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[2002] SASC 314
General information, not legal advice.
Supreme Court of SA
2002-09-20
Perry J
Original judgment source is linked above.
Judgment No. [2002] SASC 314
On Appeal from HIS HONOUR JUDGE BOWEN PAIN, MASTER OF THE SUPREME COURT
PERRY J. This is an appeal by two persons, Catherine Flower ("Ms Flower") and Stephen T. Harvey ("Mr Harvey"), from the dismissal by a Master of applications in which they sought orders discharging orders which had been made by the Master that they appear for examination and produce documents as to the affairs of Normans Wines Ltd (Receivers and Managers Appointed) (In Liquidation) ("Normans Wines").
Normans Wines was placed in liquidation by a resolution of its creditors made on 24 September 2001 pursuant to s 439C(c) of the Corporations Act 2001 (Cth) ("the Act").[1] Anthony Steven Smith and Timothy Paul Burfield, who had previously been administrators of the company, were appointed liquidators.
By a series of applications, the first of which was brought on 13 March 2002, Mr Burfield in his capacity as one of the two liquidators of Normans Wines sought orders directed towards various people for their examination and for the production of documents pursuant to s 596A, s 596B and s 596D(1) of the Act.
Section 596A obliges the court to summon a person for examination "about a corporation's examinable affairs"[2] if an "eligible applicant" applies for the summons, and if the other requirements of s 596A are met.
In s 9 of the Act, "eligible applicant" in relation to a corporation is defined to mean, inter alia:
"(b) A liquidator or provisional liquidator of the corporation:"
The various applications for examination and for the production of documents were supported by an affidavit described in the papers as the "primary affidavit of Timothy Paul Burfield". In accordance with the usual practice of the court, the affidavit was ordered by a Master to be sealed and not to be opened unless by order of the court.[3]
Separately, shorter affidavits were filed, which were not sealed, which set out grounds in support of the order sought with respect to each of the proposed examinees.
According to the reasons for judgment of the Master whose order is now under appeal:
"The primary affidavit of Burfield sets out the results of the liquidators' enquiries to that time and indicates certain transactions and procedures which the liquidators consider need to be further investigated for the potential benefit of the creditors. The individual separate affidavits rely on the primary affidavit and provide a link to the person whom the liquidator seeks to examine."
In two of the various applications which were issued, namely in separate ex parte interlocutory applications both issued on 28 March 2002, Mr Burfield sought orders pursuant to s 596B and s 596D of the Act to examine and require production of documents, as to one application, by the appellant Mr Harvey and as to the other, by the appellant Ms Flower.
In response to the applications, on 3 April 2002 a Master made orders for the examination of and production of documents by each of the appellants.
Subsequently, by separate applications the appellants sought orders that the orders of the Master that each of them be summonsed to appear for examination and to produce documents be set aside, and that the applications seeking the orders be discharged.
As well, leave was sought for Mr Harvey and Ms Flower to be at liberty to inspect the primary affidavit of Mr Burfield.
When the applications came on for hearing before the Master, Mr McNamara QC, who appeared for the appellants, challenged the making of the orders on a number of grounds. As well, he contended that in any event the orders were invalid by reason of the fact that the applications which led to the making of the orders had been brought only in the name of Mr Burfield, rather than in the name of both liquidators.
After hearing argument on that ground as well as upon the other grounds upon which the application was brought, the Master ruled against the appellants and dismissed the applications.
In their notice of appeal from the decision of the Master, the appellants advance eleven grounds.
During the course of the argument presented by Mr Richard White QC, who appeared for the appellants on the hearing of the appeal, I suggested that he confine himself at that stage to one ground, that is, ground 11, on the footing that I would hear both counsel as to that ground first, given that a ruling in favour of the appellants on that ground would determine the appeal.
In the result, I heard both counsel out fully with respect to that ground, and I deferred consideration of the remaining grounds.
"11. The Master erred in finding, notwithstanding section 506 of the Corporations Act, that Mr Burfield alone could exercise the power to seek and obtain the examination orders pursuant to s 596B and s 596D of the Corporations Act."
