Stergiou v Citibank Savings Ltd [2005] ACTCA 15

Judgment (7 paragraphs)

[1]

1. This is the latest chapter in a saga that has been unfolding for more than a decade as repeated attempts have been made to take possession of a house owned by the appellants for failure to comply with their obligations under a mortgage. The proceedings have been protracted, tortuous and attended by a comedy of errors sufficient to inspire the producers of "The Castle" to consider making a sequel.

2. The mortgage, which was in favour of Citibank Savings Ltd, was executed on 8 April 1988. An initial line of credit was progressively increased and drawn down. The appellants initially made all the payments required by the mortgage. The first stirrings of discontent arose when Citibank Savings Ltd made some debits from the appellants' accounts that it was unable to explain to their satisfaction.

3. Whilst other customers who have found themselves in such a situation may have responded by writing letters of complaint or approaching the Banking and Financial Services Ombudsman, the appellants apparently decided that decent people should have nothing further to do with a company that would behave in such a manner and declined to make any further payments under the mortgage. The last payment was made on 30 November 1991.

4. A notice pursuant to s 93 of the Land Titles Act 1925 (ACT) was duly delivered to the appellants on 22 February 1992, demanding the payment of a stipulated amount within one month. The amount demanded was not paid by the due date and on 23 March 1992 Citibank Savings Ltd had a writ of summons and statement of claim issued seeking possession of the house.

5. It enjoyed an initial flurry of success. On 29 January 1993 Master Hogan granted leave for it to enter judgment for possession of the house. Judgment was entered on 15 February 1993. The appellants appealed from that decision and on 26 February 1993 Higgins J, as he then was, ordered that execution of the judgment be stayed pending the hearing of the appeal. On 12 March 1993 Gallop J dismissed the appeal and dissolved that order. An application for a further stay of execution pending the hearing of an application to the Federal Court for leave to appeal from that decision was dismissed by Neaves J on 28 April 1993 and Citibank Savings Ltd proceeded to take possession of the house.

15. This overture elicited no response and on 13 January 2003 a further notice pursuant to s 93 of the Land Titles Act was issued demanding payment of the sum of $350,000 and warning the appellants that if that amount remained unpaid for a period of one month after the service of the notice, Citibank Savings Ltd would exercise its power of sale under the mortgage without further notice.

16. This notice also failed to elicit any response and on 19 February 2003 the current proceedings were commenced on behalf of Citibank Savings Ltd against the appellants. This time the bank trimmed its case, avowedly to give the appellants the benefit of any doubt and, perhaps, to avoid becoming embroiled in arguments over any disputed items. Reliance upon any default prior to 1 July 1992 was abandoned and the claim was founded upon a notice that had claimed only the sum of $160,000 secured by the mortgage rather than the full amount borrowed.

17. The proceedings were duly heard by Connolly J who gave judgment on 21 May 2004, finding for Citibank Savings Ltd and making orders for the possession of the house and payment of costs. The appellants promptly appealed.

18. Since any claim for the disputed amounts had been abandoned and no payments of principal or interest had been made for twelve and a half years, one might have thought that the appeal would have had little chance of success. Furthermore, the years had apparently taken their toll, not only on Mr Stergiou's businesses but also on his health. He was unable to prepare the appeal books normally required and when the matter was called on for hearing before the Full Court of the Court of Appeal on 16 February 2005, it became obvious that his hearing had deteriorated. He appeared a small, tired, sick David forced to fight a corporate Goliath without any sling or stones.

19. Yet, unexpectedly, he launched one legal missile. He handed up an historical company extract provided by the Australian Securities and Investments Commission that revealed that Citibank Savings Ltd had been deregistered on 13 June 1996.

20. That was, of course, the day upon which the Full Federal Court delivered judgment on the original claim in its favour and remitted its earlier claim for rehearing. There is no reason to suppose that this act of corporate suicide was precipitated by the prospect of further litigation with the appellants but it was immediately clear to the respondent to the appeal and the Court that its consequences for the ensuing litigation had been nonetheless catastrophic. All proceedings for or against a deregistered company are a nullity: see for example, International Bulk Shipping & Services Ltd v Minerals & Metals Trading Corporation of India [1996] 1 All ER 1017.

