National Acceptance Corporation Pty Ltd v Benson and Ors
(1988) 12 NSWLR 213(Decision by: Kirby P)
Between: National Acceptance Corporation Pty Ltd
And: Benson and Ors
Judges:
Kirby PPriestley JA
Clarke JA
Subject References:
COMPANIES
WINDING UP
Effect of order
Disposition of property after commencement of winding up by the court
Avoidance of disposition
'Void'
Legislative References:
Companies (New South Wales) Code - s 368
Case References:
Brady v Stapleton - (1952) 88 CLR 322
Chapman v Shepherd - (1867) LR 2 CP 228
Commercial Bank of Australia v Carruthers - (1964) 6 FLR 247; 82 WN (Pt 1) (NSW) 76; [1964-5] NSWR 1197
Craddock v Hopfner - (1986) 10 ACLR 714; 4 ACLC 421
Gray's Inn Construction Co Ltd, Re - [1980] 1 WLR 711; [1980] 1 All ER 814
Green v Rozen - [1955] 1 WLR 741; [1955] 2 All ER 797
London, Hamburg and Continental Exchange Bank; Emmerson's Case, Re - (1866) LR 2 Eq 231; on appeal (1866) LR 1 Ch App 433
Mal Bower's Macquarie Electrical Centre Pty Ltd (In Liq) and the Companies Act, Re - [1974] 1 NSWLR 254
Mercredits Finance Ltd v Ramsey - [1979] 1 NSWLR 354
Omnico Ltd, Re - (1976) 1 ACLR 381
Onward Building Society, Re - [1891] 2 QB 463
Proctor v Jetway Aviation Pty Ltd - [1984] 1 NSWLR 166
Rudge v Bowman - (1868) LR 3 QB 689
Rudi's Enterprises Pty Ltd v Jay - (Court of Appeal, 3 June 1987, unreported)
Sullivan v Henderson - [1973] 1 WLR 333; [1973] 1 All ER 48
Suttor v Gundowda Pty Ltd - (1950) 81 CLR 418
Tellsa Furniture Pty Ltd (In liquidation) v Glendave Nominees Pty Ltd - (1987) 5 ACLC 662
Wiltshire Iron Co, Re; Ex parte Pearson - (1868) LR 3 Ch App 443
Judgment date: 25 March 1988
Decision by:
Kirby P
The task before the Court is to give meaning to the word "void" in of the Companies (New South Wales) Code, s 368(1).
The terms of the section are set out in Priestley JA's judgment. I do not repeat them. Many cases show that the word "void" is a word of uncertain meaning. Unless the statute provides its own dictionary it is necessary for a court to decide the precise meaning of the word in the context, specifying, in each particular case, the purposes for which, the parties between whom and the extent to which the transaction affected is avoided. The most ample meaning of "void" is that the transaction affected is treated as never having, in law, occurred and as having no relevant legal effect against the world, for all purposes. Sometimes the mind is set searching for alternative meanings.
This is particularly so, where the result of such a drastic interpretation is such as to cause serious inconvenience, and the risk of grave injustice, possibly to innocent third parties who have dealt with another party in good faith and without any knowledge of the circumstances which may invalidate its actions and render them "void".
The answer to the suggestion that this approach should be adopted in the present case can be simply stated. It involves consideration of the language chosen by Parliament; the purpose of that language and the scheme of which it is part; the history of the provisions which preceded the Section in its present form; and the provision already made in the statute, in plain terms, for relief from the possibility of serious inconvenience and injustice, where it is appropriate to afford such relief.
The word used is "void". Although that word may, in particular contexts, invite a more limited construction, normally (as it seems to me) it should receive the meaning which ordinarily attaches to it in everyday speech, viz, having no legal effect for any purpose as against the world so that it is as if the transaction which is "void" has not occurred, at least so far as the eye of the law is concerned: see Mercredits Finance Ltd v Ramsey [1979] 1 NSWLR 354, at 362; cf Brady v Stapleton (1952) 88 CLR 322. This is the starting point. Other considerations may require a more limited meaning to be given to the word. But because Parliament from time to time uses "voidable" in statutes or expressions such as "void as against the liquidator" (see, eg, s 451 of the Code), it should be presumed, at least to begin with, that where Parliament refers to "void" it intends a more radical consequence, both in terms of effect and in respect of the parties affected.
Nothing in the scheme of s 368 of the Code suggests a contrary conclusion.
I shall refer specifically to the provision for relief against the consequence of statutory voidness. But quite apart from this provision, and without the other grounds of exemption referred to in s 368, it should not be forgotten that the purpose of the subsection is to ensure, by drastic consequences for the breach, that after the commencement of the winding up of a company by the court, the disposition of the property of the company should be most strictly controlled in the interests of the company's creditors. The most emphatic way in which that end may be secured (although not the only way) is by attaching voidness to dispositions of the property of the company as a discouragement to such dispositions and as a disincentive to those who might otherwise be tempted to make them.
The history of company law, both in this country and in the predecessor provisions in England, demonstrate (as Priestley JA has shown) that where something less was intended than "void" for all purposes related or incidental to the administration of the winding up of the company concerned, the legislature has so provided. Indeed, as s 451 of the Code indicates, it still so provides where that is what is meant. Although courts have not always perceived or expressed the meaning of this and predecessor provisions clearly, there is no authority binding on this Court to which reference has been made, which requires a more limited meaning to be given to the word "void" as it appears in s 368 of the Code.
Also to be considered are the provisions in the section for relief in particular circumstances by order of the court. This is signalled by the words which immediately precede the word "void" in s 368(1). It is provided for, additionally, and notwithstanding s 368(1), in the terms of s 368(2). These provisions indicate an ample basis for the Court to relieve a person affected from the statutory consequence of voidness in the circumstances envisaged by the terms of s 368(1) and s 368(2). Moreover, as Priestley JA has pointed out, the very provision for the court otherwise to order that a transaction shall not be avoided assumes that, in default of such an order, that is the consequence of the statute. This is the reverse of what would be the situation if the transaction were voidable and not void.
In the instant case, no application was made to the Court for relief from the consequences of voidness that would otherwise flow from the statute.
It is of interest to note that the conclusions which I would reach about s 368(1) of the Code, derived independently from its language, apparent purpose, history and coherent scheme, are similar to the conclusions reached by the English Court of Appeal in respect of s 227 of the English Act: see Re Gray's Inn Construction Co Ltd [1980] 1 WLR 711, at 716; [1980] 1 All ER 814 at 818.
It is sufficient to dispose of the present appeal to conclude that the word "void" as used in s 368(1), means void for all purposes related or incidental to the administration of the winding up of the company and as between the company and a person dealing with the company. At the least that is what the word means. Upon that basis, when the winding up order was made in the present case, payment by the company to the appellant was thereby rendered by the Act to be "void" when made. In the result, at least between the company and the appellant and the appellant and the present respon- dents, the law treats the payment as never having happened. No order having been made by the Court for relief, and no other bases for exemption from liability having been shown, when the proceedings were before the trial judge, he should have held that the respondents remained liable under the guarantee to the appellant.
Orders
I therefore agree in the orders proposed by Priestley JA.