Re AGL Gas Networks Ltd

[2001] NSWSC 165

Reported Decision: (2001) 160 FLR 269
(2001) 37 ACSR 441
(2001) 19 ACLC 743
[2001] NSWSC 165
[2001] ACL Rep 120 NSW 40

New South Wales

Supreme Court

CITATION:	AGL Gas Networks Limited (Application of) [2001] NSWSC 165 revised - 10/05/2001
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 5173/00
HEARING DATE(S):	26 February 2001
JUDGMENT DATE:	20 March 2001
PARTIES :	In the matter of AGL GAS NETWORKS LIMITED (formerly AGL Sydney Limited): AGL GAS NETWORKS LIMITED (formerly AGL Sydney Limited) (ACN 003 004 322) (Plaintiff)
JUDGMENT OF:	Santow J

COUNSEL :	C R C Newlinds (Plaintiff)
SOLICITORS:	Minter Ellison (Plaintiff)
CATCHWORDS:	CORPORATIONS — PROCEDURE — Rectification and validation of scheme for reconstruction and amalgamation — Scheme never became operative according to its terms contrary to the assumptions upon which everyone has acted since 1994 — Slip rule — Authorisation under the Gas Act delivered a few seconds too late — Circularity of conditions involving scheme conditions and transfer of scheme assets — Does the Court have power and jurisdiction to make rectifying and validating orders — Possible application of s1322(4) and (2) of Corporations Law. - WORDS AND PHRASES — Meaning of "in relation to".
LEGISLATION CITED:	Corporations Law s195; s411; 413; s1322 Gas Act 1986 (NSW) s16 Supreme Court Rules Pt 2 r 3; Pt 20 r 10 (the 'slip rule')
CASES CITED:	A.S.C. v Marlborough Gold Mines Ltd (1993) 177 CLR 485 Arnett v Holloway [1960] VR 22 Australasian Memory Pty Ltd and Anor v Brien and Anor [2000] 34 ACSR 250 Bailey v. Marinoff (1971) 125 CLR 592 Bond Corporation Holdings v State of Western Australia (No.2) (1992) 7 WAR 61 B.T.S. Bearings Pty Ltd v Transmission Supplies Pty Ltd (1983) 1 ACLC 923, 8 ACLR 287 Caratti v Hillman [1974] WAR 92 Diversified Mineral Resources NL v Amusmet Investments Pty Ltd (1991) 9 ACLC 1047, 5 ACSR 465 El Ali v GIO (1998) 15 NSWLR 303 Elyard Corporation Pty Limited v DDB Needham Sydney Pty Limited (1995) 133 ALR 206 Galler and Others v DDS Investments Pty Limited (Federal Court of Australia, Victoria District Registry, 7 March 1997, unreported) Hill v Anderson Meat Industries Limited [1971] 1 NSWLR 868 Kempe v Ambassador Insurance Co [1998] 1 WLR 271 Re Matine Limited & Others (1998) 28 ACSR 268 Morgan v 45 Flyers Avenue Pty Ltd (1987) 11 NSWLR 573 Re Park Lane Jewellers Pty Limited (1985) 10 ACLR 138 Paino v Hofbauer (1998) 13 NSWLR 193 Schafer v Blyth [1920] 3 KB 140 Southern Cross Exploration NL v Fire & All Risks Insurance Co Limited (1986) 7 NSWLR 319 — affirmed on appeal (1988) 165 CLR 268 Tooheys Limited v Commissioner of Stamp Duties (1960) 105 CLR 602 Workers’ Compensation Board (Qld) v Technical Products Pty Ltd (1988) 165 CLR 642
DECISION:	Rectifying orders made as set out in para 62.

REVISED — 10 May, 2001
IN THE SUPREME COURT
OF NEW SOUTH WALES
IN EQUITY

SANTOW J

No. 5173/00
In the matter of AGL GAS NETWORKS LIMITED (formerly AGL Sydney Limited)
AGL GAS NETWORKS LIMITED (formerly AGL Sydney Limited) (ACN 003 004 322)
Plaintiff
JUDGMENT

Table of Contents
Page

INTRODUCTION
FACTUAL BACKGROUND
ESSENTIAL FINDINGS OF FACT
THE CENTRAL ISSUE
RESOLUTION OF CENTRAL ISSUE
Part 20 Rule 10 — the “Slip Rule”
Inherent Power
Section 413(1) of the Corporations Law
Part 2 Rule 3 of the Supreme Court Rules
Section 1322(4)(d) of the Corporations Law
Section 1322(2) of the Corporations Law

CONCLUSION
ORDERS

INTRODUCTION

1    Before the Court to be rendered operative retroactively, is a long approved scheme for reconstruction and amalgamation. Can this be done? Can the scheme and its consequential steps be saved from the consequences of an accidental non-fulfilment of a condition precedent? Or must everything start again, though everyone has acted upon the basis that the scheme was operative and the consequential reconstruction had followed?

