Chalker v Clark
[2008] VSCA 92
•16 May 2008
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No 8256 of 2005
| JOHN LEONARD CHALKER | |
| Appellant | |
| v GRAHAM JOHN CLARK and AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION | Respondents |
| and | |
| BARWON COAST MANAGEMENT COMMITTEE INCORPORATED AND THE STATE OF VICTORIA | Interested Parties |
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JUDGES: | MAXWELL P, DODDS-STREETON JA and OSBORN AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 16 May 2008 | |
DATE OF JUDGMENT: | 16 May 2008 | |
MEDIUM NEUTRAL CITATION: | [2008] VSCA 92 | |
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CORPORATION – Application to reinstate company on register – Purpose of application to enable applicant to seek assignment of asserted cause of action – Application futile in face of position of secured creditor – Application highly speculative – Proposed cause of action statute barred – Discretion of trial judge not shown to be improperly exercised – Costs –
s 60AH(2) Corporations Act2001 (Cth), Pilarinos & Ors v ASIC [2006] VSC 301.
PRACTICE AND PROCEDURE – Costs – Interested parties granted leave to intervene as contradictors – Whether costs should be awarded where opposition to appeal successful.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant/Plaintiff | Mr G J Herbert | VM Roccisano |
| For the Interested Parties | Mr M R Scott | TressCox Lawyers |
| There were no appearances for the Respondents. | ||
MAXWELL P:
Before I invite Osborn AJA to deliver the first judgment, I want to explain for the benefit of your client, Mr Herbert, how it comes about that we are able to dispose of the case in the same morning as it has been argued.
You would be aware, Mr Chalker, that your lawyers and the respondents’ lawyers have given us in advance detailed written argument. That has enabled us, as we do in every case, to read and think about it in some detail before we come into court. We come into Court with an open mind, but having had a chance to understand the way the issues are formulated and to form provisional views on the strength of the competing arguments. We have had invaluable assistance from your barrister in clarifying, explaining and developing the argument, which we are already quite familiar with having read the written material and the judgment of the court below. The decision we have arrived at is based on the combined written and oral argument.
OSBORN AJA:
This is an appeal with respect to the decision made by Whelan J rejecting the appellant's application for an order in proceeding 8256 of 2006, pursuant to s601AH(2) of the Corporations Act 2001 (Cth) (the “Act”), requiring the second respondent to restore Chalky's in the Dunes Pty Ltd to the register.[1] By the same decision his Honour also rejected an application for an order in another proceeding, 6131 of 2006, brought under ss 511 and 1322 of the Act, that a meeting of the creditors and contributories of the company held on 17 August 2002, and the proceedings of that meeting, are void by reason of the fact that the meeting, which was the final meeting of creditors and members pursuant to s 509 of the Act, had not been duly convened.
[1]This application was itself brought by way of appeal from an order of Master Efthim dismissing the application.
Reinstatement of the company upon the register is sought on the basis that the
appellant desires to procure assignment to himself of an alleged cause of action against the interested parties, to whom I shall refer, as did the judge below, as "the objectors".
In deciding the applications now in issue, the judge summarised the background facts as follows:
The company was the trustee of a unit trust named the Chalky’s in the Dunes Unit Trust (“the trust”). All of the units in the trust are owned by a company named Caveron Pty Ltd (“Caveron”). Caveron is in turn the trustee of a discretionary trust named the Chalker Family Trust (“the family trust”). The initial beneficiaries of the family trust are Mr Chalker and his wife, Catherine Mary Chalker.
By a written lease dated 19 December 1994 the company as lessee leased from the Ocean Grove Foreshore Reserve Committee of Management Incorporated (the predecessor of the Barwon Coast Committee of Management Incorporated) a building on the Ocean Grove foreshore for use as a kiosk and restaurant. The company entered into the lease in its capacity as trustee of the trust.
Mr Chalker maintains that significant losses were suffered as a result of breaches of the lease and related wrongs for which Barwon Coast Committee of Management Incorporated and the State of Victoria are responsible. In proceeding 4252 of 2001 the allegation was that the relevant breaches occurred in January and February 1995. If Mr Chalker is successful in these applications, and if the further steps he proposes can be carried out, the claim which he wishes to pursue is that set out in a draft statement of claim which is exhibit “CX-5” to affidavits sworn by him in proceeding 8256 of 2005 on 19 October 2006 and on 17 November 2006. This proposed claim also relies upon alleged breaches of the written lease in January and February 1995, and in addition relies upon breaches of an agreement referred to as the “Background Agreement”, and upon other wrongs which extend beyond February 1995. As I read the draft statement of claim it can, however, be safely assumed that all of the breaches relied upon had occurred by 22 July 1996 when an administrator under Part 5.3A of the Act was appointed to the company. The administrator appointed was the first defendant in each proceeding before me, Mr Graham Clark.
