I’ve always wanted a motorbike, but my wife won’t let me have one.

I once asked a Harley-owning friend of mine how, during his spectacular lycra-clad roller-blading pony-tailed Harley-riding midlife crisis, he managed to get his wife to agree to his Harley. His response was to inform me that he just went out and bought it, adding – after a thoughtful pause – It’s easier to ask for forgiveness than permission.

I was, as you can imagine, quite taken with this concept, but I always considered it too dangerous to apply in my own life. I was therefore surprised to learn that our very own Supreme Court has also been known to endorse this slapdash approach to stakeholder consultation.

In the matter of Accommodation Clearing House Pty. Limited (in liquidation) [2013] NSWSC 784, the court refused to relieve a pair of liquidators from their obligation to comply with an impending statutory duty. Instead, the court said they should have just gone ahead and breached the duty, and then come and asked for forgiveness afterwards.

The background to the matter was that two jointly appointed liquidators had approached the court for permission to give notice to approximately 4,000 creditors of a failed travel agency via email, rather than post. Without this dispensation, the liquidators would have had to give notice via post, so they were staring down the barrel of a considerable amount of envelope licking.

The court recognised this, but was unable to help. Its response to the liquidators’ request was essentially “Look, I’m afraid I don’t actually have the power to permit you to give notice via email; the Act does not let the court dispense with the postal notice requirement. However, I do have the power to excuse you from breaching the Act. So run off and do your email notice, and then come back and confess, and I’ll forgive you”.

The court justified this approach on two bases: policy and precedent (theology was not mentioned):

1. The court said that it was “practically sensible” to communicate with creditors via email rather than post, noting that the only contact information on file for most creditors was an email address in any event. This was a good policy reason to excuse non-compliance with the Act.
2. The court also noted that previous cases had decided that even where the Act is breached deliberately, the court may still excuse the breach as long as it was “honest”. There was therefore some precedent for excusing deliberate non-compliance with the Act.

Looking at the matter objectively, those grounds stand up to scrutiny. It would have been completely impractical, and expensive, and probably impossible, and certainly less effective, to try to communicate with the 4,000 creditors via post. Against that, the company had a database of all of the relevant email addresses ready to go.

The case was therefore crying out for an accomplished and experienced corporations judge, who knew his way around the law and policy underlying the Act, to get in there and dish out some common sense – which is more or less what occurred. What is novel about the case is that, in order to get the commonsense result, the court basically pre-approved a breach of statutory duty, albeit with a nudge and a wink rather than an actual order.

This is not to say, of course, that the court will excuse breaches of the Act in all circumstances. The starting point is obviously that liquidators are required to observe the requirements of the Act. It should be expected that the circumstances in which the court will be excuse a deliberate breach of the Act will be few and far between. Liquidators seeking guidance as to the likelihood of this sort of relief being granted in a particular case would therefore be well advised to consult an accomplished and experienced team of insolvency lawyers.

What the case does suggest is that the court may – in the right circumstances – be prepared to do, in respect of voluntary windings up, what it has long been able to do for voluntary administrations under section 447A, i.e. tinker with the operation of the Act in order to make the system more adaptable to unusual circumstances. This is a positive development in the law relating to windings up.