Seymour, D.G. v Southern Districts Video Pty Ltd

[1985] FCA 124

Re: DUNCAN GEORGE SEYMOUR AND AUDREY SEYMOUR
And: SOUTHERN DISTRICTS VIDEO PTY. LTD. (in Liquidation)
No. WA G19 of 1985
Practice and Procedure - Companies
(1985) 3 ACLC 420 - 59 ALR 154 - 4 FCR 596

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Toohey J.(1)

CATCHWORDS

Practice and Procedure - claim for damages pursuant to s.82 of the Trade Practices Act - proceedings issued against company in liquidation - consideration of distinction between creditors' and members' voluntary winding up - whether provision in State Companies Code requiring leave of "the Court" to commence proceedings against company subject to a creditors' voluntary winding up applicable to Federal Court proceedings - whether leave should be granted by State Court or Federal Court if necessary - whether leave can be granted retrospectively

Trade Practices Act 1974 s.82

Companies (Western Australia) Code ss.4, 5(1), 401(2), Division 3 of Part XII

Companies and Securities (Interpretation and Miscellaneous Provisions) (Application of Laws) Act 1981 (W.A.)

Companies and Securities (Interpretation and Miscellaneous Provisions) (Western Australia) Code ss. 3(c), 4, 9

Companies - Winding-up - Whether members voluntary or creditors - Companies (Western Australia) Code (1981), s 401(2).

Companies - Winding-up - Leave of the court required - Whether leave required of the Supreme Court in respect of Federal Court proceedings - Companies (Western Australia) Code (1981), s 401(2).

HEADNOTE

Held: 1. A winding-up which occurs by resolution of a company but in which no declaration of solvency has been made and lodged pursuant to s 395 of the Code is a creditor's voluntary winding-up.

2. Section 401(2) of the Companies (Western Australia) Code (1981) (the Code) applies to proceedings in the Federal Court against a company in liquidation and accordingly such proceedings require the leave of the Supreme Court of Western Australia.

L Grollo & Co Pty Ltd v. Nu-Statt Decorating Pty Ltd (No 2) (1980) 47 FLR 44, followed.

Re McLennan Holdings Pty Ltd (1983) 7 ACLR 732, referred to. John Robertson & Co Ltd v. Ferguson Transformers Pty Ltd (1973) 129 CLR 65, considered.

HEARING

1985, March 22; April 4. #DATE 4:4:1985
APPLICATION

R J L McCormick, for the applicant.

M De Kerloy, for the respondent.

Cur adv vult

Solicitors for the applicant: Corser and Corser.

Solicitors for the respondent: Kott Gunning.

GFV

ORDER

1. The proceedings by the applicants against the respondent be stayed until further order with liberty to either party to apply.

2. The applicants pay the respondent's costs of the motion to date.

Proceedings by the applicant be stayed until further order with costs.

JUDGE1

Sub-section 401(2) of the Companies (Western Australia) Code ("the Code") reads:

"After the commencement of the winding up, no action or other civil proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes".

1. Section 401 is part of sub-division C of Division 3 of Part XII of the Code; sub-division C is entitled "Provisions applicable only to Creditors' Voluntary Winding Up". There are two questions before the Court. The first is whether Southern Districts Video Pty. Ltd. (in liquidation), the respondent in these proceedings, is the subject of a creditors' voluntary winding up. The second is whether in that event sub-s.401(2) has any application to proceedings in the Federal Court for damages pursuant to s.82 of the Trade Practices Act 1974.

2. The application was filed in this Court on 11 January 1985. According to the affidavit of Maurice Hodgson Lyford, one of the liquidators of the respondent, the company was placed into voluntary liquidation "in accordance with the procedure set out in Part XII Division 3 of the Companies (Western Australia) Code on the 3rd October 1984". Division 3 is concerned with voluntary winding up. It contains some provisions applicable to every voluntary winding up and some that are applicable only to members' voluntary winding up or to creditors' voluntary winding up respectively. Exhibited to Mr. Lyford's affidavit are what are described as "copies of the requisite resolutions duly passed by both the members and creditors in accordance with Part XII Division 3 of the Companies (Western Australia) Code in order to effect the said voluntary liquidation".

3. There is annexed to the affidavit a notice of resolution passed at a general meeting of the members of the company which is in terms:
   
   

"THAT the Company be wound up voluntarily and that Messrs. Rodney Michael Evans and Maurice Hodgson Lyford be and are now appointed Joint and Several Liquidators of the Company".

