Thursday, April 19, 2012

Reinstatement of pre-Corporations Law (1991) companies: Part 3

In my previous post I noted that the balance of authorities consider that the Corporations Act is not the appropriate legislation for reinstatement of a company which was registered and deregistered/dissolved under pre-1991 corporations legislation.

In City West Water Limited v Mr D Investments Pty Ltd [2002] VSC 553, Senior Master Mahony of the Supreme Court of Victoria considered that the legislation applicable at the time of the deregistration / dissolution is the appropriate legislation for the reinstatement of the deregistered company (at [28]). In Armitage v HXE Limited [2010] NSWSC 1109 White J of the New South Wales Supreme Court held that on the basis of the reasoning of Senior Master Mahony in City West Water, the Companies Act 1961 (NSW) was the appropriate legislation for reinstatement of a company deregistered at the time that the Companies Act 1961 (NSW) applied.
However, one issue with the application of these Acts is that they have been repealed. For instance:
  • The Companies Act 1961 was repealed on 10 February 2010 by s3 (Schedule 1) of the Legislation Reform (Repeals No. 5) Act 2010.
  • The Companies (Victoria) Code and Companies (Application of Laws) Act 1981 were repealed in 2008.
So how can these Acts be used to reinstate a company deregistered under them?

In Armitage, White J applied the Companies Act 1961 to effect the reinstatement of a company, whereas the Companies Act 1961 had been repealed. The basis for this was that there is legislation allowing for the survival of certain parts of previous corporations legislation which is not carried over into the Corporations Act (at [9] and [10]):
9 In Baird v WJT Howes Investments Pty Ltd [2008] NSWSC 1232; (2008) 68 ACSR 485, Barrett J followed City West Water Ltd v Mr D Investments Pty Ltd [2002] VSC 553; (2002) 43 ACSR 622 in holding that where a company had been deregistered under the Companies (New South Wales) Code, the provision of that Code remained applicable to applications for reinstatement. This was by virtue of s 85 of the Corporations (New South Wales) Act 1990 (NSW) pursuant to which the Code continued to apply by its own force in relation to matters arising directly or indirectly out of matters that arose before the commencement of that Act.
10 Section 20 of the Companies (Application of Laws) Act 1981 (NSW) provided that unless the contrary intention appeared all things and circumstances appointed or created by or under the Companies Act 1961 should, subject to the Companies (New South Wales) Code, continue to have the same status, operation and effect as they would have had if the Companies (Application of Laws) Act had not been enacted.
It appears that s85 of the Corporations (Victoria) Act 1990 may allow for the survival of the Corporations (Victoria) Code to the extent that the Corporations Act does not deal with those matters. s85 provides as follows:
(1) This section provides for the national scheme laws of this jurisdiction to supersede the co-operative scheme laws, which are to continue to operate of their own force only in relation to-

(a) matters arising before the commencement of this section; and

(b) matters arising, directly or indirectly, out of such matters-

in so far as the national scheme laws or the Corporations legislation do not deal with those matters.
Unfortunately s85 is unclear in its application and scope.

In respect of the survival of the reinstatement provisions of the Companies Act 1961, the Victorian equivalent of the survival legislation for the Companies Act 1961, being the Companies (Application of Laws) Act 1981, appears to have been repealed.

It is therefore unclear how any company could be reinstated if it was dissolved under pre-1991 corporations legislation. This issue was confronted by Barrett J in Tan v ASIC [2011] NSWSC 58 in which Barrett J was asked to reinstate a company deregistered under pre-1991 corporations legislation. Barrett J noted the lack of clarity, complexity and resultant difficulties in the equivalent New South Wales provisions at [6] to [9] as follows:
6. I am bound to say, however, that I have a distinct discomfort about continuing resort to the Companies (New South Wales) Code , given that its applicability and availability rest solely on the insubstantial foundation of s 85 of the Corporations (New South Wales) Act 1990 (NSW). The Companies (New South Wales) Code is otherwise not in force following repeal of the Companies (Application of Laws) Act 1981 (NSW) by the Statute Law (Miscellaneous Provisions) Act 2008 (NSW) which was itself repealed by the Statute Law (Miscellaneous Provisions) Act 2009 (NSW). 
7. As regards a company deregistered under New South Wales companies legislation before 1 January 1991, a combination of: 
(a) transitional provisions that came into effect upon the creation of the Corporations Law of New South Wales on 1 January 1991 by the Corporations (New South Wales) Act 1990 (NSW); 
(b) insertion into the Corporations Law of New South Wales by the Company Law Review Act 1998 (Cth) of not only reinstatement provisions corresponding with those in the present s 601AH but also the particular transitional provision that became s 1362CH;
(c) non-inclusion of that s 1362CH in the Corporations Act 2001(Cth); and 
(d) the wide-ranging but sometimes very generally and imprecisely expressed transitional provisions now in force through Division 6 of Part 10.1 of the Corporations Act 2001 (Cth)   
does not seem to provide a basis for a conclusion that reinstatement of registration may be dealt with by the court and by ASIC under s 601AH of the present Corporations Act.
8. It is in my opinion desirable that Parliament enact legislation dealing in a clear and concise way with reinstatement of the registration of a company either deregistered or dissolved before 1 January 1991 under State or Territory legislation then in force. 
9. Such cases arise fairly frequently. Identification of the correct basis on which to order and effect reinstatement is not something that is remote from practical affairs. 
The take-home message here is the following:

  • Unless the issue is resolved by a Court of Appeal, it is unclear whether there is any scope for the reinstatement of a company deregistered before 1991.
  • A practitioner needs to be very careful and thorough when faced with an application to reinstate a company dissolved before 1991.

Monday, April 16, 2012

s1324 Injunctions - AGBC Pty Ltd & Anor v Dessa & Ors [2012] VSC 118

The matter of AGBC Pty Ltd & Anor v Dessa & Ors [2012] VSC 118 was an application by a liquidator for an interim injunction under s1324(4) of the Corporations Act 2001 (Cth).  The liquidator was seeking to restrain a previous director of the company in liquidation from removing the assets and confidential information of the company.

s1324 provides as follows:
(1) Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:
(a) a contravention of this Act; or
(b) attempting to contravene this Act; or
(c) aiding, abetting, counselling or procuring a person to contravene this Act; or
(d) inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or
(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or
(f) conspiring with others to contravene this Act;
the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.
(4) Where in the opinion of the Court it is desirable to do so, the Court may grant an interim injunction pending determination of an application under subsection (1).
Gardiner AsJ referred to ASIC v Mauer-Swisse Securities Limited and Anor [2002] NSWSC 741 and set out the principles for obtaining an injunction under s1324 (at [31]):
31 In Australian Securities and Investments Commission v MauerSwisse Securities Limited and anor,[2] Palmer J of the Equity Division of the Supreme Court of New South Wales considered the principles to be applied in applications for interim injunctions under s 1324(4) of the Act. He described an inconsistency in approach in the authorities as to the principles upon which the Court should act in an application for an interim injunction under the sub-section. In the judgment, he summarised the principles he considered should be applied. Those which have relevance in the present context are as follows:

– the jurisdiction which the Court exercises under s.1324 CA is a statutory jurisdiction, not the Court’s traditional equity jurisdiction;
– Parliament has made it increasingly clear by successive statutory enactments that the Court, in exercising its statutory jurisdiction under s.1324, is not to be confined by the considerations which would be applicable if it were exercising its traditional equity jurisdiction;
– amongst the considerations which the Court must take into account in an application for an injunction under s.1324 CA are the wider issues referred to by Austin J in Sweeney and Parkes, and by Davies AJ in Pegasus; they may be gathered under the broad question whether the injunction would have some utility or would serve some purpose within the contemplation of the Corporations Act;
– these considerations are to be taken into account regardless of whether the application is for a permanent injunction under s. 1324(1) or for an interim injunction under s. 1324(4);
– although the questions whether there is a serious question to be tried and where the balance of convenience lies will not circumscribe the Court’s consideration in an application for an interim injunction under s. 1324(4), the interests of justice will always require that those questions be examined carefully when restrictions are sought to be imposed before the case has been properly examined by the Court, even where the protection of the public is said to be involved: see per Young J (as his Honour then was), in Corporate Affairs Commission (NSW) v Lombard Nash International Pty Ltd (1986) 11 ACLR 566, at 570-571;
In reaching the decision to grant the interim injunction sought by the plaintiff, Gardiner AsJ approached the matter on the principles set out in Mauer-Swisse and then considered that even if the injunction was treated as a conventional application in the equitable jurisdiction of the court, there are sufficient facts to demonstrate a serious question to be tried and that the balance of convenience favours the granting of the orders. Gardiner AsJ referred to the Court of Appeal's decision in Bradto Pty Ltd v Victoria (2006) 15 VR 6 (at [38]):
38 I also consider that the balance of convenience favours the granting of the orders sought. As was observed in Bradto Pty Ltd v Victoria,[4] the Court must in determining whether to grant an interlocutory injunction:
... [T]ake whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”, in the sense of granting an injunction to a party who fails to establish his right at the trial or in failing to grant an injunction to a party who succeeds at trial.
By way of summary:
  • In AGBC Gardiner AsJ notes that the jurisdiction to grant an injunction under s1324 is a statutory one, and the considerations are different to those in the exercise of the Court's equitable jurisdiction. 
  • The broad consideration for the granting of the injunction appears to be whether the injunction would have some utility or would serve some purpose within the contemplation of the Corporations Act
  • The considerations in the equitable jurisdiction of whether there is a serious question to be tried and whether the balance of convenience favours the granting of the orders remain relevant.

