In the matter of Riff Services Pty Ltd (in liq) and Ors

[2017] NSWSC 1826

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Riff Services Pty Ltd (in liq) and Ors [2017] NSWSC 1826
Hearing dates:	11 September 2017
Decision date:	11 September 2017
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The Court makes declarations validating the special resolutions made on 14 August 2017 by, and the appointment of the Plaintiffs as joint and several liquidators of, the companies listed in Schedule 1 to the Originating Process.
Catchwords:	CORPORATIONS — Membership — Status of membership – where companies passed resolution for voluntary winding up in general meeting – where administrator of estate of deceased member convened and voted by proxy at meeting – whether administrator relevantly “member” of companies – whether resolution validly passed and liquidators validly appointed – whether steps taken should be validated by Court
Legislation Cited:	- Corporations Act 2001 (Cth), ss 201F, 231(1)(b), 249A, 249F, 461, 467B, 491, 495, 1322
Cases Cited:	- A L Campbell & Co Pty Ltd v Federal Commissioner of Taxation [1951] HCA 36; (1951) 82 CLR 452 - Lunn v Cardiff Coal Company (No 3) [2003] NSWSC 789; (2003) 47 ACSR 79 - Nenna v Australian Securities and Investments Commission [2011] FCA 1193; (2011) 198 FCR 32; 284 ALR 386; 86 ACSR 204 - Re DUET Management Co 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34 - Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418 - Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396
Category:	Principal judgment
Parties:	Shumit Banerjee and Jason Lloyd Porter in their capacity as joint and several liquidators of Riff Services Pty Ltd (in liq) and others listed in schedule to Originating Process (Plaintiffs) Maria Gower in her capacity as administrator of the Estate of the late Matt Gower (First Defendant)
Representation:	Counsel: D Barlin (Plaintiffs)     Solicitors: Fortis Law Group (Plaintiff) Submitting appearance (Defendant)
File Number(s):	2017/273891

Judgment – ex tempore (revised 22 september 2017)

1. By Amended Originating Process filed today, by leave, the Plaintiffs, Mr Banerjee and Mr Porter, in their capacity as joint and several liquidators of Riff Services Pty Ltd (in liq) (“Company”) and several other companies, seek several declarations.

2. The first order sought is, relevantly, a declaration that, when the Supreme Court of New South Wales granted letters of administration with respect to the estate of the late Matt James Gower to Ms Maria Gower, she became a member of the several companies at issue in the proceedings. The Plaintiffs also seek declarations that the companies were wound up under s 491 of the Corporations Act 2001 (Cth) by special resolution made on 14 August 2017 and that the Plaintiffs, the liquidators, were validly appointed as joint and several liquidators pursuant to s 495 of the Corporations Act by special resolution made on that date. The Plaintiffs alternatively seek orders under s 1322 of the Corporations Act to cure any deficiencies in the winding up of the companies or their appointment or, alternatively, orders that the companies now be wound up and they be appointed as liquidators under s 461 or s 467B of the Corporations Act.

3. The proceedings were originally commenced as an application for directions to a liquidator but, appropriately, were subsequently amended to seek declaratory relief. Ms Maria Gower, in her capacity as administrator of the estate of the late Mr Gower, has been joined as Defendant and submits to the relief which is sought.

4. The application is supported by an affidavit of Mr Banerjee, affirmed 7 September 2017, which deals with the circumstances in which the liquidators were appointed to the several companies, following a resolution in a general meeting, albeit that resolution was passed by a proxy for Ms Maria Gower in her capacity as administrator of the late Mr Gower’s estate. Mr Banerjee gives evidence of the circumstances in which that resolution was passed and all the steps which have been taken in the liquidation of the companies. No declaration of solvency was made, and in those circumstances the voluntary liquidation, if validly commenced, transitioned to a creditors’ voluntary liquidation and has been conducted on that basis.

5. The liquidators have issued notices of meetings of creditors, which are due to be held shortly, on 14 September 2017, and the liquidators seek to have the position as to the validity of their appointment confirmed, both in order to address the question of costs of the meeting of creditors, but also in order to facilitate any distribution of remaining assets to creditors of the companies.

