Lunn v Cardiff Coal Co

Supreme Court of NSW|2002-12-20|Before: Barrett J, Mr P

CITATION : Lunn v Cardiff Coal Co [2002] NSWSC 1247 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 5095/02 HEARING DATE(S) : 16/12/02, 20/12/02 JUDGMENT DATE : 20 December 2002

PARTIES : William Herbert Lunn - Plaintiff The Cardiff Coal Company - Defendant JUDGMENT OF : Barrett J

COUNSEL : Mr P A Hewitt, Solicitor - Plaintiff ex parte SOLICITORS : Hewitts Commercial Lawyers - Plaintiff CATCHWORDS : CORPORATIONS - winding up - joint stock company incorporated by statute - whether "Part 5.7 body" - whether winding up order may be made in exercise of court's inherent jurisdiction LEGISLATION CITED : Cardiff Coal Company's Incorporation Act of 1863 Corporations Act 2001 (Cth) Bank of Otago v Commercial Bank of New Zealand (1867) Mac 233 Barton v Bank of New South Wales (1885) 6 NSWLR Eq 82 Clements v Bowes (1852) 21 LJ Ch 306 Droop v Bank of Australasia (1881) 6 VLR Eq 228 Edith Cowan University v Edith Cowan University Student Guild [1999] WASC 35 CASES CITED : Harrison v Smith (1869) 6 WW&a'B 182 Re The Herne Bay Pier Company (1848) 18 LJ Ch 71 Hubbard Association of Scientologists International v Attorney General for the State of Victoria [1976] VR 119 Re Kalblue Pty Ltd (1994) 12 ACLC 1,057 National Bank of Australasia v Cherry (1870) LR 3 PC 299 Western Interstate Pty Ltd v Deputy Commissioner of Taxation (1995) 13 WAR 479 DECISION : Winding up order refused

