Tydeman v State of New South Wales

Case •

[2024] NSWSC 1598

•

12 December 2024

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Tydeman v State of New South Wales [2024] NSWSC 1598
Hearing dates: 22 November 2024
Date of orders: 12 December 2024
Decision date: 12 December 2024
Jurisdiction:Equity
Before: Richmond J
Decision:

See [56]-[57]

Catchwords:

CIVIL PROCEDURE — Commencement of proceedings — Proceedings carried on by corporation — Necessity for solicitor to act

CONSTITUTIONAL LAW — Commonwealth and State relations — Inconsistency of laws

CORPORATIONS — Limits on the rights and powers of a company as an artificial legal person

Legislation Cited:

Commonwealth Constitution

Acts Interpretation Act 1901 (Cth)

Civil Procedure Act2005 (NSW)

Commonwealth of Australia Constitution Act 1900 (UK)

Constitution Act 1902 (NSW)

Corporations Act 2001 (Cth)

Judiciary Act 1903 (Cth)

Superannuation Industry (Supervision) Act 1993 (Cth)

Superannuation Industry (Supervision) Act 1993 (Cth)

Supreme Court Act 1970 (NSW)

Trustee Act 1925 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; [1992] HCA 10

Australasian Centre for Corporate Responsibility v Commonwealth Bank of Australia (2016) 248 FCR 280; [2016] FCAFC 80

Bay MarinePty Ltd v Clayton Country Properties Pty Ltd(No 2) (1986) 8 NSWLR 104

Esso Australia Resources Ltd v Dawson (1999) 87 FCR 588; [1999] FCA 363

Felton v Mulligan (1971) 124 CLR 367

Hamilton v Whitehead (1988) 166 CLR 121; [1988] HCA 65

Hubbard Association of Scientologists International v Anderson [1972] VR 340

In the matter of Tanamerah Estates Pty Ltd [2016] NSWSC 1644

Jonathan Alexander Ltd v Proctor [1996] 2 All ER 334

Kingsfield Holdings Pty Ltd v Lawfirst Pty Ltd(No 2) [2023] WASC 297

Momcilovic v The Queen (2011) 245 CLR 1; [2011] HCA 34

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28

Re Education Pty Ltd and the Companies Act [1963] NSWR 1340

Simto Resources Ltd v Normandy Capital Ltd (1993) 10 ACSR 776

Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2013] NSWSC 36

Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWCA 383

Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWSC 1519

Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWSC 1708

Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2016] NSWCA 23

Tibra Capital Pty Ltd (S84/2016) [2016] HCASL 147

Tydeman v Asgard Group Pty Ltd, in the matter of Asgard Group Pty Ltd [2023] FCA 486

Tydeman v State of New South Wales & Anor [2024] HCASL 180

Tydeman v Tibra Capital Pty Ltd(No 2) [2018] NSWSC 884

Texts Cited:

Austin & Black’s Annotations to the Corporations Act (LexisNexis, looseleaf)

Quick and Garran, The Annotated Constitution of the Australian Commonwealth (1901)

Category:Principal judgment
Parties: James Scott Tydeman in his legal capacity as the managing director of Asgard Group Pty Ltd in its legal capacity as the trustee of Alexander Superannuation Fund and in his personal capacity (First Plaintiff)
Asgard Group Pty Ltd as trustee of Alexander Superannuation Fund (Second Plaintiff)
State of New South Wales (Defendant)
Representation:

Plaintiffs (self-represented)

Counsel:
MG Sexton SC / CL Raad (Defendant)

Solicitors:
Crown Solicitor’s Office (Defendant)
File Number(s): 2023/00459780
Publication restriction: Nil

JUDGMENT

  1. By an amended summons filed on 4 November 2024 the plaintiffs seek various declarations all of which are directed, at different levels of generality, ultimately to the contention that rules 7.1(2) and (3) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) are invalid due to the operation of clause 5 of the Commonwealth of Australia Constitution Act 1900 (UK) (the Constitution Act).

  2. The first plaintiff is Mr James Tydeman (Mr Tydeman) described in the amended summons as acting in his legal capacity as the managing director of the Alexander Superannuation Fund (Superannuation Fund) and the second plaintiff is Asgard Group Pty Ltd (Asgard) in its capacity as the trustee of the Superannuation Fund. Mr Tydeman appeared in person on behalf of the plaintiffs at the hearing.

  3. The defendant is the State of New South Wales. Mr MG Sexton SC, the Solicitor-General for NSW, appeared for the defendant with Ms CL Raad of counsel.

  4. The declarations sought by the amended summons are:

  1. An order declaring s 5 of the Constitution Act has relevantly imposed legal duties to perform on the NSW Supreme Court and its judges being to give effect to federal law, including section 5 of the Constitution Act itself, which duties must be performed any time when occasion requires performance and correlative to those duties are implied legal rights conferred to (sic) the second plaintiff and the exercise of those rights directly by the second plaintiff to require performance of the correlative duties imposed on that court and its judges and which must not be undermined or modified by any lower-tier law in the hierarchy of federal laws, including Commonwealth law made under the Constitution of the Commonwealth, and any State law must not be considered if it undermines or modifies these constitutional rights/duties from being exercised/performed (Declaration 1).