6. The Plaintiffs rely on a draft memorandum of advice dated 4 August 2017 given by Mr Barlin of Counsel, prior to the conduct of the members’ meetings at which the liquidators were appointed. Mr Barlin also appears for the liquidators in this application. Mr Barlin refers, in that memorandum of advice, to his instructions that, in the particular circumstances, neither Ms Maria Gower as the administrator of the late Mr Gower’s estate, nor her other son, who was appointed as her proxy for the relevant meetings, wished to be appointed as director of the companies or to appoint anyone as a limited administrator for the purposes of dealing with the companies.

7. I pause to note that, because a director of the companies was not appointed, it was not possible to undertake the two-stage process that might otherwise have been adopted under the Corporations Act, to which Mr Barlin referred in submissions, of first appointing Ms Gower as administrator and appointing a director of the Company, in place of the late Mr Matt Gower, under s 201F of the Corporations Act, and Ms Gower then submitting an application for transmission of the late Mr Gower’s shares to her in her capacity as personal representative. The fact that that approach would have been available and its consequence would have been that Ms Gower could have been appointed as member of the companies, so as to call the relevant meeting and appoint the liquidators, indicates that what was done in this case, whether or not it was valid in the way it was done, was a step that could have properly been done by the mechanisms provided by the Corporations Act.

8. Mr Barlin’s draft advice referred to the circumstances in which the voluntary winding up could be initiated and carefully considered the circumstances in which an administrator of a deceased estate may be a “member” for the purposes of the provisions of the Corporations Act referring to that concept. Mr Barlin rightly referred to s 231(1)(b) of the Corporations Act which provides that, relevantly, a person is a member of a company if they agree to become a member of the company after its registration and their name is entered on the register of members. Mr Barlin also rightly pointed out that notwithstanding that definition draws attention to the question whether a person’s name has been entered on the register of members, there is room for a person to be treated as a “member” of a company in some circumstances at general law although he or she has not been entered on the register of members.

9. In particular, Mr Barlin rightly drew attention to the decision of Dixon J in A L Campbell & Co Pty Ltd v Federal Commissioner of Taxation [1951] HCA 36; (1951) 82 CLR 452 where his Honour undertook an exhaustive review of the earlier case law in respect of the question and observed that, at least where the question of the economic interest of members was concerned, then a legal representative of a deceased proprietor can be treated as a member, notwithstanding that he or she had not been recorded as such on the register. Mr Barlin also drew attention to the observations of Barrett J in Lunn v Cardiff Coal Company (No 3) [2003] NSWSC 787; (2013) 95 ACSR 34 where his Honour referred to Dixon J’s judgment in A L Campbell & Co Pty Ltd v Federal Commissioner of Taxation above and quoted that judgment in holding that, in that case, the unidentified legal personal representatives of the deceased members of Cardiff Coal Company could be treated as members of the company, at least in determining whether that company still consisted of more than the requisite number of members. In his draft opinion, Mr Barlin rightly observed that these authorities established that the concept of “member”, at least at general law, is capable of extending, in the case of a personal representative of a deceased member, beyond a person who is regarded as member in the register.

10. Mr Barlin went one step further, to conclude that, in the particular circumstances, Ms Gower, in her capacity as administrator of the late Matt Gower’s estate, could therefore be treated as a member of the Company who had the capacity to convene a general meeting pursuant to s 249F of the Corporations Act and to appoint a proxy to attend that meeting pursuant to s 249A of the Corporations Act, and that meeting could the pass a resolution for the voluntary winding up of the Company.

11. Given the conclusion that I will reach as to s 1322 of the Corporations Act below, it is ultimately not necessary for me to express a final view as to the correctness of Mr Barlin’s view in this case. It seems to me that the starting point of that view is correct, namely that the concept of “member” is capable of having an extended meaning in some circumstances. However, I doubt that principle can be extended to those provisions which deal with the right of members to convene or vote at general meetings under the Corporations Act. It seems to me that those provisions have a quite different character from those considered by either Dixon J in A L Campbell & Co Pty Ltd v Federal Commissioner of Taxation above, which dealt with the economic interests of members, or by Barrett J in Lunn v Cardiff Coal Company (No 3) above. It would be difficult to give the concept of “member” one meaning in those provisions in respect of small proprietary companies and a different meaning in the same sections in respect of, for example, large listed companies. There are obvious practical inconveniences if, for example, a large listed company could not determine who was or was not entitled to vote at its general meeting by reference to its members’ register but instead would need to make factual enquiries as to whether persons not recorded on the register might be personal representatives of deceased members.