1. There is also annexed a document which is not strictly a copy of a resolution. It is a notice of appointment and address of liquidator as required by s.421 of the Code. In it Messrs. Evans and Lyford give notice that they were appointed joint liquidators of the respondent:
   
   

"... by resolution of the Company passed on the 3rd day of October 1984 and of the creditors of the Company passed on 3rd day of October 1984".

1. Thus the first question to be answered is whether there was a creditors' voluntary winding up of the respondent, for only in that event is s.401 applicable. The applicant argues that what took place was a members' voluntary winding up, alternatively that there was both a members' and a creditors' voluntary winding up and that in either case s.401 has no application. In that regard it may be noted that sub-s.5(1) of the Code defines "creditors' voluntary winding up" to mean "a winding up under Division 3 of Part XII other than a members' voluntary winding up". The same sub-section defines "members' voluntary winding up" to mean "a winding up under Division 3 of Part XII where a declaration has been made and lodged pursuant to section 395".

2. In my view, what took place in the present case was a creditors' voluntary winding up. No declaration of solvency appears to have been made and lodged pursuant to s.395; indeed Mr. Lyford's affidavit makes it clear that on 3 October 1984 the respondent was insolvent and unable to pay its debts in full and that it remains so. It is of the essence of a members' voluntary winding up that the company is solvent and remains so, hence there is no need to involve the creditors. Sub-section 392(1) provides that a company may be wound up voluntarily if it so resolves by special resolution. Hence, in the case of either form of voluntary winding up, there is first a resolution of the company. If a declaration of solvency is made, the winding up may proceed as a members' voluntary winding up. If no such resolution is made, the creditors may at a meeting (which sub-s.398(1) requires to be convened for the day or the day next following the day of the meeting at which the resolution for voluntary winding up is to be proposed) proceed in accordance with sub-division C. In that event, what takes place thereafter is a creditors' voluntary winding up. That is what happened in the present case. It was said against that conclusion that the apparent appointment of liquidators by the company in general meeting evidenced a members' voluntary winding up - see sub-s.396(1) of the Code. This may be so but the insolvency of the respondent makes it clear that, however the winding up began, it must have become a creditors' voluntary winding up.

3. This conclusion makes it necessary to consider the application of sub-s.401(2) of the Code to proceedings under the Trade Practices Act. Section 4 of the Code provides that it has effect subject to and in accordance with the Companies and Securities (Interpretation and Miscellaneous Provisions) (Application of Laws) Act 1981. The Companies and Securities (Interpretation and Miscellaneous Provisions) (Western Australia) Code came into operation on the same day as the Act just mentioned. Section 3(c) of that Code identifies as "a relevant Code" for the purposes of that Act any Code to which the Companies and Securities (Interpretation and Miscellaneous Provisions) (Application of Laws) Act 1981 applies by reason of a relevant application provision in an Act. Section 4 of the Code provides that, for the purposes of para. 3(c), a provision in an Act is a relevant application provision in relation to a Code if the provision states that the Companies and Securities (Interpretation and Miscellaneous Provisions) (Application of Laws) Act 1981 applies to the Code concerned. Section 4 of the Code so provides. Through this somewhat tortuous path one arrives at s.9 of the Companies and Securities (Interpretation and Miscellaneous Provisions) (Western Australia) Code whereby in any relevant Code, unless the contrary intention appears, "Court" is defined to mean "the Supreme Court of Western Australia or a Judge of that Court".

4. Thus, as a matter of statutory interpretation, the Court which may give leave to commence proceedings or proceed with them against the respondent is the Supreme Court of Western Australia. Although the applicants contended that there had been a members' voluntary winding up, their counsel said that, for abundant caution, application had been made to the Supreme Court for leave to bring proceedings against the respondent under the provisions of the Trade Practices Act. The application was refused. Apparently no written reasons were given for the decision; I was told that the basis of the refusal was that the application was made after the proceedings in this Court had begun.

5. The question still remains for this Court. There is before it a notice of motion by the respondent that the application be set aside in the absence of an order under sub-s.401(2). Is the requirement for leave contained in that sub-section applicable to the present proceedings? The decision most directly in point is that of Smithers J. in L. Grollo & Co. Pty. Ltd. v. Nu-Statt Decorating Pty. Ltd. (No. 2) (1980) 47 FLR 44. In that case the applicant had brought proceedings in the Federal Court against several respondents under Part VI of the Trade Practices Act. Sub-section 263(2) of the Companies Act 1961 (Vic) provided:
   
   

"After the commencement of the winding up no action or proceeding shall be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes".