"506(4) [Several liquidators] When several liquidators are appointed, any power given by this Act may be exercised by such one or more of them as is determined at the time of the appointment, or in default of such determination, by any number not less than two."
"When several liquidators are appointed, every power hereby given may be exercised by such one or more of them as may be determined at the time of their appointment, or in default of such determination by any number not less than two."
"Now, as regards the claim upon the bills, the case stands in a very small compass, and it is this:- According to the Act, liquidators, when they are in the plural number, cannot perform any act except there be two at least engaged in the performance of that act, unless they have authority from the company appointing the liquidators to perform it in any other manner - as, for example, through the medium of one liquidator. Then the 95th section gives power to liquidators to accept bills of exchange which shall bind the company. That power is simply a statutory power; and the liquidators have no power whatever, except by the statute, and of course, therefore, that power must be exercised as the statute directs: that is to say, the liquidators in this case have no power to accept bills, except through the medium of two, at least, of them."
It is true that Page Wood LJ went on to hold that the four liquidators might authorise one other person, such as a clerk or agent, to sign for them. It was that part of the decision which was relied upon by the learned Master from which the present appeal is brought.
But I agree with the criticism of Mr White QC that, with respect, what Page Wood LJ had to say in that respect confuses the authority to do an act on the one hand, with the performance of the act on the other. Insofar as the Corporations Act requires that a power be exercised by no less than two, it is the performance of the act that must be effected by no less than two, not simply the decision to perform the act.
The distinction between the making of a decision to do an act and the execution of it in this context was adverted to in the second London and Mediterranean Bank case, namely In re London and Mediterranean Bank, ex parte Agra and Masterman's Bank.[7]
In that case, the four liquidators of the company passed a resolution that one of them should have power to accept bills of exchange. The court held that acceptances by one liquidator pursuant to the resolution were invalid. James LJ, with whom Mellish LJ relevantly agreed, after referring to the Birmingham Banking Company case, said:[8]
".... there was no actual decision of the Court that the act of one liquidator under any circumstances would be sufficient. It was not necessary to decide the point in that case. I must confess I do not consider it is a decision that the acceptance of the bills can be delegated to one liquidator when the Act of Parliament says that the thing ought to be done by the two. I desire not to preclude myself from expressing an opinion on that point whenever it shall arise. It appears to me strange that where the Act of Parliament provides that a bill of exchange can be accepted by two on behalf of another person, or a body of persons, anything short of the act being done by two persons will suffice."
The matter was considered again in Re Metropolitan Bank v Jones.[9] Two liquidators were appointed to wind up a company. The two liquidators then entered into an agreement for the sale of the assets of the company. A debt secured by a mortgage comprised part of the assets of the company, and a legal assignment of the mortgage security was prepared in order to effect its sale in accordance with the agreement. Before the seal of the company was affixed to the assignment, one of the liquidators died.
The court held that the surviving liquidator had no power to affix the seal of the company.
The judgment of the court was delivered by Jessel MR who said:[10]
"It is said that it is a mere ministerial act to convey the legal estate which remains vested in the old company; and so it is on the part of any one who has authority to use the seal of the company; but the question I have to consider is, whether any one has authority to use the seal. Now it is plain that the company has no power to affix the seal; and sect 133, sub-sect 6, of the Companies Act provides that where more liquidators than one are appointed two at least must act in the absence of any direction to the contrary. Here there is no such direction, and I am therefore of opinion that one liquidator cannot use the seal, and, consequently, that no person is at present authorized to use it. In order to execute a conveyance, a new liquidator must be appointed; and sect 140 of the Act affords a means for doing this."
The next authority cited by Mr White QC is the decision of the Supreme Court of New South Wales in Re Eastern Properties Pty Ltd and the Companies Act.[11] The question which arose in that case was whether or not under the Companies Act 1961 (NSW), liquidators could be appointed as joint and several liquidators. To quote from the judgment of Needham J in that case:[12]
"The ground upon which it is said to be desirable that a joint and several appointment should be made is that 'it is anticipated that (they) will not always be readily available at the one time and place to act jointly."