13 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

1 By his originating process filed 15 October 2002, the plaintiff, Mr Lunn, seeks an order for the winding up of the Cardiff Coal Company which I shall, for convenience, call "CCC". 2 CCC was incorporated by an Act of the Parliament of New South Wales 27 Victoria assented to on 30 December 1863 which, by its s.16, may be cited as the "Cardiff Coal Company's Incorporation Act of 1863". The Act caused the proprietors for the time being and from time to time of shares in the capital of a joint stock company formed by deed of settlement made on 1 October 1862 to be "one body politic and corporate in name and in deed by the name of the Cardiff Coal Company", with power to sue and be sued and other powers typically possessed by bodies corporate. 3 As I noted when this matter first came before me, CCC is thus one of the last survivors of the species of private trading corporation created in New South Wales before the advent of a general statute dealing with the incorporation of companies by registration, being the Companies Act 1874. It has outlived by a few months, in that form, the similarly constituted body created by the Bank of New South Wales Act of 1850 which earlier this year became, with the assistance of the Westpac Banking Corporation (Transfer of Incorporation) Act 2000, a company registered as such under the Corporations Act 2001 (Cth). Aspects of incorporating and enabling statutes of colonial legislatures similar to the Cardiff Coal Company's Incorporation Act of 1863 were considered by the Privy Council (National Bank of Australasia v Cherry (1870) LR 3 PC 299), courts of the Australian colonies (eg, Harrison v Smith (1869) 6 WW&a'B 182, Droop v Bank of Australasia (1881) 6 VLR Eq 228, Barton v Bank of New South Wales (1885) 6 NSWLR Eq 82) and the Supreme Court of New Zealand (Bank of Otago v Commercial Bank of New Zealand (1867) Mac 233). 4 The share register of CCC was produced to the court. Mr Lunn is recorded therein as the proprietor of 100 promoters shares in the company's capital in consequence of an order for rectification made by this court in proceedings to which I am about to refer. Under s.15 of the Act of 1863, the register constitutes prima facie evidence of the matters recorded in it. I therefore accept without further inquiry that Mr Lunn is a member of the corporation created by the Act. Indeed, it appears that Mr Lunn is the only member who can be traced. 5 The main relief sought by Mr Lunn as a member of CCC is an order for its winding up. The company has, for many years, been dormant. As a result of proceedings instituted in 1989, orders were made in 1996 for the appointment of a receiver of the property of CCC. This occurred in circumstances where it appeared that, in or about 1917, persons best described as interlopers had, through forged transfers, ostensibly come to hold shares and they or their successors had also purportedly been appointed directors. Under CCC's deed of settlement, only proprietors of shares may be appointed as directors. As a result of the proceedings to which I have referred, it was established that there were, in reality, no directors validly in office. As a consequence, Hulme J, by order made on 6 September 1996, appointed Mr A E Lewis of Ferrier Hodgson, Newcastle, to be receiver. Mr Lewis continues in that office and, when these proceedings came before me on Monday last, I made, on Mr Lunn's application, an order approving the receiver's remuneration for the period 1 July 1998 to 30 June 2002 in the sum of $23,119.10. 6 It is important to record that CCC has assets. In consequence of the sale of land in 1992, it continues to hold a considerable sum of money. The appointment of a receiver in 1996 was no doubt made by reference to a need to ensure that, in the absence of validly appointed directors, those assets were not left without appropriate custody and protection. In its present inactive state, without directors and, it appears, without any prospect at all of returning to the mainstream of corporate life, it may be accepted that a case has been made out for the winding up of CCC on the ground that it is just and equitable that it be wound up, assuming that it is open to the court to make an order for winding up. 7 It is necessary to identify the jurisdiction the court is being asked to exercise in making such an order. The main contention initially advanced on behalf of Mr Lunn was that appropriate jurisdiction is conferred by s.583 of the Corporations Act 2001 (Cth) on the footing that CCC is a "Part 5.7 body" amenable to being wound up by order made under that section. In fact, the first relief Mr Lunn sought, as a preliminary to the making of a winding up order, was a declaration that CCC is a "Part 5.7 body". 8 When I considered this question briefly on Monday last, it seemed to me that there were obstacles in the way of concluding that CCC is a "Part 5.7 body". I therefore adjourned the proceedings so that further submissions might be prepared. The application for the declaration as to "Part 5.7 body" status is no longer pressed, but it is appropriate that I nevertheless record the outcome of my further consideration of the matter. 9 The expression "Part 5.7 body" is defined by s.9 as follows: 'Part 5.7 body ' means: (a) a registrable body that is a registrable Australian body and: (i) is registered under Division 1 of Part 5B.2; or (ii) is not registered under that Division but carries on business in this jurisdiction and outside its place of origin; or (b) a registrable body that is a foreign company and: (i) is registered under Division 2 of Part 5B.2; or (ii) is not registered under that Division but carries on business in Australia; or (c) a partnership, association or other body (whether a body corporate or not) that consists of more than 5 members and that is not a registrable body. 10 Because CCC is not, on any view, a "foreign company" (having regard to the s.9 definition of that term and the geographical specifications within it), attention may be confined to paras (a) and (c) of the definition of "Part 5.7 body". The meaning of each of those paragraphs depends on other s.9 definitions. I set out the main definitions of relevance in alphabetical order: "' Capital Territory ' means the Australian Capital Territory and the Jervis Bay Territory.

'company' means a company registered under this Act and: (a) in Chapter 2K (other than sections 273A to 273E), includes a registrable body that is registered under Division 1 or 2 of Part 5B.2 of this Act; and (b) in sections 273A to 273E, includes a registered body that carries on business outside its place of origin; and (c) in Parts 5.7B and 5.8 (except sections 595 and 596), includes a Part 5.7 body; and (d) in Part 5B.1, includes an unincorporated registrable body.

' place of origin ': (a) in relation to a body corporate at a particular time, means: (i) in the case of a body incorporated at that time in a State or Territory---that State or Territory; or (ii) otherwise---the place of the body's incorporation at that time; or (b) in relation to an unincorporated body---the State or Territory, or other place, in which the body is formed. ' referring State ' has the meaning given by section 4. ' registrable Australian body' means: (a) a body corporate, not being: (i) a company; or (ii) an exempt public authority; or (iii) a corporation sole; or (b) an unincorporated body that, under the law of its place of formation: (i) may sue or be sued; or (ii) may hold property; in the name of its secretary or of an officer of the body duly appointed for that purpose; but does not include a foreign company. ' registrable body ' means a registrable Australian body or a foreign company.