2    The scheme affects six subsidiaries of the Australian Gas Light Company, five of whom were, pursuant to the scheme, purportedly dissolved over six years ago. It has recently come to light that the scheme never became operative, according to its terms. This is entirely contrary to the assumptions upon which everyone has acted since 1994. That was when orders approving it and the consequential reconstruction were first made (on 6 June 1994 “the 1994 orders”). The reason is that one of the scheme’s preconditions, and an unwaived condition of the Court’s approval, was never fulfilled. The non-fulfilment was technical in the extreme and entirely accidental. A particular notice effecting an important change in authorisation under the Gas Act 1986 (NSW) was delivered a few seconds too late; not as required before midnight on the specified day, but a moment or so after. Meanwhile, purportedly pursuant to the scheme, five subsidiaries of AGL were thereafter “reconstructed and amalgamated” with a sixth; that is, if those steps were legally effective. This was by a series of capital reductions (under the then s195 of the Corporations Law), dividend payments, transfers of assets and liabilities (under ss411 and 413) and finally the dissolution without winding-up of the five companies.

3    What now is to be done? Clearly no-one would be prejudiced if the scheme were able to be rendered operative, along with the consequential steps purportedly taken. If possible this should be retroactive, though that involves an element of retrospective fiction. Indeed if it were not possible to achieve that rectification and validation, prejudice would flow both for the AGL group of companies, and the many who have dealt with it on the assumption that the scheme was effective.

4 What this poses is whether the Court has power to do what self-evidently is in the public interest to bring about, namely an immediate and retroactive rectification and validation of the scheme, with its attendant or associated steps of capital reduction, amalgamation and reconstruction. The alternative of starting again, suggested by one line of authorities on s411 of the Corporations Law, would have serious, adverse consequences, both tax and commercial. Here however there is also the prospect of drawing upon the additional power to make further orders under s413 of the Corporations Law. It applies only to that species of s411 scheme involving reconstruction or amalgamation. As I explain, s413 is therefore available as a source of validating power, by enabling later orders now to be made.

5    There are also other sources of potential power for rectification. Thus one source of power depends on whether a scheme finds its efficacy and continued existence in the court orders approving it. If so, as Australian authority has held (see 43 and following), recourse may be had to the court’s inherent and rule-conferred capacity to rectify deficient or inefficacious court orders, including by extending the time for their compliance. There is also the so-called “slip rule”, with its retroactive effect for any curative orders. This rule may potentially be invoked in relation to the 1994 orders. This is because of the way the relevant condition was formulated and the circumstances of its non-fulfilment. These 1994 orders were made on the mistaken assumption that the amended Gas Act authorisation would be forthcoming just before midnight on the specified day, when a second after was what occurred, based on an apparent misconception. Apart from that, the formulation of that condition and in consequence the 1994 Court orders, was inherently circular in its terms. Thus fulfilment of the scheme condition depended on the scheme transfer of assets whilst the scheme transfer of assets depended on fulfilment of the scheme condition. On that basis, the 1994 orders read literally could never bring the scheme into effect. This was contrary to the expectation of all involved in the scheme process, including, it can be assumed, the judge’s.

6    Nonetheless, however worthy or pragmatic the aim, the Court is constrained by statute and the scope of its jurisdiction, actual and inherent. The question is whether the Court’s powers so derived extend far enough to rectify and validate what has occurred and if so, retroactively. Before answering that I need to record the background facts.

Factual Background

7    Prior to 30 June 1994, gas was distributed in New South Wales by the Plaintiff, then known as AGL Sydney Limited, a wholly owned subsidiary of the Australian Gas Light Company ('AGL'), along with other wholly owned subsidiaries of AGL, being Newcastle Gas Company Limited ('Newcastle'), City of Goulburn Gas and Coke Company Limited ('Goulburn'), Wollongong Gas Limited ('Wollongong') and AGL Western Limited ('Western'). AGL Information Systems Pty Limited ('AGLIS') provided technology and support services incidental to the gas distribution activities undertaken by the Plaintiff, Newcastle, Goulburn, Wollongong and Western.

8    In June 1994, the Court approved an amalgamation of the Plaintiff and Newcastle, Goulburn, Wollongong, Western and AGLIS ('Subsidiary Companies') in order to reduce the number of gas suppliers in New South Wales so that the Plaintiff would become the single gas distributor in New South Wales. This was perceived to have a number of advantages, including:

(a) to reflect more accurately the operating and management structure of the companies at the time;

(b) to permit greater flexibility and potential for improved growth;

(c) to be more clearly identifiable and accountable to customers, creditors, shareholders and regulators;

(d) to be more consistent with the price regime agreed with the Gas Council of New South Wales by which the tariff gas prices of the various subsidiary companies were regulated as if they were one entity; and

(e) to eliminate duplication of record-keeping, accounting and maintenance procedures.