1. The first respondent was a company in liquidation. Smithers J. ordered a stay of proceedings. He did so on the ground that although sub-s.263(2) did not, nor could it, apply in terms to an action brought in the Federal Court, its provisions were procedural in nature and, by reason of s.79 of the Judiciary Act 1903, extended to proceedings in the Federal Court against a company in the course of winding up.

2. The decision in Grollo has stood, apparently unchallenged, for 5 years. No reference to that decision was made by Master Lee Q.C. in Re McLennan Holdings Pty. Ltd. (1983) 1 ACLC 786 where the Master expressed doubt as to whether the appointment by the Supreme Court of Queensland of a provisional liquidator meant that the leave of that court was required in regard to proceedings in the Federal Court. Although in the circumstances it was unnecessary for him to determine the point, Master Lee suggested that a reference to the Companies and Securities (Interpretation and Miscellaneous Provisions) (Queensland) Code "shows various provisions which limit in certain respects the application of the relevant Codes to locality, jurisdiction or other matter or thing in and of Queensland unless the contrary intention appears" (at p.788).

3. Counsel for the applicants in the present proceedings sought to distinguish Grollo on the ground that s.263(2) of the Victorian Companies Act was earlier in time than the Trade Practices Act which could be assumed to have been passed in the knowledge that the State legislation existed. The Trade Practices Act precedes in time the Code.

4. But Smithers J. did not decide Grollo by reference to the chronology of the relevant statutes. His Honour was at some pains to point out that s.263(2) of the Victorian Companies Act applied to proceedings under the Trade Practices Act, not by force of State legislation but by force of Federal legislation viz. s.79 of the Judiciary Act. He relied in particular upon the decision of the High Court in John Robertson & Co. Ltd. v. Ferguson Transformers Pty. Ltd. (1973) 129 CLR 65, especially the judgment of Mason J. I quote only one passage from that judgment, at p 95:
   
   

"To ensure that State laws dealing with the particular topics mentioned in the section (Judiciary Act s.79) are applied in the exercise of federal jurisdiction by the courts other than State courts, it is necessary that State laws be applied according to the hypothesis that federal courts do not necessarily lie outside their field of application. Section 79 requires the assumption to be made that federal courts lie within the field of application of State laws on the topics to which it refers, at least in those cases in which the State laws are expressed to apply to Courts generally. This departure from the general principle that the section requires a State law to be applied according to its terms is justified, indeed demanded, by the clear requirement that State laws on the topics mentioned are to be applied in federal jurisdiction".

1. Sub-section 401(2) of the Code is a law relating to procedure and, except as otherwise provided by the laws of the Commonwealth, it is binding on courts exercising federal jurisdiction. The sub-section is expressed in general terms, so far as the prohibition is concerned, in that it strikes at all actions and other civil proceedings. It may seem curious that the leave of the Supreme Court is required to commence proceedings in the Federal Court or to continue such proceedings. But that is the result of federal legislation, not of state legislation. In this regard the operation of sub-s.68(2) of the Judiciary Act provides a useful analogy; the authorities are collected in Lamb v. Moss (1983) 49 ALR 533 at 560.

2. It follows that the leave of the Supreme Court is required before this application may proceed, more strictly that it was required before the application was commenced. The respondent's motion is to set aside the application but, in my view, the appropriate order is that made by Smithers J. in Grollo viz. that there should be a stay of the proceedings with liberty to either party to apply. It may be that the Supreme Court will be persuaded to grant leave if a fresh application is made and, in those circumstances, the applicants should not be put to the additional expense of bringing fresh proceedings. See Re Wanzer Ltd. (1891) 1 Ch 305 at 315. If it appears that the leave of the Supreme Court will not be forthcoming, it will be open to the respondent to invoke the liberty to apply provision and seek an order for dismissal of the application.

3. As to the costs of the respondent's motion, it seems that the applicants' solicitors sought the consent of the respondent's solicitors to an application in the Supreme Court under sub-s.401(2) of the Code. That consent was not forthcoming except on condition that the applicant would not claim damages under the Trade Practices Act but would seek a declaration of entitlement to prove in liquidation for the damages claimed. The respondent was not obliged to consent to the application and cannot be said to have acted unreasonably in refusing its consent except on terms.

4. In the circumstances the applicants must pay the respondent's costs of the motion to date.