Consideration
59 I am satisfied that Mr Scheuer has a sufficient interest in the outcome of the reinstatement application that it is appropriate to join him as a defendant to this proceeding. Mr Scheuer's interest arises in circumstances where he is a shareholder of SPA (a fact which is not contested) and as a defendant to claims that Endless Solar seeks to bring, the pursuit of which are the stated purpose for reinstatement.
60 Although the submissions advanced by each party at the hearing were detailed, the contentions advanced by Mr Scheuer to set aside the reinstatement order can be reduced to two principal propositions: first, the original order for reinstatement was made in circumstances in which there was a denial of procedural fairness, and the denial of procedural fairness has not been remedied in this rehearing; second, it would not be just to order the reinstatement of SPA's registration having regard to its corporate history, the circumstances in which it was deregistered, the delay in bringing the application and the hopelessness of the claims sought to be pursued by Endless Solar against SPA through the Supreme Court writs.
61 The purpose of the reinstatement is to enable Endless Solar to pursue claims against, and on behalf of, SPA. It is therefore relevant to consider the merits of those claims, more specifically whether the claims are so lacking in merit that the reinstatement of SPA would not be just. In assessing the merits of proposed claims to be brought, it is not appropriate to attempt to resolve factual matters that may be the subject of dispute: Grogan at [14]; Deputy Commissioner of Taxation v Australian Securities and Investments Commission; re Civic Finance Pty Ltd (Deregistered) [2010] FCA 1411; 91 ATR 456 at [14] (Jagot J); Pilarinos at [29]. Such matters are properly dealt with by the court or tribunal in which those claims have been, or will be, brought. It is only where the proposed claims are hopeless or bound to fail, or very likely to be stayed on some other basis (such as for an abuse of process) that the Court may conclude that it is not just to reinstate the company: see Pilarinos at [106]-[107]; see also AMP General Insurance at [35] (Maxwell P and Neave JA, noting that no claim of futility arose in that proceeding). Any lesser standard would effectively require the Court to embark on a trial of the proposed proceeding which is neither principled nor practical in the context of an application for reinstatement.
62 On this application, Mr Scheuer has agitated many criticisms of the Supreme Court proceedings that have been filed by Endless Solar. The criticisms have substance. However, I have reached the view that it would be inappropriate to reach a final determination whether reinstatement would be just in circumstances where most of the proposed defendants to the Supreme Court proceedings have not been given an opportunity to be heard.
63 It is well-established that an order for reinstatement that is made in circumstances where there has been a denial of procedural fairness is invalid and is liable to be set aside. In Miltonbrook at [85] (Tobias and Campbell JJA agreeing at [102] and [103] respectively), Spigelman CJ observed that:
It is axiomatic that when a statutory power like s 601AH(2) is conferred on a court, the legislature intends that procedural fairness will be accorded to all who may be affected by the order, unless there is a clear statement to the contrary. The denial of procedural fairness by a court is a "fundamental irregularity" which would entitle a person aggrieved to set aside an order as a matter of unconditional right. (See Cameron v Cole (at 591); Taylor v Taylor (1979) 143 CLR 1 at 16.)
64 In that case, reinstatement was sought by the plaintiff for the purpose of bringing a claim against the deregistered company. An order for reinstatement, which had been made on an ex parte basis by the primary judge, was set aside principally on the basis that the potential defendants of that claim had not been notified of the application, nor provided with a reasonable opportunity to be heard.
65 Whether procedural fairness has been afforded to persons affected by reinstatement is a separate, antecedent question to that of whether it is just to reinstate the company. Properly understood, the failure to afford procedural fairness to those who may be affected by the order for reinstatement impedes the Court's ability to consider all matters relevant to the assessment of whether it would be just to reinstate, insofar as persons affected are denied an opportunity to be heard and to raise matters that are relevant to that question.
66 The converse of the principle as expressed in Miltonbrook is that the Court ought not proceed to determine an application for reinstatement unless it can be satisfied that those persons who may be affected by an order for reinstatement - or, at least, such persons as are capable of being identified - have been afforded a reasonable opportunity to be heard on the application. In Dahozo at 741, Bryson J declined to determine an application for reinstatement made pursuant to the predecessor provision of s 601AH(2) for the purpose of pursuing proceedings on behalf of the company in circumstances where there was insufficient information before the Court as to the identity of those persons who may have an interest in the reinstatement, being either the proposed defendants in the proceedings to be pursued on behalf of the company or the directors or shareholders of the company, and whether those persons ought to be joined. Relevantly, his Honour observed (at 741-2):
A first principle for the exercise of the powers of courts is that the persons affected should be heard before a judicial decision is made against them. Audi alteram partem. For most applications there are procedural rules requiring service of notice of the application on the persons affected. There are rare instances of statutory provisions authorising the courts to act without such notice. Otherwise courts do not act in those circumstances, or if they do, the persons adversely affected are entitled to obtain reconsideration by the court of the order if they apply reasonably promptly after they learn of the order.
