Australian Securities Commission v SIB Resources NL
[1991] FCA 429
•18 JUNE 1991
Re: AUSTRALIAN SECURITIES COMMISSION
And: S.I.B. RESOURCES N.L. and RICLA HOLDINGS PTY LTD
No. V G3027 of 1991
FED No. 429
Corporations
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTY
GENERAL DIVISION
Ryan J.(1)
CATCHWORDS
Corporations - mining company - no liability company - whether company's sole objects are "mining purposes" - certificate of incorporation - conclusiveness - Crown immunities and privileges - whether extending to Australian Securities Commission - order for rectification of register of companies - whether available to remove company erroneously registered.
Corporations Act 1989 (Cwlth) s. 82 (the Corporations Law) ss. 9, 115, 120, 122, 123, 1274, 1322
Corporations Act 1989 (Cwlth) ss. 16, 17, 18
Australian Securities Commissions Act 1989 (Cwlth) ss. 1, 12, 14, 18, 138
Bowman v Secular Society Ltd v Secular Society Ltd (1917) AC 406
Cotman v Brougham (1918) AC 514
Hammond v Prentice Bros Ltd (1920) 1 Ch 201
Oakes v Turquand (1867) LR 2 HL 325
Princess of Reuss v Bos (1871) LR 2 HL 176
R v Registrar of Companies ex parte Central Bank of India (1986) 1 All ER 105
Re Australian Koyo Ltd (1984) 2 ACLC 429
Re German Date Coffee Co (1882) 20 ChD 169
Re Voxson Sales Pty Ltd (1989) 7 ACLC 479
Scott v Frank F. Scott (London) Ltd (1940) 1 Ch 794
The King v Wallis (1949) 78 CLR 529
Townsville Hospital Board v Townsville City Council (1982) 149 CLR 292
HEARING
MELBOURNE
#DATE 18:6:1991
Counsel for Applicant: Mr R. Strong
Solicitors for Applicant: Regional General Counsel for
Victoria - Australian Securities Commission
Counsel for Respondent: Mr P.K. Searle
Solicitors for Respondent: Cain and Cleaves Pty Ltd
ORDER
Upon the respondents by their Counsel undertaking to lodge with the Applicant within the time specified by s.172 of the Corporations Law the amendment to its memorandum adopted on 25 June 1991;
The application herein be dismissed with no order as to costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
An application has been made by the Australian Securities Commission ("the Commission") for an order pursuant to s.1322(4) of the Corporations Law that the register kept by the Commission under s.120 of the Corporations Law be rectified by removing therefrom:
"(a) the application by Corporate and Personal Planners Pty. Ltd. dated 15 April 1991 for the registration of S.I.B. Resources N.L. under Division 1 of Part 2.2 of the Corporations Law;
(b) the memorandum and articles of S.I.B. Resources N.L. lodged with the said application."
On 15 April 1991 an application for the registration of S.I.B. Resources N.L. ("S.I.B.") as a company under Division 1 of Part 2.2 of the Corporations Law was lodged with the Commission. The memorandum of S.I.B. lodged with that application included the following provisions:
"MEMORANDUM OF ASSOCIATION OF
S.I.B. RESOURCES N.L.
1. The name of the Company is S.I.B. RESOURCES N.L.
2. The objects for which the Company is established are to exercise the rights, the powers and the privileges as set out in Section 161 of the Corporations Law, which for the time being includes the rights, the powers and the privileges of a natural person, and without limiting the generality of the foregoing, the power:-
(a) To prospect explore drill test develop exercise turn to account and open any petroleum mineral oil and/or natural gas permits licences leases rights authorities holdings tenements claims or other rights or privileges on any lands wells mining rights or other properties from time to time in the possession of the Company or any other company or person.
(b) To acquire lands mines mineral petroleum and other properties of any tenure and grants concessions claims rights leases licences and options and any rights in to or over the same and to mine prospect work develop dredge drill test and explore for all metals minerals petroleum gas or other rare or valuable substances and precious stones and generally to work the mines and the oil or gas fields of the Company over or in respect of which the Company has rights and to carry on the business of mine owners in any part of the world.
