years, for the granting of leave under such sections, nunc pro tunc Before the Judicature Acts, it was held that the omission to obtain leave to continue a common law action after a winding-up order could not be made the subject of a plea in defence to the action, but that application for a stay must be made to the Court having winding-up jurisdiction Since the Judicature Acts, no doubt an application to stay could be made in the Court in which the action is pending, and it may be that the absence of leave could also be pleaded as a defence. But clearly the absence of leave is not a matter going to jurisdiction. Speaking of the statute in question, Sholl J added [30] : Such legislation is aimed at preserving the control of the Supreme Court over the administration of a company's affairs, a purpose which is sufficiently achieved by interpreting sections like s 199 rather as conferring a control of a directory character on the Court, than as setting up an absolute bar like a statute of limitations. His Honour's approach was followed by McLelland CJ in Eq in Re Sydney Formworks Pty Ltd [31] . 1. [1965] VR 18. 2. Re Testro Bros [1965] VR 18 at 33-34. 3. Re Testro Bros [1965] VR 18 at 35. 4. [1965] NSWR 646. See also In Matter of Companies (WA) Code (1988) 1 WAR 137; Oceanic Life Ltd v Insurance & Retirement Planning Services Pty Ltd (In liq) (1993) 11 ACLC 1157; Ceric v C E Heath Underwriting & Insurance (Australia) Pty Ltd (1994) 4 NTLR 135.
I respectfully adopt what is said by Sholl J as the approach to be taken to the legislation now under consideration [32] . To the extent that National Mutual Fire Insurance Co Ltd v The Commonwealth [33] takes a different view, it should not be followed. But that decision is in any event distinguishable, having regard to the statutory provision in question. Section 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 NSW created a charge upon certain insurance moneys and authorised recovery against the insurer, "[p]rovided that no such action shall be commenced in any court except with the leave of that court". The Court of Appeal held that "a failure to obtain the leave of the Court in advance invalidates the action and renders it incapable of being revived by leave retrospectively given" [34] . Arguably, the Court's jurisdiction was dependent upon advance leave; that is not the case here.
Except as permitted by this section, a person cannot apply for a company to be wound up in insolvency. Section 459P begins, as indicated earlier, by listing those who may apply for a company to be wound up in insolvency and then identifies those within the list, an application by whom may only be made with the leave of the Court. Section 459P(3) empowers the Court to give leave "if satisfied that there is a prima facie case that the company is insolvent, but not otherwise". The Court may give leave "subject to conditions": s 459P(4). The section concludes with sub-s (5). Having regard to the requirement of s 459P(2), sub-s (5) would seem to be aimed more at making it clear that the basis for an application for the winding up of a company must be found in s 459P, rather than itself imposing a further barrier within the section. Indeed, if the latter is its purpose, it seems superfluous.
In Torsir Pty Ltd v Maxgrow Developments Pty Ltd [35] , Young J considered
that in s 444E [36] when read with s 459P(5) the word "cannot" means that the creditor is disqualified from having locus standi to file a summons to wind up.
However, not having locus standi does not mean that proceedings commenced by that person are not validly commenced. They are not a nullity.
It is unnecessary to say anything about the actual decision in Torsir Pty Ltd v Maxgrow Developments Pty Ltd. But it does illustrate the operation which I think s 459P(5) is intended to have. 1. (1995) 121 FLR 170 at 174; 18 ACSR 201 at 205. 2. The section relevantly reads: "(1) Until a deed of company arrangement terminates, this section applies to a person bound by the deed. (2) The person cannot: (a) make an application for an order to wind up the company; or (b) proceed with such an application made before the deed became binding on the person. (3) The person cannot: (a) begin or proceed with a proceeding against the company or in relation to any of its property; or (b) begin or proceed with enforcement process in relation to property of the company; except: (c) with the leave of the Court; and (d) in accordance with such terms (if any) as the Court imposes."
Recognising that there had been an order of a superior court, the appellants contended that the order of the Full Court was voidable and should be set aside for irregularity. They argued that the defect was incurable and that the order must be set aside. They have, they said, what Rich J in a different context described as "an unconditional right, ex debito justitiae, to have the judgment set aside" [37] .
The appellants submitted that a person who makes an application other than as allowed by s 459P has no standing. They said that this is the consequence of the use of only in s 459P(2), and cannot in s 459P(5). They said that to hold otherwise would deprive those words of effect, and they relied on David Grant & Co Pty Ltd v Westpac Banking Corporation [38] in this regard. David Grant concerned s 459G of the Corporations Law Vic, which requires that applications to set aside statutory demands "may only be made within 21 days" after service of a demand. Gummow J, with whom Brennan CJ, Dawson, Gaudron and McHugh JJ agreed, held that the temporal requirement of s 459G operated to define the jurisdiction of the court in respect of an application to set aside a statutory demand. He said [39] :
The force of the term "may only" is to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G. An integer or element of the right created by s 459G is its exercise by application made within the time specified. Because compliance with s 459G went to jurisdiction, there could be no question of the application having been dismissed because of a defect or irregularity in connection with it. Consequently there was no chance of the application being saved by a provision designed to prevent dismissal where there is no more than a defect or irregularity. 1. (1995) 184 CLR 265. 2. David Grant (1995) 184 CLR 265 at 277.
The third respondent, the Commonwealth, submitted that David Grant should be distinguished from the present case because it was decided in relation to a temporal provision which has certain consequences whereas here there is a requirement that the court be satisfied that it is prima facie an appropriate case to wind up a company, and there is less significance in whether that is done before or after leave is given. There is force in the submission. The line of authority discussed above, including Testro , reveals cases more closely analogous to the present than David Grant. The consequence of this is that s 459P(2) does not impose a condition precedent to the exercise of the jurisdiction of the court. This is consistent with the analysis of David Grant by Lindgren J in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd [40] , where he said that
the distinction is between a situation in which there is a time limit within which the Court must be approached if an application for an order of a particular kind is to be made at all (s 459G), and a situation in which a proceeding is already under way and is subject to the Court's control and in which a timely but deficient order has been made. 1. (1995) 61 FCR 385 at 406.