  2. An order declaring the Supreme Court Act 1970 (NSW) (Supreme Court Act) and the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) are repugnant to or inconsistent with the Constitution Act 1902 (NSW) and those State laws shall, but only to the extent of the repugnancy or inconsistency, have no operation (Declaration 2).

  3. In accordance with s 109 of the Constitution of the Commonwealth, an order declaring s 6 of the Supreme Court Act is inconsistent with s 78 of the Judiciary Act 1903 (Cth) (Judiciary Act) and that State law shall, but only to the extent of its inconsistency, have no operation (Declaration 3).

  4. In accordance with s 109 of the Constitution of the Commonwealth, an order declaring r 7.1(2)(a) of the UCPR is inconsistent with s 78 of the Judiciary Act and that State law shall, but only to the extent of its inconsistency, have no operation (Declaration 4).

  1. The plaintiffs gave notice of a constitutional matter under s 78B of the Judiciary Act. None of the Attorneys-General sought to intervene.

Relevant statutory provisions

  1. Section 5 of the Constitution Act provides:

5 Operation of the constitution and laws

This Act, and all laws made by the Parliament of the Commonwealth under the Constitution, shall be binding on the courts, judges, and people of every State and of every part of the Commonwealth, notwithstanding anything in the laws of any State; and the laws of the Commonwealth shall be in force on all British ships, the Queen’s ships of war excepted, whose first port of clearance and whose port of destination are in the Commonwealth.

  1. Section 9 of the Constitution Act enacts the Constitution itself, including s 109 which provides:

109 Inconsistency of laws

When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.

  1. Section 78 of the Judiciary Act provides:

78 Appearance of parties

In every Court exercising federal jurisdiction the parties may appear personally or by such barristers or solicitors as by this Act or the laws and rules regulating the practice of those Courts respectively are permitted to appear therein.

  1. This needs to be read with s 79(1) and (1A) of the Judiciary Act which provide:

79  State or Territory laws to govern where applicable

(1) The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.

(1A) For the purposes of subsection (1), a Court exercising federal jurisdiction in a proceeding is taken to be exercising federal jurisdiction in:

(a) if the laws of a State or Territory apply to a part of the proceeding because of subsection 68C(5)—that State or Territory; or

(b) if paragraph (a) does not apply:

(i) if the proceeding is transferred or remitted—the State or Territory to which the proceeding is transferred or remitted; and

(ii) otherwise—the State or Territory in which the proceeding is commenced;

except as otherwise provided by the Constitution or the laws of the Commonwealth.

  1. Section 124 of the Corporations Act 2001 (Cth) (Corporations Act) provides:

124 Legal capacity and powers of a company

(1) A company has the legal capacity and powers of an individual both in and outside this jurisdiction. A company also has all the powers of a body corporate, including the power to:

(a) issue and cancel shares in the company;

(b) issue debentures (despite any rule of law or equity to the contrary, this power includes a power to issue debentures that are irredeemable, redeemable only if a contingency, however remote, occurs, or redeemable only at the end of a period, however long);

(c) grant options over unissued shares in the company;

(d) distribute any of the company’s property among the members, in kind or otherwise;

(e) grant a security interest in uncalled capital;

(f) grant a circulating security interest over the company’s property;

(g) arrange for the company to be registered or recognised as a body corporate in any place outside this jurisdiction;

(h) do anything that it is authorised to do by any other law (including a law of a foreign country).

A company limited by guarantee does not have the power to issue shares.

Note 1: For a company’s power to issue bonus, partly—paid, preference and redeemable preference shares, see section 254A.

Note 2: A CCIV’s power to issue shares is affected by sections 1230 and 1230B.

(2) A company’s legal capacity to do something is not affected by the fact that the company’s interests are not, or would not be, served by doing it.

(3) For the avoidance of doubt, this section does not:

(a) authorise a company to do an act that is prohibited by a law of a State or Territory; or

(b) give a company a right that a law of a State or Territory denies to the company.

(4) Subsection (1) does not prevent a mutual entity that is a company limited by guarantee issuing MCIs.

  1. Section 5 of the Constitution Act 1902 (NSW) provides:

5 General legislative powers

The Legislature shall, subject to the provisions of the Commonwealth of Australia Constitution Act, have power to make laws for the peace, welfare, and good government of New South Wales in all cases whatsoever—

Provided that all Bills for appropriating any part of the public revenue, or for imposing any new rate, tax or impost, shall originate in the Legislative Assembly.

  1. Section 6 of the Supreme Court Act provides:

6 Inconsistency with rules

Any Act in force immediately before the commencement of this Act which is inconsistent with the rules shall be superseded to the extent of such inconsistency and while such inconsistency continues to exist.

  1. Rule 7.1 of the UCPR, which is delegated legislation made under s 9 of the Civil Procedure Act, provides:

7.1 By whom proceedings may be commenced and carried on

(1) A natural person may commence and carry on proceedings in any court, either by a solicitor acting on his or her behalf or in person.

(1A) Despite subrule (1), but subject to subrule (5), the court may order that proceedings commenced by a natural person acting on behalf of another person pursuant to a power of attorney be carried on, on behalf of that other person, by a solicitor.