9 This scheme of amalgamation and reconstruction was known as the "One Gas Scheme" ('Scheme'). Following appropriate resolution at meetings of members of the Plaintiff and the Subsidiary Companies the Scheme was approved by the Court by order made 6 June 1994 (“the 1994 orders”). Relevantly the orders provided for the transfer of all of the property, powers, and liabilities of the subsidiary companies to the Plaintiff, certain inter-company payments and dividends, the reduction of capital of the Subsidiary Companies under s195 of the Corporations Law and the dissolution of those Subsidiary Companies without winding up. I shall call these collectively “the associated steps”, comprising the reconstruction and amalgamation to be effected by the scheme.

10    The relevant orders (other than the order approving the scheme) were all subject to the conditions precedent of the Scheme, which included relevantly the following provision:

"3. Conditions Precedent
The Scheme will not operate unless on or prior to midnight 30 June 1994
(a) written Ministerial approval is given under section 57 and section 58 of the Gas Act;
(b) Sydney's current authorisation under section 9 of the Gas Act is amended to allow it to undertake all gas reticulation activities previously undertaken by the ... [Subsidiary Companies]"

11    The orders made by the Court on 6 June 1994 relevantly were in the following terms:

“1. The scheme of arrangement annexed to these orders … be approved correcting the typographical error in 4.4(a) by amending "$20,000" to "$20,000,00”
…
3. Subject to satisfaction of all the conditions precedent contained in clause 3 of the Scheme, immediately after midnight on 30 June 1994
(a) the property of each … [Subsidiary Company] … vest in the Plaintiff;
…
4. Subject to satisfaction of all of the conditions precedent contained in clause 3 of the Scheme … the reduction of capital effected by special resolution at the general meeting of the members of [the Subsidiary Companies] be confirmed …;
6. Subject to satisfaction of all of the conditions precedent contained in clause 3 of the Scheme … each [of the Subsidiary Companies] be dissolved immediately without winding up…'

12    The time for the Conditions Precedent to be fulfilled was prescribed by Clause 3 of the Scheme document.

13 At around one second past midnight on 1 July 1994, the Plaintiff received written notice under s16 of the Gas Act so as to amend its then authorisation to allow it to undertake all gas reticulation activities previously undertaken by the transferors.

14 The relevant part of the form of the written notice intended to cause the amendment to come into effect in terms of s16 was as follows:

"Pursuant to section 16 of the Gas Act 1986, the Gas Council now serves notice of the following amendments to the company's Authorisation:
1. That the documents forming annexures A and B to this Notice be added as annexures A and B to the Authorisation;
2. That the following new Conditions be added to the Authorisation:
Scheme or Arrangement
41. Upon the occurrence of the event referred to in this Condition, the terms of this authorisation shall be amended by the deletion of Conditions 1 to 40 (inclusive) and the replacement of those Conditions with Conditions with Conditions 1 to 40 (inclusive) set out in the document which forms annexure A to this Authorisation. The event is the transfer of all of the assets and liabilities of ... the subsidiary companies ... pursuant to the members' Scheme of Arrangement involving those companies and the approval of that Scheme by the Supreme Court of New South Wales."

15 Circularity is inherent in the last quoted portion of the notice, as I have earlier said (5 above). Thus subs 16(6) of the Gas Act, 1986 as it applied on 30 June 1994 causes an amendment of an authorisation earlier made by the Gas Council only to take effect “when the [statutory] notice is served”.

16    The effect of the written notice is to amend the Plaintiff's authorisation by the addition of Annexures A and B and the addition of new clauses 41 and following. By statute this amendment occurred immediately on receipt by the Plaintiff of the written notice.

17 Nonetheless, in apparent contradiction, clause 41 in its terms purports to amend the authorisation if certain circumstances prevail namely the scheme transfer of assets. Given that, under subs 16(6) of the Gas Act, 1986, only the Council can amend the terms of an authorisation and must do so by written notice, clause 41 cannot have the effect that it purported to have. In my view clause 41 has effect not by amending the varied authorisation brought about by the written notice, but by indicating which parts of the authorisation are operative and when. Logically, AGL Sydney Limited could not start to supply the gas the other five companies were supplying until the scheme transfers had taken place of the assets required for that supply. In my view by the effect of s16, that written notice had the effect, in terms of condition 3(b) of the scheme, of amending the authorisation to allow the Plaintiff to undertake all gas reticulation activities previously undertaken by the Subsidiary Companies. However, the authorisation by its own terms would only have that operative effect once the transfer of the assets and liabilities of the Subsidiary Companies was effected. However, that does not, in my view, prevent the written notice satisfying the requirement of the Condition Precedent in clause 3(b) of the Scheme. This is subject to application of the slip rule to remove any apparent circularity, achieved by my clarifying the 1994 orders.