Section 459P(3) requires the Court to exercise a supervisory role, satisfying itself that there is a prima facie case that the company is insolvent before granting leave. This helps avoid "the drastic commercial consequences which may follow the issue of process for winding up" [41] . There are policy considerations which favour taking a liberal view of the requirements of s 459P, especially in situations such as an application for an urgent ex parte order to appoint a provisional liquidator, where it would be inconvenient if leave had to be granted before the application was made.
Mozley and Whiteley's Law Dictionary [42] offers this definition of nunc pro tunc:
Now instead of then; meaning that a judgment is entered, or document enrolled, so as to have the same legal force and effect as if it had been entered or enrolled on an earlier day. 1. 11th ed (1993), p 184.
The orders of the Court of Chancery, issued by the Lord Chancellor, stretched in a continuous series from 1388 to the Judicature Acts late in the nineteenth century. Until the advent of formal law reports, those orders provided the best evidence of the organisation of the Court and the rules of procedure which led to the substantive rules of equity. However the system of recording the orders was haphazard. Not only was there an absence of an official record; some orders were made during the hearing of a case [43] . The first record of an order nunc pro tunc seems to be of one made by Lord Clarendon in Ex parte Robert Devenish and Henry Devenish v Richard Bernford , per pet, a private case [44] .
Thereafter the use of an order nunc pro tunc is well recorded in judicial decisions [45] . In Donne v Lewis [46] , Lord Eldon said:
The Court will enter a Decree nunc pro tunc, if satisfied from its own official documents, that it is only doing now what it would have done then. 1. See eg, Williamson v Henshaw (1747) Dickens 129 [ 21 ER 217]; Jesson v Brewer (1763) Dickens 370 [ 21 ER 312]; Lawrence v Richmond (1820) 1 Jac & W 241 [37 ER 367]; Re Jones [1891] WN 114. 2. (1805) 11 Ves Jun 601 at 601 [32 ER 1221 at 1222].
After the Judicature Acts, the English Rules of the Supreme Court specified the method of entry of judgment or order nunc pro tunc [47] . The relevant provisions were later omitted as unnecessary [48] .
If the absence of leave was not fatal to the Commission's application, there is no sufficient reason why this Court should interfere with the nunc pro tunc order made by the Full Court. The order for winding up made by O'Loughlin J was entirely appropriate. Proceedings to wind up the Group A companies had been launched by the ATO in June 1995. Those companies owed income tax of approximately $50 million. Evidence was led before the Full Court of the Federal Court that the Emanuel Group had a negative net worth of more than $74 million. There were serious allegations as to the conduct of the directors of the Emanuel Group. It was in the interests of creditors that the activities of the companies be brought under the control of an official liquidator as soon as possible. The Full Court said [49] :
The evidentiary material before the Court on 30 August 1995 established a strong prima facie case that the Group A Companies and each of them were insolvent. Before this Court the appellants did not seriously challenge this finding. 1. Emanuele v Australian Securities Commission (1995) 63 FCR 54 at 67.
It follows that the appeal should be dismissed. In that event the first respondent's notice of contention and cross-appeal has no significance and should also be dismissed. The appellants should pay the respondents' costs of the appeal. There should be no order for the costs of the cross-appeal.
Section 459P of the Corporations Law (the Law) [50] provides as to the identity of those who may apply for a company to be wound up in insolvency. It does so in these terms:
(1) Any one or more of the following may apply to the Court [51] for a company to be wound up in insolvency:
(b) a creditor (even if the creditor is a secured creditor or is only a contingent or prospective creditor);
(e) a liquidator or provisional liquidator of the company;
(2) An application by any of the following, or by persons including any of the following, may only be made with the leave of the Court:
(a) a person who is a creditor only because of a contingent or prospective debt;
(3) The Court may give leave if satisfied that there is a prima facie case that the company is insolvent, but not otherwise.
(4) The Court may give leave subject to conditions.
(5) Except as permitted by this section, a person cannot apply for a company to be wound up in insolvency.
The references in s 459P(1)(f) and (2)(d) to "the Commission" are references to the first respondent, the Australian Securities Commission (the Commission). 1. The Law is set out in s 82 of the Corporations Act 1989 Cth. It applies in this case by force of s 7 of the Corporations (South Australia) Act 1990 SA which enacts the Law as a law of South Australia. 2. Prior to 16 October 1995, "Court" was defined in s 9 of the Law to mean "the Federal Court, or the Supreme Court of this or any other jurisdiction, when exercising the jurisdiction of this jurisdiction". Section 58AA(1), inserted with effect from that date, adds reference to the Family Court of Australia and courts to which s 41 of the Family Law Act 1975 Cth applies because of a Proclamation made under s 41(2) of that Act.
The Commission applied to the Federal Court of Australia for orders in relation to companies in the Emanuel Group of companies, including an order for the winding up in insolvency of thirty-three of those companies and an order that, pursuant to s 467(3) of the Law, the Court dispense with the notice requirements of s 465A in relation to that application [52] . It neither applied for nor obtained leave under s 459P(2) to make the winding up application. This notwithstanding, O'Loughlin J made an order, amongst others, that sixteen of the thirty-three companies be wound up in insolvency. The sixteen companies have since come to be known as "the Group A Companies". They are the second respondents to this appeal.
The appellants are directors of various companies in the Emanuel Group, including the Group A Companies. They appealed to the Full Court of the Federal Court from the orders of O'Loughlin J, complaining, amongst other things, that leave had not been granted pursuant to s 459P(2). The Commission also sought leave to cross-appeal. In the result, the Full Court (Spender, von Doussa and Hill JJ) dismissed the appeal but ordered that the orders of O'Loughlin J be amended by adding an order that the Commission "have leave nunc pro tunc pursuant to s 459P(2) of the Corporations Law " to apply to wind up the Group A Companies and thirty-eight other Emanuel Group companies placed in provisional liquidation by O'Loughlin J [53] . It held that, in the circumstances, it was unnecessary to deal with the application by the Commission for leave to cross-appeal [54] .
The Full Court expressed the view, by reference to Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd [55] , that, pursuant to O 35, r 7(3) of the Federal Court Rules (the Rules), O'Loughlin J could have made a nunc pro tunc order granting leave under s 459P(2) at any time, even after the winding up order was sealed [56] . And it took the view that it had power to do whatever O'Loughlin J could have done. In this regard, it was said that the Court "ha[d] the power to make such order as in all the circumstances it [thought] fit" [57] , a reference to the power conferred by s 28(1)(b) of the Federal Court of Australia Act 1976 Cth [58] . The appellants contend that it was not open to the Full Court to make the nunc pro tunc order and now seek orders from this Court setting aside that order in its application to the Group A Companies and, also, setting aside the orders made by O'Loughlin J with respect to those companies.
