Stork ICM Australia Pty Ltd v SFS 007.298.633 Pty Limited [2010] FCA 53 | Case summary

REASONS FOR JUDGMENT 1 On 14 December 2006 I made orders and published reasons for judgment in this proceeding: see In the matter of Stork ICM Australia Pty Ltd; Stork ICM Australia Pty Ltd v Stork Food Systems Australasia Pty Ltd (2007) 25 ACLC 208. The present reasons are to be read in the light of those reasons and I will not repeat what I said in them. For those and the present reasons, on 2 February 2010 I made the further orders that appear at the front of these reasons. 2 I will use the abbreviated forms of reference that I used in the earlier reasons, including "Stork FSA" for the defendant, even though I note that Stork FSA subsequently changed its name as appears in the heading above. 3 Little needs to be said here concerning the background to the earlier reasons and orders. Stork ICM had once been engaged in the fields of mechanical and electrical engineering, and it was involved in the construction of petrochemical plants. It had long since sold its business and ceased all active operations. However, from time to time, claims had been made against it by persons who alleged that they had suffered injury arising out of exposure to asbestos fibre. Dealing with these claims when they were made seems to have been Stork ICM's only activity. The claims were handled by the relevant insurer. 4 Both Stork ICM and Stork FSA were Australian subsidiaries of a global corporation that was incorporated in the Netherlands. For tax reasons, the parent corporation desired that Stork ICM's defunct status be formalised by a transfer of its assets and liabilities to Stork FSA followed by the deregistration of Stork ICM. The question that arose was whether this innocuous aim could be achieved without prejudicing the position of persons who might in the future claim to have suffered injury from exposure to asbestos fibre. 5 It is expressly contemplated by s 601AA(2)(e) of the Act that in the case of a deregistration following the making of an application to ASIC, the application may be made only if the company has no outstanding liabilities. No doubt the Court would ordinarily wish to be satisfied that a company has no outstanding liabilities at the time when it makes an order for deregistration without winding up under s 413(1)(d) of the Act. The reason is that s 601AD(1) of the Act provides that on deregistration the company ceases to exist. Although s 601AD(2) vests the company's property, other than property that it held on trust, in ASIC, the Act does not, of course, subject ASIC to any outstanding liabilities of the company. When the orders were made on 14 December 2006, the evidence established that all known asbestos related claims against Stork ICM had been resolved. 6 In the circumstances explained in the earlier reasons and above, the present case has been concerned with the possibility that Stork ICM may have unknown liabilities or potential liabilities to persons suffering from exposure to asbestos fibre. At the time of the making of the orders on 14 December 2006, all claims that had been made by such persons had been satisfied, and no further claims were known to exist. It was acknowledged by all, however, that further claims might emerge in the future. 7 By the terms of the orders on 14 December 2006, there were excluded from the transfers of Stork ICM's property and liabilities, what were referred to in the orders as "Excepted Policies" and "Excepted Liabilities". The reason was to be found in "no assignment without consent" provisions contained in Stork ICM's insurance policies. There was a possibility that while a liability of Stork ICM might be transferred to Stork FSA, the purported transfer of responding insurance might fail to achieve its purpose because of that contractual provision - a result which would be to the disadvantage of Stork FSA and might be to the disadvantage of the claimant. 8 I discussed this matter at [96]-[99] of the earlier reasons, but did not need to decide the point finally, because the practice adopted was to transfer only insurance indemnities where the insurers had consented, the others being the Excepted Policies. Any liability of Stork ICM to a sufferer from exposure to asbestos fibre to which an Excepted Policy responded (Excepted Liability), was not transferred, and that Excepted Policy was not transferred either. The objective was to avoid any possibility of liabilities being transferred without responding insurances also being transferred or insurances being transferred without liabilities to which they respond also being transferred. 9 At [123] of the earlier reasons I noted that if a claimant to whom an Excepted Liability related subsequently came to light and wished to sue Stork ICM, he or she would be entitled to apply under s 601AH(2) of the Act for the Court to order that ASIC reinstate the registration of Stork ICM. I also noted that the Court would make such an order if it was satisfied that it was just to do so. 10 There have been developments since the making of the orders on 14 December 2006. 11 First, Zurich Australian Insurance Limited (Zurich) has consented to a transfer of all insurance policies which Stork ICM held or holds with that company, if any, and also insurance policies which Stork ICM held or holds with other parties for which Zurich is now responsible, if any, to Stork FSA in accordance with the Scheme. 