On 15 August 1996 Mr Clark became liquidator of the company.
On 6 June 2000 Mr Chalker became bankrupt. Mr Chalker attributes his bankruptcy to the matters which are the subject of the company’s claims against Barwon Coast Committee of Management Incorporated and the State of Victoria.
The final meeting of creditors and members of the company pursuant to s 509 of the Act was held on 17 August 2000. The company was deregistered on 22 November 2000.
The meeting held on 17 August 2000 was not convened in the manner required by the Act. Section 509(2) of the Act requires that the meeting must be convened by an advertisement published in the gazette at least one month before the meeting. The advertisement in this case was published on 18 July 2000, less than one month before 17 August 2000. Mr Chalker also maintains that creditors and members were not given notice of the meeting and that a quorum was not present. Mr Clark, in his affidavit sworn 23 November 2005 (para 6), says that he delegated the convening of the meeting to his staff and that he has “no reason to doubt” Mr Chalker’s evidence both as to the insufficiency of the notice in the gazette and the fact that he did not receive notice himself. The material before me indicates that Barwon Coast Committee of Management Incorporated did receive notice.
Procedural irregularities do not invalidate a meeting unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice and declares the proceeding to be invalid: s 322(2), or unless the Court declares proceedings at the meeting void: s 1322(3). Mr Chalker in proceeding 6131 of 2006 seeks an order under s 1322(3). He seeks that order so as to fortify his application to have the company reinstated and, according to his affidavits sworn 19 October 2006 and 17 November 2006 (para 7), so as to give him the opportunity to put a proposal to a meeting of creditors that they “consider my offer to the company to purchase by way of assignment in my favour whatever cause of action it may have against the defendants”.
Mr Chalker and his son brought proceeding number 4252 of 2001 against the objectors purportedly in their capacity as new trustees of the trust and on some other grounds. The claim was dismissed because it was held that the proceeding when issued was incompetent. It was found that Mr Chalker and his son were not trustees of the trust and were not authorised to institute the claim at the time they did so. The Court of Appeal upheld the order dismissing the proceeding on 3 May 2005. Mr Chalker commenced the proceeding to have the company restored to the register on 19 September 2005.
Proceeding 4252 of 2001 referred to in his Honour's summary was instituted by the appellant and his son in January 2001. In that proceeding, Gillard J held that the plaintiffs were not entitled to sue on behalf of the trust. On appeal the Court of Appeal agreed that the proceeding was not competent because at the date when the action was issued the plaintiffs had not been appointed trustees of the trust.
As Whelan J found, the current proceeding contemplates a claim which amplifies the previous claim. It raises at its core the same causes of action as that previously alleged but adds additional matters. It contemplates a claim brought both in the capacity of assignee and personally by Mr Chalker. I accept that the appellant feels a genuine sense of grievance as to the underlying facts of the matter, but the question with which we are now concerned is whether he should be permitted to litigate this underlying grievance by way of the procedure proposed.
Reinstatement Application
I turn then to the reinstatement application. The application for reinstatement is made pursuant to s 601AH of the Act, which relevantly provides:
(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.
(3) If the court makes an order under sub-s (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.
...
(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.
The objectors contended before Whelan J that the appellant is not a person aggrieved in the sense of this section as a result of the deregistration. His Honour rejected this contention and held that, by reason of association of the appellant ("Mr Chalker") with the company, there was sufficient basis to hold that he had standing. The objector’s take issue before us with this conclusion, but in the event I have found it unnecessary to rule upon it.
His Honour next reiterated the essentially speculative nature of the application. Mr Chalker proposes that the company be reinstated so that the creditors and a new liquidator can consider offers by Mr Chalker to take an assignment of the cause of action which he asserts exists, in order that he may in turn institute proceedings as an assignee. It can be seen that this purpose reflects a speculative application seeking to establish an opportunity to treat.
After identifying the purposes of the application, his Honour identified a series of issues relevant to the court's discretion with respect to it.
1.National Australia Bank (“NAB”) has a charge over all property which was held by the company, including any cause of action the company had against the objectors. It is contended on behalf of the objectors that the existence of NAB as a secured creditor and its attitude to the proposed claim means that there is no point in reinstating the company.
2.The objectors maintain that this is a clear case where the proposed cause of action to be pursued, which is the purpose of reinstating the company, is statute barred.