(2) A company within the meaning of the Corporations Act 2001 of the Commonwealth--

(a) may commence and carry on proceedings in any court by a solicitor or by a director of the company, and

(b) may commence and, unless the court orders otherwise, carry on proceedings in the Local Court by a duly authorised officer or employee of the company.

(3) In the case of proceedings in the Supreme Court, subrule (2)(a) authorises a company to commence proceedings by a director only if the director is also a plaintiff in the proceedings.

(4) A corporation (other than a company within the meaning of the Corporations Act 2001 of the Commonwealth)--

(a) may commence and carry on proceedings in any court by a solicitor, and

(b) may commence and carry on proceedings in any court (other than the Local Court) by a duly authorised officer of the corporation, and

(c) may commence and, unless the court orders otherwise, carry on proceedings in the Local Court by a duly authorised officer or employee of the corporation.

(4A) Despite subrules (1)-(4), any person may commence and, unless the Commission orders otherwise, carry on proceedings in the Industrial Relations Commission by an industrial agent within the meaning of the Industrial Relations Act 1996.

(4B) Subrule (4A) does not apply to or in respect of proceedings in the Industrial Relations Commission when constituted as the Industrial Court.

(5) Despite subrules (1)-(4), any person may commence and, unless the court orders otherwise, carry on proceedings in the Local Court--

(a) by a person who carries out commercial agent activity that is debt collection within the meaning of section 60 of the Fair Trading Act 1987, in relation only to proceedings on an application for--

(i) an instalment order, or

(ii) an order for examination, or

(iii) a writ of execution, or

(iv) a garnishee order, or

(b) by a person holding a licence as a real estate agent, strata managing agent or on-site residential property manager within the meaning of the Property, Stock and Business Agents Act 2002 in relation only to--

(i) proceedings on an application referred to in paragraph (a), or

(ii) the filing of a certificate under section 51 of the Consumer, Trader and Tenancy Tribunal Act 2001.

(6) A solicitor who is a person’s solicitor on the record must hold an unrestricted practising certificate.

  1. UCPR r 7.1(2) and (3) operate subject to s 14 of the Civil Procedure Act which provides:

14 Court may dispense with rules in particular cases

In relation to particular civil proceedings, the court may, by order, dispense with any requirement of rules of court if satisfied that it is appropriate to do so in the circumstances of the case.

Background

  1. Mr Tydeman, and his mother, Ms Catherine Alexis Tydeman, are the only shareholders and directors of Asgard, a company registered on 31 October 2016.

  2. Since 9 June 2022, Asgard has been the trustee of the Superannuation Fund, a self-managed superannuation fund established under the Superannuation Industry (Supervision) Act 1993 (Cth) in about May 2002: Tydeman v Asgard Group Pty Ltd, in the matter of Asgard Group Pty Ltd [2023] FCA 486 at [2], [8]. Tanamerah Estates Pty Ltd (Tanamerah) was sole trustee of the Superannuation Fund from its creation to 1 September 2016. Mr Tydeman and Catherine Tydeman were joint trustees of the Superannuation Fund between 1 September 2016 and 9 June 2022, at which time Asgard was appointed trustee: Tydeman v Tibra Capital Pty Ltd (No 2) [2018] NSWSC 884 at [22]; Tydeman v Asgard Group Pty Ltd, in the matter of Asgard Group Pty Ltd [2023] FCA 486 at [25]-[27].

  3. Commencing in January 2008, Tanamerah purchased shares in Tibra Capital Pty Ltd (Tibra). By April 2009, after a share split, it owned 231,830 shares as trustee for the Superannuation Fund: Tydeman v Asgard Group Pty Ltd, in the matter of Asgard Group Pty Ltd [2023] FCA 486 at [11]. On 9 June 2011, Tibra bought back the shares pursuant to a shareholders’ agreement. The buy-back gave rise to a dispute about whether Tibra paid the market value of the shares: Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2013] NSWSC 36 at [21]; In the matter of Tanamerah Estates Pty Ltd [2016] NSWSC 1644 at [3].

  4. On 29 August 2012, Tanamerah commenced proceedings against Tibra in relation to the disputed share buy-back (SC proceedings no. 2012/269942). Mr Tydeman sought to appear on behalf of Tanamerah as of right or by dispensation with rr 7.1(2) and (3) of the UCPR. That application was dismissed by Hallen J on 6 February 2013 in Tanamerah Estates. His Honour also stayed the principal proceedings until a solicitor had been appointed to act on behalf of Tanamerah.

  5. On 22 May 2015, Tibra issued a creditor’s statutory demand to Tanamerah in respect of a debt arising from costs orders made in the proceedings before Hallen J and subsequent review and appeal proceedings: In the matter of Tanamerah Estates Pty Ltd [2016] NSWSC 1644 at [5]. By summons filed on 15 June 2015 (and amended on 23 September 2015), Tanamerah applied to set aside the statutory demand (SC proceedings no. 2015/176355). The amended summons was signed by Mr Tydeman, who sought to carry on the proceedings as an authorised director acting on behalf of Tanamerah: Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWSC 1519 at [1]-[2].