18    After 30 June 1994 all of the Subsidiary Companies involved in the Scheme, and presumably all the customers of the Plaintiff, conducted themselves as if the Scheme were going forward. The Scheme has been acted upon in that all of the assets, liabilities and powers of the Subsidiary Companies have been treated as if transferred to the Plaintiff from 1 July 1994, the Subsidiary Companies have been dissolved and in fact have been deregistered by the ASIC. On this premise of the scheme being in effect, dividends were declared and tax assessed; both were then paid. The Plaintiff has thereafter undertaken all activities that would have otherwise been undertaken by the Subsidiary Companies on the basis they no longer exist.

19    Recently, an option holder, in considering whether to exercise an option to purchase some Old System land brought all this to light. He requisitioned the Plaintiff, as grantor of the option, as to the performance of the conditions precedent to the Scheme of Arrangement.

20    In the course of consideration of that requisition, the non-compliance with Condition Precedent 3(b) was noticed and its consequences appreciated for the first time. That background leads me to make the following findings of fact.

Essential Findings of Fact

21    I find as a matter of fact that:

(a) As at about one second past midnight on 30 June 1994 and thereafter, the Plaintiff and the Subsidiary Companies (to the extent that the effectiveness of their dissolution and other associated steps is questioned) acted on the basis that the Conditions Precedent to the Scheme of Arrangement and the Court orders had been complied with so that the scheme was assumed to be operative.

(b) After midnight on 30 June 1994, the affairs of the Plaintiff and the Subsidiary Companies have been conducted on the assumption that the Scheme and its associated steps have been fully implemented.

(c) In the event the Court is able to and does make orders validating, rectifying or confirming the validity of the Scheme and its associated steps retroactively, no injustice will be occasioned to any person now or in the future.

(d) If no such orders are made, then substantial injustice in the form of inconvenience, cost and confusion will inevitably be occasioned to the scheme companies, their ultimate shareholders, customers and to the public generally insofar as it has dealings with the scheme companies.

The central Issue

22    I have concluded that if it is within the Court’s powers and jurisdiction to do so, the Court should make such rectifying and validating orders. The real issue for determination is whether this Court’s power and jurisdiction so far extend and in relation to what kind of orders.

RESOLUTION OF CENTRAL ISSUE

23    Counsel for the Plaintiff relies on a number of sources for the Court's jurisdiction and powers to make the appropriate orders. These severally or in combination, are said to suffice for effective, retroactive rectification and validation of the scheme and its associated steps, to the extent that is needed. These possible sources in summary are:

(i) Part 20 rule 10 of the Supreme Court Rules (the 'slip rule ');

(ii) The inherent jurisdiction of the Court;

(iii) Section 413(1) of the Corporations Law ;

(iv) Part 2 rule 3 of the Supreme Court Rules ;

(v) Section 1322(2) and 1322(4)(d) of the Corporations Law .

24 Notwithstanding that the Plaintiff had originally sought relief under s1322(4)(d) as also s1322(2), I have concluded that relief under this head is sufficiently open to question as to lead me to look beyond those provisions for an alternative source of power. This is as a basis for the orders I have formulated at the conclusion of this judgment.

25 Essentially those orders amend and clarify the earlier orders of 4 June 1994 confirming their effect. They operate also a “later order” pursuant to s413(1) of the Corporations Law as applicable to schemes for reconstruction and amalgamation which “provides for” the necessary steps. No attempt is made to amend the Scheme pursuant to s411(6) of the Corporations Law or the provisions in the scheme (cl 6.2) that mirror it. The time for doing so is past, when the scheme is already approved. So Needham J decided in relation to the predecessor provision in B.T.S. Bearings Pty Ltd v Transmission Supplies Pty Ltd (1983) 1 ACLC 923, 8 ACLR 287. Section 411(6) is directed to the Court imposing, or consenting to alterations or conditions “as it thinks just”. But these must be attached contemporaneously to the Court’s approval of the compromise or arrangement. In contrast, s413 of the Corporations Law expressly contemplates a “later order” providing for the relevant steps to facilitate a reconstruction or amalgamation.

Part 20 Rule 10 — the “Slip Rule”

26    This provision, commonly known as the "slip rule" is in the following terms:

"Where there is a clerical mistake, or an error arising from an accidental slip or omission, in a minute of a judgment or order, or in a certificate, the Court on the application of any party or of its own motion may at any time correct the mistake or error."

27    In Elyard Corporation Pty Limited v DDB Needham Sydney Pty Limited (1995) 133 ALR 206 at 210, Lockhart J (with whom Black CJ agreed) said (of substantially similar provisions in the Federal Court Rules):

"It is well settled that the application of the slip rule is not confined to giving effect to the intention of the Judge at the time when the Court order was made, or judgment given. It extends to the intention which the Court would have had, but for the failure that caused the accidental slip or omission."

28    In Galler and Others v DDS Investments Pty Limited (Federal Court of Australia, Victoria District Registry, 7 March 1997, unreported) North J found that a distinction between a situation where one of the parties expressly intended to apply for an extension of time (to the extent that supporting affidavits had been filed) (as was the case in Elyard Corporation Pty Limited v DDB Needham Sydney Pty Limited), and the situation where it was implicit from the orders sought that the parties intended that an extension of time be granted, was not determinative. He granted such an extension.