3.Mr Chalker relies on the irregularities concerning the final meeting in contending that it is just that the company be reinstated.
4.Material has been filed as to the attitude of the former liquidator, Mr Clark, both as to the cause of action itself and as to its assignment.
5.The offers made or foreshadowed by Mr Chalker in relation to the assignment involve, or have involved, modest sums, and an issue arises as to whether it is just to reinstate the company so as to consider such offers.
6.It was submitted on behalf of both ASIC and the objectors that it was unnecessary to reinstate the company as Mr Chalker and his son are now, or can become, the new trustees of the trust and there is nothing to prevent them from issuing a fresh proceeding in that capacity, although the objectors contend that any such proceeding would be statute barred.
His Honour considered the evidence bearing on the position of the NAB as a secured creditor. He noted first that the parties had proceeded on the basis that the NAB holds security over all of the property and undertaking formerly held by the company, including the relevant cause of action. Secondly, the NAB had in September 2005 rejected an offer by Mr Chalker to take an assignment of the cause of action for the sum of $6,000. A further, even lower, offer of $5,000 was rejected in July 2006. Thirdly, the former liquidator of the company had been unable to interest the NAB in the proposed litigation. Fourthly, by letter of 2 February 2006, the NAB had set out its position with respect to the proposed reinstatement, and indicated that it would not give financial support to the plaintiff's action. It stated that:
In the event that the application to reinstate the company is successful, and any legal action taken by the company is financially fruitful, the National accepts that an indemnified creditor may be reimbursed for the costs incurred in pursuing the action. Subject to any court order regarding preferential payment to an indemnified creditor, the National would expect the proceeds of any legal action to be paid to it pursuant to its fixed and floating charge in priority to unsecured creditors.
As his Honour stated, in substance NAB will not assign the cause of action, it will not pursue it itself, it will not fund its pursuit, and it insists that if it is pursued by others any proceeds be paid to it.
In turn his Honour concluded:
There is no reason to reinstate the company so that a liquidator and the creditors can consider an offer from Mr Chalker to take an assignment of the cause of action. If NAB is not a party to the assignment, there is no point to it. Neither the creditors nor a new liquidator can effectively assign the cause of action to Mr Chalker.
His Honour further concluded that s 554F(2) of the Act would not enable a re-appointed liquidator to impose redemption on a secured creditor in the circumstances evidenced before him.
His Honour next considered whether the proposed new proceeding was barred by the Statute of Limitations. He concluded that the cause of action is statute barred.
His Honour further concluded that if other objections had not been made out, he would not have reinstated the company merely for the purpose of allowing Chalker to offer $6,000 to take an assignment of the action.
Perhaps in anticipation of such a finding, however, Mr Chalker had foreshadowed a different proposal. He proposed that the creditors would be asked to consider 'an improvement in my offer, in which I shall offer to pay the creditors one third of the net profits in the event of my succeeding in prosecuting the said cause of action'. He also offered to indemnify the members and creditors against any loss or expense, and gave evidence as to his financial capacity.
His Honour concluded that, despite this evidence, creditors and a new liquidator might be rightly concerned that Mr Chalker would not have sufficient resources to both pursue the cause of action unsuccessfully and meet any obligations he might have under the indemnity. In turn he concluded:
If I had not found that the position regarding the secured creditor is a fatal objection, and I had not found that the action proposed would be statute barred, I would not have considered it just to reinstate the company only so that a new liquidator and creditors could consider offers of the kind proposed to be put by Mr Chalker.
Lastly his Honour concluded that if the objections for reinstatement which he had identified had not existed, then he would have reinstated the company, despite further arguments that it was unnecessary to do so because proceedings could be brought on behalf of the trust without reinstatement of the old trustee. Accordingly, the application for reinstatement was dismissed.
In turn his Honour rejected the application made in proceeding 6131 of 2006. His Honour concluded the position of the NAB rendered a further meeting of creditors futile. Accordingly, despite prior irregularity, the application for declarations concerning the prior meeting should be dismissed, and this decision is not the subject of challenge on appeal.
The appeal
I turn then to the appeal. The decision to refuse a reinstatement order is properly characterised as discretionary, because it calls for the application of a very general standard - what is just - to the particular circumstances of the case.[2] Accordingly the appellant must show the discretion miscarried in accordance with the well established principles for appellate review of discretionary decisions.[3]
[2]AMP General Insurance Ltd v Victorian WorkCover Authority & Ors (2006) 15 VR 175, 181.
[3]House v The King (1936) 55 CLR 499.
