Lunn v Cardiff Coal Co

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

1 On 20 December 2002, I dismissed an application by the plaintiff for an order for the winding up of the Cardiff Coal Company the proprietors of shares in which from time to time were, by the Cardiff Coal Company's Incorporation Act of 1863, made "one body politic and corporate": see Lunn v The Cardiff Coal Company [2002] NSWSC 1247. 2 Subsequently, on 4 February 2003, Mr Hewitt, who again appeared for the plaintiff, filed in court, by leave, a notice of motion under Part 40 rule 9(1) of the Supreme Court Rules by which the plaintiff sought to have the judgment of 20 December 2002 set aside. I directed that the notice of motion be returnable instanter, heard the application and reserved my decision. 3 The plaintiff's application was advanced on the footing that the original decision was affected by an obvious error of law of such a kind that it is open to the trial judge to correct the position and necessary that he do so. In Wentworth v Rogers [2002] NSWSC 921, I had occasion to consider the authorities concerning re-opening after judgment and said: "It seems to me that the relevant principles, as they apply in a case such as the present, can be summarised in one basic proposition, namely, that a single judge whose decision is susceptible to appeal through readily available channels (with or without any preliminary need for leave to appeal) should allow re-opening after judgment where it is obvious to that judge that the decision has miscarried and that the miscarriage may be rectified and the situation retrieved by attention to the matter by that judge rather than by an appeal court. What is highly undesirable is that the first instance judge should be cast in the role of hearing what amounts to an appeal against his or her own decision. I adopt, in that connection, the following observation of Rix LJ in Compagnie Noga D'Importation et D'Exportation SA v Abacha [2001] 3 All ER 513: 'I do not wish to say anything against the usefulness of the reconsideration jurisdiction, within its proper limits. I have made use of it myself. However, it is in the nature of the legal process that, once judgment has been rendered, analysis thereafter becomes clarified and refined, and citation of authority is applied to the findings made at first instance so as to illuminate that clarification and refinement of analysis of which I speak. But that is the function of the appeal process. In my judgment, to grant this application that I reconsider my judgment would subvert the appeal process itself. In doing so, it would not answer the interests of justice, but would be the antithesis of justice according to law. There are of course cases where an error of fact or law may be too clear for argument. The best test of that is perhaps - but not necessarily - where the judge himself identifies the error which concerns him. In such a case, it is better that the error is corrected without imposing on the parties the need for an appeal. But no parallel to Noga's application has been cited to me. It is in my judgment wrong for a judge to be treated to an exposition such as would be presented to a court of appeal. If in such circumstances a judge should be tempted to open up reconsideration of his judgment, an appeal would not be avoided, it would be made inevitable. Every case would become subject to an unending process of reconsideration, followed by appeal, both on the issue of reconsideration and on the merits.'" 4 I must therefore decide on the present application whether the judgment of 20 December 2002 was affected by an error of law "too clear for argument" so that, in the words of Rix LJ in Compagnie Noga D'Importation et D'Exportation SA v Abacha [2001] 3 All ER 513, "it is better that the error is corrected without imposing on the parties the need for an appeal". 5 The aspect of the judgment of 20 December 2002 exhibiting such an error of law is, in Mr Hewitt's submission, that dealing with the question whether the court's inherent jurisdiction enables it to make an order for the dissolution or winding up of a body corporate created by Act of Parliament, in circumstances where neither the incorporating Act nor any other statute for the time being in force contemplates the making of such an order in relation to that body corporate. At paragraphs 26 to 30 of the judgment of 20 December 2002, I held that such an order could not be made in exercise of the court's inherent jurisdiction and gave reasons for so holding. 6 It is now submitted on behalf of the plaintiff that that conclusion is wrong as a matter of law in such a way as to warrant exercise of the jurisdiction to re-open after judgment. That contention was advanced by means of written submissions supplemented orally on 4 February 2003. Mr Hewitt obviously devoted considerable time and effort to the preparation of the written submissions. So that I may be sure to do them justice, I set them out in full: " Inherent jurisdiction of the court

1. 'The inherent jurisdiction has positive and negative aspects, depending on whether judicial powers are being invoked to facilitate the proper conduct of legal proceedings or to overcome practices or devices which tend to delay, impede or frustrate judicial functioning. The mere fact that some statute or rule of court enables a court to deal with the particular problem in a particular way will not usually exclude inherent powers to deal with it in other ways. Indeed, this jurisdiction may be asserted even though the conduct complained of may be in literal compliance with some statute or rule of court.' The Inherent Jurisdiction of the Court Keith Mason ALJ Vol. 57 August 1983 pp449.