(c) To apply for purchase take on lease or tribute or otherwise acquire and deal in and to manage supervise or control mines and mining properties grants concessions leases claims options licences of or other interests in mining rights mineral petroleum or other mining properties or interests or shares (undivided or other) therein and such water and other rights as are considered valuable or desirable by the Company.
(d) To prospect explore open and work claims or mines and raise dig and quarry for gemstones precious stones heavy minerals tin gold silver uranium coal ores and minerals generally.
(e) To cut refine treat or otherwise deal with or turn to account gemstones precious stones minerals and any other substances and to render the same marketable and fit for use.
(f) To carry on the business of pumping drawing transporting purifying marketing selling disposing of and dealing in natural gas petroleum mineral oils and other substances.
(g) To purchase acquire construct erect and maintain all necessary refineries mills works plant machinery laboratories workshops dwelling houses for workmen and others and other incidental building works and appliances.
(h) To erect establish construct or acquire by purchase or otherwise all such roads ways aerodromes and wharves as may be necessary for the mining or prospecting purposes of the Company.
...
(x) To carry on the business of financiers bankers brokers and underwriters in all their respective branches and departments including the borrowing raising or taking up of money the lending or advancing of money the discounting buying selling and dealing in Bills of Exchange Promissory Notes Coupons Drafts Bills of Lading Warrants Debentures Certificates Scrip and other instruments and securities granting and issuing letters of credit the buying selling and dealing in bullion and specie the acquiring holding issuing on commission underwriting and dealing with stock funds shares debentures debenture stock bonds obligations securities and investments of all kinds the negotiating of loans and advances the collecting and transmitting of money and securities the managing of property and carrying on or performance of secretarial services and generally the transmission of all kinds of agency business carried on by bankers. ...
(bb) To lend money to such persons companies and corporations and upon such terms and upon such security real or personal including stocks and shares and other choses in action or on mortgage bonds or other obligations or any kind of real or personal security or without taking security as the Company shall think fit. ...
(nn) To undertake and carry on the business of an Investment and Trust Company in all or any of its branches.
...
(mmm) To do all such other things as are incidental or conducive to the attainment of the above objects.
AND IT IS HEREBY DECLARED that the word `Company' in this clause shall be deemed to include any partnership or other body of persons whether incorporated or not incorporated and whether domiciled in the Commonwealth or elsewhere and the objects set forth in any sub-clause of this Clause shall not, except when the context expressly so requires, be in any way limited or restricted by reference to or inference from the terms of any other sub-clause or by the name of the Company. None of such sub-clauses or the objects therein specified or the powers thereby conferred shall be deemed subsidiary or auxiliary merely to the objects mentioned in the first sub-clause of this Clause but the Company shall have full power to exercise all or any of the powers conferred by any part of this Clause in any part of the world and notwithstanding that the business undertaking property or acts proposed to be transacted acquired dealt with or performed do not fall within the object of the first sub-clause of this Clause."
It is contended by the Commission that by reason of s.115 of the Corporations Law only a "mining company" as defined may be a no liability company. Section 115 provides:
"(1) A company registered under this Division may be:
(a) a company limited by shares;
(b) a company limited by guarantee;
(c) a company limited both by shares and by guarantee; or
(d) an unlimited company.
(2) A mining company registered under this Division may be a no liability company."
As defined in s.9 of the Corporations Law "mining company" means:
"a company:
(a) whose memorandum contains a provision stating the objects of the company; and
(b) whose sole objects are mining purposes;"
That leads in turn to the following definition in the same section:
"`mining purposes' means any or all of the following purposes:
(a) prospecting for ores, metals or minerals;
(b) obtaining, by any mode or method, ores, metals or minerals;
(c) the sale or other disposal of ores, metals, minerals or other products of mining;
(d) the carrying on of any business or activity necessary for, or incidental to, any of the foregoing purposes; whether in Australia or elsewhere, but does not include quarrying operations for the sole purpose of obtaining stone for building, roadmaking or similar purposes."