Thursday, April 12, 2012

ACCC v Google [2012] FCAFC 49 - the appeal to the Full Court (FCA)

The matter of Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49 was an appeal from the decision of Nicholas J. I gave a summary and analysis of the decision of Nicholas J in my previous post here.

The matter was heard before Keane CJ, Jacobson and Lander JJ, and concerned part of the matter before Nicholas J. Specifically, it concerned four advertisements, or 'sponsored links' which appeared on the Google search page. The 'sponsored links' were triggered by the insertion of key words concerning their competitors. By way of summary, the appeal concerned the following (at [5] to [8]):
  1. The other aspect of the ACCC’s case at trial raised what is now the principal issue on the appeal. The primary judge held that in four instances relied on by the ACCC an advertiser had engaged in misleading and deceptive conduct by falsely representing that there was a commercial association or affiliation with its competitor, and that information regarding the competitor could be found by clicking on to what was, in fact, the advertiser’s web address. These instances concerned sponsored links triggered by the insertion of key words relating to “Harvey World Travel”, “”, “Alpha Dog Training”, and “Just 4x4s Magazine”.
  2. His Honour held, however, that Google did not make the representations contained in these sponsored links. His Honour held that Google did not endorse or adopt the advertisement but did no more than represent that the advertisements were advertisements.
  3. The ACCC contends in its appeal to this Court that, given Google’s involvement in the process of displaying the sponsored links in response to a user’s search, the primary judge should have held that Google had engaged in misleading conduct.
  4. Google supports the decision of the primary judge. It also contends that it was entitled to succeed on other grounds not accepted by his Honour. In this latter regard, it contends that each of the advertisements in question either was not misleading or that Google was entitled to rely upon the defence afforded by s 85(3) of the Act.
The Full Court upheld the appeal and held that Google had engaged in misleading or deceptive conduct. In doing so, the Full Court analysed what conduct was said to be misleading or deceptive and held that Google was more than a 'mere conduit' of information from the advertiser (at [88] to [90]): 
  1. It is necessary to be clear as to what it is about Google’s conduct that is said to be misleading or deceptive on its part. Google’s conduct consists relevantly of the display of the sponsored link in response to the entry of the user’s search term in collocation with the advertiser’s URL. The display of the sponsored link is effected by Google’s engine as Google’s response to a user’s search. That which is displayed by Google is called up by Google’s facility as Google’s response to the user’s search. The clickable link, when clicked, takes the user directly to the advertiser’s URL.
  2. An ordinary and reasonable user would conclude from these circumstances that it was Google who was displaying the sponsored link in collocation with the sponsor’s URL in response to the user’s search. Even if all these circumstances would not be apparent to ordinary and reasonable users, so that Google could not be “seen” by them to be more than a mere conduit, these circumstances show that Google is, in fact, much more than a mere conduit. The reaction of the ordinary and reasonable member of the class is not solely determinative of the issue. As Gummow J said in ACCC v Channel Seven the question is whether the “carrier is and is seen to be a mere conduit”; and as the primary judge acknowledged, the fact that a representation is not understood by the audience to be an advertisement for another person will not necessarily exclude Google from the scope of s 52 of the Act. His Honour said at [186]:
The mere fact that the relevant class may not have understood the representations to have been made by Google cannot be determinative of the question:Cassidy v Saatchi & Saatchi [2004] FCAFC 34(2004) 134 FCR 585 per Moore and Mansfield JJ at [28].
  1. Critical to this conclusion is the fact that the sponsored link is displayed on the screen in response to the user’s query which is made by the entry of selected key words. Thus, the user asks a question of Google and obtains Google’s response. Several features of the overall process indicate that Google engages in misleading conduct.
The misleading conduct was said to be Google's conduct because it responded to a query using search terms and informed the user that the content of the 'sponsored link' is responsive to the user's query (at [92]):
  1. The conduct is Google’s because Google is responding to the query and providing the URL. It is not merely passing on the URL as a statement made by the advertiser for what the statement is worth. Rather, Google informs the user, by its response to the query, that the content of the sponsored link is responsive to the user’s query about the subject matter of the keyword.
The Australian Financial Review has reported that Google is considering an appeal to the High Court. The article is here.