2. '"Inherent jurisdiction" is the power which a court has simply because it is a court of a particular description….Inherent jurisdiction is not something derived by implication from statutory provisions conferring particular jurisdiction; if such a provision is to be considered as conferring more than is actually expressed that further jurisdiction is conferred by implication according to accepted standards of statutory construction and it would be inaccurate to describe it as "inherent jurisdiction", which as the name indicates, requires no authorizing provision.' The Queen v Forbes; Ex parte Bevan (1972) 127 CLR 1.

3. 'In Cameron v Cole Rich J. said (22) (1944) 68 CLR571, at 589: "in the absence of clear words, a statute should not be treated as depriving a court of the inherent jurisdiction possessed by every court to ensure that trials before it are conducted in accordance with the principles of natural justice". Given that superior courts are possessed of inherent jurisdiction and inherent powers because they are necessary in the interests of justice (23) Cocker v Tempest (1841) 7 M and W. 502, at pp503-504 151 ER 864, at p 865; Jackson v Sterling Industries Ltd. (1987) 162 CLR 612, at pp638-639; Hamilton v Oades (1989) 166 CLR, at p502, that statement necessarily applies to every aspect of that jurisdiction and those powers.' Wentworth v New South Wales Bar Association (1992) 176 CLR 2 Deane, Dawson, Toohey and Gaudron JJ.

4. Contrast 'However, with the greatest respect, a judge cannot dispense with the requirements of the Rules of Court unless the Rules give him the power to do so, and when a power is expressly conferred on the court subject to a condition, a judge cannot, by relying on inherent powers, escape from the necessity of ensuring that the condition has been fulfilled' Doyle & Ors v The Commonwealth of Australia & Anor (1985) 156 CLR 510. In the instant case there are no conditions precedent imposed on the Court before it exercises its inherent jurisdiction, there being no express preclusion by any relevant legislation.

Has Parliament expressly or by necessary implication precluded the court's inherent jurisdiction ?

As is acknowledged legislation to facilitate incorporation and to regulate the operation of joint stock companies (as the Cardiff Coal Company was) arose out of the needs of the growing commercial community of the 19th century. The Parliament of New South Wales, in 1863, when it passed the Cardiff Coal Company's Incorporation Act ('the CCC Act') could not have turned its mind to current company law, there being no general legislation covering the winding up of companies at the date of incorporation of the Cardiff Coal Company ('CCC') in New South Wales. In England and Ireland there had been enacted Joint Stock Companies Winding Up Act (1848), Joint Stock Companies Amendment Act (1848) and Joint Stock Companies Winding Up Act (1857) which states at part V 8. 'Or if any other Matter or Thing shall be shown which in the Opinion of the Court shall render it just and equitable that the Company should be dissolved'.

Those acts recognised or reflected part of the common law before its codification but not exclusion in the Companies Act of 1862, such common law also applying to partnerships.

The Recitals to the CCC Act disclose only that "the said company is desirous of being incorporated and it is expedient that the said company should be incorporated." It cannot have been the intention of the Legislature in 1863 to preclude the common law right to a just and equitable winding up. It turned its mind to the particular question of winding up by the inclusion of paragraph 2 (confirmation of the deed of settlement) and requiring the then members and subsequent members to be struck with the bargain contained in the terms of the deed of settlement, subject to equitable principles, but not to the general question of any other circumstance where it might be appropriate to seek a winding up of the CCC.

It cannot have contemplated winding up under other legislation as such legislation did not then exist.

The statement by Charles Wordsworth in the sixth edition (1851) referred in Your Honour's judgment of 20 December must be viewed as being made prior to the first Companies Act of 1862. Likewise the observation of Knight Bruce VC in Re The Herne Bay Pier Company is made prior to 1862 and the English parliament recognising that a separate law or laws needed to be developed to control companies. In contrast, Sir Nathaniel Lindley's statement in "Treatise on the Law of Companies" recognises these developments by the inclusion of the words "or by another act of Parliament." The development of company law between 1848 and 1891 can be seen by virtue of the fact that 18 separate acts of Parliament were passed in England between the Joint Stock Company Winding Up Act of 1848 and the Companies Act 1886.

The effect of these acts is to impose laws to regulate the actions of directors and companies. Likewise, in New South Wales, the position was:

1. Inherent jurisdiction to wind up companies under the general equitable jurisdiction of the Court of Chancery; 2. Deed of Settlement dated 1 October 1862 brings CCC into existence as a Joint Stock Company.

