The Rectification Issue
24 Barrett J referred to his earlier judgment in Lavercombe v Auscott Ltd [2006] NSWSC 867; (2006) 202 FLR 390 ("Lavercombe"), esp at 399-400. His Honour characterised the scope of the power under s 1322(4)(b) as one which "is exercisable where the content of the register does not conform with the law and is for that reason in need of correction. If the content already conforms with the law, there is nothing to correct" [40].
25 In support of his approach to the section, Barrett J relied on the judgment of Ryan J in Australian Securities Commission v SIB Resources NL (1991) 30 FCR 221. His Honour did not approve of the reasoning of Senior Master Mahony in Re Peter Conyers Holdings Pty Ltd (in liq) (1996) 14 ACLC 1,835. In Lavercombe his Honour had refused to follow the similar conclusion of Finkelstein J in Onesteel Reinforcing Pty Ltd v Westpoint Constructions Pty Ltd [2005] FCA 808; (2005) 23 ACLC 1,384. (See John Tarrant "Rectification of ASIC registers and databases" [2007] 25 Company and Securities Law Journal 544.)
26 His Honour concluded:
"[41] In the case now before me, an entry was regularly and validly made in the register of companies by ASIC in consequence of the making of the order of 5 March 2007. In line with the High Court's decision in Wilde v Australian Trade Equipment Co Pty Ltd (above), any order setting aside that order will not produce any statutory warrant for removal or alternation of that entry. The setting aside of the order would therefore not create any occasion for rectification of the register."
27 His Honour further said:
"[44] … Section 1322(4)(b) … does not allow the court to direct anything beyond the steps necessary to ensure that a register is kept in conformity with the statutory provisions applicable to it. Once it is recognised that the reinstatement of the registration of Churnwood effected by ASIC on 14 March 2007 was effected in accordance with the Corporations Act , there is nothing in need of rectification or capable of being rectified."
28 His Honour's analysis of s 1322(4)(b) quoted his own conclusions in Lavercombe, where his Honour considered the legal issue in detail. In that case his Honour had identified the range of registers "kept by ASIC under this Act" which extend to registers kept under the Corporations Regulations 2001 (Cth) (see at [24]-[25]). Although his Honour held that there was no relevant register with respect to the matter there under consideration, he went on to consider the scope of the power to rectify. He applied those obiter remarks in this case.
29 In Lavercombe, his Honour referred to the body of case law on the power to rectify the register of members that had long existed in corporations legislation and said:
"[31] The concept of 'rectification', as applied to the register of members, has been the subject of extensive judicial consideration. Where rectification took the form of removing something contained in the register, it was a reflection of a decision by the court that the matter in question should never have been entered or, at least, that it should not have remained beyond some past time. The rectification process has long been regarded as one by which the court causes the register to omit things which the law does not permit to be there and to include things that the law requires to be included. The first part of the concept is explained in the following passage in the judgment of Lindley LJ in Re National Bank of Wales [1897] 1 Ch 298 concerning s 35 of the Act of 1862:
'That section only comes into operation when the company improperly puts on the register a name which ought not to be on it, or improperly refuses to put on the register a name which ought to be on it.'
[32] The second part of the concept was referred to in Re Imperial Chemical Industries Ltd [1936] 2 All ER 463 where Clauson J said (at 469):
'I understand that the section means that if without sufficient cause a name stands on the register, the court has jurisdiction under this section to take it off.'
[33] The relevant notions of sufficient cause and propriety look to legal rights and legal obligations. A register of members is to be kept in accordance with certain statutory provisions and legal rules. The court's power to rectify or correct is exercisable to ensure that effect is given to those provisions and rules."
30 His Honour went on to consider some English cases with respect to records kept by a regulatory authority and added:
"[36] These cases emphasise that publicly available registers and records of the kind typically kept by a registrar or similar official under companies legislation are creations of statute and that the content of those registers and records is entirely a statutory matter. Provisions with respect to the rectification or correction of registers and records exist to ensure that they are kept as the statute requires them to be kept."
