Re Asset Risk Management Ltd
[1995] FCA 549
•1 AUGUST 1995
CATCHWORDS
CORPORATIONS - financial assistance in acquisition of own shares - whether s. 205(10) of the Corporations Law was "substantially complied with" - power of Court under s. 205(11) to declare compliance - requirement of special resolution of ultimate holding company unable to be met because it was a State bank with no shareholders - approval of State Treasurer treated as equivalent to special resolution - whether section is concerned with the practical effect of what has been done.
STATUTORY INTERPRETATION - "day next following".
Acts Interpretation Act 1901, s. 36(2)
Corporations Law, ss. 9, 105(3) and 205
State Bank of South Australia Act (SA), s. 15
Zangzinchai v Millanta (1994) 53 FCR 35
In the matter of Jovial Pty Limited and Jeffison Pty Limited
unreported, 22 September 1992, Lockhart J.
Re U Drive Pty Ltd (1986) 5 ACLC 117
Re News Corporation Limited (1993) 11 ACLC 733
IN THE MATTER OF ASSET RISK MANAGEMENT LIMITED, ARM EQUIPMENT FINANCE PTY LIMITED, ARM RENTAL FINANCE PTY LIMITED AND LEVEL 28 PTY LIMITED
NG 3623 of 1994
Burchett J.
Sydney
1 August 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) NG 3623 of 1994
)
GENERAL DIVISION )
IN THE MATTER OF ASSET RISK MANAGEMENT LIMITED, ARM EQUIPMENT FINANCE PTY LIMITED, ARM RENTAL FINANCE PTY LIMITED AND LEVEL 28 PTY LIMITED AND SECTION 205 OF THE CORPORATIONS LAW
ASSET RISK MANAGEMENT LIMITED
First Applicant
ARM EQUIPMENT FINANCE PTY LIMITED
Second Applicant
ARM RENTAL FINANCE PTY LIMITED
Third Applicant
LEVEL 28 PTY LIMITED
Fourth Applicant
CORAM: Burchett J.
PLACE: Sydney
DATE : 14 December 1994
DECLARATIONS MADE BY THE COURT
THE COURT DECLARES THAT:
The provisions of s. 205(10) of the Corporations Law have been complied with in relation to the proposed giving of financial assistance by Asset Risk Management Limited in connection with the proposed sale by Southstate Investment Limited of all of the issued shares in Asset Risk Management Limited to Consolidated Capital Acceptances Limited.
The provisions of s. 205(10) of the Corporations Law have been complied with in relation to the proposed giving of financial assistance by Asset Risk Management Equipment Finance Pty Limited in connection with the proposed sale by Southstate Investment Limited of all of the issued shares in Asset Risk Management Limited to Consolidated Capital Acceptances Limited.
The provisions of s. 205(10) of the Corporations Law have been complied with in relation to the proposed giving of financial assistance by Asset Risk Management Rental Finance Pty Limited in connection with the proposed sale by Southstate Investment Limited of all of the issued shares in Asset Risk Management Limited to Consolidated Capital Acceptances Limited.
The provisions of s. 205(10) of the Corporations Law have been complied with in relation to the proposed giving of financial assistance by Level 28 Pty Limited in connection with the proposed sale by Southstate Investment Limited of all of the issued shares in Asset Risk Management Limited to Consolidated Capital Acceptances Limited.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) NG 3623 of 1994
)
GENERAL DIVISION )
IN THE MATTER OF ASSET RISK MANAGEMENT LIMITED, ARM EQUIPMENT FINANCE PTY LIMITED, ARM RENTAL FINANCE PTY LIMITED AND LEVEL 28 PTY LIMITED AND SECTION 205 OF THE CORPORATIONS LAW
ASSET RISK MANAGEMENT LIMITED
First Applicant
ARM EQUIPMENT FINANCE PTY LIMITED
Second Applicant
ARM RENTAL FINANCE PTY LIMITED
Third Applicant
LEVEL 28 PTY LIMITED
Fourth Applicant
CORAM: Burchett J.
PLACE: Sydney
DATE : 1 August 1995
REASONS FOR JUDGMENT
BURCHETT J.:
By s. 205(1) of the Corporations Law the long familiar provision forbidding a company to give financial assistance in relation to the acquisition of its own shares is re-enacted. A later subsection (subs. (5)) makes it an offence for an officer of the company to be involved in a contravention of the section. Section 205(10) then provides (so far as is relevant for the purposes of this case):
"Nothing in subsection (1) prohibits the giving by a company of financial assistance for the purpose of, or in connection with, an acquisition or proposed acquisition by a person of shares or units of shares in the company or in a holding company of the company if:
. . .
(b)where:
. . .
(ii)the company is not a subsidiary of a listed corporation but is a subsidiary whose ultimate holding company is incorporated in Australia or an external Territory;
... the ultimate holding company ... has, by special resolution, approved the giving of the financial assistance;
. . .
(e)not later than the day next following the day when the notice referred to in paragraph (c) is dispatched to members of the company there is lodged with the Commission a copy of that notice and a copy of the statement that accompanied that notice;
. . . ."