The Commissioner further takes the view that some of the objects in S.I.B.'s memorandum, including some of those contained in the extracts quoted above, are not mining purposes and that accordingly S.I.B. is not a company whose sole objects are mining purposes. It follows, it is said, that S.I.B. is not a mining company and therefore not entitled to the registration, which it obtained on 18 April 1991, as a no liability company.
Also on 18 April 1991 the Commission issued a certificate of incorporation in relation to S.I.B. The operative part of that certificate read:
"CERTIFICATE OF REGISTRATION OF A COMPANY Corporations Law Sub-section 121(1)
This is to certify that
S.I.B. RESOURCES N.L.
Australian Company Number 051 422 596
is a registered company under Division 1 of Part 2.2 of the Corporations Law of New South Wales and because of its registration it is an incorporated company. The company is a no liability company. The company is a public company.
The day of commencement of registration is the eighteenth day of April 1991."
It is appropriate first to consider whether S.I.B. not being a mining company should not have been registered, and is not entitled to remain, as a no liability company. In my view, s.115 is a code exhaustively defining the classes of company which may be registered under Division 1 of Part 2.2. Furthermore, the express stipulation in sub-s(2), that a mining company may be a no liability company, by implication denies that facility to companies which are not mining companies as defined. For a discussion of the principles of statutory construction which compel that result see The King v Wallis (1949) 78 CLR 529 per Dixon J. at 550.
I also consider it to be clear that some of the objects stated in S.I.B.'s memorandum are not mining purposes. A "main objects" principle of construction has been applied in older authorities, e.g. Re German Date Coffee Co (1882) 20 ChD 169 so as to treat later, and apparently widely drawn, paragraphs of a memorandum as merely ancillary or incidental to the main or dominant objects said to be discernible in the early paragraphs. However, that principle may be excluded by words which make it clear that each paragraph is intended to specify an object which is to be given full effect according to the ordinary meaning of the language in which it is expressed without any limitation or restriction imported from the words or position in the memorandum of any other paragraph; (Cotman v Brougham (1918) AC 514). The declaration with which paragraph 2 of the memorandum of S.I.B. concludes manifestly has that effect. Consequently, it is open to S.I.B. as one of its objects, to borrow or lend money or to carry on business as an investment and trust company even if that activity is not necessary for, or incidental to, any of the purposes enumerated in paragraphs (a), (b) and (c) of the definition of "mining purposes" in s.9 of the Corporations Law. It follows that S.I.B.'s sole objects are not mining purposes so that it is not a mining company as defined and accordingly may not be a no liability company.
It has been argued on behalf of S.I.B. that s.122 of the Corporations Law precludes the Commission from impugning the registration of a no liability company on the ground that its objects travel outside those permitted to a mining company. Section 122 provides:
"A certificate under the commission's common seal stating that a specified company has been registered under this Division is conclusive evidence that:
(a) all requirements of this Law in respect of:
(i) registration of the company as a company under this Division; and
(ii) matters preceding or incidental to the registration;
have been complied with;
(b) the company is duly registered under this Division; and
(c) the day of commencement of the registration is the day (if any) specified as such in the certificate."
Provisions to similar effect, gradually increasing in scope, have long been present in companies legislation, and have been held on high authority to preclude a court from going behind a certificate of registration where the incorporation of the company or some prerequisite thereto is the subject of collateral attack by a party to litigation involving the company; (see e.g. Oakes v Turquand (1867) LR 2 HL 325 at 354; Cotman v Brougham (supra) and Hammond v Prentice Bros Ltd (1920) 1 Ch 201).