31 His Honour then considered a submission that the concept of rectification in s 1322(4)(b) should extend to a form of "reformation in a wider sense", based on the short reasons to that effect by Finkelstein J in Onesteel v Westpoint, and characterised the submission in the following manner:
"[37] … According to that approach, the court may, in exercise of a wider reformatory jurisdiction, direct expungement of content that results from due and faithful adherence to the statutory scheme. Such expungement would, it seems, be directed according to criteria found outside that scheme."
32 His Honour then turned to consider, and to reject, the applicability of this wider approach in the context of a winding up application and said:
"[38] … it would be necessary, according to the wider reformatory approach, to identify the non-statutory criteria distinguishing cases meriting expungement from those not meriting expungement. The court would, it seems, employ some general notion of fairness in drawing the distinction …"
33 His Honour went on to identify the difficulties that could arise in this respect in the context of winding up applications. However, such difficulties did not in fact arise on the basis of his Honour's previous reasoning, which appears correct to me, that there was no register of any character involved with respect to winding-up applications. His Honour then concluded, a passage which he repeated in the judgment presently under appeal:
"[39] Section 1322(4)(b) does not create any general reformatory jurisdiction. It allows the court to make orders ensuring that the content of registers kept by ASIC under the Corporations Act accords with the statutory requirements with respect to such content. Every decision as to whether such an order should be made will be informed by the statutory requirements regarding register content. If the register does not contain something that the legislation requires it to contain, the jurisdiction to order rectification is enlivened. If the register contains something that the legislation says it must not contain, the jurisdiction to order rectification is also enlivened (also, perhaps, where something not required to be included is included). But if a particular thing is in the register and its presence there represents precise compliance with a requirement imposed by the statute, the jurisdiction to order rectification is not enlivened. Nor is the jurisdiction enlivened if there is absent from the register something that the legislation does not require to be there."
34 Insofar as his Honour's approach was influenced by the case law on rectification of a register of members, it must be remembered that that statutory power was usually confined to be exercised only in a specific range of circumstances. Indeed that was apparent in Wilde where a power to rectify "an omission or mis-statement of any particular" was held not to empower the court to remove a registration once effected. (at 603). In contrast, s 1322(4)(b) is not confined to "an omission or mis-statement".
35 In the 1981 Companies Code, to which I refer because that was the occasion on which the general power to rectify any register kept by the regulatory authority was first introduced into the Australian legislative scheme, the power to rectify the register of members was found in s 259. This section established clear pre-conditions for an application to rectify as follows:
"259(1) If -
(a) an entry is omitted from the register;
(b) an entry is made in the register without sufficient cause;
(c) an entry wrongly exists in the register;
(d) there is an error or defect in an entry in the register; or
(e) default is made or unnecessary delay takes place in entering in the register the fact of any person having ceased to be a member.
…"
36 As can readily be seen these pre-conditions are more specific than the power found in s 539(4)(b) of the Companies Code of 1981, which is in the same general terms as the provision presently under consideration.
37 The statutory provision considered in Re National Bank of Wales [1897] 1 Ch 298, on which Barrett J relied in Lavercombe, was similarly engaged in specific circumstances. Section 35 of the Act of 1862 had the same structure as subsequent such provisions down to and including s 259 of the Companies Code. Relevantly it provided:
"If the name of any person is, without sufficient cause, entered in or omitted from the register of members of any company or if default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member … the court may … make an order for rectification of the register."
38 This is the context in which the observations of Lindley LJ in Re National Bank of Wales must be understood. His Lordship said at 308:
"[Section 35] only comes into operation when the company improperly puts on the register a name which ought not to be on it, or improperly refuses to put on the register a name which ought be on it."
39 The words "ought" and "ought not be on" the register are capable of a broad interpretation. His Lordship does not confine their scope other than to indicate that the section did not extend to the facts of that case, when a liquidator had lawfully registered a share transfer pursuant to an express power to do so. The formulation of Lindley LJ does not necessarily invoke the interpretation adopted by Barrett J at [39] of Lavercombe, to repeat: whether the register does or does not "contain … something that the legislation requires it to contain … or says it must not contain".