The respondents support the nunc pro tunc order made by the Full Court as an exercise of the power conferred by O 35, r 7(3) of the Rules. That sub-rule allows for the correction of "[a] clerical mistake or an error arising in a judgment or order from an accidental slip or omission". They also contend that, pursuant to s 467(3)(b) of the Law, this Court should dispense with the requirement for the Commission to obtain leave under s 459P(2) or that, by force of s 467A, that requirement can now be disregarded. The terms of ss 467(3) and 467A will be noted later in these reasons. In the alternative, the Commission seeks special leave to cross-appeal to argue that the Full Court should have granted it leave to cross-appeal from the decision and orders of O'Loughlin J, allowed that cross-appeal and, in the exercise of appellate jurisdiction, made an order to the same effect as the order now under appeal.
As in the Full Federal Court, much of the argument in this Court was directed to the question whether the requirement that the Commission obtain leave under s 459P(2) of the Law is "jurisdictional" or "procedural". The argument proceeded on the basis that, if it is jurisdictional, it is a complete impediment to the winding up orders made by O'Loughlin J but, if it is procedural, it can be remedied by the subsequent grant of leave. The dichotomy between "jurisdictional" and "procedural" requirements is not new [59] . Nevertheless, resort to that dichotomy tends to oversimplify the issue involved in this case. And it also tends to divert from the task of ascertaining the meaning and effect of s 459P.
The question raised in this appeal with respect to s 459P of the Law can be formulated in different ways. It can, for example, be asked whether its requirement for the grant of leave is a strict requirement. And if it is not, it can then be asked in what circumstances leave can be granted. However, these questions fail to ask the essential question, namely, what is required by s 459P. The answer to that question depends, in the first instance, on whether s 459P(2) requires that leave be granted before an application is made to wind up a company in insolvency. If it does not, a further question arises as to the circumstances in which leave may thereafter be granted.
It is pertinent to note at the outset that s 459P serves a dual function. It establishes who may apply to wind up a company in insolvency and it also confers power on the Court to grant leave to the persons specified in s 459P(2) to make an application of that kind. In its broader context, s 459P is one of several provisions concerned to establish the grounds on which and the procedures by which the Court may order that a company be wound up.
The power to order that a company be wound up in insolvency is conferred by s 459A of the Law in these terms:
On an application under section 459P, the Court may order that an insolvent company be wound up in insolvency. Ancillary powers are conferred by s 467(1) and (3). Section 467(1) allows that, subject to sub-s (2) and s 467A, the Court may dismiss or adjourn a winding up application or make any interim or other order it thinks fit. Sub-section (2) is of no present relevance. However, s 467A(a) directs that a winding up application [60] must not be dismissed because of "a defect or irregularity in connection with the application" unless the Court is satisfied that it results in substantial and irremediable injustice. Section 467(3)(b) provides that the Court may "dispense with any notices being given or steps being taken that are required by [the] Law, or by the rules, or by any prior order of the Court". 1. Section 467A refers to applications under Pt 5.4 which deals with winding up in insolvency and under Pt 5.4A which deals with winding up by the Court on other grounds.
The language of s 459P is emphatic, directing that "[a]n application may only be made with the leave of the Court" (sub-s (2)), that it may be granted "if [it is] satisfied that there is a prima facie case that the company is insolvent, but not otherwise" (sub-s (3)) and that "[e]xcept as permitted by [that] section, a person cannot apply for a company to be wound up in insolvency" (sub-s (5)). However, it does not, in terms, provide that an application may only be made by a person specified in sub-s (2) if there has been a prior grant of leave. Or to put the matter another way, it does not, in terms, provide that the Court may only grant leave prior to an application being made for the winding up of a company.
Once the question in this case is approached in terms of the Court's power to grant leave, rather than in terms which ask whether s 459P must be complied with strictly, it is clear, in my view, that s 459P(2) cannot be confined to the grant of leave prior to an application being made for the winding up of a company. As already indicated, s 459P(2) is a provision conferring power on a court. As such, it is not to be construed as subject to implications or limitations unless clearly required by its terms, its context or its subject matter [61] . Similar considerations dictate that such provisions should not be construed as directing an inflexible approach unless that is clearly indicated. Courts are possessed of powers to be exercised in the interests of justice. And as a general rule, the interests of justice are not well served by the exercise of powers inflexibly and without regard to the convenience of the situation.
In Re Testro Bros Consolidated Ltd [62] , considerations of convenience led Sholl J to the conclusion that leave could be granted "retrospectively, nunc pro tunc" under s 199 of the Companies Act 1961 Vic. Section 199 relevantly provided, in terms not dissimilar from those involved in this case, that "[e]xcept by leave of the Court after the service of [notices calling a meeting of creditors to place a company under official management] no action or proceeding in any court [should] be proceeded with or commenced against the company" [63] . Sholl J reached the conclusion that leave could be granted retrospectively, saying [64] :
If the Court can stay the current proceedings, and yet grant leave to bring them all over again, it seems to me that it must be able to achieve a similar result by treating the current proceedings as if brought with leave, whether it calls what it does giving leave nunc pro tunc, or not. The decision in Re Testro Bros Consolidated Ltd was followed in other States in relation to similar legislative provisions concerned with the commencement and continuation of proceedings against companies [65] . 1. [1965] VR 18. 2. Note that the headnote to Re Testro Bros Consolidated Ltd incorrectly states that s 199 required prior leave (emphasis added). 3. Re Testro Bros [1965] VR 18 at 34-35. 4. See, eg, Re Sydney Formworks Pty Ltd (In liq) [1965] NSWR 646; In Matter of Companies (WA) Code (1988) 1 WAR 137; Oceanic Life Ltd v Insurance & Retirement Planning Services Pty Ltd (In liq) (1993) 11 ACLC 1157. See also Ceric v C E Heath Underwriting & Insurance (Australia) Pty Ltd (1994) 4 NTLR 135.