12. It is, however, not necessary to express a concluded view as to that matter because, as I will note below, even if, as I am inclined to think, Ms Maria Gower could not be treated as a member of the companies, in her capacity as administrator of the estate of the late Matt Gower, for the purposes of convening, appointing a proxy at or voting at the meetings to appoint the liquidator, it seems to me that the steps taken to appoint the liquidators to those companies may be validated under at least s 1322 of the Corporations Act and the liquidators seek such validation.

13. Turning now to s 1322 of the Act, that section reflects a broad legislative policy that the law should not inflict unnecessary liability or inconvenience or invalidate transactions because of non-compliance with these requirements, where such non-compliance is the result of honest error or inadvertence and where the court can avoid its effects without threat to the public interest in compliance with the law; and the court will have regard to the purposes of the Corporations Act, the interests of all affected parties and the public interest in exercising its powers under the section: Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418. Section 1322(4) of the Corporations Act in turn allows the court to declare that an act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under the Corporations Act or in relation to a corporation is not invalid by reason of a contravention of a provision of the Act or a provision of the corporation’s constitution. The power under s 1322(4) may be exercised in several alternative cases, where a contravention of the Act is essentially procedural or the persons concerned had acted honestly or it is just and equitable that an order be made, and provided that no substantial injustice has been or is likely to be caused to any person: s 1322(6). These conditions are alternative so that only one of them need be satisfied in order to allow an order to be made under s 1322(4) of the Act.

14. The width of the power under s 1322(4) of the Corporations Act was confirmed by the High Court of Australia in Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 where French CJ observed (at [39]) that s 1322(4)(a) “...is to be construed broadly and applied pragmatically, principally by reference to considerations of substance rather than those of form.” Hayne, Crennan and Kiefel JJ also there observed (at 55) that the power given to the court under that section is not to be hedged about by any implied limitation and Gageler J referred at [60] with apparent approval to the Court of Appeal’s observation in that case that the section is “to be construed with all the liberality that its language permits.”

15. In this case there may be a question whether the irregularity involved could be characterised as merely “procedural”, but it is nonetheless of a character that allows an order under s 1322(4)(a) of the Corporations Act. The section allows an order where the persons concerned in the relevant failure acted honestly or where it is just and equitable that the order be made, and no substantial injustice is likely to be caused to any person. It seems to me plain that the persons involved acted honestly in this case. The steps which they were seeking to take, namely, to bring about a voluntary winding up of the companies and to discharge the creditors’ debts, were properly undertaken to promote the purposes of the Corporations Act. They took Counsel’s advice as to the steps to be taken, and that advice dealt with complex issues of law by reference to the relevant case law. Although I would not necessarily form the view that Counsel formed as to the entitlement of Ms Gower to vote, by proxy, at the meeting without being registered as a member, that view seems to me to have been one that was open upon the authorities and the parties acted honestly in acting upon it. In any event, it also seems to me that it is plainly just and equitable that an order be made to validate the liquidators’ appointment where they have been taking responsible steps to bring about the finalisation of the companies’ affairs, and in circumstances that Ms Gower has an understandable concern about appointing a director. The orders that are sought will not cause substantial injustice to any person. Indeed, they will facilitate steps which the liquidators are taking to deal with the creditors’ claims and their proper entitlement to remuneration and costs in respect of the liquidation. That that result would be available even if the relevant contraventions were advertent in character: Nenna v Australian Securities and Investments Commission [2011] FCA 1193; (2011) 198 FCR 32; 284 ALR 386; 86 ACSR 204; Re DUET Management Co 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34 at [18].

16. The conclusions which I have reached as to the application of s 1322 of the Corporations Act in this case are sufficient to have the result that the Plaintiffs should succeed in their application. I should add, however, that it seems to me unlikely that I could have made an order for winding up under s 467B of the Corporations Act in the relevant circumstances, which the Plaintiffs sought in the alternative, because that section turns on the starting point that the Company is already being wound up voluntarily. That would not be established unless the voluntary winding up had itself been validly commenced. Had it been necessary to do so, I would have made an order winding up the Company under s 461(1)(k) of the Corporations Act because it would be just and equitable to wind up each of the companies in the relevant circumstances. However, it is preferable to validate the existing appointment of the liquidators, which will have effect from the date of that appointment, rather than to make an appointment of liquidators under s 461(1)(k) of the Corporations Act which may only have effect from the date of the Court’s orders.

17. I make orders in accordance with the short minutes of order initialled by me and placed in the file.

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Decision last updated: 08 January 2018