  6. Tibra filed a notice of motion seeking a declaration that Tanamerah did not have standing to bring the proceedings on the basis of non-compliance with r 7.1(3) of the UCPR. Mr Tydeman submitted that he was entitled to represent Tanamerah as of right: Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWSC 1519 at [16]. Black J rejected that submission and stayed the proceedings for 28 days in order for Tanamerah to obtain legal representation: Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWSC 1519. The 28-day period was subsequently extended to allow Tanamerah a final opportunity to appoint a solicitor: Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWSC 1708. On 18 November 2015, Black J made orders in chambers dismissing the proceedings on the basis that Tanamerah had not filed a notice of appearance by a legally qualified representative. The orders were stayed pending any appeal brought by Tanamerah: In the matter of Tanamerah Estates Pty Ltd [2016] NSWSC 1644 at [9]-[10].

  7. Following a series of unsuccessful appeals and applications for leave to appeal, the orders made by Black J took effect: In the matter of Tanamerah Estates Pty Ltd [2016] NSWSC 1644 at [7], [11]; Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2015] NSWCA 383; Tibra Capital Pty Ltd (S84/2016) [2016] HCASL 147; Tanamerah Estates Pty Ltd v Tibra Capital Pty Ltd [2016] NSWCA 23. Tanamerah was therefore taken to have failed to comply with the statutory demand.

  8. On 11 March 2016, Tibra filed an application for an order winding up Tanamerah (SC proceedings no. 2016/78202). On 22 November 2016, Black J made an order winding up Tanamerah in insolvency: In the matter of Tanamerah Estates Pty Ltd [2016] NSWSC 1644.

  9. By summons filed on 29 May 2023, Asgard commenced proceedings in this Court seeking a vesting order under s 71 of the Trustee Act 1925 (NSW) in favour of Asgard in respect of the 231,830 ordinary shares in Tibra said to be held by Tanamerah as trustee of the Superannuation Fund (SC proceedings no. 2023/171175) (Vesting Proceeding). On 1 February 2024, Asgard sought leave to file a proposed amended summons in the Vesting Proceeding adding Tibra as a defendant. The proposed amended summons also sought the additional relief of a mandatory injunction under s 1324 of the Corporations Act, compelling Tibra to amend its register of members to show that Tanamerah remains a member of it and an order vesting the Tibra shares in Asgard as trustee for the Superannuation Fund.

  10. Asgard is not represented by a solicitor in the Vesting Proceeding.

  11. On 28 November 2023, Mr Tydeman filed a notice of motion in the Vesting Proceeding seeking declarations that s 78 of the Judiciary Act is inconsistent with the Supreme Court Act, the Civil Procedure Act and unparticularised rules of court made pursuant to those statutes. On 1 February 2024, Asgard filed a notice of motion seeking orders in substantially the same terms. On 16 February 2024, Mr Tydeman filed a third notice of motion seeking orders in substantially the same terms.

  12. The plaintiffs commenced these proceedings on 19 December 2023. The plaintiffs assert in their written submissions that they seek relief in these proceedings so that the Vesting Proceeding can progress despite Asgard not having legal representation. The Vesting Proceeding was listed for directions on the date that these proceedings were listed for hearing, 22 November 2024.

  1. On 9 April 2024, Mr Tydeman filed an application for removal of these proceedings to the High Court pursuant to s 40 of the Judiciary Act (HC proceedings no. S49/2024). On 8 August 2024, the High Court (Gleeson and Beech-Jones JJ) refused the application on the stated basis that the application had insufficient prospects of success to warrant removal to that Court: Tydeman v State of New South Wales & Anor [2024] HCASL 180.

  2. At the commencement of the hearing, I drew to the attention of Mr Tydeman the fact that the difficulty created by the requirement of UCPR rr 7.1(2) and (3) for his conduct of the Vesting Proceeding without Asgard having legal representation would appear not to arise if he and his mother replaced Asgard as trustee of the Superannuation Fund (restoring the position which had existed prior to Asgard’s appointment as trustee on 9 June 2022). The trustees of a self-managed superannuation fund may be individuals, rather than a body corporate, if they are members of the fund: Superannuation Industry (Supervision) Act 1993 (Cth), s 17A(1). That is a matter relevant to the future conduct of the Vesting Proceeding given the outcome of this proceeding as explained below.

Submissions

Plaintiffs’ submissions

  1. The starting point of the plaintiffs’ submissions is that s 124(1) of the Corporations Act confers on a company registered under the Corporations Act the legal capacity and powers of an individual (a term defined in s 2B of the Acts Interpretation Act 1901 (Cth) (Acts Interpretation Act) to mean a natural person).

  2. It was submitted that while a company is a creature of statute, it metaphysically appears to do acts and things personally in circumstances where a human being is directly exercising the company’s powers of a natural person. That human being merges with the company’s legal personality so that actual things caused to be done by that human being must be treated, by operation of law, as if the company had done those things itself.

  3. The plaintiffs draw attention to two replaceable rules contained in the Corporations Act: under s 198A, the directors may directly exercise all of the powers of a company and under s 201J the directors may appoint any director as the managing director and confer on that person any of the powers of the company that the directors can exercise (s 198C). In the first case when the directors so act, they do so as the company and not as agents of the company. In the second case when the managing director does an act or thing for the company in exercise of any of the powers so conferred, the managing director must by operation of the Corporations Act be treated as if the company had personally done that act for itself. Reference was made to s 9 of Corporations Act which provides that ‘doing an act or thing includes causing or authorising the act or thing to be done’.