The principles which govern the construction of provisions conferring powers on courts and the fact that provisions similar to the provision now in question have been construed liberally rather than inflexibly favour a construction of s 459P which is not confined to the granting of leave prior to the making of an application to wind up a company in insolvency. That construction is not inconsistent with the emphatic language of s 459P. And no different construction is directed by context or by subject matter. Rather, it is reinforced by the terms of ss 467(3)(b) and 467A(a) of the Law which, respectively, permit the Court to dispense with steps required by the Law and direct that a winding up application not be dismissed for any "defect or irregularity in connection with the application".
It does not follow from the holding that s 459P(2) is not confined to the grant of leave prior to the making of an application for the winding up of a company that leave may be granted at any time subsequent to the making of a winding up order. Whether the latter course is permitted depends on the meaning and effect of s 459P. It is not to the point that O 35, r 7(3) of the Rules allows for correction of accidental slips or omissions if, on its proper construction, s 459P does not permit of the grant of leave subsequent to the making of a winding up order. Similarly, it is not to the point that s 467(3)(b) allows the Court to dispense with compliance with the requirements of the Law if, on its proper construction, s 459A, read in the light of s 459P, does not allow for a winding up order to be made on the application of a person specified in s 459P(2) until leave has been granted.
Before turning to s 467(3)(b) of the Law and O 35, r 7(3) of the Rules, it is convenient to note that, contrary to the argument for the Commission, s 467A does not provide that defects may be disregarded by the Court when making a winding up order. And it certainly does not provide that they may be disregarded by a court exercising appellate jurisdiction. Section 467A provides that a winding up application is not to be dismissed merely because of one or more of the defects or irregularities specified in pars (a) and (b) of that section, namely, a defect or irregularity in connection with the application or a defect or irregularity in a statutory demand.
Because s 467A simply operates as a direction that a winding up application is not to be dismissed for defects and irregularities of the kind specified in pars (a) and (b), it is necessary that it be read in conjunction with remedial provisions, such as s 467(3), and other provisions, such as s 459P(2), which allow for flexible procedures. When read in the light of those provisions, the effect of s 467A is to require whatever remedial or procedural orders are necessary, not to allow defects and irregularities to go uncorrected.
The power conferred on the Court by s 459P(2), (3) and (4) to grant leave to apply for the winding up of a company in insolvency is a discretionary power. It is not to be exercised unless the Court is satisfied "that there is a prima facie case that the company is insolvent" (s 459P(3)). However, it does not follow that it must be exercised if that is the case. The discretion conferred by those sub-sections is a real discretion and it is to be exercised, not by asking whether a company is prima facie insolvent but whether, in all the circumstances, an application should be made by a person specified in s 459P(2) for the winding up of a company that is prima facie insolvent.
The question to be asked on the exercise of the discretion conferred by s 459P(2), (3) and (4) is not one that can be asked once a winding up order has been made. Various questions may then be asked. It may, for example, be asked whether, if the question had been adverted to, the trial judge would have granted leave. So, too, it may be asked by an appellate court whether, if the question had been raised, it would have granted leave. However, these are not the questions directed by those sub-sections. Moreover, their formulation indicates that the only question that can be asked once a winding up order is made is a hypothetical question, and not the question which the sub-sections direct. To allow that s 459P(2), (3) and (4) may be satisfied by answering a hypothetical question is to reduce the grant of leave to a mere formality. And it is to negate the nature of the independent judicial discretion which the sub-sections confer.
It follows, in my view, that although leave to make a winding up application may be granted at any point prior to, or simultaneously with, the making of a winding up order, it may not be granted thereafter, whether by the judge who made the order or by a court exercising appellate jurisdiction. More precisely, until leave has been granted there is no application for the purposes of s 459A and, thus, no application on which a winding up order can be made. That conclusion is directed by the nature of the discretion which s 459P(2), (3) and (4) confer. And no different view is suggested by s 467(3)(b). Although s 467(3)(b) allows for notices and steps required by the Law to be dispensed with, it does not allow for the making of a winding up order in the absence of a winding up application. And as already indicated, the effect of s 459A, when read in the light of s 459P(2) and (5), is that, until leave is granted, there is no application upon which a winding up order can be made.
In my view, the nature of the discretion also precludes the granting of leave pursuant to O 35, r 7(3) of the Rules once a winding up order has been made. And that is so whether or not the order is expressed to be nunc pro tunc, and regardless of whether leave is then sought from the judge who made the order or from a court exercising appellate jurisdiction. As already indicated the power conferred by O 35, r 7(3) is a power to correct "[a] clerical mistake or an error arising in a judgment or order from an accidental slip or omission". The failure involved in this case was a failure to exercise an independent discretion. It was not a clerical mistake. And to equate it with "an error arising in a judgment or order" is also to reduce the discretion conferred by s 459P(2), (3) and (4) to a mere formality.
The appeal should be allowed with costs. Special leave should be granted to the Commission to cross-appeal and its cross-appeal dismissed with costs. Order 2 of the orders of the Full Court, as it relates to the Group A Companies, should be set aside; in lieu thereof, the appeal to that Court should be allowed with respect to the Group A Companies and the orders of O'Loughlin J winding up those companies and appointing a liquidator set aside. Otherwise, the orders of the Full Court should not be disturbed. Liberty should be reserved to the respondents to apply to this Court in the event of non-compliance with the undertakings given on the grant of special leave [66] .
Brennan CJ and Gaudron J would allow this appeal. Dawson and Toohey JJ would dismiss it. That division in the Court reflects the acute controversy which is tendered for decision. In many cases which depend upon the meaning of legislation found to be ambiguous, strong arguments can be assembled for the competing points of view. So it has proved in this appeal. We deceive ourselves in such cases if we pretend that there is only one available interpretation. The judicial task is to seek out and to declare the preferable construction of the legislation. Only then does it become the one interpretation which the law holds to be correct.
In order to ensure that, in such a case, the mind of the decision-maker addresses the pertinent considerations, it is useful, in my view, to collect and reflect upon the competing arguments stated at their strongest. Ultimately, I have concluded that the appeal should be dismissed. But I do not pretend that the decision is an easy one. I acknowledge the force of the arguments on the other side.
Mr Rocco Emanuele and Mr Lynton Emanuele (the appellants) are directors of sixteen companies in the "Emanuel Group", referred to as the "Group A" companies. There are other companies in the group. In fact, the Emanuel Group comprises about seventy companies. However, the terms upon which special leave to appeal to this Court was granted to the appellants confine the proceedings to the position of the Group A companies [67] .