However, that line of authority does not resolve the question of whether the certificate of registration is conclusive against the Crown, or the Commission, when seeking to attack directly, and not collaterally, the validity of the incorporation of a company. That question, in turn, raises the subsidiary question of whether the Commission is entitled to the privileges and immunities of the Crown. In deciding that question, as Gibbs C.J. pointed out in Townsville Hospital Board v Townsville City Council (1982) 149 CLR 282 at 288:
"it is necessary to consider all the circumstances of the case and that `(t)he fact that function has been a traditional function of government and that no intention of "alienating" it appears is sufficient to answer the question in many cases': Grain Elevators Board (Vict.) v Dunmunkle Corporation (1946) 73 CLR 70, at p 75. There have been cases in which the fact that the objects which the statutory body was set up to achieve were peculiarly within the province of the Government was regarded as decisive: see, e.g. Repatriation Commission v Kirkland (1923) 32 CLR 1; see also Superannuation Fund Investment Trust v Commissioner of Stamps (S.A.) (1979) 145 CLR 330, at pp 349, 356. However, many functions formerly regarded as matters of private concern are now carried out by instrumentalities of government and the question whether the functions in question are traditionally or peculiarly governmental is likely to be increasingly unhelpful in deciding whether the body formed to carry out those functions enjoys the privileges and immunities of the Crown. However, if it matters, the provision of hospital services is not a traditional function of government, and is still regarded as a matter in which private enterprise as well as governments will play a part.
The answer to the question must in the end depend upon the intention to be derived from the statute under which the body in question is constituted."
Registering companies and supervising the conduct and affairs of companies remaining on the register have been traditional functions of government. The first object of the Australian Securities Commission Act 1989 ("the ASC Law") under which the Commission is constituted is expressed in s.1(1)(a) as being to establish the Commission "to administer such laws of the Capital Territory, the States and the other Territories as confer functions and powers under those laws on the Commission". Commission members are appointed by the Governor-General on the nomination of the Minister, and the Commission is subject to direction by the Minister under s.12 about policies it should pursue or priorities it should follow, and under s.14 that it should investigate a matter. Copies of reports of its investigations are required by s.18 to be given to the Minister. By s.138(1) the Commission is a public authority to which Division 3 of Part XI of the Audit Act 1901 applies.
The matters to which I have just referred by no means exhaust the indications contained in the ASC Law of the Commission's close relationship with government. However they suffice to imply an intention that the Commission should have, at least when exercising its central functions, the privileges and immunities of the Crown.
That subsidiary question having been resolved in favour of the Commission, it is next necessary to consider whether or not s.122 is binding upon the Crown.
In Bowman v Secular Society Ltd (1917) AC 406, Lord Parker of Waddington observed at 439:
"My Lords, some stress was laid on the public danger, or at any rate the anomaly, of the Courts recognizing the corporate existence of a company all of whose objects, as specified in its memorandum of association, are transparently illegal. Such a case is not likely to occur, for the registrar fulfils a quasi-judicial function, and his duty is to determine whether an association applying for registration is authorized to be registered under the Acts. Only by misconduct or great carelessness on the part of the registrar could a company with objects wholly illegal obtain registration. If such a case did occur it would be open to the Court to stay its hand until an opportunity had been given for taking the appropriate steps for the cancellation of the certificate of registration. It should be observed that neither s.1 of the Companies Act, 1900, nor the corresponding section of the Companies (Consolidation) Act, 1908, is so expressed as to bind the Crown, and the Attorney-General, on behalf of the Crown, could institute proceedings by way of certiorari to cancel a registration which the registrar in affected discharge of his quasi-judicial duties had improperly or erroneously allowed."
Lord Buckmaster expressly agreed, at 478, with that observation. To similar effect Lawton L.J. pointed out in R v Registrar of Companies ex parte Central Bank of India (1986) 1 All ER 105 at 117:
"Counsel for the registrar invited our attention to the words of exclusion used in s 98(2), viz that `the certificate shall be conclusive evidence that the requirements of this Part of this Act as to registration have been complied with'. They are words excluding the admission of evidence, not words excluding the jurisdiction of the court to grant judicial review. If an unsecured creditor seeks judicial review solely on the ground that the chargee did not deliver the prescribed particulars he cannot put the necessary evidence before the court. But, if he seeks judicial review on some other ground, as, for example, if he alleges a registration was obtained by some fraudulent means, and he can prove his case, maybe the court would grant judicial review: see National Provincial and Union Bank of England v Charnley (1924) 1 KB 431 at 454 per Atkin L.J. Probably the Attorney General could ask for judicial review to quash a certificate, since the 1948 Act is not so expressed as to bind the Crown: see Bowman v Secular Society Ltd (1917) AC 406 at 439-440, 478, (1916-17) All ER Rep 1 at 17, 38 per Lord Parker and Lord Buckmaster. In R v Registrar of Companies, ex p A-g (17 December 1980, unreported) decided in the Divisional Court the Attorney General did apply successfully for the registration of a company, Lini St Claire (Personal Services) Ltd, to be quashed despite the provisions of s15(1) of the 1948 Act that a certificate of incorporation shall be conclusive evidence that all the requirements of the Act as to registration had been complied with. Counsel for the registrar accepted that, save in cases of these special kinds, s 98(2) had the effect of excluding jurisdiction but it does not in terms provide that any order or determination of the registrar shall not be called into question in any court."