  4. The plaintiffs submitted that it is necessary to distinguish between a human actor who directly does an act or thing as the company from one who does an act or thing directly, through being an agent acting for and on behalf of the company. Reference was made to Hamilton v Whitehead (1988) 166 CLR 121; [1988] HCA 65 and Kingsfield Holdings Pty Ltd v Lawfirst Pty Ltd (No 2) [2023] WASC 297 at [9].

  5. In Hamilton, Mr Whitehead was the managing director of a company and was charged with being knowingly concerned in the commission of an offence by the company which was to offer or issue to the public a prescribed interest, in breach of s 169 and s 174 of the Companies (Western Australia) Code. Section 169 prohibited a person from relevantly offering or issuing to the public for subscription or purchase any prescribed interest, and s 174 prohibited a person from contravening or failing to comply with s 169. The word ‘person’ was defined to include a company (the Interpretation Code, s 9). Mason CJ, Wilson and Toohey JJ said at 127:

In contrast to the statutory provision under consideration in Mallan v Lee, s 169 of the Code speaks directly to the company. It is not a case of a company being made liable for an act performed by a servant of the company on its behalf. The liability imposed is direct, not vicarious. The distinction was drawn by Viscount Haldane LC in Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 at 713. Its significance is explained by Lord Reid in Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170:

I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company’s servant or agent. In that case any liability of the company can only be a statutory or vicarious liability.

See also the statement of Denning LJ in H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd [1957] 1 QB 159 at 172.

There can be no doubt, on the facts of the present case, that the respondent, in placing the advertisement and in dealing with those who replied to it, was the company. He was its managing director and his mind was the mind of the company. The company therefore was liable as a principal for the breaches of s 169 of the Code. The liability was direct, not vicarious.

It is against this background that the liability of the respondent falls to be considered. As we have said, the applicant relies upon s 38(1) of the Interpretation Code, the terms of which have been set out. Since the respondent was the actor in the conduct constituting the offences and had knowledge of all the material circumstances, it must follow, according to the applicant, that the respondent was “knowingly concerned” in the commission of the offences committed by the company.

In our opinion, the submission is plainly right. Counsel for the respondent sought to gain some comfort from the words of Dixon J in Mallan v Lee. But, as we have sought to explain, the inversion of which his Honour spoke has no application here. The company is not vicariously liable for the actions of the respondent. The company is the principal offender and the respondent is charged as an accessory. Franklyn J thought that it was “wrong and oppressive” to prosecute the respondent for the identical acts and decisions as were relied on as the acts of the company. There is nothing conceptually wrong in such a course since “it is a logical consequence of the decision in Salomon v Salomon & Co [1897] AC 22 that one person may function in dual capacities”: Lee v Lee’s Air Farming Ltd [1961] AC 12 at 26. In R v Goodall (1975) 11 SASR 94 , Bray CJ discussed what his Honour described as: “… some sort of metaphysical bifurcation or duplication of one act by one man so that it is in law both the act of the company and the separate act of himself as an individual” (at 100) and expressed his conclusion as follows (at 101): “… my view is that the logical consequence of Salomon’s case … is that the company, being a legal entity apart from its members, is also a legal person apart from the legal personality of the individual controller of the company, and that he in his personal capacity can aid and abet what the company speaking through his mouth or acting through his hand may have done.” We agree with this view.

  1. Kingsfield Holdings concerned Order 4 r 3(2) of the Rules of the Supreme Court 1971 (WA) which provides that a body corporate may not begin or carry on any proceedings in the Supreme Court otherwise than by a solicitor. The question was whether the plaintiff company was entitled under Order 4 r 3(2) to be represented in the proceedings through an employee of the company, Mr Lee, who was a lawyer authorised to engage in legal practice as a corporate legal practitioner. Lundberg J concluded that it was not, observing at [9] that ‘to allow these proceedings to be conducted by the first plaintiff through Mr Lee would in effect mean the proceedings are being conducted ‘by’ Kingsfield Holdings, and not ‘by’ a solicitor’.

  2. The plaintiffs submitted that the legal capacity and powers of a natural person which are conferred on a company by s 124(1) include the doing of all types of acts and things which a natural person can do, including to speak. Clause 5 of the Constitution Act requires any court or judge to apply s 124(1). However, s 124(3) operates to pick up and apply UCPR r 7.1, which purports to limit or deny a company’s legal capacity and powers of a natural person under s 124(1).

  3. It was submitted that s 124(3) cannot validly operate to the extent that it affects, directly or indirectly, cl 5 of the Constitution Act. This is because there is a hierarchy of legislation operating in Australia, under which the Constitution Act and the Constitution itself are at the apex. Consequently, no Commonwealth law or state law may validly be made so as to limit or deny the ‘binding’ imposed by or under cl 5 of the Constitution Act which can be described as a binding ‘duty to perform’ imposed on courts and judges.

  4. As a consequence of UCPR r 7.1 as it has been interpreted by the courts, a company within the meaning of the Corporations Act cannot commence proceedings ‘in person’: Tanamerah Estates at [90]. However, it was submitted that this approach fails to recognise that s 124(1) merges a company’s legal personality with the relevant human being who is directly exercising that companies powers as a natural person under s 124(1) and s 198A(2) of the Corporations Act. The relevant human being is the physical embodiment of the company, and the courts and judges of NSW must recognise that legal fact by operation of cl 5 of the Constitution Act in respect of the ‘binding’ application of the Corporations Act.

