University of Newcastle Union Ltd [2008] NSWSC 1361

New South Wales Supreme Court

CITATION : University of Newcastle Union Ltd [2008] NSWSC 1361

HEARING DATE(S) : 15/12/08

JUDGMENT DATE : 17 December 2008

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Barrett J

DECISION : Winding up ordered.

CATCHWORDS : CORPORATIONS - winding up - application by the company itself - decision to apply made by directors - whether application regular

LEGISLATION CITED : Corporations Act 2001 (Cth), ss 124(1), 125, 461(1)(a), 461(1)(k), 462(2), 462(5), 491

CATEGORY : Principal judgment

Campbell v Rofe (1932) 48 CLR 258 Re Botar-Tatham Pty Ltd [2001] NSWSC 613; (2001) 52 NSWLR 680 Re Giant Resources Ltd [1991] 1 QdR 107 Re Inkerman Grazing Pty Ltd (1972) 1 ACLR 102 CASES CITED : Re Interchase Management Services Pty Ltd (1992) 9 ACSR 148 Re Kalblue Pty Ltd (1994) 12 ACLC 1057 Re United Medical Protection Ltd [2002] NSWSC 413; (2002) 41 ACSR 623 Re United Uranium NL [1990] VR 121 Western Interstate Pty Ltd v Deputy Commissioner of Taxation (1995) 13 WAR 479

PARTIES : University of Newcastle Union Limited - Plaintiff

FILE NUMBER(S) : SC 5568/08

COUNSEL : Mr J C Giles - Plaintiff

SOLICITORS : UTR Law - Plaintiff

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

WEDNESDAY 17 DECEMBER 2008

5568/08 UNIVERSITY OF NEWCASTLE UNION LIMITED JUDGMENT 1 This is an application under s 461(1)(k) of the Corporations Act 2001 (Cth) for a winding up order in respect of The University of Newcastle Union Limited ("UNU"), a company limited by guarantee. Winding up is sought on the just and equitable ground. 2 UNU was incorporated in 1999 to take over the funds, assets and liabilities of an unincorporated association which had for some time provided social, welfare and other facilities and amenities for students at the University of Newcastle. 3 Commonwealth legislation enacted in 2006 had the effect of making membership of student bodies such as UNU voluntary. It had previously been compulsory and universities themselves had collected membership fees for such bodies. 4 After the 2006 legislation came into force, UNU suffered a significant loss of members. The position today is that it has 804 life members but no other members (there are several classes of membership). In particular, there are now no ordinary members and no associate members 5 UNU no longer conducts operations. It appears that its ability to do so was severely compromised by the changes to which I have referred. As a result, UNU's assets were transferred to UON Services Limited ("UON") which also assumed all liabilities. UON was established and funded by the University of Newcastle, with the active concurrence and support of the board of UNU, in order to provide services and facilities generally similar to those that UNU had provided while financially able to do so. 6 As a result of the circumstances to which I have referred, the board of UNU has come to the view that there is no longer any reason for UNU to continue and that it should be wound up. It is, however, not possible to obtain a special resolution of members for voluntary winding up (s 491) or for the making of an application to the court (s 461(1)(a)). This is because, under the constitution, only ordinary members and associate members have the right to vote at general meetings and, as I have said, there are now no members of either such class. 7 The board of UNU has therefore caused the company itself to bring these proceedings. 8 There can be no doubt that the company is a competent applicant for an order for its own winding up. It is one of the persons identified in s 462(2) as persons who "may apply for an order to wind up a company": see s 462(2)(a). 9 The court should, however, concern itself with "the validity of the decision and executive act of the directors to present the petition in the name of the company", to quote words used by Street J in Re Inkerman Grazing Pty Ltd (1972) 1 ACLR 102 at 103. It was held in that case that a company's directors may cause it to make application to the court for its own winding up where, as is commonly the case, they are given by the constitution the ability to exercise all such powers of the company as are not, by the legislation or the constitution, required to be exercised by the company in general meeting. That was a proposition not embraced in all cases (see the comment at (1990) 64 ALJ 600 about then recent cases in Victoria and Queensland to the contrary, being Re United Uranium NL [1990] VR 121 and Re Giant Resources Ltd [1991] 1 QdR 107). However, as Austin J pointed out in Re United Medical Protection Ltd [2002] NSWSC 413; (2002) 41 ACSR 623, the differences now seem to have been settled in favour of the Inkerman Grazing approach. This is particularly so in light of Re Interchase Management Services Pty Ltd (1992) 9 ACSR 148. 10 It is, at all events, clear that the court will entertain an application by the company itself, instigated by its board of directors, where, as a matter of construction, the powers of the directors as defined by the constitution are sufficient to enable them to activate the company in that way. 11 The general powers conferred on the board of directors of UNU are expressed in article 9.1: "The Board is vested with and responsible for pursuing the objects of UNU and controlling its affairs and property." 12 The objects of UNU are stated in article 3.1. It is not necessary to set them out. It is sufficient to say that they are concerned with providing facilities and services for students, graduates and staff of the University of Newcastle. Article 4.1 says that UNU "has all the powers of a natural person but its powers must only be used in the pursuit of its objects". 13 Despite article 4.1, UNU has power to petition the court for its own winding up. The company's powers do not derive from or depend on the provisions of the constitution. Under s 124(1) of the Corporations Act, every company has "the legal capacity and powers of an individual", "all the powers of a body corporate" and the particularly enumerated powers in paragraphs (a) to (b); and it is made clear by s 125 that a particular exercise of power is not invalid because contrary to an express restriction or prohibition in the constitution or because contrary to or beyond any objects in the constitution. The fact that s 462(2)(a) makes a company a competent applicant for its own winding up clearly implies a power for the company to make such an application. 14 The real question goes to the powers of the directors. Article 9.1, quoted above, is in an unusual form. It can nevertheless be seen to consist of two distinct parts. First, the board is given power and responsibility for "pursuing the objects of UNU". Second, the board is given power and responsibility for "controlling its [UNU's] affairs and property". To present a petition for the company's winding up is not to pursue its objects. But is presentation of a petition for the company's winding up to control its affairs? 15 I am of the opinion that this question should be answered "yes". "Affairs" is a very broad term. By analogy with the approach taken by the Privy Council in Campbell v Rofe (1932) 48 CLR 258, I think that a power to control the "affairs" of UNU should be construed as a comprehensive power to do anything that it is lawful for UNU to do in relation to any matter touching its property, business, activities, existence or status. Action directed towards the imposition of a form of external administration is, to my mind, action within the power to control UNU's "affairs". 16 The winding up application made by UNU in accordance with a decision of its board should therefore be regarded as validly made by the company itself. This makes it unnecessary to consider the question whether the court can entertain a winding up application and order winding up in the absence of an application by someone who is recognised by s 462(2) as a competent applicant: see Re Kalblue Pty Ltd (1994) 12 ACLC 1057, Re Botar-Tatham Pty Ltd [2001] NSWSC 613; (2001) 52 NSWLR 680 and the contrary decision in Western Interstate Pty Ltd v Deputy Commissioner of Taxation (1995) 13 WAR 479. The likelihood, in my view, is that, given s 462(5), it cannot. 17 As to the merits of the present application, the evidence shows that UNU is no longer able to perform the functions for which it was established and that there is no prospect of its doing so again. 18 I am satisfied, therefore, that it is just and equitable that the company be wound up. Orders will be made accordingly. **********