Appellant v Respondents

Supreme Court of Victoria|2006-08-24|Before: WHELAN J

CORPORATIONS - Corporations Act 2001 (Cth) s.601AH - Appeal de novo from Order of a Master - Application for re-instatement of registration of company - Whether 'just' to do so - Applicant asserts a statutory right of recovery against deregistered company - Application resisted by company's insurer - Applicant's delay - Application an inappropriate venue for considering effect of delay on future proceedings unless clear that prospective action an abuse of process - Reinstatement Ordered.

• Compensation payments made after the date of deregistration, being 11 September 1998, could not be recovered. This was said to be because liability under s.138 of the Act only arises upon the making of each individual payment (VWA v Manildra Pty Ltd[1]) and because liability under s.601AG only arises where there is a fully constituted cause of action immediately before deregistration (Hutchinson v ASIC[2]).

• Compensation payments made prior to 11 September 1998 could not be recovered because they are statute barred. It is unnecessary to set out the reasons for this assertion as on the hearing before me senior counsel for WorkCover conceded that that was correct. Indeed, as part of WorkCover's submissions, its counsel contended that only payments made over the prior six years could now be recovered.

11 The propositions advanced by Herbert Geer & Rundle prompted the application dealt with by Master Efthim. In the material filed in support of that application WorkCover's solicitor deposed that if Jara was reinstated WorkCover would seek to add it as a defendant to the proceeding issued against AMP.

12 In substance, WorkCover wishes to have Jara reinstated and to add it as a defendant to the proceeding against AMP so as to circumvent what WorkCover perceives will otherwise be the combined operation of limitation periods and s.601AG. WorkCover anticipates it can circumvent that position by recovering judgment against Jara pursuant to s.138 of the Act and then pursuing recovery from AMP as its insurer, relying, if necessary, upon s.562 of the Corporations Act.

13 ASIC did not appear at the hearing before me but it filed a written submission which read as follows:

"1. At first instance, based upon the material filed by the plaintiff, ASIC was satisfied that the plaintiff had made out a prima facie case that

(a) it was a person aggrieved by the deregistration of Jara Constructions; and

(b) that it was just that the company's registration be reinstated.

2. Therefore ASIC neither consented to, nor did it oppose an order for the reinstatement pursuant to s.601AH of the Corporations Act (2001), and ASIC handed up to the Master a form of orders which ASIC would not oppose. Those orders were made by Master Efthim in the Supreme Court on 5 July 2006.

3. ASIC does not disagree with Master Efthim's decision of 5 July 2006 that the Court's discretion be exercised to reinstate Jara Constructions."

14 I was informed that the surviving former director of Jara had been notified of the application before Master Efthim and that the issue of his resumption of control consequent upon reinstatement had been addressed with ASIC and before Master Efthim. Provision was made in Master Efthim's order for notice of reinstatement to be given to that former director and the shareholders of Jara.

15 Before Master Efthim and before me, AMP contended that Jara ought not be reinstated. Senior counsel for AMP submitted that this case was unique and that prior cases concerning reinstatement were of little assistance. Counsel for AMP placed particular emphasis upon the fact that WorkCover was seeking to litigate causes of action which would require enquiry into an accident which occurred almost 17 years ago. It was submitted on behalf of AMP that WorkCover's approach to the matter involved unexplained and inexcusable delay and that there was a consequent risk that there could not be a fair trial of the issues. It was submitted that a consequence of reinstatement would be to create new liabilities which did not previously exist. Counsel for AMP relied upon Bishopsgate Insurance v Deloitte Haskins & Sells,[3] which concerns an application to dismiss a proceeding for want of prosecution, Herron v McGregor,[4] which concerns the power to stay a proceeding as an abuse of process, Brisbane South Regional Health Authority v Taylor,[5] which concerns the exercise of the discretion to extend a limitation period, and Batistatos v Roads and Traffic Authority of New South Wales,[6] which also concerns an application to stay a proceeding as an abuse of process. These authorities were relied upon by counsel for AMP in two ways. First, it was submitted that they assisted in determining whether it is just that the company be reinstated. Second, and very much as a fall back position, it was submitted that reinstatement should not be permitted as the only purpose of reinstatement was to institute a proceeding which was futile as it was bound to be stayed as an abuse of process.

16 Counsel for AMP had foreshadowed a submission that WorkCover was not a person aggrieved by the deregistration and accordingly was not entitled to apply for reinstatement. Counsel for AMP advised me that AMP did not press that submission.

17 Senior counsel for WorkCover submitted that AMP's approach amounted to an attempt to convert the reinstatement application into an application concerned with abuse of process. The submission was that all of the matters put in that regard were irrelevant and that those matters could be addressed once a proceeding was on foot. Senior counsel conceded that if it was clear that the proposed proceeding was bound to be summarily dismissed then reinstatement might not be ordered because it would be futile. Senior counsel for WorkCover frankly explained that the purpose of reinstatement and the proposed proceeding against Jara was to address the cogency of the arguments put forward on behalf of AMP concerning the combined operation of the limitation periods and s.601AG of the Corporations Act. In that context he submitted that it was clear that payments outside the prior period of six years are now statute barred. Counsel for WorkCover submitted that the sort of material which one would normally expect on an abuse of process application was missing here and that it was, on the material before Master Efthim and before me, simply impossible to assess the issues relevant to such an application. Counsel for WorkCover particularly relied upon the decision of the New South Wales Court of Appeal in WorkCover Authority NSW v Picton Truck and Trailer Repairs.[7]

18 Applications for reinstatement arise in a great variety of circumstances. They concern companies that have been in liquidation and have been consciously deregistered in accordance with the procedures provided for in the Corporations Act, and companies which have continued trading whilst deregistered in circumstances where the officers of the company were oblivious to what had happened. Reinstatement may be sought for the purpose of pursuing former officers and members and for the purpose of realising assets to distribute to former members. The variety of circumstances which can give rise to an application to reinstate is very wide and many particular instances of decisions made upon such applications can be found in the reports. Whilst it does appear that there is no reported case arising in the same circumstances as arise here, in my view it is not correct to describe this application as being "unique". In my view this application does have relevant similarities to that in Picton, and also has relevant similarities to the great number of cases where persons who have been exposed to dangerous dusts have sought to reinstate companies effectively seeking access to insurance proceeds in relation to events which have occurred many years earlier[8].