The relevant section of the New South Wales Companies Act is then cited by Needham J in the following passage:[13]
"Section 232 of the Companies Act 1961 is one of the sections contained in Pt X (Winding Up), Div 2 (Winding up by the Court), subdivision (2) (Liquidators). Subsection (7) provides as follows:
'(7) If more than one liquidator is appointed by the Court, the Court shall declare whether anything by this Act required or authorised to be done by the liquidator is to be done by all or any one or more of the persons appointed.'
The Act requires or authorizes many things to be done by liquidators and it would clearly come within the purview of s 232(7) that the Court could declare that a particular aspect of the responsibilities or powers of the appointed liquidators should be performed by 'any one or more of the persons appointed'. Although the subsection seems to place a duty on the Court in all cases where more than one liquidator is appointed, it has not, so far as I am aware, been the practice of the Court to make such declarations in all cases. Generally speaking, liquidators have a duty to act jointly - cf Re London and Mediterranean Bank; Ex parte Birmingham Banking Co.[14]
It would, no doubt, be assumed, if more than one liquidator were appointed and no declaration made under s 232(7), that the liquidators were to act jointly in all respects." (emphasis added)
Needham J then went on to refer to s 269(3) of the New South Wales Act which was in exactly the same terms as s 506(4) of the Corporations Act (Cth). As for that section, Needham J observed:[15]
"In my opinion, s 269(3) should be construed so as to enable creditors or members, as the case might be (or the court, as Chitty J said), to designate a 'particular matter' or particular matters which could be attended to by a particular number of liquidators. For example, it might be convenient to resolve that cheques could be drawn by any two liquidators; that calls should be made by a certain number, and so on. I do not think that s 269(3) would empower a meeting or the Court to say that every power given to liquidators by the Act could be exercised by any liquidator. It would be strange if it did, as the potentiality would exist for inconsistent exercises of power.
I also am of the opinion that s 232(7) does not empower the Court to say that, where more than one liquidator is appointed, one may act in all of the affairs of the winding up if the other or others are absent. The words of the subsection would not, in my opinion, bear such a construction."
The cases to which I have so far referred lend strong support for the view that where two or more liquidators are appointed, the appointment should be regarded as joint and not several, so that absent any statutory provision to the contrary, liquidators must act together and are unable to authorise any one or more of them to act on behalf of all of them.
In cases to which s 506(4) applies, that principle may be qualified, in the sense that where there are several liquidators, any two or more may exercise any power given by the Act, or, if a determination is made at the time of their appointment, such one or more of them may do so, as may be so determined at that time.
In upholding the competence of Mr Burfield alone to make the applications which were before him, the learned Master whose decision is under appeal referred to the decision of Mansfield J in the Federal Court in Re ACN 007 537 000 Pty Ltd; Ex parte Parker.[16]
In that case, one out of two liquidators of a company applied pursuant to s 511 of the Corporations Law (as it then was) for the determination of certain questions arising in the winding up of the company.
In the course of his decision Mansfield J observed:[17]
"The applicant and Mr Freer are in partnership as accountants and the applicant brings this application on behalf of each of them. In those circumstances, no issue arises as to the appropriateness of the court giving answers to the question sought by reason that only one of two joint liquidators makes the application."
But the decision Ex parte Parker should be distinguished, as earlier in his judgment Mansfield J noted that the applicant and Mr Freer were appointed as joint and several liquidators of the company.[18]
Mr Hoffmann of counsel for Mr Burfield raised an argument which was not put before the Master, which I will deal with now.
This was that given that the introductory words of s 506(4) are "If several liquidators are appointed ...." the section is not of application in the present case, as two liquidators do not amount to "several liquidators". In aid of that submission, he pointed to a number of dictionary definitions of the word "several".
For example, in the 2nd revised edition of the Macquarie Dictionary the following definition appears:
"several adj. 1. being more than two or three, but not many. 2. respective; individual: they went their several ways. 3. separate; different: three several occasions. 4. single; particular. 5. divers; various: the several steps in a process. 6. Law. Binding two or more persons who may be sued separately on a common obligation. -n. 7. several persons or things; a few; some. [ME, from AF, from L separ distinct + -alis - AL]"
Of those definitions, it is the first which is relevant. This defines several as being more than two or three, but not many.