  5. The plaintiffs’ central argument, as summarised at paragraph 45 of their written submissions, was that by operation of cl 5 of the Constitution Act and in accordance with s 15A of the Acts Interpretation Act, s 124(3) of the Corporations Act must be read down to the extent that - in relation to cl 5 of the Constitution Act - it is invalid for s 124(3) in the Corporations Act to pick up and apply UCPR r 7.1 to limit or deny a company’s legal capacity and powers of a ‘natural person’ under s 124(1) of the Corporations Act by reason of:

  1. neither Commonwealth law nor State law may validly be made to limit or deny the mandatory ‘binding’ duty to perform which has been imposed on the relevant courts/judges by or under cl 5 of the Constitution Act;

  2. the Supreme Court and its judges have been captured within the scope of that ‘binding’ duty to perform; and

  3. UCPR r 7.1 invalidly purports to limit or deny that ‘binding’ duty to perform which is caused indirectly by that statutory rule purporting to limit or deny the company’s legal capacity and powers of a ‘natural person’.

Defendant’s submissions

  1. The defendant submitted that Declaration 1 should not be made because:

  1. At common law, it is well established that a company, as an artificial legal person, is incapable of appearing personally in court: see eg, Re Education Pty Ltd and the Companies Act [1963] NSWR 1340 at 1341; Jonathan Alexander Ltd v Proctor [1996] 2 All ER 334 at 340-341. It must instead appear before a court by or through an agent. A member or officer of a company has no common law entitlement to appear before a court on behalf of the company (BayMarinePty Ltd v Clayton Country Properties Pty Ltd (No 2) (1986) 8 NSWLR 104 at 105-6) and the class of agents through which a company may appear may be limited by statute or by the practice of the court: Hubbard Association of Scientologists International v Anderson [1972] VR 340 at 341.

  2. Section 124 of the Corporations Act does not alter the common law position. There is a distinction between legal powers and capacities and physical powers: AustralasianCentre for Corporate Responsibility v Commonwealth Bank of Australia (2016) 248 FCR 280; [2016] FCAFC 80 at [50]. Section 124(1) cannot overcome the reality that a company is an artificial person with no physical attributes, and thus it cannot confer on a company the physical power to appear personally in proceedings: Bay Marine at 111; Simto Resources Ltd v Normandy Capital Ltd (1993) 10 ACSR 776 at 781-2.

  3. It follows that, to the extent that UCPR rr 7.1(2)-(3) restrict the circumstances in which a director may appear on behalf of a company, those rules of court do not undermine any right conferred by s 124(1) or any duty imposed on Supreme Court judges under covering cl 5 of the Constitution to act in accordance with the Constitution and Commonwealth laws.

  4. Even if s 124(1) conferred a prima facie right on a company to appear personally in court through its director, s 124(1) is qualified by s 124(3), which expressly provides that, ‘for the avoidance of doubt’, s 124 is not intended to authorise a company to do an act that is prohibited by a law of a State or Territory or give a company a right that a law of a State or Territory denies to the company.

  5. Section 124(3) is a valid law. It is within the capacity of the Commonwealth Parliament to confer powers on companies and expressly limit those powers by reference to State laws. Covering cl 5 of the Constitution does not make absolute all rights and duties conferred by Commonwealth laws, notwithstanding an express statement of intention that the Commonwealth law is intended to be qualified by certain State laws. When there is a clear statement of intention of the kind in s 124(3), the operation of the State laws is effectively preserved, such that the State law cannot undermine the Commonwealth law. Nor are any constitutional rights or duties undermined. Accordingly, neither s 124(3) nor UCPR r 7.1 purports to require Supreme Court judges to contravene any ‘binding’ duty imposed under covering cl 5 of the Constitution to give effect to the Constitution and Commonwealth laws.

  6. Neither s 124(3) of the Corporations Act, nor UCPR r 7.1(2)-(3), causes any ‘substantial obstruction’ to the exercise of the judicial power of the Commonwealth as referred to in s 71 of the Constitution. UCPR rr 7.1(2)-(3) do not deny companies the right to bring proceedings but merely regulate the manner in which such proceedings may be commenced and carried on.

  7. In any event, UCPR rr 7.1(2)-(3) do not impose an absolute prohibition on directors carrying on proceedings on behalf of companies because under s 14 of the Civil Procedure Act, the Court has a discretionary power to dispense with UCPR r 7.1 in an appropriate case.

  1. The defendant submitted that Declaration 2 should not be made because, although s 5 of the Constitution Act 1902 (NSW) expressly makes the legislative power of the NSW Parliament ‘subject to the provisions of the Commonwealth of Australia Constitution Act’, for the reasons stated in the preceding paragraph, UCPR r 7.1 is not inconsistent with any duty imposed by covering cl 5 of the Constitution.

  2. The defendant submitted that Declaration 3 should not be made because there is no basis to conclude that s 6 of the Supreme Court Act is inconsistent with s 78 of the Judiciary Act.