12 Second, on or about 14 August 2009, David Raymond Willesden filed a writ in the Supreme Court of Queensland against, inter alia, Stork ICM seeking damages in respect of asbestos related injuries. It has been determined that WorkCover Queensland is the insurer in relation to that claim. Bruce Thomas Lawyers represent WorkCover Queensland in the proceeding. They have advised that Mr Willesden has caused Stork FSA to be substituted as defendant for Stork ICM. Obviously, the problem is that in terms of the orders made on 14 December 2006, any liability of Stork ICM to Mr Willesden is an Excepted Liability and any responding insurance of WorkCover Queensland is an Excepted Policy. WorkCover Queensland has, however, consented to any right of indemnity under any policy enjoyed by Stork ICM with WorkCover Queensland being transferred to Stork FSA. 13 Stork FSA has applied pursuant to the liberty to apply reserved by Orders 7 and 8 of 14 December 2006 for orders having the effect of transferring to Stork FSA the rights of insurance indemnity previously enjoyed by Stork ICM as against Zurich, or other entities in respect of whose policies Zurich is now responsible, and WorkCover Queensland, and all liabilities to which both of those indemnities respond (including the alleged liability to Mr Willesden). 14 The objective that is sought to be achieved is one that is concurred in by all parties. This is that no claimant or prospective claimant and no insurer will be disadvantaged, and that every claimant or prospective claimant and insurer will stand in the same position vis-à-vis Stork FSA following a transfer as he, she or it would have occupied in relation to Stork ICM if that company had not been deregistered. 15 Zurich, WorkCover Queensland's solicitors Bruce Thomas Lawyers, and Mr Willesden's solicitors Maurice Blackburn, are aware of the making of the present application by Stork FSA. None of them has expressed opposition or sought to be heard. ASIC has been heard and must be added as a party for the reasons that appear below. 16 Pursuant to Order 4(c) made on 14 December 2006, ASIC deregistered Stork ICM on 20 December 2006. Consequently, by the operation of s 601AD(1) of the Act, Stork ICM ceased to exist on that date. Since that date it has not been possible for Stork ICM to be sued because it has been non-existent. 17 Whatever the position may be in relation to a transfer of property formerly owned by Stork ICM (which vested in ASIC on the deregistration under s 601AD(2)), a former liability of Stork ICM cannot now be transferred without Stork ICM's registration being first reinstated. The reason is that, absent reinstatement, there is no longer an entity that is liable, and therefore, in effect, no longer a liability in existence (see [33] below). 18 Section 601AH of the Act provides for reinstatement of the registration of a company that has been deregistered. Subsection (2) of that section provides as follows: (2) The Court may make an order that ASIC reinstate the registration of a company if: (a) an application for reinstatement is made to the Court by: (i) a person aggrieved by the deregistration; or (ii) a former liquidator of the company; and (b) the Court is satisfied that it is just that the company's registration be reinstated. 19 In my opinion Stork FSA is a person aggrieved by the deregistration of Stork ICM. The expression "aggrieved by the deregistration" should be given a wide meaning. I do not think that it is confined by reference to a person who was aggrieved by ASIC's act of deregistration at the time when that act took place. It seems that in the present case, Stork FSA would not satisfy that description because it acquiesced in the deregistration of Stork ICM. I think that the expression is wide enough, however, to encompass a person who is aggrieved by the state, fact or condition of deregistration. Stork FSA is so aggrieved. One reason is that it is being sued by Mr Willesden and desires to have the benefit of any insurance indemnity provided by WorkCover Queensland. 20 Whether it is just that registration be reinstated depends, inter alia, on the effect of reinstatement. The effect of reinstatement is described in subs (5) of s 601AH, which provides as follows: (5) If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim. 21 In my view it is just that the position described in subs (5) be achieved in relation to any claims to which the insurance indemnities, if any, which Zurich and WorkCover Queensland are liable to provide, respond. Claims should be able to be made against a legal entity that will have the benefit of the relevant insurance indemnity, as would have been the case prior to the deregistration of Stork ICM on 20 December 2006. 22 Two questions remain to be discussed. 23 First, a question was raised as to whether it is necessary that ASIC be joined as a party. In my opinion this is necessary for two reasons. The first reason is that the property of Stork ICM at the time of its deregistration, including its rights under insurance policies, vested in ASIC upon the deregistration by the operation of s 601AD(2) of the Act. An order having the effect of divesting property from ASIC should not be made without ASIC's being a party. The second reason is that an order for reinstatement is an order that ASIC reinstate the registration. Save in special circumstances, an order that a person do something should not be made without the person's being a party. 24 The second question arises from Stork FSA's preferred course that an order be made under s 601AH(3)(b) of the Act that reinstatement take effect as of the date of the order and not be deemed by s 601AH(5) to have taken effect as of the time of deregistration on 20 December 2006. 25 Subsection (3) is as follows: (3) If the Court makes an order under subsection (2), it may: (a) validate anything done between the deregistration of the company and its reinstatement; and (b) make any other order it considers appropriate. Subsection (5) was set out at [18] above. 26 It will be appreciated that the proposed reinstatement of registration, transfers of liabilities and responding insurances, and subsequent (second) deregistration are to occur in rapid succession. Stork FSA prefers that the reinstatement take effect in the same accounting period as that in which the other two acts take effect. 