The subsection contains numerous requirements which I have omitted only because no question arises in respect of them in this particular case.
It will be observed that the paragraphs of subs. (10) set out conditions, introduced by the word "if", subject to compliance with which the prohibition in subs. (1) is removed. By subs. (11), provision is made for a case where compliance is not perfect, but may be accepted as sufficient. Subsection (11) provides:
"Where, on application to the Court by a company, the Court is satisfied that the provisions of subsection (10) have been substantially complied with in relation to a proposed giving by the company of financial assistance of a kind mentioned in that subsection, the Court may, by order, declare that the provisions of that subsection have been complied with in relation to the proposed giving by the company of financial assistance." (Emphasis added.)
This provision is a remarkable example of obscure English drafting. For although the condition of its operation is that the provisions of subs. (10) "have been substantially complied with", not that they have actually been complied with, the declaration it authorizes is a declaration "that the provisions of that subsection have been complied with". It may be that the draftsman used this formula to fit in with s. 206(6), but this possibility does not make the language accurate. However, the general purpose of the provision is clear enough.
What this case presents is a special example of a situation requiring the remedy of a declaration under subs. (11). It is a special example because the problem is not due to any error on the part of those responsible for the decisions, or the implementation of the decisions, of a corporation, but arises from a difficulty inherent in the constitution of the ultimate holding company falling within the reach of para. (b) of subs. (10). However, before turning to that point, it is convenient that I should dispose of a minor difficulty of a different sort. There is a suggestion that para. (e) raises a question, insofar as the day when the
notice referred to in that paragraph was dispatched to members of the company was a Friday. The "day next following" being a Saturday, the copy of the notice was lodged with the Commission (i.e. the Australian Securities Commission) on the following Monday. I do not regard this as a non-compliance, since both s. 105(3) of the Corporations Law, read with the definition of "business day" in s. 9, and s. 36(2) of the Acts Interpretation Act 1901 expressly permitted the doing of the act in question "on the first day following" which, in this case, was not a Sunday. That is because the last day of the period allowed fell on a Saturday. See Zangzinchai v Millanta (1994) 53 FCR 35.
Turning to the real failure of compliance with which the case is concerned, I need to explain that the ultimate holding company of each of the applicants is South Australian Asset Management Corporation, a body corporate constituted under s. 6(2)(a) of the State Bank of South Australia Act 1983. This corporation was formerly known as the State Bank of South Australia, but was renamed under s. 6A(1) of the State Bank of South Australia Act. The difficulty is that it has no shareholders, and therefore is unable to pass a special resolution. However, by s. 15 of the State Bank of South Australia Act, South Australian Asset Management Corporation is subject to the control and direction of the Treasurer of South Australia, representing the State of South Australia, and the Treasurer's approval has been obtained as the nearest equivalent to a special resolution.
In all other respects, there has been compliance, as regards each of the applicants, with the requirements of s. 205(10) of the Corporations Law.
In this situation, when the matter came before me as an application brought pursuant to subs. (11), I took the view that it was proper to make a declaration under that subsection, as Lockhart J. had done in a precisely similar matter, In the matter of Jovial Pty Limited and Jeffison Pty Limited (unreported, 22 September 1992). However, as the decision in that case was also given on an ex parte application, and as counsel understood it was given without reasons, I was asked to give reasons for my decision, on the basis that South Australian Asset Management Corporation is the ultimate holding company of a number of other companies, in respect of which the same problem is likely to arise. Accordingly, having made declarations under subs. (11), I reserved my reasons.
There is little authority on the operation of s. 205(11). I was referred to Re U Drive Pty Ltd (1986) 5 ACLC 117, a decision of Young J., and to Re News Corporation Limited (1993) 11 ACLC 733, a decision of Hill J. In neither case was the non-compliance in question comparable. In each, the court looked to see whether the practical effect of compliance with subs. (10) had been achieved, and in the latter, Hill J. said (at 734):
"Ultimately, it seems to me the matter is one of degree in a case such as the present, namely whether the compliance is such that it can fairly be said to be a substantial compliance." (Emphasis original.)
I agree that substantial compliance is a matter of degree. What the Court is concerned with is the practical effect of what has been done, which should be compared with the practical effect the legislature appears to have sought to achieve. But each case is likely to raise its own problems, and it will always be necessary to apply afresh the statutory language. I shall not attempt to place a gloss upon it. In my opinion, in this case where the approval of the Treasurer of South Australia was obtained in lieu of the passing of a special resolution, and where all the other provisions of subs. (10) have been complied with, there has been substantial compliance within the meaning of subs. (11). It was for these reasons that I made the declarations which I did make at the hearing.
Since the preparation of the foregoing, I have discovered that Lockhart J. did, in fact, give reasons in Jovial Pty Limited and Jeffison Pty Limited, although the applicants apparently failed to obtain a copy. However, those reasons are not at variance with mine in this matter.
I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.
Associate:
Date: 1 August 1995
Counsel for the Applicants: Mr M.B. Oakes S.C.
Solicitors for the Applicants: Mallesons Stephen Jaques
Date of hearing: 14 December 1995
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