  3. The defendant submitted that Declaration 4 should not be made. Section 79(1) of the Judiciary Act picks up and applies UCPR r 7.1 as a surrogate Commonwealth law in full because nothing in s 78 of the Judiciary Act ‘otherwise provides’. The terms of s 78 preserve the operation of procedural rules such as UCPR r 7.1(2)-(3) (picked up and applied by s 79(1)). As s 78 is silent on the question of whether a company is permitted to appear by some agent other than a barrister or solicitor, there is no inconsistency between UCPR r 7.1 and s 78 of the Judiciary Act in the relevant sense. Even if s 78 of the Judiciary Act is construed as conferring a right on an individual to ‘appear personally’ in proceedings, that right is not available to a company because a company is incapable of appearing ‘personally’ in court.

Consideration

  1. I agree with the defendant’s submissions as to why none of the declarations sought by the plaintiffs should be made. It is sufficient if I make the following additional observations.

  2. Clause 5 of the Constitution Act (which is often described as ‘covering cl 5’) and s 109 of the Constitution establish the supremacy of the Constitution and the laws of the Commonwealth made pursuant to the powers conferred by the Constitution over the legislation of the State of New South Wales: Felton v Mulligan (1971) 124 CLR 367 at 412 per Walsh J. As Gummow J observed in Momcilovic v The Queen (2011) 245 CLR 1; [2011] HCA 34 at [211] (footnotes omitted):

The interaction of federal and state or provincial laws must be a matter of first importance in framing a federal constitution. Covering cl 5 makes not only federal laws, but also the Constitution itself, binding in the manner it specifies. As Quick and Garran noted at the time, covering cl 5 is substantially similar in scope and intention to the Supremacy Clause (Art VI cl 2) of the United States Constitution. But the framers of the Commonwealth Constitution went further by making the express provisions of Ch V: ss 106–120. Chapter V is headed “The States” and includes s 109. Whatever may be the relationship between the amendment provision in s 128 of the Constitution and the covering clauses, there could be no doubt that s 128 applies to s 109.

See also Hayne J at [311] and Crennan and Kiefel JJ at [625].

  1. The passage in Quick and Garran, The Annotated Constitution of the Australian Commonwealth (1901), p 353 to which Gummow J was referring in the above passage includes the following observations regarding the words ‘shall be binding on the courts, judges, and people of every State and of every part of the Commonwealth’):

The importance of these words, as indicating one of the fundamental principles of the Constitution, should be specially noted. They made Clause 5 of the Commonwealth Constitution Act substantially similar in scope and intention to article VI. sec. 2 of the Constitution of the United States, supra. Under the clause, the Act, the Constitution, and laws of the Commonwealth made in pursuance of its powers, will be the supreme law of the land, binding on the Courts, Judges, and people of every State, notwithstanding anything to the contrary in the laws of any State. The latter words operate as a rescission on all State laws incompatible with the Act, with the Constitution, and with such laws as may be passed by the Parliament of the Commonwealth in the exercise of its Constitutional rights. Therefore, by this clause, coupled with sections 106 to 109, all the laws of a State, constitutional as well as ordinary, will be in effect repealed so far as they are repugnant to the supreme law. All the laws of any State, so far as not inconsistent with the supreme law, will remain in force until altered by the proper authority.

  1. The declarations sought by the plaintiffs seek to invoke cl 5 of the Constitution Act to invalidate various state laws including, but not limited to, r 7 .1 of the UCPR. The first difficulty faced by the plaintiffs is that declaratory relief must be directed to a real controversy, not merely a hypothetical dispute. The limitations on a court’s power to grant declaratory relief were noted by Mason CJ, Dawson, Toohey and Gaudron JJ in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; [1992] HCA 10 at 582:

It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which “it is neither possible nor desirable to fetter… by laying down rules as to the manner of its exercise”: Forster v Jododex Aust Pty Ltd (1972) 127 CLR 421, at p 437, per Gibbs J. However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions: see In re Judiciary and Navigation Acts (1921) 29 CLR 257. The person seeking relief must have “a real interest” (Forster (1972) 127 CLR, at p 437, per Gibbs J; Russian Commercial and Industrial Bank v British Bank for Foreign Trade, Ltd [1921] 2 AC 438, at p 448, per Lord Dunedin) and relief will not be granted if the question “is purely hypothetical”, if relief is “claimed in relation to circumstances that [have] not occurred and might never happen” (University of New South Wales v Moorhouse (1975) 133 CLR 1, at p 10, per Gibbs J) or if “the court’s declaration will produce no foreseeable consequences for the parties” (Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180, at p 188, per Mason J; see also at p 189, per Aickin J; 18 ALR 55 at pp 69, 71 respectively).

  1. Declarations 1, 2 and 3 are stated at such a high level of generality that they raise, at most, merely hypothetical questions and should not be granted for that reason alone.

  2. In oral submissions Mr Tydeman sought to emphasise that s 5 of the Constitution Act makes ‘this Act’ binding on the courts, judges and people to which it refers. That is, of course, true. However, he was not able to explain the significance of those words in the present context beyond the fact that what is made binding by ‘this Act’, through s 5, is federal laws and the Constitution itself. The only federal laws which Mr Tydeman could identify as raising a potential inconsistency with the State laws referred to in the amended summons were s 124(1) of the Corporations Act and s 78 of the Judiciary Act.