21. At this point Mr Meagher SC, who appeared for the respondent and until then had believed he had been appearing for a company that was registered and entitled to be represented by him, understandably sought an adjournment to enable those instructing him to verify the accuracy of the record and consider their position.

22. It was, of course, startling to find that legal proceedings had been maintained by and against Citibank Savings Ltd throughout a period of nearly nine years after the company had been deregistered. However, the solicitors ostensibly retained to act for the company throughout that period had not been informed either of its deregistration or of the assignment of its rights under the mortgage. They presumably acted upon an assumption that those operating a major banking institution would have known whether the company they thought they worked for actually existed. Nonetheless, the potential implications for them and the bank officers that instructed them were at least interesting. The adjournment was duly granted.

23. On 11 April 2005 a notice of motion was filed, ostensibly on behalf of Citibank Savings Ltd and another company Citibank Pty Ltd, seeking the following orders:

24. Since the application was interlocutory in character it was suggested that I could deal with it as a single judge of the Court of Appeal. The appellants did not oppose this course and, in the interests of saving time and money, I agreed to do so.

25. In support of the application Mr Meagher submitted that the reinstatement of Citibank Savings Ltd would effectively restore it to the position that it would have enjoyed had it never been deregistered. Since, it would then be taken to have existed throughout the whole of the period since 19 February 2003, the proceedings would not be seen as a nullity but would, in effect, have been retrospectively validated. In that event, Citibank Pty Ltd, which is the company to which the rights under the mortgage had been assigned, could be joined as plaintiff in lieu of Citibank Savings Ltd and the judgment amended accordingly. The Court's power to order a document to be amended to allow the joinder of a party can be exercised even after judgment and on appeal. See, for example Classic Gourmet Sausages Pty Ltd v Leda Commercial Properties Pty Ltd [2000] FCA 389; (2000) 97 FCR 313. In the present case this would not cause any prejudice to the appellants as they had not raised any issue that might have been determined differently had Connolly J realised the true position. On the other hand, unless the company were reinstated the proceedings would remain a nullity and it would be necessary to start again. This would be pointless, time consuming and onerous.

26. Whilst Mr Meagher mounted this rescue attempt with ingenuity and resourcefulness, the course that he attempted to chart is beset with numerous obstacles.

27. First, I am unable to see how orders could be made in proceedings that are a nullity that would not equally be nullities.

28. Second, the application is made by two companies, one that is unregistered, and hence has no standing to make any such application, and the other that is not a party to the proceedings.

29. Third, I am unable to accept that it would be an appropriate exercise of the power conferred by s 601AH of the Corporations Act (2001) (Cth) to reinstate a company, not for the purpose of asserting any rights of or against it, but merely as a technical device intended to retrospectively validate proceedings that have been a nullity since their inception. Even if so validated, the proceedings could ultimately have no effect on the rights or obligations of the reinstated company because it had divested itself of any rights under the mortgage.

30. Fourth, even if the proceedings could be retrospectively validated, the appellants would not only be entitled to succeed in their appeal but to an order for summary judgment. The proceedings were founded upon the service of a s 93 notice invalidly issued by a deregistered company demanding payment of a debt which had not been owed to it.

31. Fifth, I am unable to see anything in s 601AH that suggests that the power thereby conferred was intended to permit the retrospective validation of orders made in proceedings that were a nullity at a time when the orders were made.

32. Sixth, no issue as to whether Citibank Pty Ltd was entitled to possession of the appellants' house or had any rights against them was ever litigated before Connolly J and I do not accept that they could be effectively denied a hearing on such issues by an amendment of the judgment in the manner suggested.

33. Seventh, it would in any event be inappropriate for such an approach to be taken on appeal.

34. Accordingly, I can see no basis for the exercise of any discretion provided by s 601AH and the application must be dismissed.

35. In view of the concession that the proceedings before Connolly J were a nullity, the appeal will presumably proceed unopposed and the appellants will live to litigate again should Citibank Pty Ltd decide to start a new action against them.

36. I will hear argument, if necessary, on the issue of costs.

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Judgment (7 paragraphs)

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