On 27 June 1995, the Commonwealth of Australia (the third respondent), acting in the interests of the Australian Taxation Office (ATO), filed a notice of motion in the Federal Court seeking an order that the Group A companies in the Emanuel Group be wound up. On 29 August 1995, the Australian Securities Commission (the first respondent) (ASC) filed a notice of motion in the Federal Court seeking an order that the Group A companies in the Emanuel Group be wound up in insolvency. Neither in its originating process, nor by its oral application to the Federal Court when its notice of motion was heard by O'Loughlin J, did the ASC seek or obtain prior leave of the Court to wind up the companies in insolvency as required by s 459P(2) of the Corporations Law (the Law).
This defect not having been noticed by any party, or by O'Loughlin J, on 29 August 1995, his Honour ordered that the Group A companies be wound up in insolvency. When the ASC moved for a winding up order on 30 August 1995, it did so having intervened under s 1330 of the Law. In that way it became a party in the substantive winding up proceedings. It gave notice of its intention to move for the winding up some seven days earlier. Although he did not advert to s 459P(2), O'Loughlin J did say: "I will dispense with compliance with the rules so far as the ASC is concerned." Clearly, this order falls short of the grant of leave required by s 459P(2) of the Law.
The orders finally made by O'Loughlin J were based on the notice of motion of the ASC and not that of the ATO. Such orders could not have been made on the ATO's motion because s 444E(2) of the Law prevented the ATO from proceeding with its applications whilst certain deeds of company arrangement remained on foot. The ASC was not so confined. The most advantageous sequence for the winding up of the Group A companies, so far as both the ASC and the ATO were concerned, was that the companies be wound up first and that the deeds of company arrangement be set aside later.
The appellants appealed to the Full Court of the Federal Court. They raised a number of procedural objections. One of these relied on the failure of the ASC to obtain the leave required by s 459P(2). The Full Court dismissed a challenge by the ASC to the standing of the appellants. It also dismissed other grounds of appeal. This Court has not been concerned with any of those decisions, nor with the way in which the Federal Court acquired jurisdiction in this case, in part at least, by the purported conferral of jurisdiction by State legislation [68] .
Having reached the view that it was lawful and appropriate to add to the orders of the primary judge an additional order granting leave to the ASC nunc pro tunc to apply to wind up the Group A companies in insolvency, the Full Court found it unnecessary to consider a notice of contention filed by the Commonwealth which sought to uphold the orders in question pursuant to remedial provisions contained in the Law [69] . Furthermore, the Full Court, finding it unnecessary to consider a claim for relief by the ASC on the ground that O'Loughlin J had himself erred in omitting to consider the requirement of leave, dismissed the application for leave to cross-appeal. In this Court, the ASC (supported by the other respondents) defensively maintained its alternative case, viz that relief of the kind afforded by the Full Court could be made under the remedial provisions of the Law [70] . If need be, it pressed its cross-appeal to afford it an alternative vehicle to secure relief in the form of the order which, it claimed, ought to have been made by the primary judge in the first instance, notwithstanding its own failure to seek that relief at trial.
The failure of the ASC to obtain leave, as required by s 459P of the Law, was not disputed before the Full Court. What was in contest was the construction of the section and whether, upon that construction, the prior requirement of leave was an indispensable pre-condition either to the jurisdiction of the Federal Court to make the orders winding up the companies as it did or to the lawful exercise of the power, so that retrospective confirmation was not available.
The Full Court referred to conflicting authority in Australia upon similar statutory provisions requiring leave before relief could be granted under a statute. It demonstrated that for every decision taking a strict approach [71] another decision could be found espousing a flexible approach to "procedural" requirements and upholding a capacity to afford retrospective relief where the power of the Court and the merits of the case dictated that course [72] .
The Full Court also drew support from a long line of cases in the particular field of company law by which it had been held that a requirement to obtain leave of a court before securing an order winding up a company was not a condition precedent to the jurisdiction of the Court but a procedural error which could be cured, in a proper case, by an order nunc pro tunc. The line of cases is collected in a detailed analysis by Sholl J in the Supreme Court of Victoria in Re Testro Bros Consolidated Ltd [73] . A similar conclusion was reached by McLelland CJ in Eq in the Supreme Court of New South Wales in Re Sydney Formworks Pty Ltd (In liq) [74] . However, a contrary view on the requirements of the Companies Act 1961 Vic had been expressed by Gillard J in Re Excelsior Textile Supply Pty Ltd [75] , a decision which the judges in Testro Bros and Sydney Formworks declined to follow.
Against this background of principle and legal history, and notwithstanding the strong language of s 459P, the Full Court concluded [76] :
[T]he requirement to obtain leave in s 459P(2) does not impose a condition precedent to the jurisdiction of the Court and a failure to obtain leave can be cured by an order nunc pro tunc.
It would have been open to the primary judge even after the order of 30 August 1995 had been sealed to have amended the order under the Federal Court Rules, O 35, r 7(3) This Court has the power to make such order as in all the circumstances it thinks fit. The evidentiary material before the Court on 30 August 1995 established a strong prima facie case that the Group A Companies and each of them were insolvent. If the grounds of appeal are otherwise to fail this Court should amend the orders made on 30 August 1995 to include an order that the ASC have leave nunc pro tunc under s 459P(2). It is unnecessary to grant leave to the ASC to file a notice of appeal against the orders of 30 August 1995 to achieve this end, or to resort to s 1322 of the Law.
Having found that all other grounds of challenge failed, the Full Court ordered that to the orders of O'Loughlin J there be added, by amendment, an order that the ASC have leave nunc pro tunc, pursuant to s 459P(2) of the Law, to apply to wind up in insolvency the Group A companies [77] . The appellants now challenge that order in this Court. 1. Emanuele v Australian Securities Commission (1995) 63 FCR 54 at 67. 2. Other companies were included in the orders but, having regard to the terms of the grant of special leave, this Court is not concerned with them.
Section 459P was introduced into the Law with effect from 23 June 1993. For the first time, it gave the ASC a general right to apply to the Court to wind up a company in insolvency. The ASC retained the right, previously conferred, to apply to the Court for the winding up of a company where it was investigating, or had investigated, certain matters.