27 I do not think, however, that s 601AH(3)(b) empowers the Court to make an order denying to a reinstatement the retrospective effect provided for in s 601AH(5). Subsection (3) assumes that an order has been made under subs (2), and in my view the only order that the Court is able to make under subs (2) is one having the retrospective effect provided for in subs (5). There is a question, however, precisely what that retrospective effect is. 28 Senior counsel for Stork FSA referred the Court to what has been described as the limited nature of the retrospective effect for which subs (5) provides. The second and third sentences of subs (5) suggest that the first sentence has a limited effect. 29 Senior counsel referred to the discussion by Campbell J in White v Baycorp Advantage Business Information Services Ltd (2006) 200 FLR 125 (White); and by White J in Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq) (2008) 65 ACSR 476. Reference may also be made to CGU Workers Compensation (NSW) Ltd v Rockwall Interiors Pty Ltd (2006) 201 FLR 296 (CGU); Mitzev v Foxman (2007) 13 BPR 24,989; and Tom Michael Oates v Consolidated Capital Services Pty Ltd [2007] NSWSC 680. The relevant issue addressed in these cases was whether particular acts, conduct, states of mind or omissions were to be attributed to the deregistered company, or particular acts purportedly directed against it were to be treated as effective, in each case as at a time during the period of the deregistration. The cases recognise that the mere retrospective effect of a reinstatement, without more, does not supply the additional facts necessary to make for a positive answer to such questions. 30 The circumstances of the present case, however, are more akin to those of GIO General Ltd (Agent for NSW WorkCover Scheme) v Sabko Pty Ltd (2007) 70 NSWLR 743. In that case, as in the present one, all of the circumstances giving rise to the liability in question had occurred prior to deregistration and all that remained for the liability to be enlivened was the effluxion of time. The company had entered into a contract of insurance for the period 8 April 2005 to 8 April 2006. After doing so, the company was deregistered on 25 December 2005. The contract of insurance provided for automatic renewal for a further year from 8 April 2006 to 8 April 2007, for a premium that was to fall due on 31 July 2006, unless the company gave a certain notice to the insurer. The insurer issued an invoice for the renewal premium for the second annual period, the "due date" being 31 July 2006. 31 On 16 March 2007, a reinstatement order was made and on the hearing it was assumed that ASIC had reinstated the registration of the company in accordance with that order. 32 Austin J held that by reason of the first sentence of s 601AH(5) the reinstatement was retrospective to 25 December 2005 and that the company had become indebted to the insurer for the renewal premium in 2006. His Honour distinguished White and CGU. In White certain notices were purportedly given on behalf of the deregistered company, and in CGU a statutory demand was served purportedly on the deregistered company and not complied with by it during the deregistration period. 33 Austin J emphasised that in the case before him, the liability for the renewal premium accrued under the terms of the pre-existing contract by nothing more than the effluxion of time. His Honour rejected a submission that the liability was not enlivened by reason of the fact that while it was deregistered the company could not have given to the insurer notice that the renewal was not required. 34 In the circumstances of the present case, there are no post-deregistration acts, conduct, states of mind or omissions of the company or post-deregistration acts directed against the company that are essential to the accrual of the liability. The mere deemed continued existence of Stork ICM is sufficient to perfect its liability. 35 Even if, contrary to my view, the Court has power, by an order made under s 601AH(3)(b) to modify the operation of subs (5), it would not do so in the circumstances of the present case. The reason is that the enlivening of the liabilities of Stork ICM depends on reinstatement being fully retrospective. As noted earlier, when Stork ICM ceased to exist on 20 December 2006 there ceased to exist any legal entity that bore the liabilities in question. In these circumstances it seems an appropriate use of language to say that upon deregistration the liabilities ceased to exist (more precisely they ceased to exist subject only to the possibility of a retrospectively effective reinstatement). If, as Stork FSA asks, an order were made pursuant to s 601AH(3)(b) of the Act that the first sentence of s 601AH(5) not apply, apparently the reinstatement would have effect only from the date when ASIC in fact reinstated the registration pursuant to the Court's order. In these circumstances, the non-existence of the company from 20 December 2006 down to that date would remain untouched and Stork ICM's liabilities would not be enlivened upon the making or effectuating of the order for reinstatement. 36 For the above reasons, on 2 February 2010 I made, first, an order joining ASIC as second defendant; second, an order that ASIC reinstate the registration of Stork ICM; third, orders that immediately following reinstatement, the insurance indemnities, if any, that are available from Zurich and WorkCover Queensland and all of the liabilities, if any, of Stork ICM to which any such policies respond, be transferred to Stork FSA and any legal proceeding pending in respect of such policies or liabilities be continued by or against Stork FSA; and, fourth, an order that Stork ICM be again deregistered without winding up. The liberty to apply reserved by orders 7 and 8 made on 14 December 2006 will continue. This is relevant in case any further consenting insurer comes to light or any further claim is made arising out of exposure to asbestos fibre. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Stork ICM Australia Pty Ltd v SFS 007.298.633 Pty Limited

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