29    The effect of an order made under the slip rule is that it operates as though the order had been made, in the corrected terms, at the time when the order was originally made. Thus it has the retroactive effect desired here.

30    It is sometimes said that a useful test as to whether a mistake or omission is accidental is whether, if it had been drawn to the attention of the Court or the parties at the relevant time, the error would have been corrected as a matter of course; Arnett v Holloway [1960] VR 22.

31    It is submitted by the Plaintiff that the mistake made by the parties and the Court at the time the order was entered on 6 June 1994 was that the Authorisation would be obtained prior to midnight on 30 June 1994. There is also the circularity earlier referred to.

32 It is submitted by the Plaintiff, and I accept, that if it had then been known that the amended Authorisation would not be obtained until one second past midnight on the following day, then the Court would have approved the Scheme but altered it pursuant to its power under s411(6) of the Corporations Law.

33 I infer from all the evidence before me that at the hearing on 6 June 1994, the Plaintiff and its representatives honestly and reasonably believed that all the conditions precedent (including the requirement for the authorisation held by the Plaintiff to be amended) were capable of being satisfied and would be satisfied prior to midnight on 30 June 1994. The Court was not misled deliberately in relation to the orders that were sought. Instead both the parties and the Court were operating under a mistake of fact (that is, that the authorisation would be obtained prior to midnight on 30 June 1994). If the parties or the Court had been aware of the true state of affairs, I find that it is inevitable that the Court would have made an order altering the terms of the order and the Scheme pursuant to s411(6) of the Corporations Law.

34    Applying those facts to the law as explained by the Full Court of the Federal Court in Elyard Corporation Pty Limited v DDB Needham Sydney Pty Limited, and taking into account the earlier mentioned circularity, I am satisfied that the ‘slip rule’ applies and that it is appropriate for me to exercise my discretion to rectify the 1994 orders. Those orders as amended would then take effect from the date of the original 1994 orders, thus overcoming any issue of retrospectivity; Morgan v 45 Flyers Avenue Pty Ltd (1987) 11 NSWLR 573.

Inherent Power

35    The Court has an inherent power to amend an entered judgment if it does not represent the true intention of the actual judgment pronounced by the Court.

36    An example of an apparent exercise of this power in similar fact circumstances to the present case is the decision of Young J in Re Park Lane Jewellers Pty Limited (1985) 10 ACLR 138, though on its facts a case where the orders had been pronounced but not formally taken out.

37    In that case, there had been a Court convened meeting pursuant to the then s315 of the Companies Code (equivalent to s411 of the now Corporations Law) for the purpose of considering a scheme of arrangement. Part of the order included a direction that documents be posted on or before a relevant day.

38    Young J, having found that there was reason to believe that there would be a postal strike and noting it was the obvious intention of the orders that the documents be posted so as to reach the relevant persons prior to the meeting, varied the original orders. In so doing after tracing varying approaches to varying scheme orders, liberal or more restrictive, said what I too would adopt here:

"It seems to me in this day and age that a less strict view is taken of variation of orders, even final orders than was taken in 1899. In Taylor v Taylor (1979) 143 CLR 1, the High Court made it quite clear that this matter of varying final orders was not some sort of intellectual game the Courts were playing but that the whole object of making orders of the Court is to do justice between the parties and has no other purpose. In the instant case where an order is made ex parte to convene a meeting of creditors and where no notice of meeting has been set out, apart from some theoretical or technical objection, I cannot see how any aspect of justice is served by refusing to vary the order."

39    In my view, the inherent power exercised by Young J is also available as a source of power to make the orders that I propose. I appreciate that it has been said that such power is limited to amending the Order prior to the time limit expiring: see for example Bailey v. Marinoff (1971) 125 CLR 592, though with respect, I would not accept that limitation. Moreover, I think a review of that case indicates that limitation is itself subject to a condition that it applies only if substantive rights of any party are not affected adversely by the varied order. In the present case, I am satisfied that the retrospective nature of the order I propose does not stand in the way of making it. Moreover, as I have earlier found, no person’s rights would be adversely affected by the making of the orders contemplated.

Section 413(1) of the Corporations Law

40 Relevantly, s413(1) of the Corporations Law provides: [emphasis added]

“Where an application is made to the Court under this Part for the approval of a compromise or arrangement and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies or the amalgamation of 2 or more Part 5.1 bodies and that, under the scheme, the whole or any part of the undertaking or of the property of a body concerned in the scheme (in this section called the transferor body) is to be transferred to a company (in this section called the transferee company), the Court may, either by the order approving the compromise or arrangement or by a later order , provide for all or any of the following matters:
(a) the transfer to the transferee company of the whole or a part of the undertaking and of the property or liabilities of the transferor body;
…
(g) such incidental, consequential and supplemental matters as are necessary to ensure that the reconstruction or amalgamation is fully and effectively carried out.”