The immediate progenitors of s 459P include s 221 of the Companies Act 1962 SA, s 363 of the Companies (South Australia) Code 1982 SA and s 462 of the Law, as first enacted and subsequently amended. In line with the requirements of company law stretching back to the English legislation of the nineteenth century, these provisions enacted various gateways by which the court, administering the companies legislation, was afforded the power to supervise applications for the winding up of companies. The need for such supervision is obvious. The very commencement of proceedings to wind up a company, particularly on grounds of insolvency, and the publicity which may attend that course, may do irreparable damage to the company's reputation, to its capacity to raise capital for its continued operations, to the value of its shares and the interests of its shareholders, officers and employees.
The Companies Act 1962 SA contained Div II of Pt X (Winding up by the Court). In s 221, a list of parties with the standing to petition for the winding up of a company was set out. Limitations on the exercise of the power were contained in s 221(2). That sub-section contained paragraphs which placed controls upon the entitlements of various designated persons to present a petition and upon the Court to hear the petition. Thus s 221(2)(a) provided that "a contributory may not present the petition" except in specified circumstances. Similarly, s 221(2)(c) provided that the Court should not hear the petition in certain circumstances unless "a prima facie case for winding up has been established to the satisfaction of the Court". By s 222(2) it was expressly enacted:
Any action or proceeding which is commenced or proceeded with in contravention of this section shall be void and of no effect.
The Companies (South Australia) Code 1982 introduced, by s 363(1)(e), an entitlement for the National Companies and Securities Commission ("NCSC", the forerunner of the ASC), to make application for the winding up of a company under an order of the Court. The power of the Court to order winding up was provided by s 364. Nine grounds were specified including, finally, that the Court was of the opinion that it was "just and equitable that the company be wound up".
In the Law as originally enacted, s 462 specified the parties with standing to apply for an order winding up a company. By s 462(2)(e) the ASC was included in certain cases. By s 462(4) in the case of an application by a contingent or prospective creditor, it was enacted that the Court "shall not hear" the application "unless and until" security for costs was given as ordered by the Court and "a prima facie case for winding up the company has been established to the Court's satisfaction". Section 462(5) then provided:
Except as permitted by this section, a person is not entitled to apply for an order to wind up a company.
Part 5.4 of the Law, containing s 459P, was part of the reform of the Law introduced to give effect to the recommendations of the report of the Australian Law Reform Commission [78] . That this is so is clear from the explanatory paper and the Explanatory Memorandum which accompanied enactment of the Corporate Law Reform Bill 1992 Cth [79] . It is permissible to have regard, for the elucidation of ambiguities and uncertainties in the construction of s 459P, to the Australian Law Reform Commission's report and the explanatory documents which accompanied the Bill in its passage through the Parliament. So much was not contested.
The Commission's report proposed a new part of the Act dealing with the winding up of insolvent companies. At the time of the report the NCSC was still functioning. The Law Reform Commission suggested that the NCSC should be one of those parties which could make an application for winding up of a corporation in its insolvency. The report went on to explain the requirement and protection of leave of the court which it proposed [80] . The passage is set out in the reasons of Brennan CJ.
The explanatory paper accompanying the Bill stated [81] :
698 [T]he Court may give leave if satisfied that there is a prima facie case that the company is insolvent but not otherwise.
699 [T]he Court may give leave subject to conditions.
700 [N]o person other than those provided for in the section may apply for a company to be wound up in insolvency.
It is against this legislative background that s 459P became part of the Law. It appears in Pt 5.4 "Winding up in insolvency". Division 4 of that Part is titled "Application for order to wind up company in insolvency". Section 459P appears under the heading "Who may apply for order under section 459A". Its terms are also contained in the reasons of Brennan CJ. I will not repeat them.
The provisions of s 459P(5) are reflected elsewhere in the Law. Thus, s 462(5) is in the same terms, prescribing the standing of parties who may apply for winding up within Pt 5.4A (Winding up by the Court on other grounds). It is in this Part, specifically in s 461 of the Law, that the traditional and familiar grounds for the winding up of a company by the Court are set out. The ASC is amongst those parties which, by s 462(2)(e) of the Law, may make an application under that Part, pursuant to s 464. Section 464 deals with an application for winding up in connection with an investigation under the ASC Law. But there is no provision in Pt 5.4A requiring the Commission or any other party to secure leave. In that sense, the requirements of s 459P, as affecting the ASC, are more stringent. A reference to the Law Reform Commission's report suggests that this additional stringency was deliberate. However, s 461(h) of the Law provides that, amongst the grounds on which a company may be wound up within Pt 5.4A of the Law is the ground that "the Commission has stated in a report that, in its opinion the company cannot pay its debts and should be wound up". There is therefore not a great deal of apparent difference between the potential of an application under Pt 5.4 and an application under Pt 5.4A to damage the reputation of the company and undermine its capacity to trade. Obviously, either application could have serious consequences for the company.
This notwithstanding, the terms of s 459P are clear enough. They are particular to some only of the parties with standing to apply to the Court for a company to be wound up in insolvency. The ASC is one of those parties. Just why it should have to obtain leave where a "prescribed agency" does not is a matter for debate. Nevertheless, the ASC failed to obtain leave in this case. The question is whether that omission was fatal or could be cured, retrospectively, as the Full Court of the Federal Court ordered.
A number of general propositions may be stated which assist in the construction of a provision such as s 459P:
In the former case, upon which the appellants strongly relied in this Court, as in the Full Federal Court, Glass JA (with the concurrence of Moffitt P and Samuels JA) said, writing of the requirement in the Law Reform (Miscellaneous Provisions) Act 1946 NSW, s 6(4), to obtain leave of the Court to commence an action directly against an insurer [93] :
There is no question of strict or substantial compliance. The action is commenced with leave or it is not. If it is commenced without leave, the proceeding is either a complete nullity or else it remains valid irrespective of whether or not leave is subsequently granted or else it continues in a state of suspended validity which will come to an end if leave is not obtained within an unspecified time. I can see nothing to support the attribution of a legislative intention of the two last-mentioned kinds. In my view the legislative intention properly to be garnered from the terms of sub-s (4) and its place in the framework of s 6 is that a failure to obtain the leave of the Court in advance invalidates the action and renders it incapable of being revived by leave retrospectively given. This approach has been followed several times [94] . However it was rejected by a single judge in the Supreme Court of the Australian Capital Territory [95] . It was unanimously disavowed by the Court of Appeal of the Northern Territory [96] . Care must therefore be exercised in the use of analogies drawn from different legislation, having different purposes. The most that a study of these cases will show is that minds can differ in deriving the legislative purpose where Parliament has omitted expressly to provide for a consequence of default in obtaining leave. Even historical patterns must be studied with care. The focus should remain, from first to last, upon the statutory language containing the leave requirement, understood in its context and having regard to its apparent purposes. 1. National Mutual Fire Insurance [1981] 1 NSWLR 400 at 408. 2. See, eg, Spautz v Kirby (1989) 21 NSWLR 27 at 30. 3. Dixon v Royal Insurance Australia Ltd (1991) 105 ACTR 1. 4. Ceric v C E Heath Underwriting & Insurance (Australia) Pty Ltd (1994) 4 NTLR 135. See also Smart v Stuart (1992) 2 NTLR 43 at 47-48.