40 Barrett J also referred to the judgment of Clauson J in Re Imperial Chemical Industries Ltd [1936] 2 All ER 463 in which the Court made an order rectifying the register of members under s 100 of the Companies Act 1929 (UK). In that case a shareholder had been induced to transfer shares in a public company on a temporary basis, for purposes which were probably illegal, an issue which the Court did not need to precisely resolve as the original shareholder was not involved.
41 Section 100 of the 1929 Act was, even by then, in longstanding form applying when "any person is, without sufficient cause, entered in or omitted from the register of members". It was almost precisely reproduced as s 83(1) of the Companies Act 1936 (Cth) and s 103(1) of the Uniform Companies Act 1961.
42 Clauson J applied the section, saying at 469:
"It was rather suggested in argument … that, if I am once satisfied that a name was properly entered on to the register, I have no jurisdiction to remove that name, that I have only jurisdiction to remove it if it was improperly in the first instance, put on the register. I do not take that view. I understand that the section means that if without sufficient cause a name stands on the register, the court has jurisdiction under this section to take it off."
43 In my opinion, the facts of the Re Imperial Chemical Industries case are more consistent with a broad rather than a narrow approach to the power. The focus of the reasoning is on the phrase "without sufficient cause" rather than on the word "rectify". Nevertheless, rectification was ordered where, as a matter of proprietary right, the true legal and beneficial owner of the shares had been removed from the register.
44 As Barrett J said at [33], to repeat, "[t]he relevant notions of sufficient cause and propriety look to legal rights and obligations". However, the scope of such "rights and obligations" was not confined in Re Imperial Chemicals Industries to incidents of the registration process. It extended to underlying or originating rights and obligations. This goes beyond his Honour's conclusion at [36] to repeat: that provisions for rectification "exist to ensure that" corporations law registers "are kept as the statute requires them to be kept".
45 The line of authority on statutory provisions for rectification of a register of members reflects the general proposition that the scope of a statutory power of this character must be commensurate with the circumstances which call its exercise into existence. This, in turn, is a specific application of the overriding principle of statutory interpretation that words must be construed in their context.
46 Where the trigger for the power comprises the identification of a specific set of circumstances, which must exist before the power can be exercised, the power may well be construed to be similarly confined. Where there is no such trigger a broader interpretation may be appropriate.
47 "Rectify" is a protean word with a range of meanings: to correct, to remedy, to make right, to abolish. It should be given a scope that encompasses a response to the full range of circumstances that trigger the exercise of the power to rectify. Whether it is to be given a narrow or a wide scope requires attention to the purpose and subject matter of the legislative scheme.
48 In the present case, the word rectify must be understood in its textual context, particularly s 1322, and the broader context of the legislative scheme, including the Act and Corporations Regulations 2001. The fact, if it be such, that the word "rectify" has been given a particular meaning in case law on rectifying the register of members (the word "rectify" has been replaced by "correct" in the most recent version in s 174 of the Act) is of limited assistance.
49 Section 1322(4) is made subject to the following provisions of the Act, including s 1322(6)(c), which provides that: "[t]he court must not make an order under [s 1322(4)(b)] unless it is satisfied … that no substantial injustice has been or is likely to be caused to any person". I find this provision to be of some significance for purposes of determining the scope of the power under consideration. This requirement of positive satisfaction indicates that the Court should not make a rectification order, subject to considering all the circumstances, where fundamental purposes served by the register would be compromised. Accordingly, a broader interpretation would not have any such consequence.
50 The immediate textual context is subs (4). Paragraph (a) authorises the Court to declare anything done in any proceeding, broadly defined in s 1322(1)(a) to extend beyond legal proceedings, not to be invalid by reason of any contravention of either the Act or of the constitution of a corporation. To similar effect par (c) permits the Court to relieve a person from any civil liability in respect of a contravention of the Act or of the constitution of a corporation.
