Reported Decision : (2003) 56 NSWLR 721 (2003) 21 ACLC 583 New South Wales Supreme Court CITATION : Sihota v Pacific Sands Motel [2003] NSWSC 119 HEARING DATE(S) : 28 February 2003 JUDGMENT DATE : 3 March 2003 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Leave granted CATCHWORDS : CORPORATIONS - winding up - leave to begin proceedings against company in liquidation - whether Supreme Court of New South Wales can grant leave when winding up order was made by the Supreme Court of Queensland LEGISLATION CITED : Corporations Act 2001 (Cth) ss 9, 58AA, 471B Corporations Law s 471(2) Action Engineering Pty Ltd v Campbell (1991) 103 ALR 437 Continental Venture Capital Ltd v Amann Aviation Pty Ltd (in liq) (2001) 53 NSWLR 687 CASES CITED : FAI General Insurance Co Limited [2002] NSWSC 262 Re Coastal Constructions Pty Ltd (1994) 13 ACSR 329 Re Wakim; Ex parte McNally (1999) 198 CLR 511 State Bank of South Australia v Clockwork Motors Pty Ltd (1991) 101 ALR 402 Tarsem Singh Sihota (P) PARTIES : Pacific Sands Motel Pty Ltd (In liq) (D1) Bridgecorp Australia Pty Ltd (D2) FILE NUMBER(S) : SC 6071/02 COUNSEL : A Ogborne (P) Ms D Lim (D2) Stacks the Law Firm (P) SOLICITORS : Clout & Associates (D1) MacGillivary's (D2) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J MONDAY 3 MARCH 2003 6071/02 TARSEM SINGH SIHOTA V PACIFIC SANDS MOTEL PTY LTD (IN LIQ) & ANOR JUDGMENT 1 HIS HONOUR: In this proceeding, which began on 20 December 2002, the plaintiff seeks to extend a caveat over a development property in Kingscliff in New South Wales. Limited extensions of the caveat have been ordered in interlocutory applications. The first defendant is in liquidation. The Supreme Course of Queensland made a winding up order in March 2002. 2 The plaintiff has made an interlocutory application to this Court under s 471B of the Corporations Act 2001 (Cth) for leave, nunc pro tunc, to begin the proceeding against the first defendant. The application came before me in the Equity Duty List. After considering the matter, I decided that I had jurisdiction to grant leave and on the merits I should do so, and so I made an order granting leave under s 471B. I decided that the Court has the power to grant leave under s 471B nunc pro tunc, relying on Re Coastal Constructions Pty Ltd (1994) 13 ACSR 329. However, I reserved my reasons for judgment on the point of law concerning jurisdiction. 3 The application raised this short but important point: can leave under s 471B be granted by a Court (as defined in s 58AA) other than the one that made the winding up order? 4 Section 471B provides: "471B While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with: (a) a proceeding in a court against the company or in relation to property of the company; or (b) enforcement process in relation to such property; except with the leave of the Court and in accordance with such terms (if any) as the Court imposes." 5 It will be seen that s 471B makes a distinction between a "court" and a "Court". Section 9 of the Act defines those terms by reference to s 58AA, which is in the following terms: "58AA (1) Subject to subsection (2), in this Act: ' court ' means any court; ' Court ' means any of the following courts: (a) the Federal Court; (b) the Supreme Court of a State or Territory; (c) the Family Court of Australia; (d) a court to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act. (2) Except where there is a clear expression of a contrary intention (for example, by use of the expression 'the Court'), proceedings in relation to a matter under this Act may, subject to Part 9.7, be brought in any court. Note : The matters dealt with in Part 9.7 include the applicability of limits on the jurisdictional competence of courts." 6 It is plain that the reference to Part 9.7 is now incorrect, and should be a reference to Part 9.6A, which deals with jurisdiction and procedure of courts. Section 1337B confers concurrent jurisdiction with respect to civil matters arising under the Corporations legislation, upon the Federal Court of Australia and the Supreme Courts of each State, the Capital Territory and the Northern Territory. Section 1337C confers equivalent jurisdiction on the Family Court and each State Family Court. Section 1337E confers jurisdiction on the lower courts of each State-and the two Territories with respect to civil matters arising under the Corporations legislation, but it provides that the jurisdiction conferred on a lower court is subject to the court's general jurisdictional limits relating to amounts and the value of property with which the court may deal. Thus a "court" has jurisdiction with respect to civil matters under the Corporations legislation but there are limits on what it can do, whereas a "Court" has plenary jurisdiction (subject, in the case of State Courts, to s 9 of the Administrative Decisions (Judicial Review) Act 1977 (Cth)). 7 The plaintiff has properly drawn my attention to some observations by Barrett J in Re FAI General Insurance Co Limited [2002] NSWSC 262. The case involved an application to this Court by Permanent Trustee Australia Limited and another company under s 471B to prosecute proceedings in the High Court of Australia against FAI, which was in liquidation pursuant to an order of this Court. Special leave had been granted to appeal from a decision of the Court of Appeal of this Court, which had held that FAI was not liable in respect of professional indemnity insurance issued to the applicants because of alleged breaches by them of their duty of disclosure. 8 In the course of setting out his reasons for granting the leave that had been sought, Barrett J said: "Section 471B says that where a company is being wound up in insolvency or by 'the Court', a person cannot begin or proceed with a proceeding 'in a court' except with the leave of 'the Court'. Having regard to the meanings given by s 58AA, via s 9, to 'court' with a small 'c' and 'Court' with a capital 'C' and to the fact that 'winding up in insolvency', which occurs by virtue of an order of 'the Court' (see s 459P) is recognised by the s 9 definition of 'winding up by the Court' as a species of 'winding up by the Court', it is plain that the proceedings in relation to which the prohibition upon proceeding without leave applies are proceedings in any court whatsoever; but that the Court from which the necessary leave is to be obtained is the Court by which the order for winding up was made. This is consistent with the position under earlier statutes: see, for example, the observation of McLelland CJ in Eq in Re Sydney Formworks Pty Ltd [1965] NSWR 646 that 'the Court administering the liquidation may give leave'. That, in the present case, is this court." 