Before turning to the construction of s 459P and its application to the facts of this case, it is appropriate to note an argument, advanced by the Commonwealth, which, it was said, would circumvent all of the problems before the Court.
It was argued that, where in s 459P it was required that an application (relevantly by the ASC) might only be made with the leave of the Court, that application could be made orally in court. In this case, so it was argued, it was in effect subsumed within the notice of motion for winding up the companies in insolvency. Thus, there had been an application for leave, although not expressly stated. By inference, the application had been granted. It was suggested that policy and other general considerations favoured this view, especially because of the frequent urgency of moving for the appointment of a provisional liquidator, eg where there was a threat that large sums of the company's capital were about to be remitted out of Australia. Upon the footing that a time consuming two-stage process of application for leave and an application for winding up could not have been the purpose of Parliament, it was argued that the procedures could be telescoped. This had occurred in the present case.
I entirely agree that the Law should be construed so as to accommodate urgent ex parte applications in the circumstances stated, which are by no means unusual. There is no reason why the application for leave should not be returned with documentation ready for filing, where necessary in court, the moment leave is granted. But the design of the legislation, and its obvious purpose, suggests that a gateway of leave was required by the Law in the specified cases. The application for leave obliges consideration by the judge of whether the applicant can establish a prima facie case that the company is insolvent. Only then may the application be made to wind up the company. The making of the application can be dated from the moment that the documents are filed at the court registry or, by leave, in court [97] .
In the present case the procedure followed at first instance was not that provided by the Act. What happened was not in accordance with the procedures laid down by the Act. Those procedures were not telescoped. One step was simply not taken. No separate consideration was given to whether the ASC, as a designated applicant, could satisfy the Court that there was "a prima facie case that the company [was] insolvent" as s 459P(3) of the Law required. It is therefore necessary to consider the consequences of that default. The suggestion to the contrary should be rejected.
Both before O'Loughlin J and in the Full Court of the Federal Court, the appellants disclaimed any jurisdictional argument. The disclaimer was continued in this Court. Thus, it was not submitted that the want of the provision of leave deprived the Federal Court of jurisdiction to make the order which it did. Instead, it was asserted, the Federal Court being a superior court of record with large express and implied powers, that the order, having been erroneously made, was voidable: giving rise to an unconditional right to have it set aside on the application of persons, such as the applicants, with an appropriate interest [98] .
In order to demonstrate what I accept to be the strong argument of the appellants, some of the main points should be noticed:
The language of s 459P is unusually emphatic. An application by the ASC for an order to wind up a company in insolvency is permitted. However, it is treated as being in a different and subordinate class, requiring first the grant of leave. There are then three indicia in the section that suggest the requirement of an element of strictness in compliance with the preconditions. The application may " only be made" with the leave of the Court (s 459P(2)). Leave may be granted if it is demonstrated that prima facie the company is insolvent, " but not otherwise " (s 459P(3)). And the strictness is rounded off by the instruction, in the last sub-section, that except as permitted by the section, a person " cannot apply " (s 459P(5)) (emphasis added).
This view of the language of the section receives a measure of reinforcement from the passage in the report of the Law Reform Commission referred to. That report indicates that the drafters were concerned with the possibility of mischievous and damaging applications and the potential which they had to do irreversible damage to the company. Questions might be raised as to the policy behind designating some of the parties with standing as those requiring leave (eg, the ASC) whilst others did not (eg, a creditor or a "prescribed agency"). The differentiation might have arisen from the different interests and functions of the ASC when compared to those parties not requiring leave. The juxtaposition was clearly deliberate. It was expressed in the statute. It binds the courts. In so far as the authorities suggested that the key to discerning the policy of the legislation was to be found in its terms, those terms were, in this case, strongly and repeatedly expressed.
In some cases requirements designated as purely procedural have been treated as "directory" or not such as to deprive a court of jurisdiction or power to make orders. However, where there is default in compliance with their requirements, it is not uncommon for an element of strictness to attach where the leave envisaged is antecedent to the institution of penal proceedings or proceedings affecting the rights and status of parties [99] . In the present case, the commencement of proceedings to wind the company up in insolvency would inevitably have an adverse effect upon a company's capacity to carry on business such that a high degree of strictness could readily be supported [100] .
Unless an approach of strictness is adopted with respect to the requirement of leave before the application may proceed, the prior supervision of the court, which Parliament clearly envisaged in the specified cases, would be illusory. Prior consideration of whether a prima facie case could be established could never adequately be undertaken retrospectively. Effectively, the legislative requirement at the gateway would be lost. Instead, a court would be obliged to consider the matter, as here, entangled in the inevitable inconvenience which would follow a refusal to afford relief nunc pro tunc. Courts should not be put in this position. The default was that of the ASC which, it was argued, might be expected to be aware of legislation governing it and of the pre-conditions specially enacted to control its applications under this Part of the Law. The objection was taken promptly in the notice of appeal. Accordingly, the ASC had been made aware of it virtually from the time of the primary judge's orders. The ASC's failure to conform to deliberately enacted provisions, introducing novel concepts but under specified conditions, should not be condoned.