1. Cardiff Coal Company incorporated pursuant to the Cardiff Coal Company's Incorporation Act of 1863; 2. That Act does not specifically exclude any rights arising under the 'jurisdiction of the Court of Chancery to wind up companies' either expressly or by necessary implication; 3. The CCC, under paragraph 1 has perpetual succession, but this is subject to the company being dissolved by operation of law (see Dartmouth College v Woodward NH , 17 U.S. 518 (1819) where Chief Justice Marshall describes a company as being: 'A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence.' 4. Paragraph 2 of the Act confirms the Deed of Settlement as the 'several laws rules regulations clauses and agreements in the said deed" as the by-laws of the CCC as between the members. It also states that "no rule or by-law shall on any account or pretence whatsoever be made by the said corporation either under or by virtue of the said deed of settlement or of this Act in opposition to the general scope or true intent and meaning of this Act or of any of the laws or statutes in force for the time being in the said Colony.'

1. Section 131 of the 1874 Act appears to codify the previous general law inherent jurisdiction, including, inter alia, 'Whenever the Court is of opinion that it is just and equitable that the company should be wound up', but does not appear to have excluded the general law principles either expressly or by necessary implication as it did not set out definitively those circumstances where it would be 'just and equitable'. This must be for the very reason that the Parliament recognised that it would be inappropriate to attempt to define all of the circumstances justifying a 'just and equitable' winding up; 2. Section 133 of the 1874 Act defines the Court as being 'the Supreme Court in its equity jurisdiction'; 3. Section 135 of the 1874 Act qualifies those contributories that may present a petition to the Court for a winding up of a company; 4. The effect of section 135 must be to read down paragraphs 108 and 114 of the Deed of Settlement as between the members so that even if a member qualified under paragraph 114 but did not meet the requirements of section 135, the position must be that the member would need to meet the requirements of section 135 to present a petition to the Court for a winding up of the Company.

1. Section 206 of this Act provides 'The Court shall have jurisdiction to wind up any company.' (my underlining) 2. Section 208 provides, inter alia, 'A company may be wound up by the court if- (f) the court is of opinion that it is just and equitable that the company should be wound up.'

1. The position remains unchanged in that section 222 (1) (h) is in the same terms as section 208(f) of the 1936 Act. Again there is no specific exclusion of the general law principles relating to a just and equitable winding up either expressly or by necessary implication.

1. The position changes after the introduction of the current legislative scheme in that under the now section 462(5) of the then Law and now Act, there is a qualification imposed: 'Except as permitted by this section, a person is not entitled to apply for an order to wind up a company'. 2. This must be seen as an express ouster of the inherent jurisdiction the Court had to order the winding up of a company on the presentation by any person of a petition that it is just and equitable to allow that person to present that petition, see Western Interstate Pty Ltd v DFC of T (1996) 14 ACLC 219. 3. The position now under section 462(5) of the Corporations Act is a clear example of the development of law relating to companies. A further example is the exclusion of a company like the CCC from the jurisdiction of the Corporations Act leaving it susceptible to only the Act which created it and the general law, a law which has developed further since the passing of the CCC Act. The inherent jurisdiction of the Court to wind up companies on a just and equitable basis having not been excluded or ousted in relation to the CCC should now be available to fill 'the gap' into which the CCC appears to have fallen.

Can the Cardiff Coal Company's Incorporation Act 1863 exclude the common law just and equitable basis for a winding up ?