In the present case his Honour justified the exercise of his discretion against the appellant on a series of alternative bases. In my view, each of three of those was capable of justifying his decision, and it is sufficient for present purposes to deal with these.
The NAB
The appellant now contends that his Honour erred in the findings he made with respect to the position of the NAB. It is contended that - (a) it was not open to conclude that the NAB would not assign the cause of action; and (b) the proposed claim exceeds $7 million and the gross debt to NAB is in the order of $160,000 plus interest. Accordingly, his Honour should not have concluded that 'any' net proceeds of the proposed claim would necessarily be paid to the secured creditor.
It seems to me that the first impugned conclusion was open to his Honour on the evidence. As to the second, his Honour did not make the finding asserted. He recorded the insistence of the NAB that any net proceeds be paid to it. His Honour relevantly concluded that neither the creditors nor a new liquidator could 'effectively assign' the cause of action to Mr Chalker without the concurrence of the NAB. This conclusion was open as a matter of fact. As Mr Herbert conceded, it cannot be disputed the NAB was in a position to materially impede the proposed assignment.
The fundamental consideration which arose with respect to the NAB's position was that there was no basis on which to conclude that it was likely to agree to the assignment of the cause of action in accordance with Mr Chalker's proposal. This bores on whether the proposed order could be shown to be other than futile. It was for this reason that the defendants sought to mount an argument before his Honour pursuant to s 554(2) of the Act - an argument which was not pursued by the notice of appeal.
The fact that Mr Chalker has hitherto offered the sums of $5,000 and $6,000 for assignment of the cause of action necessarily supports the probability that the cause of action is, as the liquidator stated at one point, 'highly speculative'. If its value is not significantly less than the $160,000 plus interest owed to the NAB, then it lies in Mr Chalker's hands to pay out the secured creditor or reach an accommodation with it. This opportunity is not dependent upon the prior reinstatement of the company. Conversely, until such an accommodation is reached, the stated purpose of the reinstatement is entirely speculative.
The company is not solvent and there is a real prospect that reinstatement would multiply debts.[4] I respectfully agree with Whelan J that the evidence before him did not satisfactorily establish Mr Chalker's capacity to indemnify in the event the proposed action were unsuccessful. This raises further serious doubts that the assignment Mr Chalker seeks would ever be agreed to and confirms that the application should be regarded as highly speculative.
[4]Cf Clasquin SA v AAR International Pty Ltd & Anor (1989) 7 ACLC 284; Re Donald Kenyon Ltd [1956] 3 All ER 596.
Accordingly, I am of the view his Honour was correct to hold that the position of the NAB was a proper reason for the court in its discretion to refuse reinstatement. He was further correct to hold that, if the position of the secured creditor is not regarded as fatal to the application, it would not be just to reinstate the company 'only so that a new liquidator and creditors would consider offers of the kind proposed to be put by Mr Chalker'.
The underlying problem
There is, however, in my view, a further fundamental problem confronting the appellant. Section 601AH(5) provides that upon reinstatement 'any property of the company that is still vested in the Commonwealth or ASIC revests in the company'. In the present case, the relevant deed of trust provided:
19 RETIREMENT AND REMOVAL OF TRUSTEE
19.1The Trustee may retire upon giving 90 days prior notice to the Holders of its desire so to do and by Special Resolution at a meeting of the Unitholders a new Trustee shall be appointed in its stead.
19.2If the Trustee goes into liquidation or ceases to carry on business or a Receiver or an Official Manager of its undertaking is appointed the Trustee shall forthwith give notice in writing to all Unitholders of that entry into liquidation, cessation or appointment and shall convene a meeting of Unitholders. The Trustee shall be deemed to have resigned effective on the date of such liquidation, cessation or appointment and by Special Resolution at a meeting of the Unitholders a new Trustee shall be appointed.
19.3At any time and from time to time the Trustee may be removed and another Trustee may be appointed in its place by Special Resolution at a meeting of the Unitholders.
19.4A new trustee appointed pursuant to sub-clauses 19.1, 19.2 and 19.3 hereof shall execute an instrument setting out his or its consent to his or its appointment as Trustee.
19.5Every new Trustee appointed pursuant to sub-clauses 19.1, 19.2 and 19.3 hereof on the execution of the instrument of appointment referred to in sub-clause 19.4 hereof shall have all the powers, authorities and discretions as his or its predecessor and may in all respects act as if he or it had been originally appointed the Trustee of the Trust by this Deed.