  3. The only real controversy between the parties is whether, as the plaintiffs contend, s 124(1) of the Corporations Act or s 78 of the Judiciary Act has the consequence through cl 5 of the Constitution Act, read with s 109 of the Constitution, of invalidating UCPR r 7.1(2) or (3).

  4. In so far as to s 124(1) of the Corporations Act is concerned, the immediate difficulty with the plaintiffs’ contention that there is relevant inconsistency is that the meaning of a statutory provision must be determined by reference to the language of the statute read as a whole: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69]. Relevantly, subsection (1) of s 124 is qualified by subsection (3) (‘for the avoidance of doubt, this section does not…’), so that the conferral on a company of the legal capacity and powers of an individual under subsection (1) does not give a company a right which the law of a State denies to the company. UCPR r 7.1 is such a law.

  5. The plaintiffs appear to recognise in the manner in which the submission recorded at [38] is made that s 124(1) is qualified by s 124(3) and they submit that s 124(3) must be read down by reason of cl 5 of the Constitution Act. However, nothing in cl 5 of the Constitution Act justifies reading down s 124(3); to the contrary, the starting point is to construe s 124 of the Corporations Act and then, having done so, to determine whether a law of New South Wales conflicts with it. Clearly, UCPR r 7.1 does not conflict with s 124 as it is specifically adopted by it through s 124(3).

  6. Clause 5 makes s 124 of the Corporations Act binding on the ‘courts, judges, and people of every State and of every part of the Commonwealth’ and within that third category are the plaintiffs themselves. Hence, they are bound, just as the courts and judges of this State are bound, by the effect given to UCPR r 7.1 by s 124(3) of the Corporations Act as a necessary limitation on the conferral on a company of the legal capacity and powers of a natural person under s 124(1) of the Corporations Act.

  7. In so far as s 78 of the Judiciary Act is concerned, there is no relevant inconsistency with UCPR r 7.1(2) and (3) given the terms of s 79(1) which adopts, as a rule of procedure, the requirements in rule 7.1. In any event, the words relied on in s 78 (‘parties may appear personally or by…barristers or solicitors’) are concerned with the right of audience in courts exercising federal jurisdiction (Esso Australia Resources Ltd v Dawson (1999) 87 FCR 588; [1999] FCA 363 at [30]) and permit such a right to be exercised either personally or by a legal practitioner. In the case of a company, appearance ‘personally’ is not possible and this is not affected by s 124(1) of the Corporations Act. While it provides that a company has the legal capacity and powers of an individual, it needs to be construed in a common sense way, and does not extend to giving to a company the capacity to act in a physical sense such as speaking in court. As the Full Court of the Federal Court (Allsop CJ, Foster and Gleeson JJ) said in Australasian Centre for Corporate Responsibility at [50], in rejecting a submission that a company can express an opinion by passing resolution in general meeting:

We see nothing in the legal powers and capacities of an individual which would support the existence of a legal power or capacity in the company in general meeting to express an opinion, by resolution, on a matter concerning the company’s management. An individual’s expression of an opinion, even an opinion concerning him or herself, ordinarily does not involve the exercise of any legal power or capacity. The appellant’s submission confuses legal powers and capacities with physical powers (in this case, the power of speech). The shareholders of a company are, of course, free to express their opinions concerning the management of the company, individually and collectively.

  1. To similar effect are the following observations in Austin & Black’s Annotations to the Corporations Act (LexisNexis, looseleaf) at [2B.124]:

The point of [s 124(1)] is that when one or more fully competent individuals purport to act as, or on behalf of, a company, the company's capacity and powers are no more limited than the capacity and powers of the individuals. But there are necessary limits, for there are some things that it is impossible for a company to do, even allowing for the creativity of company lawyers. Since a corporation has ‘no soul to be damned, and no body to be kicked’ (a quotation commonly attributed to Edward, First Baron Thurlow, 1731–1806), it makes no sense, for example, to envisage a company, as principal by its human agent, praying or scratching itself. However, it is easy enough to attribute to the company as principal the conduct or knowledge of its human agent in many contractual, tortious or even criminal settings.

  1. As the plaintiffs correctly submitted, a company acts through a human actor or actors and, in certain cases, the acts of the human actor are properly seen as acts of the company rather than of an agent of the company, as illustrated by Hamilton in the passage extracted at [33] above. However, it does not follow that a company, in such a case, is acting ‘in person’ or ‘personally’: see the discussion by Hallen J in Tanamerah Estates at [91]-[94] and the cases referred to at [39] above. But, more importantly, it is well-established that the manner in which a company may bring and conduct proceedings in a court may be limited by state legislation, including rules of court which operate as delegated legislation, and this does not involve a relevant inconsistency with cl 5 of the Constitution Act for the reasons given above.

Conclusion

  1. For the above reasons, the order of the Court will be that the amended summons be dismissed with costs.

  2. I will stand over the Vesting Proceeding until 5 February 2025 at 9.30am to allow the plaintiffs an opportunity to obtain legal representation or pursue any other alternative open to them for the future conduct of that proceeding.

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Decision last updated: 12 December 2024

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Ainsworth v Criminal Justice Commission [1992] HCA 10
Martin v Taylor [2000] FCA 1002
Ainsworth v Criminal Justice Commission [1992] HCA 10