41 The pre-conditions for the application of s413(1) have in a substantive sense been satisfied in relation to the One Gas Scheme. This was recognised by the willingness of this Court in June 1994 to give orders under s413(1).

42 The section expressly empowers the Court ‘by later order’ to make further orders to effectuate a reconstruction or amalgamation by providing for the necessary steps. In my view, I have power to make further remedial orders under s413(1) in relation to the One Gas Scheme. For example, if I was not satisfied that order 3 of the orders made on 6 June 1994 was effective I could now make an order under s413(1)(a) transferring the property, undertaking and liabilities of the Subsidiary Companies to the Plaintiff. Indeed if amenable to the slip rule as I consider they are here, those orders could be made retroactive in the way slip rule orders are.

43 Section 413(1)(g) is expressed in suitably broad terms so as to give the Court wider powers to ensure that a reconstruction or amalgamation is fully and effectively carried out. The clear intent of the provision is to allow the Court to make such orders as are appropriate to ensure that schemes of arrangement intended by the members and the Court to be carried out are carried out. To the extent that the One Gas Scheme has not been fully and effectively carried out for want of satisfaction of the condition precedent contained in clause 3(b) of the Scheme within the time specified by reason of the misapprehension earlier identified, this is a suitable case for remedial further orders under s413(1)(g). These are to rectify the orders made on 6 June 1994 to the extent needed.

Part 2 Rule 3 of the Supreme Court Rules

44    This provision enables the Court by order relevantly to “extend … any time fixed … by any judgment or order”.

45    There is a threshold question bearing upon whether it can be called in aid in a scheme context. If, as the Plaintiff submits, once the Court has made an order approving a scheme, that scheme takes its effect from the order, then there is no impediment to me dispensing with the time period prescribed in the conditions. If, on the other hand, the scheme takes its effect from the member’s resolution or antecedents including the statute, then this provision does not provide any relevant power.

46    Counsel for the Plaintiff made the following submissions:

(a) The intention of a Scheme of Arrangement is achieved not by the relevant resolution of creditors (members) but by the Court order and upon the order taking effect:

· Hill v Anderson Meat Industries Limited [1971] 1 NSWLR 868 at 877 per Street J;

· Caratti v Hillman [1974] WAR 92 at 94 and 95;

· Bond Corporation Holdings v State of Western Australia (No.2) (1992) 7 WAR 61 at 68.

(b) In Australia, these authorities establish that an approved scheme does indeed derive its force from the court order, not from the antecedent resolutions of members and creditors. In this respect Street J found (at 877) in Hill v Anderson Meat Industries Limited in relation to a creditors scheme:

“The approval by the court of the scheme amounts to a discharge of the debtor company's liability by operation of law. The discharge is effected by the court order and not by the events antecedent thereto, albeit that these antecedent events are indispensable statutory prerequisites of the court's jurisdiction to make an order approving a scheme and thus rendering it binding on the company and on the creditors.”

(c) The effect of these cases is that, once approved, there is no 'scheme' separate from the order of the court. Rather, any 'scheme' in the sense of the proposal decided at the relevant meetings is subsumed into and by the order of the court.

(d) In Re Matine Limited & Others (1998) 28 ACSR 268, the above authorities were considered by me and their apparent conflict with the Privy Council decision in Kempe v Ambassador Insurance Co [1998] 1 WLR 271 noted. Whilst it was unnecessary for me to decide that issue for the purpose of that case, I did indicate a tentative view that I would prefer to follow the Australian cases were it necessary.

(e) Unless satisfied that the Australian decisions to which I have referred are plainly wrong, I should, especially in national legislation, follow them as a matter of comity; A.S.C. v Marlborough Gold Mines Ltd (1993) 177 CLR 485.

(f) With respect, I do not find the reasoning in Kempe’s case compels me to a different conclusion. Their Lordships proceed on the assumption that a scheme does not derive its efficacy from the order of a court. Rather a scheme is given binding force by a statute which operates on a number of ingredients (in the case of a scheme, a scheme put forward by the scheme proponent, the necessary majorities of members or creditors and the sanction of the court). Taken to its logical conclusion, that reasoning would produce incongruous consequences. Take, for example, the jurisdiction of a court which is conferred by statute. The fact that the jurisdiction is conferred by statute does not make any decisions of the court under the statutory jurisdiction any less orders of the court deriving their efficacy from being made. The statute may be an indispensable statutory prerequisite to the Court's’ jurisdiction. But it is, in causative terms, a “background” fact behind that efficacy, part of the “ res inter alios acta ”. It is like saying that the birth of Lee Harvey Oswald “caused” the death of President Kennedy.