1. Prima facie, there is nothing in the Act which precludes, either expressly or by necessary implication, the just and equitable basis for winding up the CCC; 2. 'legislative intent must, of course, be found in the provisions of the statute - including its subject matter and disclosed purpose and policy - when construed in a context which includes permissible extrinsic aids' Bropho v Western Australia (1990) 171CLR 1 F.C. 90/027. 3. Your Honour notes at point 26 in Your Judgment of 20 December 2002 that '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'. 4. But, post the CCC Act the legislature clearly thought that a regime should be introduced to govern the winding up of companies, hence the various Companies Acts. Even if the intent of the CCC Act was to lay out the complete basis upon which the CCC could be wound up, and such is not admitted, that intent must 'necessarily give way to the provisions of a subsequent enactment which, notwithstanding the earlier provision, disclosed a contrary legislative intent since the subsequent enactment would represent a pro tanto repeal or amendment of the earlier provision'. Bropho v Western Australia (1990) 171CLR 1 F.C. 90/027. 5. The imposition of various Companies Acts are examples of this concept at work and is what was recognised by Lindley in his work of 1891. 6. The legislating of section 206(1) in the 1936 Act is also evidence that the legislature has recognised that holes may have occurred over the intervening years when companies have previously been brought into existence by legislation and that legislation did not provide a means to bring about the dissolution of the company if appropriate. 7. As His Honour Brennan J says in Bropho : 'if it be right to look at all the relevant circumstances to determine what the intention ought fairly be imputed to the legislature when it enacts a statute in the future, equally it must be right to look at all the relevant circumstances when interpreting a statute enacted in the past'. 8. It is not unreasonable to draw the conclusion that the legislature, when enacting the CCC Act did not even turn its mind to the dissolution of the CCC other than in terms of paragraphs 108 to 114, ie dissolution agreed between the members, there being no legislation in place New South Wales covering the dissolution of companies generally; 9. To come at the problem from the opposite angle, the introduction of section 462(5) in the Corporations Act is an example of where the legislature has sought to define exclusively those persons entitled to approach the Court to seek the winding up of a company to which the Corporations Act applies. An example of the refining of legislation over a period of time but which itself may well be refined further in the event of future developments in company law; 10. It is the Applicant's submission that nothing in the CCC Act either expressly or by necessary implication precludes the general right of the just and equitable basis for winding up the CCC.

Does your Honour have the power to order a winding up of the CCC ?

1. If it is Your Honour's belief that there is no express power available to you under the CCC Act to wind up the CCC and therefore no legislative basis to do so, notwithstanding the general law power, then it is the Applicant's submission that the correct view is that set out in Re: Landsal Pty Ltd (in liquidation); W.A. Reid Constructions Pty Ltd (in liquidation) No. S G53of 1992 Fed No. 171 Federal Court 113 ALR 643(1993) 41 FCR 421 where the full Court observed (at 25) 'This Court's implied power (and the Supreme Court's) to regulate its own procedures in the administration of justice in a particular regard is not confined to a situation in which there is no statute or rule of court that could possibly apply to what is to be done in that regard. The true rule is that a Court may exercise its inherent or implied powers in a particular case, even in respect of matters that are regulated by a provision of a statute or rules of court, so long as it can do so without contravening any such provision: see Taylor v The Attorney-General (1975) 2 NZLR 675 at 680, 687-8 and 692-3. Cf. Wentworth v NSW Bar Association (1992) 66 ALJR 360 at 364.'; 2. Re KalbluePty Ltd (1994) 12 ACLC 1,057 is relevant in that Young J (as he then was) held that there was an inherent power in the Court to wind up companies where it is just and equitable to do so; 3. The approach of Master Bredmeyer in the Supreme Court of Western Australia in Western Interstate Pty Ltd v DFC of T (1996) 14 ACLC 219 does not affect the inherent power held by the Court. What it does is ouster the power of the Supreme Court to utilise the Corporations Act to order a winding up of a company by anybody other than a person set out section 462 (5). The important distinction between this case and Kalblue is that it does not ouster either expressly or by necessary implication the power of the Court to order a winding up on just and equitable grounds which Young J found still exists. It is merely precedent for saying that only those persons set out in section 462(5) can seek a just and equitable winding up of a company susceptible to the Corporations Act ; 4. Neither the CCC Act nor any subsequent Companies Acts ousted the inherent power of the Court either expressly or by necessary implication; 5. It is therefore the Applicant's submission that the Court has the power to order the winding up of the CCC as such an order would not be contravening any statute, the CCC Act containing no reference to a general power to wind up the CCC. This is particularly so in light of Brennan J's observations in Brohpo and at the time of the enactment of the CCC Act no companies legislation existed in New South Wales. Your Honour has already found that a case has been made out for the winding up of the CCC on just and equitable grounds (paragraph 33 of the Judgment of 20th December). It is the Applicant's submission that no statutory bar exists to preclude this Honourable Court from making the orders sought in respect of winding up the CCC."