A similar definition appears in a number of other dictionaries and phrase books, although in legal dictionaries the definition is often confined to the other common meaning which the word "several" has, namely "separate" or "distinct".
Of the various meanings attributed to the word in the Shorter Oxford English Dictionary, the following definition is offered:
"4. As a vague numeral: Of an indefinite (but not large) number exceeding two or three; more than two or three but not very many. (The chief current sense.) 1661."
But the Shorter Oxford English Dictionary also offers as a meaning of the word:
"2. ..... b. In legal use: More than one 1531."
Notwithstanding that suggestion, I have not been referred to, nor have I been able to find, any early legal use of the word in which it is taken to mean "more than one".
I do not pause to refer expressly to the other dictionary definitions to which I have had access. In the vast majority, when the word "several" is used in the relevant sense, it is defined as more than two or three, but not very many.
But the question of interpretation of the word in the context of s 506(4) of the Act is not necessarily to be governed by a process of lining up the various dictionary definitions to see how many give it one meaning or another, and what is the most common definition.
The process must always be to give the word its ordinary and natural meaning, in the context in which it appears, provided that this does not give rise to an absurdity. In my opinion, the ordinary and natural meaning, in context, is that to which I have just referred, namely more than two or three, but not very many.
However, to define the word "several" in those terms where it appears in s 506(4), does not necessarily determine the question which I must decide.
If it is accepted that where more than one liquidator is appointed the liquidators should be regarded as joint liquidators, with the consequence that they must act jointly and not severally in the exercise of any powers which may be conferred upon them, the reason why s 506(4) deals only with the situation where "several liquidators" are appointed becomes clear. Absent any determination to the contrary made at the time of their appointment, where three or more liquidators are appointed, any power given by the Act may be exercised by any number not less than two.
If on the other hand, there are two liquidators appointed, and as is ordinarily the case, the appointment is joint, there is no need for the section to deal with that situation, as they must in any event act jointly.
Furthermore, where there is more than one liquidator, if any one or more could be authorised by the other or others to exercise on their behalf any power given by the Act, s 506(4) would be otiose.
The presence of s 506(4) in the Act necessarily presupposes that absent the provisions to be found in the section, any power given by the Act to liquidators would necessarily have to be exercised by all of the liquidators jointly. That view is consistent with cases such as Re Eastern Properties Pty Ltd (supra) in which the court was dealing with a situation in which two liquidators were appointed.
That the matter should be approached in that way seems to me to be consistent with basic legal theory. If by analogy one has regard to a cause of action which in law is vested jointly in two or more people, all must sue to enforce it, unless, if it is capable of being assigned, one or more have assigned the cause of action to others. The parties entitled to the cause of action cannot between them, absent any statutory authority enabling them to do so, authorise one or more of their number to exercise the right to sue on the cause of action.
That, I apprehend, is analogous to the situation where more than one liquidator has been appointed jointly. Absent any express statutory warrant authorising such a course, any power conferred on the liquidators by the Act must be exercised by all of them.
I do not overlook that the definition of "an eligible applicant" in s 9 speaks of "a liquidator or provisional liquidator" (emphasis added). But I agree with the submission of Mr White QC that the definition in s 9 cannot override the substantive provision in s 506(4); expressio unius est exclusio alterius.
In any event, the words in the definition of eligible applicant "a liquidator or provisional liquidator" must be read, having regard to s 23 of the Acts Interpretation Act 1901 (Cth), as including the plural, given that no contrary intention appears.
For these reasons, I hold that Mr Burfield lacked power to bring the applications in question.
The applications should have been dismissed as incompetent.
In those circumstances, it is unnecessary to deal with the other grounds of appeal.
I would allow the appeal and set aside the orders for the examination of the appellants and for the production of documents by them.
[1] The winding up took effect as though the company had passed a special resolution under s 491 of the Act that it be wound up voluntarily: see s 446A(1)(a) and s 446A(2)(a).
[2] The expression "examinable affairs" is defined in s 9 of the Act.
HARVEY AND ANOR
BURFIELD A LIQUIDATOR OF NORMANS WINES LTD No. SCCIV-02-374 [2002] SASC 314