(g) The fact that their Lordships were proceeding from what may be attackable reasoning does not necessarily mean that their conclusion is wrong. However, an analysis of the facts of Kempe’s case indicate that the reasoning is indeed vulnerable. The scheme considered in Kempe’s case allowed a dissatisfied scheme creditor to apply to the court for an order reversing or varying certain decisions of the liquidators . Their Lordships proceeded on the basis that there was nothing untoward in this. However, their Lordships do not indicate where the court obtains jurisdiction to exercise the functions conferred. If schemes generally operate as an order of the court, jurisdiction is inherent. On the other hand, if schemes only operate by virtue of the relevant statute then the court would have no jurisdiction as the statute only refers to a compromise or arrangement between a company and its creditors (or between a company and its members).

47    Counsel’s submissions on this topic then continued:

(a) Part 2 rule 3 of the Supreme Court Rules is in the following terms:

"The Court may on terms by order extend or abridge any time fixed by the Rules or by any judgment or order."

(b) This provision has been held to confer a wide discretion and permits an extension of time whenever appropriate to do so to avoid injustice; El Ali v GIO (1998) 15 NSWLR 303; Schafer v Blyth [1920] 3 KB 140 at 143.

(c) The power exists irrespectively of whether the time limit is contained in the Rules or has been fixed by an order in particular proceedings; Paino v Hofbauer (1998) 13 NSWLR 193 at 196.

(d) Once one accepts that the Scheme operates by virtue of the Court order, then it is clear that the failure to obtain the approval within time was a failure to comply with a time specified in a Court order.

(e) The rule has been held to be of sufficient width to allow the Court to extend the time for compliance even after default in compliance with the particular time provision had occurred; Morgan v 45 Flers Avenue (1987) 11 NSWLR 573 at 587; Southern Cross Exploration NL v Fire & All Risks Insurance Co Limited (1986) 7 NSWLR 319 at 327 — affirmed on appeal (1988) 165 CLR 268.

(f) Accordingly, I am satisfied that it is open for me to exercise my discretion pursuant to Pt 2 r 3 Supreme Court Rules and amend order 1 of the orders made on 6 June 1994 so as to allow the Plaintiff until 10 minutes after midnight on 30 June 1994 to satisfy the conditions precedent to the Scheme.

(g) In making any such order, it was submitted that I would not be amending the Scheme as such as it would not involve a change to any substantive provision of the Scheme. Rather I would be extending the time in which an act required to be done under the order can be done, that order embodying the scheme and itself intrinsically capable of variation. While that conclusion is not beyond doubt, I am prepared to adopt it in making the various orders as I have done. In particular I do not consider the earlier cited Australian cases “plainly wrong” and will follow them as the basis for these orders, in preference to Kempe . It may be that at some future time, and with an effective contradictor, their reasoning may need to be further tested either at trial or appellate level.

Section 1322(4)(d) of the Corporations Law

48    This provision is in the following terms:

"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."

49    Section 1322(6) relevantly provides that the Court shall not make an order unless satisfied that no substantial injustice has been or is likely to be caused to any person.

50 The Plaintiff submits that s1322(4)(d) is applicable to the circumstances. In contrast to s1322(2), there is no limitation on the power by reference to the matter under consideration being "of a procedural nature". All the Court needs to identify is:

(a) there was a period for doing a thing;

(b) that the thing was not done in that period; and

(c) the thing relates to instituting or taking any proceeding under the Corporations Law or, relevantly, in relation to a corporation; and

(d) no substantial injustice has been or is likely to be caused to any person.

51 Although it is not necessary finally to decide whether s1322(4)(d) applies in these circumstances, and especially with no contradictor, clearly s1322(4)(d) was drawn in very wide terms as a remedial provision. Moreover, the words “in relation to” are well recognised as words of expansive meaning (see, for example, Tooheys Limited v Commissioner of Stamp Duties (1960) 105 CLR 602) but gathering its meaning “from the context in which it appears … which will determine the matters to which it extends” (per Deane, Dawson and Toohey JJ in Workers’ Compensation Board (Qld) v Technical Products Pty Ltd (1988) 165 CLR 642 at 653). It allows the Court to make an order extending or abridging time whether for any proceeding under the Law or “relating to a corporation”. A scheme of arrangement clearly “relates to a corporation” being the corporation which proposed the scheme. It is then submitted that so too does performance of all the scheme steps, including fulfilling the scheme conditions precedent. But does that extend to a step to fulfil a scheme condition precedent, here amending the Gas Act authorisation, which is not a step directly relating to a corporate proceeding though indispensable to it taking effect? Compare the steps for convening a directors’ or shareholders’ meeting, which is more clearly and more directly related than the situation before me. Moreover this is not a step the corporation itself has to take but simply an extraneous event affecting the corporation. This is save perhaps impliedly, in requiring the corporation to take all (reasonable) steps to bring about fulfilment, there being no express obligation to that effect. However, even if that be so, there is authority for the proposition that where time expires automatically, for example under the Law or the articles — and it might be suggested a scheme condition — s1322(4)(d) cannot be used to extend it; Diversified Mineral Resources NL v Amusmet Investments Pty Ltd (1991) 9 ACLC 1047, 5 ACSR 465 per McLelland J. Dicta by the High Court may suggest that that constraint does not apply at least where the step is one directly for the corporation or its creditors to take, rather than one which less directly merely concerns the corporation; Australasian Memory Pty Ltd and Anor v Brien and Anor [2000] 34 ACSR 250 at 260