7 The plaintiff thus does not contend that any statute empowers the court to make orders directed towards dissolution of the Cardiff Coal Company or the winding up of its affairs. The contention is, rather, that a court of equity possesses such a power as part of its general equitable jurisdiction. To the extent that various statutory provisions in force in New South Wales between 1874 and 1990 are seen as relevant, the fact remains that none of them supports the proposition sought to be advanced by the plaintiff with respect to inherent equitable jurisdiction since each created a specific statutory jurisdiction by reference to classes of companies defined in such a way as to include the Cardiff Coal Company; and it is conceded that no statute in force today continues any such statutory jurisdiction. Mr Hewitt's written submissions proceed on the basis that, historically, a court of equity could dissolve companies and direct and supervise the winding up of their affairs and that that jurisdiction continues today. That proposition is undoubtedly correct, but only when "company" is understood as not extending to a body of persons made by Parliament into a body corporate having perpetual succession. The Cardiff Coal Company was established as an unincorporated company by and pursuant to its deed of settlement made on 1 October 1862. In that form, it was amenable to the equitable jurisdiction to which I have just referred. But its complexion changed entirely when the Act of the following year caused the proprietors from time to time of shares in its capital to be "one body politic and corporate". 8 In the reasons for judgment published on 20 December 2002, I quoted briefly from the fifth edition (1891) of Sir Nathaniel Lindley's "A Treatise on the Law of Companies". It is appropriate now to quote more extensively: "[A] company which is incorporated by act of Parliament can be dissolved only as therein provided, or by another act of Parliament. But as will be seen presently, several acts of Parliament, commonly called the winding-up acts, have been passed expressly for the purpose of providing for the dissolution and winding up of companies, whether unincorporated or incorporated, and whether incorporated by charter, special act of Parliament, or registration. These acts do not prevent the Court from dissolving unincorporated companies in the exercise of its general jurisdiction: Jones v Charlemont 16 Sim 271, Clements v Bowes 17 ib 167; but they greatly extend its power, especially as regards incorporated companies; and, practically, the law relating to the dissolution and winding up of companies may be said to depend almost entirely on the acts in question." 9 This extract draws very clearly the distinction that seems to me to be missed in the submissions made on behalf of the plaintiff, namely, the distinction between companies that are unincorporated and exist by virtue of some essentially contractual compact or nexus among members (such as is created by a joint stock company's deed of settlement) and those that are "incorporated by charter, special act of Parliament, or registration". The extract confirms that, before the English winding up Acts of the 1840s, a company incorporated by statute - that is, a fluctuating body of persons made by Parliament into a body corporate having perpetual succession - could not be dissolved except by the authority of Parliament itself. The first of those winding up Acts (7 & 8 Vict. c.111) enacted in 1844 proceeded on exactly that footing. That Act, which brought various classes of companies within the general bankruptcy jurisdiction, applied to "any commercial trading Company now or at any Time hereafter incorporated by Charter or Act of Parliament" as well to companies that were not incorporated. Section 26 of the Act said: "And be it enacted, That after the Court shall have certified to the Committee of Privy Council for Trade and Plantations the Cause of the Failure of any such Company or Body adjudged bankrupt it shall and may be lawful for Her Majesty, Her Heirs and Successors, upon the Recommendation of the said Committee, by any Instrument in Writing under Her or their Great Seal of Great Britain, or Privy Seal, to signify Her or their Pleasure for revoking and making void, and thereby to revoke and make void, all the Powers, Privileges, and Advantages at any Time, by any Charter or Letters Patent or Act of Parliament, granted to such Company or Body, and to determine the same; and thereupon the said Powers, Privileges, and Advantages shall accordingly be revoked, and the same Company or Body shall be determined, without any Inquisition, Scire facias, or any Matter or Thing to make void or determine the same, any thing in such Charter or Letters Patent or Act of Parliament contained to the contrary notwithstanding " [emphasis added]. 10 The effect of the italicised part of this section of the Act of 1844 was to put an end to the existence of any company that Parliament had caused to be a body corporate and which had subsequently been fully dealt with in accordance with the winding up procedure provided for by the Act itself. This remains the pattern in corporations legislation today: winding up under the Corporations Act 2001 (Cth) of a company that, by operation of that Act, "comes into existence as a body corporate" upon and by virtue of registration (s.119) culminates in deregistration by which the body corporate "ceases to exist" (ss.601AC and 601AD). The body created by statute is destroyed by statute, not by any order of the court imposing a regime of winding up. 11 The court possesses no jurisdiction to set in train processes resulting in the extinction of a body corporate created by statute except to the extent that statute so allows. No statute presently in force creates jurisdiction allowing any order for winding up or dissolution to be made in relation to the body politic and corporate created by the Cardiff Coal Company's Incorporation Act of 1863. 12 I am not persuaded that my judgment of 20 December 2002 is affected by any error of law warranting its being set aside. The plaintiff's notice of motion filed on 4 February 2003 is therefore dismissed. The rather unfortunate impasse in which the plaintiff finds himself is, to my mind, one that can be resolved only by the legislature. **********

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