19 Section 601AH(2) provides as follows:

"A court may make an order that ASIC reinstate the registration of a company if:

(a) the application for reinstatement is made to the court by:

(i) a person aggrieved by the deregistration;

...

(b) the court is satisfied that it is just that the company's registration be reinstated."

20 Counsel for AMP did not contend that WorkCover is not a person aggrieved. A submission that it is not a person aggrieved would have been contrary to the Court of Appeal decision in Picton. For the reasons given in Picton, I find WorkCover is a person aggrieved by the deregistration.

21 In many situations establishing that an applicant is aggrieved leads to the conclusion that reinstatement is just. It is, however, a separate consideration and it is the aspect of s.601AH(2) upon which AMP relies. I observe that even where application is made by a person aggrieved, and where the court is satisfied that it is just that the registration be reinstated, the sub-section nevertheless provides the court "may" then make an order. Notwithstanding the doubts expressed by the New South Wales Court of Appeal in Picton[9], it seems to me that there must accordingly be a residual discretion in relation to the making of an order, although it is difficult to imagine circumstances where that discretion would be exercised so as not to make an order where an aggrieved person had applied and the court was satisfied that reinstatement was just.

22 In substance the issue argued before me was whether or not it was just to reinstate the company, notwithstanding that WorkCover was aggrieved by its deregistration, because of WorkCover's inexcusable and unexplained delay in pursuing its remedies.

23 After argument on the matter before me had concluded, Gillard J handed down his decision in Pilarinos v ASIC.[10]

24 I gave the parties an opportunity to make further submissions on Pilarinos, and AMP and WorkCover did so.

25 Like this proceeding, the purpose of reinstatement in Pilarinos was to enable a legal proceeding to be taken and, like this proceeding, the application was opposed by the prospective defendant. Gillard J dealt at some length with the issue of whether such a prospective defendant ought to be heard in opposition to the application. That matter was not raised before me and I express no view in relation to it.

26 Much of the judgment in Pilarinos addresses the issue of whether the applicant was a person aggrieved. Senior counsel for AMP said this distinguished Pilarinos from the case before me. That is a difference between the two cases, but it is also true, as counsel for WorkCover submitted, that the issues of whether the applicant is aggrieved and whether reinstatement is just overlap.

27 In Pilarinos the prospective defendant made detailed submissions concerning the extensive period of time which had elapsed between the application for reinstatement and the events which would be the subject of the proposed action and upon the futility of the proceeding given the strength of the prospective defendant's defences. Gillard J held that an application for reinstatement was not the appropriate venue to agitate such issues and that a reinstatement would not be refused on those grounds other than perhaps in "the clearest of clear cases"[11].

28 The position contended for by AMP before me was different to that contended for by the prospective defendant in Pilarinos. AMP did not contend that it had a defence to the prospective action which was bound to succeed, but rather contended that it was not just to reinstate a company for the purpose of instituting a proceeding in circumstances where the defendant would be or may well be prejudiced by the applicant's own inexcusable delay.

29 Whilst AMP's submission before me was not the same as that made to Gillard J in Pilarinos, it seems to me that the answer to it is the same. The application for reinstatement is not the appropriate venue to deal with such matters, other than in the clearest of clear cases. If it were clear that the prospective action would be stayed as an abuse of process, then the reinstatement would be futile and the Court would not order it, either because it was not just to do so or in the exercise of the Court's residual discretion. That is not the position I am in. It is not clear to me that the prospective proceeding will be stayed as an abuse of process. I accept the submissions of WorkCover's counsel in that regard.

30 As to AMP's submission that reinstatement will create new liabilities, the basis of this submission was that any liabilities would have arisen for the first time whilst the company was not in existence, but that the effect of s601AH(5) would be that upon reinstatement the company would be taken to have continued in existence as if it had not been deregistered. I accept that that will be the effect of reinstatement. But, as counsel for WorkCover submitted, a similar circumstance also arises where injury is sustained during a period in which a prospective defendant was deregistered as a result of circumstances which occurred before deregistration. Such circumstances can easily arise in the dust exposure cases. The effect which is the basis of AMP's submission is expressly and deliberately provided for by the legislation.

31 In my view, it is just to reinstate this company for the following reasons:

(a) WorkCover asserts a statutory right of recovery which, if otherwise well-founded, will be frustrated by a deregistration which occurred by virtue of circumstances entirely unrelated to any issues relevant to the pursuit of that statutory right.

(b) If WorkCover's delay and other conduct means that the proceeding which it intends to take against Jara, by joining it as a defendant to the existing proceeding or otherwise, would amount to an abuse of process or inflict such unnecessary injustice as would require that the proceeding be stopped, then an appropriate application seeking that relief can be made in the proceeding on the basis of material properly directed to that issue. That is the appropriate venue for such matters to be addressed and determined.

32 For these reasons AMP's application by Notice of Appeal dated 11 July 2006 is dismissed.

At a glance

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Judgment (19 paragraphs)

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Cases Cited (2)