The conclusion reached in those cases that a provision like s.122 of the Corporations Law which forms part of Chapter 2 is not binding on the Crown remains unaffected by the specific stipulations in the Corporations Act 1989 of those parts of the Corporations Law which do, and do not, bind the Crown. Those stipulations are expressed as follows in ss 16, 17 and 18 of the Corporations Act:
"16 To avoid doubt, a reference in this Part to the Crown in a particular right includes a reference to an instrumentality or agency (whether a body corporate or not) of the Crown in that right.
17(1) Chapter 5 (except Part 5.8) of the Corporations Law of the Capital Territory binds the Crown in right of the Commonwealth, of each of the States, of the Capital Territory, of the Northern Territory and of Norfolk Island. 17(2) To avoid doubt, Chapter 7 of the Corporations Law of the Capital Territory does not bind the Crown in right of the Commonwealth, of any State, of the Capital Territory, of the Northern Territory or of Norfolk Island. 18 Chapter 5 (except Part 5.8) of the Corporations Law of each jurisdiction other than the Capital Territory binds the Crown in right of the Commonwealth, of the Capital Territory and of Norfolk Island."
Accordingly, I am led to conclude that s.122 of the Corporations Law is not binding on the Crown as represented by the Commission, so as to preclude it from mounting a direct attack on the validity of the incorporation of S.I.B.
It has been contended on behalf of S.I.B. that an order for rectification of the register pursuant to s.1322(4) cannot go to the lengths of depriving a company of its corporate existence. Sub-sections 1322(4) and (6) provide:
"(4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Law, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Law or in relation to a corporation is not invalid by reason of any contravention of a provision of this Law or a provision of the constitution of a corporation;
(b) an order directing the rectification of any register kept by the Commission under this Law;
(c) an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a);
(d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Law or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit.
(6) The Court shall not make an order under this section unless it is satisfied:
(a) in the case of an order referred to in paragraph
(4)(a):
(i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii) that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii) that it is in the public interest that the order be made;
(b) in the case of an order referred to in paragraph
(4)(c) - that the person subject to the civil liability concerned acted honestly; and
(c) in every case - that no substantial injustice has been or is likely to be caused to any person." "Register" is defined in s.9 of the Law as meaning: "(a) in relation to a name - register under Part 4.2;
(b) otherwise - register under this Law."
Some guidance as to what is embraced by the concept of "register" used as a substantive is provided by s.120(1) of the Law which stipulates:
"Subject to this Law, where the Commission is satisfied that an application has been made in accordance with section 118, it shall:
(a) register the company by registering:
(i) in any case - the application; and
(ii) unless the company is registered as a company limited by shares and as a proprietary company - the company's memorandum and articles (if any); and
(b) allot to the company a registration number distinct from the registration number of each body corporate (other than the company) already registered under this Part, Part 4.1 or a law corresponding to this Part or Part 4.1."
The Commission is also required to keep a number of other registers including one of disqualified directors (s.243), an Australian register of company charges (s.265), a register of registered Australian bodies (s.341), a register of foreign companies (s.344), a register of licensed dealers and investment advisers (s.789), a register of prospectuses (s.1020A), a register of futures licensees (s.1155), a register of auditors (s.1280) and a register of liquidators (s.1282). As well there is a general provision in s.1274(1) that the Commission shall, subject to the Law, keep such registers as it considers necessary in such form as it thinks fit.