' this jurisdiction ' means the geographical area that consists of: (a) each referring State (including its coastal sea); and (b) the Capital Territory (including the coastal sea of the Jervis Bay Territory); and (c) the Northern Territory (including its coastal sea); and (d) also, for the purposes of the application of a provision of Chapter 7 or an associated provision (as defined in section 5)---any external Territory in which the provision applies because of subsection 5(9) (but only to the extent provided for in that subsection). " 11 Given CCC's creation as a corporation by the 1863 enactment of the Parliament of New South Wales, its "place of origin", as defined by s.9, is New South Wales. 12 The term "referring State" takes its meaning from s.4. Having regard to the existence and operation of the Corporations (Commonwealth Powers) Act 2001 of the Parliament of this State, New South Wales is a "referring State" for the purposes of the Corporations Act 2001 (Cth). 13 In determining whether CCC is a "registrable Australian body", paragraph (b) of the definition of that term may be ignored since the effect of the Act of 1863 is to cause the fluctuating body of persons with which it is concerned to be incorporated. This is the effect of the statutory designation of that body as "one body politic and corporate". Paragraph (a) of the definition of "registrable Australian body" is satisfied, to the extent that CCC is, for the reason just stated, "a body corporate", the s.9 definition of that term being irrelevant for present purposes. It is therefore necessary to consider whether it is within any of the excluding subparagraphs (i), (ii) and (iii) of that paragraph (a). 14 Subparagraph (i) refers to "a company". The only relevant part of the s.9 definition of "company" is that referring to "a company registered under this Act", that is, a body registered as a company under s.118 (which accordingly owes its existence as a body corporate to s.119), a body registered as a company under Part 5B.1 or a body deemed by Division 2 of Part 10.1 to be registered as a company. No such registration or deemed registration exists in relation to CCC. Its existence as a body corporate derives solely from the Act of 1863. 15 Subparagraph (ii) of paragraph (a) of the definition of "registrable Australian body" refers to an "exempt public authority". Having regard to the s.9 definition of that term, there is no basis on which CCC can be regarded as an "exempt public authority". Subparagraph (iii) refers to a "corporation sole", that is, an incorporated succession of single persons: Hubbard Association of Scientologists International v Attorney General for the State of Victoria [1976] VR 119. CCC is not of that description. 16 With none of subparagraphs (i) to (iii) of paragraph (a) of the definition of "registrable Australian body" applying and CCC being, as already mentioned, a "body corporate" but not being a "foreign company", it is a "registrable Australian body". Every "registrable Australian body" is within the s.9 definition of "registrable body". CCC is accordingly a "registrable body". 17 From that point, I return to the definition of "Part 5.7 body". CCC's status as both a "registrable body" and a "registrable Australian body" means that it is within that part of the paragraph (a) definition of "Part 5.7 body" that precedes subparagraphs (i) and (ii). The fact that it is not a "foreign company" means that it cannot be within paragraph (b) of the definition. The fact that it is a "registrable body" means that it cannot be within paragraph (c). It is therefore necessary to pursue the questions posed by subparagraphs (i) and (ii) of paragraph (a). 18 Subparagraph (i) of paragraph (a) refers to being registered under Division 2 of Part 5B.2. The requirement for registration under that division arises by virtue of s.601CA: "A registrable Australian body must not carry on business in a State or Territory in this jurisdiction unless: (a) that State or Territory is its place of origin; or (b) it has its head office or principal place of business in that State or Territory; or (c) it is registered under this Division; or (d) it has applied to be so registered and the application has not been dealt with. " 19 The effect of s.601CA is that, in the absence of registration under Division 2 of Part 5B.2, a registrable Australian body is precluded from carrying on business within a constituent State or Territory of "this jurisdiction" (that is, the "referring States" plus the "Capital Territory and the Northern Territory") unless that constituent State or Territory is its "place of origin" (that is, it owes its existence to the law of that State or Territory) or it has its head office or principal place of business in that State or Territory. It follows that a corporation that is a registrable Australian body does not need this form of registration if it carries on business only in the State or Territory of its incorporation (that is, its "place of origin") and its head office or principal place of business is situated in that State or Territory. CCC's "place of origin" (and the location of any office or place of business is situated) is New South Wales. Registration under Division 2 of Part 5B.2 would therefore be necessary only if it wished to carry on business in some part of "this jurisdiction" outside New South Wales. In its present state of inactivity, CCC presumably has no such wish. There is, in any event, no evidence (or suggestion) that any such registration has ever been effected, whether directly under the provisions of Division 2 of Part 5B.2 or under any corresponding previous provisions such as those in Division 1 of Part 4.1 of the Corporations Laws of the various States and Territories in the form in which they came into operation on 1 January 1991. 