NEW SOUTH WALES COURT OF APPEAL
CITATION: Union Club v Lord Andrew Charles Robert Battenberg [2006] NSWCA 72
FILE NUMBER(S):
40322/05
HEARING DATE(S): 13 March 2006
DECISION DATE: 07/06/2006
PARTIES:
Union Club - Appellant
Lord Andrew Charles Robert Battenberg - Respondent
JUDGMENT OF: Giles JA Santow JA Bryson JA
LOWER COURT JURISDICTION: Supreme Court
LOWER COURT FILE NUMBER(S): SC 2448/04
LOWER COURT JUDICIAL OFFICER: Campbell J
COUNSEL:
S Gaegler SC & R Scruby - Appellant
R Aldridge SC & J R Dupree - Respondent
SOLICITORS:
Minter Ellison - Appellant
Russo and Partners - Respondent
CATCHWORDS:
Company articles - membership ceased if member "becomes bankrupt" - member became bankrupt - bankruptcy then annulled on entry into arrangement with creditors - whether annulment meant had not ceased to be a member - consideration of effect of annulment in bankruptcy law - annulment retrospective - reversed fact of becoming bankrupt - but on construction of articles, membership ceased and was not restored upon annulment. D
LEGISLATION CITED:
Bankruptcy Act 1966;
Bankruptcy Amendment Act 1991;
Income Tax Assessment Act 1936;
Insolvency Act 1986 (UK).
DECISION:
(1) Grant leave to appeal; (2) Direct the filing of the notice of appeal within seven days; (3) Appeal allowed; (4) Set aside the declarations and orders made by Campbell J on 30 March 2005; (5) In lieu thereof, order that the summons be dismissed; (6) Order the respondent to pay the costs of the trial and the appeal, and that he have a certificate under the Suitors Fund Act if otherwise qualified.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40322/05
ED 2448/04GILES JA
SANTOW JA
BRYSON JAWednesday 7 June 2006
UNION CLUB v LORD ANDREW CHARLES ROBERT BATTENBERG
Judgment
GILES JA: The appellant is a company limited by guarantee. It was incorporated in 1972 to acquire and take over the assets and liabilities of the then unincorporated body known as Union Club, and thereafter provided and continues to provide to its members the facilities of a club at premises in Sydney.
The appellant’s Articles of Association provided for a number of categories of membership. Ordinary members had to be proposed, seconded and elected by ballot. By Article 7(e), after election and on payment of the entrance fee and subscription the ordinary member -
“ … shall be enrolled in the books of the Club, and shall be bound by the Articles and By-laws and subject thereto shall be entitled to the rights and privileges of a member.”
On 6 October 1992 the respondent became an ordinary member of the appellant. By Article 4(a) he did not by reason of his membership have any interest in any of the property, profits or income of the appellant.
Article 16(b) provided -
“(b)A member shall cease to be a member if he becomes bankrupt or enters into a deed of assignment, a composition or a scheme of arrangement with his creditors under Part X of the Bankruptcy Act 1966 (as amended).”
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- Case
- [2006] NSWCA 72
- Decision Date
CaseChat Overview and Summary
The central legal issue before the Full Court was the construction of Article 16(b) of the Union Club's articles of association in light of the annulment of the respondent's bankruptcy. Specifically, the court had to determine whether the annulment of the bankruptcy, which had retrospective operation under bankruptcy law, meant that the respondent had not, for the purposes of the club's articles, ceased to be a member.
The Full Court reasoned that while annulment of bankruptcy generally operates retrospectively, restoring the bankrupt to their original position, this did not mean that the fact of having become bankrupt was expunged from history. Applying this distinction to the construction of the club's articles, the court held that membership ceased upon the event of becoming bankrupt, and that the subsequent annulment, despite its retrospective legal effect, did not operate to restore the membership. The court found that the language of the articles indicated a cessation of membership upon the occurrence of bankruptcy, and that this cessation was not reversed by the retrospective operation of the annulment.
Consequently, the Full Court allowed the appeal, set aside the declarations and orders made by Campbell J, and dismissed the summons. The respondent was ordered to pay the costs of the trial and the appeal.
Orders
Orders of the court
(1) Grant leave to appeal; (2) Direct the filing of the notice of appeal within seven days; (3) Appeal allowed; (4) Set aside the declarations and orders made by Campbell J on 30 March 2005; (5) In lieu thereof, order that the summons be dismissed; (6) Order the respondent to pay the costs of the trial and the appeal, and that he have a certificate under the Suitors Fund Act if otherwise qualified.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
The Act relevantly took its form as at 23 March 2000 with amendments made by the Bankruptcy Amendment Act 1991. Sections 153B and 154A(1) came to provide separately for annulment, and annulment upon payment of debts in full and upon approval of a composition or scheme of arrangement was automatic, without the need for approval by the court or a court order.Retrospective operation In referring to annulment of the bankruptcy “on” a particular date, ss 153A(1) and 74(5) were open to the view that their annulment operated to bring the bankruptcy to an end without any retrospective effect. Annulment by court order pursuant to s 153B was open to the same view. However, historically and from the saving provisions dealing with the consequences of annulment, that view was not adopted. Smallcombe v Olivier did not prevail, and from Bailey v Johnson onwards numerous decisions spoke of annulment as having retrospective operation. In Australia, in re Taylor; ex parte Taylor (1898) 8 BC (NSW) 50 it was said at 51 that if a bankrupt obtains an order annulling the bankruptcy he “goes scot free, and it is as though he had never been in the Court at all”. In the High Court in Cameron v Cole Latham CJ said at 594, citing Cockburn CJ in Bailey v Johnson, that in respect of his property the debtor is “restored to the status quo ante” and “remitted to his original situation”; see also Starke J at 594 (“remit all persons interested to their original positions”). In Marek v Tregenza (1963) 109 CLR 1 at 4-5 Kitto and Menzies JJ described annulment as restoring the bankrupt to his former condition, so far as that could be done without invalidating intermediate acts of the court and bankruptcy officials. The language of restoring the bankrupt to his original situation was used in re Lawson (1939) 11 ABC 137, re Gay (1943) 13 ABC 134 and re Falvey (deceased) (1946) 13 ABC 291. In all these cases but Cameron v Cole the annulment was because the bankrupt had paid his creditors in full or obtained a legal acquittance of his debts, that is, the bankrupt had properly been made bankrupt. Retrospective operation even in that circumstance was thoroughly established. I will come to more recent decisions taking up, and further extending, these descriptions of annulment. The appellant did not dispute in the appeal that annulment under the three avenues in the Act, including pursuant to s 74(5), had retrospective operation. Its submissions were principally directed to construction of Article 16(b). They included, however, that retrospective operation did not of itself provide the answer to the question because the retrospectivity did not extend to the fact of becoming bankrupt. In University of Wollongong v Metwally (1984) 159 CLR 447 at 478 Deane J said of the nature of the retrospective operation of a statute -“A parliament may legislate that, for the purposes of the law which it controls, past facts or past laws are to be deemed and treated as having been different to what they were. It cannot, however objectively, expunge the past or "alter the facts of history": cf. Akar v Attorney-General (Sierra Leone). If the fact was that its Emperor wore no clothes, it is powerless either to reverse that fact outside the fields in which it is master or objectively to convert into falsehood the truth which a small child saw.”