The Commissioner is specifically empowered to strike entities off, for example, the register of foreign companies, or to remove particulars of licensees from, for example, the register of licensed dealers and investment advisers. It is also significant that the Australian register of company charges is specifically rectifiable by order of the Court under s.274. The Commission on the other hand is empowered to strike entities off, remove particulars from other registers or cancel registration, see for example ss.342, 350, 789(4) and 1155(4), 1280(7) and 1282(8).
The legislative ancestor of s.1322(4) was s.539 of the Companies Code, sub-ss(4) and (6) of which were substantially identical to the corresponding sub-sections of s.1322 which have been set out above. In Re Australian Koyo Ltd (1984) 2 ACLC 429, McLelland J. was asked to make an order under s.539(4) of the Code to validate certain appointments of directors and acts done by them after an amendment to the articles of a company had created a lacuna where a power to appoint directors had previously existed. His Honour observed, at 431:
"In my opinion the company's problem is not able to be solved by an order under sec. 539. Any invalidity in the conduct of the company's affairs has occurred not by reason of any contravention of, or failure to comply with, any provision of the Code or any provision of the memorandum or articles of association, but rather by reason of a defect in the articles of association introduced by the amendment of 1 March 1972, and in my view sec. 539(4)(a) has no relevant application to the unusual circumstances of the present case, notwithstanding that, being a remedial provision, it should be given a liberal construction.
The application must therefore be dismissed.
I would however add that I can see no reason why the problem cannot be remedied by appropriate action by the members of the company. During the hearing of the application it was made clear that there is no practical difficulty in convening and holding a general meeting of the company at which the articles of association could be appropriately altered, and in accordance therewith new directors could be validly appointed. Such a meeting might also itself ratify all the relevant acts of those who have purported to act as directors since 1 March 1972, and for good measure the new directors might themselves do so also. I cannot see how ratification by both the members in general meeting and by validly appointed directors, particularly if it were unanimous in each case, could be otherwise than effective to validate those acts."
In Re Voxson Sales Pty Ltd (1989) 7 ACLC 479 various documents were lodged with the National Companies and Securities Commission ("the NCSC") in connection with an appointment, or purported appointment of receivers and managers pursuant to the terms of debentures. The NCSC accepted the documents for registration as required by the Companies Code. The company later applied for the removal from the register of those documents, contending that the appointment of the receivers was made without power. However, Ambrose J. considered that an order could not be made under s.539(4) of the Companies Code for removal of the relevant documents. His Honour observed at 483-485:
"I was informed that there appears to be little authority dealing with the principles upon which a rectification of registers kept by the Commission ought be directed. I have been unable to discover any cases which give any assistance. ...
I have no doubt that in an appropriate case a court may under sec. 539(4)(b) direct a rectification of a register which will be achieved in some cases perhaps by altering or correcting information stored on a microfilm in a microfiche jacket kept with respect to a particular company. I am unpersuaded however that a register may be `rectified' by removing and destroying microfilm of documents which have been lodged with and accepted by the Commission pursuant to the various sections of the Code to which I have referred. The Commission is given significant powers under sec. 31(8) to refuse to receive a document which is lodged with it. Steps may well have been taken by the applicants prior to those documents being lodged to prevent their lodgment. From time to time proceedings are taken to prevent the filing of an application to wind up a company. Once an application to wind up however has been made that fact cannot be `hidden' from public gaze merely because upon the hearing of the application it is shown that the application ought never to have been made.
On the facts of the present application as they appear to me at any rate the documents lodged with the Commission to which the applicants object were lodged under a statutory obligation imposed by the Companies Code. The Commission registered those documents pursuant to the obligations imposed upon it by sec. 31 of the Code. In my view it is not open to the applicants now - nearly two years after those documents were lodged - to seek to have them removed in effect from the register kept by the Commission by arguing that the receivers and managers were in effect improperly appointed. It was open to the applicants when they were advised of the intention of Alliance to appoint receivers and managers on 21 October 1986 before that appointment was made to take steps to prevent that course of action. Had the appointment been without power I have little doubt that it would have been open to the applicants to seek an injunction restraining the appointment and/or restraining both Alliance and the receivers and managers involved from lodging the documents which were in fact lodged.