20 Because CCC is not registered under Division 2 of Part 5B.2 of the Corporations Act 2001 (Cth), it becomes necessary to address the question posed by subparagraph (ii) of paragraph (a) of the definition of "Part 5.7 body" in that event, namely, whether CCC "carries on business in this jurisdiction and outside its place of origin". 21 There is a threshold question here as to whether CCC is properly regarded as carrying on business at all. On the whole and in light of the specifications in s.21, the better view must be that, as it has assets which are apparently being administered by the receiver, it does carry on business. But even then there is no suggestion in the evidence that it carries on business anywhere beyond New South Wales. Activities within New South Wales that amount to the carrying on of business for the purposes of s.21 are engaged in within "this jurisdiction" (the meaning of which has already been noted). But, returning to the closing words of subparagraph (ii) of paragraph (a) of the definition of "Part 5.7 body", CCC cannot on any basis be said to carry on business "outside its place of origin" (being New South Wales). That factor causes it to fail the final test for inclusion in the only potentially applicable part of the definition of "Part 5.7 body". 22 The conclusion must therefore be that CCC is not a "Part 5.7 body" for the purposes of the Corporations Act 2001 (Cth). It follows that s.583 cannot be invoked as a basis for the making of a winding up order by the court in relation to CCC. 23 Lest it be thought that this result is somehow unintended or perverse, I should say that, since the inception of the Corporations Law regime on 1 January 1991, bodies incorporated by State or Territory law outside the mainstream of corporations legislation have not, in general, been capable of being wound up under the general corporations legislation if their activities and presence have been confined to the home jurisdiction. Such a body was classified under the Corporations Law of the place of its formation as a "registrable local body" and, because of that status, was expressly excluded from that Corporations Law's definition of "Part 5.7 body" (a point that seems to me, with respect, not to have been recognised in Edith Cowan University v Edith Cowan University Student Guild [1999] WASC 35), although it might, depending on factors to do with registration and carrying on of business, have been within the "Part 5.7 body" definition in the Corporations Law of some other State or Territory. The Corporations Act 2001 (Cth), like the several Corporations Laws before it, does not seek to provide for the winding up of such State and Territory bodies territorially confined to their jurisdiction of origin. 24 This position contrasts with that which existed under earlier legislation. Before 1 January 1991, provision was made in s.470 of the Companies (New South Wales) Code for the winding up of any body (whether incorporated or unincorporated) having more than five members, regardless of territorial factors. This was the general pattern in New South Wales for over a century from 1874 until the adoption in 1991 of the Corporations Law scheme with its "registrable local body" exception to which I have referred. 25 No other provision of the Corporations Act 2001 (Cth) (by which I mean a provision other than s.583) confers upon this or any other "Court" (as defined by the Act) jurisdiction to make a winding up order in respect of CCC. The other provisions giving the "Court" power to order winding up are ss.233, 459A, 459B and 461. In each case, the winding up jurisdiction is exercisable only in relation to a "company". For each such purpose, the primary meaning given to "company" by s.9 is the only applicable meaning. For reasons already stated, CCC is not such a "company". In theory, CCC might become a "company" by registration under Part 5B.1, although in its present state there may be serious obstacles, not the least of them being the apparent absence of any provision of the law of New South Wales satisfying the requirement referred to in s.601BC(8)(d). 26 It was submitted on behalf of the plaintiff that a court of equity may, in the exercise of its inherent jurisdiction, wind up or dissolve corporations. I do not think that this is so. Exercising general equitable jurisdiction now reflected in provisions of the Partnership Act, the court might order dissolution of an unincorporated joint stock company (which is really no more than a fluctuating partnership) and therefore precipitate a winding up of its affairs. The availability of that equitable jurisdiction in relation to an unincorporated joint stock company even after the enactment of the original winding up acts of the 1840s was recognised in Clements v Bowes (1852) 21 LJ Ch 306. In such a case, the court intervenes to dissolve the bond that the parties themselves have created. But once Parliament has caused such a company or body of proprietors to be incorporated as "one body politic and corporate", a new and separate bond is superimposed by the legislature and it is for the legislature alone to provide the means of putting an end to the perpetual succession it thereby creates. 27 I adopt, in this respect, the succinct statement at page 610 of the fifth edition (1891) of Sir Nathaniel Lindley's "Treatise on the Law of Companies": "[A] company which is incorporated by act of Parliament can be dissolved only as therein provided, or by another act of Parliament."