… When an application is made to reinstate a company to the register the persons whose interests might be adversely affected by reinstatement cannot always be identified readily or immediately, and there could be many circumstances in which the impact on some person of action taken on the basis that the company was off the register could not be perceived by the applicant or by the court. Whether or not the court's order reserved liberty to persons so affected to apply to set the order aside, it will be open to the person who was not a party to the application to apply late to set it aside if that person had grounds on which the court should reconsider whether the court is satisfied that it is just that registration of the company be reinstated.
However, when it is known to the court that some person has an apparent interest in a reinstatement application, the court would ordinarily make a direction which would enable that person to resist, such as requiring service of notice of the application on a person, making the person respondent to the application or allowing the person to intervene. The absence of any provision in the rules of court dealing with this is not an indication that notice of an application is not necessary; it is to be explained rather by the court's ordinarily acting in accordance with the audi alteram partem rule.
67 Justice Bryson further observed that, the fact that delay to the determination of the application would create difficulties for the plaintiffs (by reason of an expiring limitation period) was immaterial in light of the plaintiffs' responsibility for the delay and the importance of considering the interests of those affected (at 741).
68 Similarly, in Liberty International Underwriters v Australian Securities and Investments Commission, in the matter of Moore Murphy Holdings Pty Ltd [2021] FCA 103 at [28], McKerracher J concluded that further time ought to be allowed before determining an application for reinstatement for the purpose of pursuing proceedings on behalf of the company to afford the defendant to those proceedings a reasonable opportunity to respond to the application. His Honour ultimately made orders providing a period within which any person or party opposing the application could indicate their opposition to the Court, failing which the company would be reinstated.
69 A similar approach was taken in Manny v David Lardner & Associates [2018] ACTSC 159, in which orders were sought to reinstate three entities pursuant to s 601AH(2) of the Act, and to stay the winding up of the companies on their reinstatement, for the purpose of enabling the plaintiff to pursue claims on behalf of the companies. Associate Justice McWilliams (as her Honour then was) made orders requiring the creditors of the companies to be served with a copy of her Honour's reasons in the reinstatement application before final orders granting the application were made, to enable any creditor to seek to be heard in circumstances where her Honour could not be satisfied that all creditors had been served with the reinstatement application. Her Honour found that, while it was unlikely that the creditors would be adversely impacted by the reinstatement, it was not for the Court to "pre-empt what the creditors might say if they were given an opportunity to be heard" (at [42]).
70 The concern of the law with respect to procedural fairness is to avoid practical injustice: Minister for Immigration and Multicultural Affairs; Ex parte Lam (2003) 214 CLR 1 at [37] (Gleeson CJ). In the context of an application for reinstatement, there may be circumstances in which procedural fairness does not require all persons who may be potentially affected by reinstatement to be notified of the application. For example, if the Court concludes that a claim proposed to be brought by a reinstated company against a proposed defendant is hopeless, it would be unnecessary to hear from the defendant: Fletcher (as liquidators of Octaviar Administration Pty Ltd) v Anderson [2014] NSWCA 450; 292 FLR 269 at [64] (Barrett JA, with Beazley P and McColl JA agreeing at [1] and [2] respectively).
71 On the present application, Endless Solar placed considerable reliance on the statements of Brereton J in Re ERB that "on an application for reinstatement, the court is concerned with the justice of reinstating the company - not the justice of any proceedings which it proposed that the reinstated company might institute or resume" (at [10]) and (at [13]):
It will be a very rare case that merely reinstating a company will be prejudicial to a potential defendant. That potential defendant still has available all the remedies of summary dismissal and stay in the substantive proceedings, if they are instituted. All he or she is deprived of is the opportunity to prevent the proceedings even being instituted - an issue on which a defendant usually has no say. In my view, a court should not, on a reinstatement application, conclude that reinstatement would be unjust on account of considerations analogous to abuse of process or want of prosecution unless affirmatively satisfied that a fair trial could not be had, or that the proposed proceedings were doomed to fail. Consistently with what the Victorian Court of Appeal said, such questions can usually only been addressed once the cause of action has been formulated and pleaded and the issues defined, and are best examined by the court in which the substantive proceedings are conducted.