In my view whatever may be the circumstances in which it is appropriate to make an order under sec. 539(4)(b) for rectification of a register kept by the Commission it is not appropriate in the circumstances disclosed upon this application for me to do so."
Of more direct relevance to the present issue is the view taken of earlier companies legislation that it did not provide a peremptory means of removing from the register companies whose incorporation was vitiated from the outset by non-compliance with a statutory requirement or whose right to remain on the register was lost as a result of supervening circumstances. Thus, in Princess of Reuss v Bos (1871) LR 5 HL 176, Lord Hatherley L.C. pointed out, at 193:
"All we have to ask ourselves is this, my Lords: Has this company come into existence - has it been born? If it has been born, I think with regard to another question there can be no doubt, namely, that it ought to be, as speedily as possible, extinguished.
The question is, therefore, simply whether it has been created. If created, there is no power given in this Act of Parliament, nor in any other Act of Parliament that I am aware of, by which through any result of a formal application, like an application by scire facias to repeal a charter, the company can be got rid of, unless it can be got rid of by being extinguished through the effect of the Act of Parliament which provides for the winding up of companies when they ought, from any circumstances whatsoever, to be wound up. But your Lordships will remember that, in addition to various other specified causes for which a company may be wound up, it may be wound up when the Court shall, for any reason, think it `just and equitable' that it should be so wound up (25 and 26 Vict. c.89, s.79, sub-s.5). That question as to its being just and equitable has reference, of course, to what is just and equitable in a judicial point of view, regard being had to all the circumstances of the case."
Likewise, Lord Cairns, at 202, observed:
"My Lords, it might have been a very wise provision of the Legislature to say that in a case of that kind - a case where there was an abuse of the Act of Parliament going on, a case where, if it had been the matter of a royal grant, there would have been what is termed a forfeiture of the franchise, by reason of nonuser or misuser - it might have been a very wise thing for the Legislature to say that in a case of that kind there should be some summary, peremptory mode of reducing or getting rid of the incorporation, and putting an end to a state of things which was an abuse of, or a fraud upon, the Act of Parliament, and which ought not to be allowed to continue. However, the Legislature has not thought fit to provide any means in the nature of a process of reduction, in the ordinary sense of the term, for getting rid of an incorporation in any such circumstances. But, it appears to me, the Legislature has given powers under this very Act of Parliament quite large enough to deal with such a case, whether it was absolutely in the mind of those who framed these powers or not. I refer to the section which has been mentioned, which defines the circumstances under which a company ought to be wound up, or may be wound up."
In Scott v Frank F. Scott (London) Ltd (1940) 1 Ch 794 the Court of Appeal held that there was no implied power in the Court to order rectification of the memorandum or articles of a company, noting, at 804, that:
It was argued that in such a case the hardship on the ordinary shareholders must be capable of remedy by rectification. We think the short answer to such a case is that the proper remedy would be to petition the Court for an order for the compulsory winding up of the company on the ground that it was in the circumstances just and equitable so to do. We respectfully agree with the refusal of Bennett J. to make any order for rectification."
In my opinion having regard to its context and legislative history, s.1322(4) does not evince an intention that the Court should have a power, on the application of the Commission, retrospectively to deprive a company of the corporate existence conferred by s.123 of the Law, in addition to and distinct from the express power to make a winding up order having prospective operation conferred by ss.460 and 461. I consider that a grant of such a power would have been at the forefront of a substantive legislative provision and not merely conferred as part of a general facility to relieve from the consequences of procedural and other irregularities.
I therefore decline to make an order under s.1322(4)(b) on the present application. However, because I have concluded that S.I.B.'s objects are wider than those permitted to a no liability company, it cannot remain on the register as a company of that class if those objects are not amended. I propose, accordingly, to adjourn this application to a date to be fixed to enable S.I.B., of its own accord, or pursuant to a request of the Commission of the kind contemplated by s.1274(11) to amend its memorandum or to convert to a company limited by shares as allowed by s.167(1)(b). If the opportunity thus afforded be not availed of, S.I.B. would be liable to be wound up on the application either of the Commission or the Attorney-General.
The costs of all parties of the proceedings so far are reserved.
4
6
0