Brown v Hodgkinson

[2008] NSWSC 625

CITATION:	Brown v Hodgkinson [2008] NSWSC 625 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	18 June 2008
JUDGMENT OF:	Hammerschlag J
EX TEMPORE JUDGMENT DATE:	18 June 2008
DECISION:	Motion dismissed
CATCHWORDS:	CORPORATIONS – Corporations Law 2001 (Cth) chapter 5A – deregistration and reinstatement of company – effect on caveat under Real Property Act 1900 (NSW) lodged before deregistration and on orders for extension made by Court while deregistered where company subsequently reinstated – application that orders for extension be vacated refused
LEGISLATION CITED:	Real Property Act 1900 (NSW) Corporations Act 2001 (Cth) Civil Procedure Act 2005 (NSW)
CASES CITED:	Foxman v Credex [2007] NSWSC 1422 Cameron v Cole (1944) 68 CLR 571. Dennis v Australian Broadcasting Corporation [2008] NSWCA 37
PARTIES:	Justin John Brown Sharlotte Pty Limited ACN 088 892 906 Abadeen Group Pty Limited ACN 056 601 640 Lighter Quay Investments Limited Lance Hodgkinson Bluestone Property Services Pty Limited ACN 090 597 836 203 Palmer Street Pty Limited ACN 104 271 874 Daniel Hausman Crown Street Developments Pty Limited ACN 104 076 691 519 St Kilda Road Developments Pty Limited ACN 106 203 963 Gorcha Pty Limited ACN 106 442 068
FILE NUMBER(S):	SC 2008/2008
COUNSEL:	B.A.J. Coles QC with J.P. Donohoe (Plaintiffs) R. Francois (Defendants)
SOLICITORS:	Edwin Davey Commercial and Litigation Lawyers (Plaintiffs) Clayton Utz (Defendants)

- 7 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

HAMMERSCHLAG J

18 JUNE 2008

2008/2008 JUSTIN BROWN V LANCE HODGKINSON

EX TEMPORE JUDGMENT

1 HIS HONOUR: On 14 September 2006, the second plaintiff ("the Company") entered into a contract to buy land from the third defendant, Palmer Street Pty Limited.

2 On 8 October 2007, the Company lodged a caveat pursuant to s 74F of the Real Property Act 1900 (NSW) seeking to protect its interest in the land as purchaser.

3 By Statement of Claim issued on 2 May 2008, the Company commenced proceedings against the third defendant and various other parties seeking orders including for specific performance of the contract (“the main proceedings”).

4 On 23 December 2007, the Company was deregistered by the Australian Securities and Investments Commission (“ASIC”) pursuant to s 601AB of the Corporations Act 2001 (Cth) (“the Act”). By virtue of s 601AD of that Act, upon deregistration the Company ceased to exist.

5 The third defendant procured the purported service of a lapsing notice under s 74J of The Real Property Act 1900 (NSW) on the second plaintiff (whilst it did not exist) in respect of the caveat on 3 March 2008.

6 On 18 March or thereabouts, the sole director and shareholder of the Company made an application to ASIC to have it reinstated.

7 On 25 March 2008, Nicholas J initially made orders briefly extending the operation of the caveat. On 27 March 2008, by consent, against an undertaking as to damages purportedly given on behalf of the Company, the caveats were extended by His Honour until delivery of judgment in the main proceedings "or further order of the Court".

8 By letter dated 28 March 2008, the third defendant's solicitors wrote to the second plaintiff's solicitors in terms which sought explanations as to how it had come about that the deregistered status of the second plaintiff had not been drawn to the Court's attention. The letter invited the second plaintiff to withdraw the proceedings so far as extension of the caveat was sought and to pay costs to date on an indemnity basis. The letter concluded that a response was requested by noon on Monday, 31 March 2008, "after which time our clients will regard themselves as being at liberty to take any action necessary to protect their interests."

9 On 8 April 2008, the Company was reinstated by ASIC pursuant to s 601AH(1) of the Act which provides that ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered.

10 By motion filed on 4 April 2008, the third defendant (and all other defendants in the proceedings) moved for orders that the order made by Nicholas J on 27 March be vacated and for costs, once again on an indemnity basis.

11 On 9 April 2008, the Company's solicitors responded to the 28 March 2008 letter from the third defendant’s solicitors. They referred to a telephone conversation earlier that afternoon between the solicitors and said this:

“We note that we have been advised today that ASIC has reinstated Sharlotte Pty Limited and we request that you obtain instructions as to whether your client will consent to its motion being dismissed in the light of the effective reinstatement under s 601AH(5) of the Corporations Act 2001.”