52 It could also be argued that s1322(4)(d) is a general provision of law which has no application where there is a more specific provision. The argument would be that s411(6) Corporations Law deals with the matter of alteration to schemes and is in that sense a code for how amendments are to be made. Therefore s1322(4)(d) cannot apply. However, I am inclined to take the view that extending or abridging the period for doing any act, matter or thing for instituting or taking any proceedings under the Corporations Law does not itself amend the scheme. In addition, s411(6) in its own terms only relates to amendments before a scheme is approved. Accordingly, I prefer the view that s411(6) does not cover the field in relation to amendments after the order approving the scheme is made. Here in any event s413 can be called in aid to make later orders. Moreover, I have earlier concluded that Pt 2 r3 Supreme Court Rules and the slip rule in combination permit the kind of retroactive amendments here to be made, which are to the original orders embodying the scheme, as distinct from merely amending the scheme.

53    The Plaintiff submits that in the circumstances of this case the operation of the section is enlivened and that as a matter of discretion I could make appropriate orders. If I had not been minded to make orders on the bases set out above, I would have needed to reach a conclusion on that; but I do not need to do so and prefer to leave that question for another day.

Section 1322(2) of the Corporations Law

54    This provision is in the following terms:

"A proceeding under this Law is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceedings to be invalid."

55 There is no doubt that the Scheme is a "proceeding" for the purposes of s1322(2). Section 1322(1)(a) provides that 'a reference to a proceeding under this Law is a reference to any proceeding whether a legal proceeding or not'. There does remain a question as to whether matters in relation to fulfilment of a condition precedent for the scheme would be embraced by that provision.

56    I have already found that there has been no substantial injustice (or indeed any injustice at all) caused by the "irregularity".

57    The question is whether what is under consideration can properly be described as a "procedural irregularity".

58    It is submitted on behalf of the Plaintiff that it is. The substance of the orders was to provide for the Scheme to be implemented. The Scheme was a logical way of setting out the practical steps that needed to be taken so that the Scheme could have effect. The particular Condition Precedent was one of those practical steps, authorisation being necessary so as to ensure that once the amalgamation took place the Plaintiff would have the relevant authorisation under the Gas Act to carry out the activities it would be required to carry out. The point is that although authorisation was a necessary step, the time at which the authorisation was to be given was not important (except that it be early enough to allow the scheme to operate). This supports the argument that failure to satisfy the condition precedent was a procedural irregularity. However, as against that, the condition precedent was itself fundamental to the scheme.

59 Accordingly, the effect of section 1322(2) if it applies is that the failure to comply with the Condition Precedent would be automatically cured, without need of order.

60 Because of the orders I propose to make in these proceedings, I do not need to determine whether section 1322(2) applies in these circumstances. My tentative view is that the failure to comply with the condition is more than merely procedural and therefore this section cannot be called in aid by the Plaintiff.

Conclusion

61    I conclude that I have power to grant the Plaintiff the relief it seeks drawing as required on the following heads of power and sources of jurisdiction:

· Part 20 Rule 10 of the Court’s Rules;

· The Court’s inherent jurisdiction;

· Section 413(1) of the Corporations Law; and

· Part 2 Rule 3 of the Court’s Rules.

ORDERS

62 I make the following orders, pursuant to all powers thereunto enabling and in particular s413(1) of the Corporations Law, the Court’s inherent jurisdiction, the slip rule in Pt 20 r 10 Supreme Court Rules and Pt 2 r 3 Supreme Court Rules and so that such orders to the extent capable of doing so shall operate from the time the original orders of 4 June 1994 (“the orders”) were to be effective:

(a) Order 1 of the orders made on 6 June 1994 be amended, and the time for compliance therewith be extended, by adding at the end thereof the words “and as if the scheme in clause 3 thereof were read with these words added immediately after “30 June 1994”, before the colon, namely “or within 10 minutes thereafter”.

(b) The amendment to AGL Sydney Limited’s current authorisation under s9 of the Gas Act shall be taken to satisfy the requirements of the orders containing clause 3(b) of the Scheme in order for the scheme so embodied to be deemed to have become operative as part of such orders notwithstanding that:

(i) notice of the amendment was furnished just after midnight 30 June 1994; and
(ii) the authorisation is expressed to be amended upon the event set out in paragraph 41.

(c) All of the orders made on 4 June 1994 which are expressed to be “subject to satisfaction of all of the conditions precedent contained in clause 3 of the scheme” shall be and be taken to have been effective from the expiry of 1 July 1994 and, but only to the extent necessary for their efficacy, are also repeated without the above quoted words by way of later order pursuant to s413(1) of the Corporations Law .

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Last Modified: 05/11/2001