72 It is important to note that no question of procedural fairness arose in Re ERB. Brereton J observed that notice of the application had been given to those who, as a result of reinstatement, might be exposed to proceedings by the company (at [2]). Rather, his Honour's observations at [10] and [13] concerned the question of whether reinstatement would be just, and the extent to which the Court should enquire into the merits of the proposed proceeding.
73 The persons affected by the reinstatement in the present application can be readily identified. They comprise Mr Scheuer and the other named defendants in the two Supreme Court writs. I will deal with each of Mr Scheuer and the other defendants in turn.
74 I accept that Mr Scheuer was denied procedural fairness in the hearing of the application for reinstatement before Judicial Registrar Luxton in circumstances where Mr Scheuer was not notified of the application (and did not in fact become aware of it until after an order for reinstatement was made) and did not have an opportunity to be heard in respect of the application. However, this deficiency has since been remedied. Mr Scheuer had a full opportunity to present his case in opposition to reinstatement on the hearing of the present application, which was conducted as a de novo hearing.
75 The other named defendants in the writs stand in a different position to Mr Scheuer. I consider that these persons have an interest in the present application and a right to be heard in relation to it. The named defendants - who are readily identifiable - stand to be affected by the reinstatement of SPA insofar as they may become defendants in active litigation (assuming the writs are served and Endless Solar chooses to prosecute the claims).
76 There is no evidence before me to indicate that the defendants named in the two writs were notified of the application for reinstatement when it was first made in February 2023, or that they were otherwise given a reasonable opportunity to be heard at the hearing before Judicial Registrar Luxton. The two writs were not filed until 6 March 2023 and 17 March 2023 respectively, after the order for reinstatement was made on 2 March 2023. Nonetheless, I infer that the identity of the proposed defendants would have been known to Endless Solar at the time when the application for reinstatement was first made to this Court. The pursuit of those claims was the sole basis on which the reinstatement of SPA was sought.
77 Nor is there any evidence before me to indicate that the named defendants in the two writs were notified of the application for review made by Mr Scheuer on 14 April 2023, and none of the named defendants (with the obvious exception of Mr Scheuer) have appeared before me on this application. I therefore cannot be satisfied that these persons have been notified of the application and that they have been given a reasonable opportunity to be heard.
78 In my view, procedural fairness requires that the defendants named in the Supreme Court writs (other than Mr Scheuer) are notified of this application, and that they are afforded an opportunity to be heard on the application before it is finally determined. Considerations of efficiency, cost effectiveness or, in the case of the applicants, the possible operation of statutory limitations periods, cannot outweigh the importance of ensuring that the requirements of procedural fairness are observed. It is possible that the other defendants, should they seek to be heard, will not be able to demonstrate that they will be adversely affected beyond the fact of being made a defendant to proceedings (which is not, as Brereton J observed in Re ERB, ordinarily a prejudice of the kind that will weigh against reinstatement). It is also possible that the other defendants will not be able to add meaningfully to the matters already raised by either Mr Scheuer or Endless Solar in the present application. However, the Court cannot, and should not, pre-empt the matters that those persons may seek to raise. The Court cannot be satisfied that it has all material before it relevant to, and necessary for the determination of, this application unless and until the other defendants are informed and their objections to reinstatement, if any, are heard.
79 I do not accept that it would be appropriate in the present case to determine the application in the absence of the other defendants and afford them liberty to apply to set aside the reinstatement. Procedural unfairness of this kind is a fundamental irregularity in the Court's process: Miltonbrook at [85] (Spigelman CJ). As Mr Scheuer correctly submitted, the Court cannot make an order with respect to the reinstatement in the knowledge that it is infected by a fundamental irregularity. Importantly also, the defendants' interest in the reinstatement affords them a right to be heard in this application, not in any subsequent application that they may wish to bring challenging the decision made.
80 It follows that the initial decision to reinstate made by Judicial Registrar Luxton was procedurally unfair with respect to the named defendants other than Mr Scheuer and that it is liable to be set aside on that basis. However, having regard to the de novo nature of the Court's task in the present application, the unfairness occasioned to the other defendants in the hearing of the initial application for reinstatement can be remedied in the present application if the other defendants are notified of this application and permitted a period of time within which they may approach the Court to be heard on the matter, should they wish to do so. Until such notice is given, and any defendant to the two writs (other than Mr Scheuer) is given an opportunity to be heard, the appropriate course is to adjourn the present application part heard.