Whatever the perceived merits of the particular case, it was urged that the Court should declare and uphold the strict construction of s 459P for the good administration of the Law. A "loose" construction of the section, condoning non-compliance with the Law to solve an oversight in a particular case, was less desirable than that a strict construction should be adopted which gave effect to the deliberate introduction of a requirement for leave, to be sought and obtained before the application, not after orders of winding up were made [101] . Only in this way would the Court exercise effective prior, and not illusory retrospective, supervision. Advertisements of the application must be made in the Gazette and in newspapers [102] ; contingent liabilities of the company and of guarantors of the companies' debts are crystallised; security documents typically provide that such applications constitute a contractual default; and creditors coming to know of the application press for their own debts to be paid, scrambling for such advantages as they can secure.
The Full Court did not have the advantage in this case of reference to the then recently decided opinion of this Court in David Grant &emsp Co Pty Ltd v Westpac Banking Corporation [103] . That decision concerned a failure by Victorian companies to comply with statutory demands served on them by a creditor within the twenty-one days provided by the Law, s 459E(2)(c). By s 459G of the Law it is provided that such an application "may only be made within 21 days" of service of the demand. Applications to set aside the demands were filed and served but after the prescribed period. This Court held that s 459G imposed a time requirement as an essential pre-condition to the exercise of the right to have the statutory demand set aside. The requirements of the Law were held to be strict. They could not be supplemented by general remedial provisions, such as s 1322 of the Law. Some of the language expressing the opinion of the Court suggests that conformity to the procedural time limit was a precondition to the jurisdiction of the court from which relief was claimed [104] . However that may be, the approach of this Court was certainly insistent. The provision in question in Grant appears in the same Part of the Law that is in question in this case (Pt 5.4 - Winding up in insolvency). The decision of this Court was there affected by the use in s 459P(2) of the word "only". The same word appears in s 459P(2). The appellants submitted that the word should be given the same strict meaning in this case. In case of default, the same consequences should attach to the ASC which arguably had less reason for failing to comply with the conditions imposed upon it than a company beset with insolvency problems had for the minor default found to have been fatal in Grant. So went the arguments for the appellants.
The arguments are obviously powerful. For a time I was persuaded as to their correctness. However, I have ultimately come to the view that the better opinion is that which found favour in the Full Court of the Federal Court. My reasons are as follows:
Except by leave of the Court and subject to such terms as the Court imposes no action or proceeding in any court shall be proceeded with or commenced against the company until after the meeting or any adjournment thereof or where it is resolved at the meeting that the company be placed under official management until it ceases to be under official management. Notwithstanding that strong provision, and the default on the part of the Attorney-General who had brought the petition in Re Testro Bros , Sholl J concluded that leave could be given retrospectively. It was granted. Clearly, his Honour was affected by virtually a century of legal authority in company law to which he referred. 1. [1965] VR 18.
Equally powerful is the reasoning of McLelland CJ in Eq in Re Sydney Formworks Pty Ltd (In liq) [108] . I remind myself that Sholl J and McLelland CJ in Eq had very great experience in managing the company lists in their respective courts. The provision under consideration in Re Sydney Formworks was s 218 of the Companies Act 1936 NSW. It was similar to the Victorian Act. It provided that "[w]hen a winding-up order has been made, or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the court, and subject to such terms as the court imposes". McLelland CJ in Eq traced the provision to the substantially identical terms of s 87 of the Companies Act 1862 UK. As early as 1866, a case arose with a problem similar to that now before the Court. In Gray v Raper [109] , proceedings were commenced without the grant of leave. The question arose whether the absence of leave could be pleaded in bar for noncompliance with the Companies Act 1862 UK, s 202. The plea was rejected [110] . In Re Sydney Formworks [111] McLelland CJ in Eq explained:
This view is in keeping with what I consider to be the obvious intention of the section, namely, to ensure that the assets of the company in liquidation will be administered in accordance with the provisions of the Companies Act and that no person will get an advantage to which, under those provisions, he is not properly entitled, and to enable the Court effectively to supervise all claims brought against the company which is being wound up. A similar line of authority may be traced in Australian decisions in relation to default in obtaining leave under parallel companies legislation [112] . This was the background to the conflict in Victoria between the decisions of Gillard J in Re Excelsior Textile [113] and of Sholl J in Re Testro Bros [114] . McLelland CJ in Eq in Re Sydney Formworks had no hesitation in following the long line of authority which he and Sholl J had reviewed. He said that this could be done simply by giving leave to the applicant to continue the action or "in terms that the applicant may be at liberty nunc pro tunc to commence the action" [115] . This is the established background of law and practice against which the Law was enacted. 1. [1965] NSWR 646. 2. (1866) LR 1 CP 694. 3. See also In re Wanzer Ltd [1891] 1 Ch D 305; R v Lord Mayor of London; Ex parte Boaler [1893] 2 QB 146; Rendall v Blair (1890) 45 Ch D 139. 4. [1965] NSWR 646 at 649-650. 5. See Thomson v Mulgoa Irrigation Co Ltd (1894) 4 BC (NSW) 33; Murray v United Pacific Transport Pty Ltd and Marnock Gardner [1960] QWN 20; Howe v R M MacDougall Pty Ltd (1939) 13 WCR (NSW) 180. Nunc pro tunc orders were made in the foregoing cases. 6. [1964] VR 574. 7. [1965] VR 18. 8. Re Sydney Formworks [1965] NSWR 646 at 651.
My conclusion obviates the necessity to consider the alternative arguments which were advanced for the ASC, reliant upon the remedial provisions of the Law. Similarly, it is unnecessary to determine the application for special leave to cross-appeal which was filed defensively.
I therefore agree in the orders proposed by Toohey J.
Emanuele
Australian Securities Commission
(1988) 1 WAR 137
(1944) 68 CLR 571
(1946) 74 CLR 461
(1995) 121 FLR 170
(1994) 4 NTLR 135
(1995) 63 FCR 54
(1995) 61 FCR 385
(1995) 184 CLR 265
(1994) 181 CLR 404
(1987) 162 CLR 514
(1987) 9 NSWLR 390
(1989) 21 NSWLR 27
(1990) 171 CLR 1
(1987) 11 NSWLR 404
(1986) 7 NSWLR 560
(1960) 105 CLR 214
(1977) 52 ALJR 218
(1978) 52 ALJR 589
(1995) 39 NSWLR 1
(1993) 177 CLR 541
(1994) 179 CLR 427
(1994) 34 NSWLR 523
(1992) 2 NTLR 43
(1994) 52 FCR 194
(1988) 14 NSWLR 643