12 In that letter a timetable was proposed for the further conduct of the proceedings.

13 Today there was filed in Court, with leave, an amended motion seeking vacation of the orders made by Nicholas J both on 25 March and 27 March 2008.

14 Ms Francois of counsel appeared for the defendants. Mr Coles of Queen's counsel together with Mr Donohoe of counsel appeared for the Company.

15 It is put that the orders of Nicholas J should be vacated because when they were made the Company was, by operation of statute, not in existence by virtue of the provisions of s 601AD(2)A of the Act. That section provides that on deregistration all property of a company vests in ASIC. Hence, it is put, at the time the orders were made by Nicholas J the Company had no interest in the land which could have sustained either the caveat or the orders which His Honour made.

16 Sections 601AH(2) and (3) of the Act provide that the Court may make an order that ASIC reinstate the registration of a company and if it makes such an order that it may validate anything done between the deregistration of the company and its reinstatement and make any other order it considers appropriate.

17 Section 601AH(5) provides that if a company is reinstated it is taken to have continued in existence as if it had not been deregistered and that any property of the company “that is still vested in…ASIC revests in the company”.

18 It follows that when reinstatement is by ASIC rather than by order of Court (which may validate things done earlier or make any other appropriate order) the property which revests in the company only does so again from the time of reinstatement; see Foxman v Credex [2007] NSWSC 1422.

19 Hence, during the period of deregistration the Company was not vested with the property being its claimed interest in the land and did not get it back until its reinstatement. The reinstatement does not have retrospective effect so far as it concerns the revesting of that property. It follows, it was put, that the orders of Nicholas J were “invalid” and should be vacated. It was put further that to leave the orders standing is productive of confusion.

20 There was no issue between counsel that a lapsing notice could not have validly been served at the time it was, on the Company.

21 There was, however, also no issue that the caveat (which was lodged before deregistration) has by virtue of the reinstatement and the operation of s 605AH(5) continued throughout to have effect. That section provides

"If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered.”

22 It may be accepted that during the period of its deregistration (including when the extension orders were made by Nicholas J) the Company ceased to have any interest in the land because for that period the land vested in ASIC. For that period it could not have validly sustained the caveat.

23 But on its reinstatement, the Company is taken to have existed throughout. The caveat had been lodged before registration and the effect of reinstatement means that it has had a caveat lodged (whether it had an interest or not) during the whole time.

24 Its reinstatement also means that it had capacity throughout to make the application for extension whether it had an interest in the land at the time or not.

25 On established principle, the orders of Nicholas J are not a nullity. As orders of a Superior Court of record they are binding on those to whom they are addressed until they are set aside; Cameron v Cole (1944) 68 CLR 571.

26 If the Company had a caveatable interest before its deregistration, that caveatable interest has revested in it. In the meantime, orders have been made extending the caveat reflecting the very same interest.

27 There is accordingly no good reason why those orders should now not operate according to their tenor or why they should be set aside.

28 There is nothing to inhibit the defendants if they see fit, to have a new lapsing notice served or to move the Court that the orders made by Nicholas J be varied.

29 There was no suggestion that during the time of the Company’s deregistration, there was any dealing on the part of the defendants by which, if the caveat had not then be validly lodged, they were prejudiced. Moreover, the undertaking as to damages has been reaffirmed by counsel on behalf of the Company as applying and being available to the defendants from the time when it was originally given until such time as it ultimately expires.

30 In my view, no possible confusion arises as a consequence of the orders made by the Court

31 Furthermore, there is in my view, no utility of any nature to be served by vacating those orders. Indeed, to do so now would run counter to the exhortation in s 56(2) of the Civil Procedure Act 2005 (NSW) for the quick, just and cheap disposition of the true issues in the proceedings: see Dennis v Australian Broadcasting Corporation [2008] NSWCA 37.

32 When the motion was originally filed and the Company was not in existence, there was justification for bringing the motion. That justification dissipated on 9 April 2008 when the third defendant’s solicitors were informed of the reinstatement. There was no justification for it from that time onwards.

33 In the circumstances, I decline to make the orders sought in the Notice of Motion and it is dismissed.

34 The orders for costs will be:

a the second plaintiff is to pay the third defendant's costs of the motion from 4 April 2008 to 9 April 2008;

b the third defendant is to pay the second plaintiff's costs of the motion thereafter until today.

**********

20/06/2008 - remove parenthesis from citation - Paragraph(s) 2