51 Of particular significance for the interpretation of par (b) is the fact that in par (c) the nature of the contravention identified is that referred to in par (a). Accordingly, immediately before and immediately after the particular paragraph that falls to be interpreted in the present proceedings there are interrelated provisions which permit the Court to remedy error in certain specific circumstances. It is at least unlikely that the provision which comes in between two such provisions was intended to have a similar, albeit implicit, restriction.
52 It has not been, and could not be in my opinion, suggested that par (b) is in some sense consequential upon an order under par (a). The express reference to par (a) found in par (c) and the absence of any such reference in par (b) would suggest otherwise. Indeed, the final words of subs (4) empower the Court to make orders consequential upon an order under any of the paragraphs.
53 The limitation of the powers in (a) and (c) to circumstances in which there has been a contravention of the Act or of the corporate constitution, is a textual indication that the power in (b) is not similarly confined. The power is broader than that suggested by Barrett J in Lavercombe at [36], ie to ensure that "registers … are kept as the statute requires them to be kept".
54 The immediate textual context is, in my opinion, more consistent with a broader than a narrower interpretation of the word 'rectify'. Nevertheless, it is necessary to consider the relevant legislative sub-regime for registration and reinstatement.
55 I repeat my observations in BP Australia Ltd v Brown [2003] NSWCA 216; (2003) 58 NSWLR 322:
"[78] Section 1322 confers a series of powers designed to mitigate the strict application of the various kinds of provisions found elsewhere in the legislative scheme of the Corporations Act. It constitutes a recognition by the legislature that, in the wide variety of unpredictable circumstances that arise in the conduct of the affairs of corporations, the precise rules for which the statute provides may operate unfairly or unjustly in some circumstances.
[79] Nevertheless the requirements of certainty or of deterrence or of other objectives performed by particular regulatory sub-regimes within the legislative scheme, may be such that the flexibility for which s 1322 makes provision is not appropriate …"
56 The power under consideration extends in its terms to the full range of registers kept by the regulator. It may well be that the register of charges kept under s 274 of the Act is not included. This is because of a separate power found in that section to rectify on the basis of a trigger that "a particular … has been omitted or misstated in the register". This may involve the line of authority including Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 at 7 and R v Wallis (1949) 78 CLR 529 at 550; cf BP Australia Ltd v Brown supra at [40]-[50].)
57 Subject to such considerations, it is pertinent to note that the power extends to a range of different registers which perform various functions. Some are primarily designed to give notice to persons who deal with corporations or participants in corporate life or aspects of corporation and securities conduct, sometimes reinforced by certification provisions. Others primarily serve the function of a record. The power to rectify must be given an ambulatory operation which has regard to the different purposes served by different registers.
58 It is unnecessary to identify the scope of the power to rectify in a single formulation. Like Barrett J I am not attracted to terminology such as a "general reformatory" jurisdiction. The relevant scheme of the Act is:
· ASIC may register a company and issue a certificate that states the company is registered (s 118(1));
· ASIC must keep a record of the registration (s 118(2));
· A company comes into existence on the day it is registered (s 119);
· Reference to a company in the Act means a registered company (s 9);
· The register provides detailed information about the company (s 1364(2)(c) and Corporations Regulations 2001 9.1.02(a));
· On deregistration a company ceases to exist and its property is vested in ASIC (s 601AD).
59 The principal purpose of registration is to cause a company to exist as a legal entity and to establish that it is governed and regulated by the Act. A further purpose is to provide information, specified in the regulations, to persons who deal with a company.
60 In my opinion, the power to rectify the register of companies under s 1322(4)(b) extends to removing a company from the register where the process by which the company was placed on the register was invalid. Where, as is here suggested, that process involved a denial of procedural fairness there would be a relevant invalidity. I do not find it necessary, for reasons discussed below, to treat the alleged non-disclosure as in some way constituting a separate basis to that of procedural fairness.