To the same effect is the statement by Charles Wordsworth in the sixth edition (1851) of "The Law of Railway, Banking and Other Joint Stock Companies": "The perfect form of incorporation … given by Royal Charter or act of Parliament, involves a character of perpetuity, to destroy which would appear to amount to overruling the Royal Prerogative, or to repealing an act of Parliament."

It is no doubt for this reason that modern statutes by which the Parliament of New South Wales creates, for special non-public purposes, corporations that are not Part 5.7 bodies typically contain provisions of their own as to winding up. Examples are s.16 of the Garvan Institute of Medical Research Act 1984 and s.31 of the National Trust of Australia (New South Wales) Act 1990. 28 Unless some statutory warrant is found for the making of an order directed towards dissolution or winding up of a body incorporated by Act of Parliament, the court may not make the order. As Knight Bruce VC observed in Re The Herne Bay Pier Company (1848) 18 LJ Ch 71 in relation to one of the original winding up Acts, any statutory jurisdiction to order winding up must not be exercised except in relation to bodies "clearly and beyond all doubt coming within the meaning of that statute". 29 Mr Hewitt, who appeared for Mr Lunn, submitted that the decision of Young J in Re Kalblue Pty Ltd (1994) 12 ACLC 1,057 supports the proposition that resort may usefully be had to the court's inherent jurisdiction in this case. Young J there had before him an application for the making of a winding up order under the Corporations Law in respect of a company clearly amenable to winding up under that enactment. The factor that caused his Honour to resort to what he considered to be the court's inherent jurisdiction was the absence from the proceedings of an applicant within any of the classes of competent applicants specified in the Corporations Law. It was in that context that Young J referred to the existence, before the advent of any winding up statute, of the jurisdiction of the Court of Chancery to wind up companies - being the dissolution jurisdiction also pre-dating the Partnership Act to which I have already referred. 30 Young J did not purport to order the winding up of a body not within any of the classes in respect of which legislation enabled the court to make such an order. He did no more than to make an order of the kind clearly envisaged by the legislation in respect of a body squarely within its contemplation, even though the order had not been sought by anyone competent under the legislation to seek it. Whether or not that decision is correct (and I note that it was not followed in Western Interstate Pty Ltd v Deputy Commissioner of Taxation (1995) 13 WAR 479), it has no bearing on the present case. 31 I should interpolate here that Mr Hewitt also referred to a provision of CCC's deed of settlement allowing the company to be dissolved by a procedure involving a resolution passed by members. A deed of settlement provision to that effect may well have contractual force among the members as a means of bringing their association to an end. The status the deed of settlement later attained as the by-laws of the corporation (s.2 of the Act of 1863) gave its provisions added force as among the members. But even if the by-laws of a private trading corporation created by statute could confer jurisdiction on this court (which I do not think they could), there is nothing in the relevant deed provision that purports to enable the court to order dissolution. 32 The court's inherent jurisdiction, while broad, is not unlimited. In particular, it does not permit the court to do things which, expressly or by necessary implication, Parliament has precluded. For that reason, I consider that, in the absence of a demonstrated statutory basis for doing so, it is not open to the court, by an order directing winding up or dissolution, to purport to countermand Parliament's statement that a particular body of persons is (and is to be) "one body politic and corporate". 33 Conscious as I am that this outcome is unsatisfactory for Mr Lunn as apparently the sole traceable member of a corporation in respect of which a case for winding up on the just and equitable ground has been shown, I regret that no winding up order can be made. The balance of the originating process filed on 15 October 2002 must be dismissed. **********

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