9 This construction of s 471B is obviously open on the wording of the section itself. It found favour, under the similarly worded provisions of s 471(2) of the Corporations Law, with von Doussa J in State Bank of South Australia v Clockwork Motors Pty Ltd (1991) 101 ALR 402. Barrett J and von Doussa J are judges highly experienced in corporations matters. Nevertheless I have decided, with respect, to take a different view. 10 Barrett J's observations were clearly obiter dicta. The case before him was one where the winding up order was made in the Court to which the application for leave was directed. It seems unlikely that the point now before me was fully argued. 11 His Honour referred to Re Sydney Formworks, a decision made under the Uniform Companies Acts of the States. McLelland CJ in Eq's observation, quoted by Barrett J, reflects a time when statutory company law was purely a matter for each State. While there were some political arrangements for consultation which were designed (unsuccessfully, as it turned out) to maintain uniformity of legislation, there were no co-operative arrangements in place to cause amendments in the Australian Capital Territory to apply automatically in the States, and each State administered its company law separately from the others. Generally speaking, proceedings under the Companies Act of a State were brought in the Supreme Court of that State. There was no statutory cross-vesting law and the Federal Court of Australia had not been formed. 12 A national co-operative system of company law was achieved during the period 1979 to 1982, with the enactment of the legislative framework under which the Companies Codes of the States operated. Each State legislated to cause the statutory company law of the Australian Capital Territory, as amended from time to time, to apply in the State. Separate State commissions or commissioners remained, but a National Companies and Securities Commission was also established. Prior to the commencement of the cross-vesting legislation (see Jurisdiction of Courts (Cross-vesting) Acts (1987) Cth and States)), the general position was that only the Supreme Court of the State whose legislation was in question had jurisdiction to make orders to give effect to statutory rights and liabilities or with respect to a statutory procedure: see HAJ Ford, Principles of Company Law (5th edition, 1989), paragraph [2416]. 13 A new co-operative system was established in 1991 under which the Companies Codes and related Codes were replaced by the Corporations Law, and a single national commission, originally called the Australian Securities Commission, was established to replace the State commissions. An attempt was made in the legislative scheme to confer concurrent plenary jurisdiction on the Federal Court and the State Supreme Courts. It was necessarily a complex exercise because the legislation was a combination of State and Commonwealth legislation. The effect of the Corporations Law and allied legislation, so far as concerns the question currently under consideration, was resolved authoritatively by the Full Federal Court in a case not decided to Barrett J, Action Engineering Pty Ltd v Campbell (1991) 103 ALR 437. That decision survived the High Court's decision in Re Wakim; Ex parte McNally (1999) 198 CLR 511: see Continental Venture Capital Ltd v Amann Aviation Pty Ltd (in liq) (2001) 53 NSWLR 687. 14 In my opinion the reasoning of the Full Federal Court in Acton Engineering governs the issue under the Corporations Act as well as under the Corporations Law. Lockhart J, with whom Black CJ and Davies J agreed, expressly held that any Court having jurisdiction under the Corporations Law, including the Federal Court, had jurisdiction to grant leave to commence or continue proceedings against a company in liquidation under what was then s 471(2) of the Corporations Law, although the Court granting leave had not made the winding up order against the company in question. He disapproved of von Doussa J's decision in the Clockwork Motors case. 15 The complexity arising because the Corporations Law applied in each of the States as a law of the State, while applying in the Australian Capital Territory as a law of the Commonwealth, made it necessary for the Full Federal Court to consider whether the wording of the Corporations Laws of the States might have a narrow meaning because of the limited geographical subject matter of each State's law. The Court held that a limited construction should not be adopted, because it was the intention of all legislatures within Australia to establish a national legislative scheme in which the Federal Court and the Supreme Courts might exercise jurisdiction in respect to civil matters, without any Court having primacy over any other. 16 The position is now more straightforward, since the Corporations Act is an exercise of Commonwealth legislative power pursuant to referrals of power by the States. The scheme obviously is a national scheme, and Part 9.6A establishes jurisdictional arrangements for the Federal Court and the Supreme Courts in which, generally speaking, the jurisdiction is concurrent and no Court is given primacy. That being so, the structure of the statutory scheme suggests a legislative intention that any "Court" should have jurisdiction to make orders consequent upon orders made by any other "Court". 17 In my opinion, s 471B can and should be construed in a manner that achieves this result. Under the construction that I favour, one must take the definition of "Court" in s 58AA(1) and insert it in substitution for the words "the Court" whenever the latter words appear in s 471B. It then becomes plain that the reference to "the Court" at the end of the section is a reference to any Court, and is not confined to the Court that made the winding up order. 18 Consequently, I have decided that this Court had jurisdiction to grant leave to the plaintiff under s 471B, notwithstanding that another Court, the Supreme Court of Queensland, made the winding up order. I have made an order accordingly. ********** Last Modified: 03/12/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.