19.6On the retirement or removal of a Trustee, he shall cease to be Trustee and all property rights and benefits of any kind vested in him or it shall without need for any instrument vest in the new Trustee on the new Trustee executing the instrument of appointment, provided always that the retired or removed Trustee shall have the benefit of the indemnity in Clause 29 hereof in respect of all matters and things the subject of that indemnity prior to the date of retirement or removal. (My emphasis)
The trustee went into liquidation in August 1996 and is deemed in terms by the deed to have resigned from the date of such liquidation. Further, a new trustee has been appointed. Mr Chalker deposes by his affidavit of 4 May 2006:
The CD Trust continues in existence and latterly in 2005 my son Benjamin John Chalker and I were appointed the trustees with due notice to ASIC and with no objection by ASIC. However, our appointment was too late to overcome the obstacle of the Statute of Limitations in respect of the said cause of action arising in about 1996, and we had rested upon an assumed right to sue as acting trustees, to which, in the judgment of this Honourable Court, we were not entitled.
As I have said, the previous proceeding instituted by Mr Chalker with respect to the relevant cause of action was held to be invalid because Mr Chalker and his son had not been appointed trustees at the date of the institution of the proceeding. It was implicit in the Court's decision, however, that a new trustee could be appointed pursuant to Clause 19 of the trust deed, and it was accepted, consistently with Mr Chalker's evidence in this proceeding, that that may in fact already have occurred:
In my opinion, the contention that the proceeding has been ratified by subsequent appointment of the appellants as trustees must be rejected. Mr Bick did not challenge the capacity of Cavaron to have appointed the appellants trustees. Indeed he accepted that one or both of the last two instances where Cavaron purported to do so probably achieved that result. That, however, only achieved a prospective effect. It could not act retrospectively to make the appellants trustees at the time of the issue of the writ. Cavaron had not appointed the appellants trustees before they issued the writ. The proceeding was a nullity.[5]
[5]Eames JA with whom Chernov and Vincent JJA agreed.
In general it is the trustee who makes a proceeding is to protect the trust estate and enforce rights belonging to it.[6] If there be doubt as to the vesting of the trust property in the trustee, that doubt may be removed by a vesting application.[7] On Mr Chalker's own material, however, the cause of action is presently vested in the trustee and that trustee is no longer the company which Mr Chalker seeks to have reinstated. Reinstatement is not a prerequisite for the institution of proceedings in respect of the cause of action.
[6]Young v Murphy (1996) 1 VR 279, 291, Brooking JA with whom JD Phillips and Batt JJA agreed.
[7]Ibid.
His Honour did not regard this circumstance as fatal to the application, but in my view it bears directly on the assessment of the next issue, which his Honour did regard as fatal.
The difficulty which faces proceedings by Mr Chalker and his son is the Statute of Limitations. Whelan J was correct to observe as follows:
It is often not appropriate for prospective defendants to a proceeding proposed to be pursued after reinstatement of a deregistered company to be permitted to make submissions as to the merits of the proposed action on the reinstatement application. In some circumstances, it is appropriate to entertain such submissions. For example, where it can be demonstrated that reinstatement is futile, as the proposed cause of action is clearly statute barred.
His Honour referred to the decisions in Pilarinos & Ors v ASIC[8] and AMP v Victorian Workcover Authority.[9] In my view, these authorities warranted his Honour's observations.
[8][2006] VSC 301, [29].
[9][2006] VSCA 236, [42].
The fundamental reality is that the breaches of contract and duty which Mr Chalker alleges occurred, if at all, more than ten years before the application before Whelan J. In turn the claims are barred by s 5 of the Limitation of Actions Act1958. The claims are founded on simple contract or alleged tort and, as I have said, include claims in the proposed statement of claim both on behalf of the company and Mr Chalker personally.
The appellant himself conducted an appeal to this Court in the previous proceeding on the basis that the limitation period in issue had expired. The Court of Appeal judgment records, at [7] of the judgment of Eames JA:
It is accepted on both sides that, if the proceeding was a nullity, then fresh proceedings would be futile because the claims would now be statute barred.
That concession was made in the context of a claim brought by Mr Chalker and his son on the alternative bases that either they were trustees having been appointed after the institution of the proceeding, and that such appointment was ratified after the commence of the proceeding, or that they were acting in the stead of the trustee of the unit trust by virtue of the definition of trustee in the trust deed.
Given that the alleged breaches of duty in issue are now more than eleven years old, and the company was deregistered more than seven years ago, it would in my view be unjust to permit Mr Chalker to seek to revive the cause of action by reinstating the company and using it as a vehicle to seek to circumvent the limitations period by way of an order pursuant to s 601AH(3)(b). The fact that no regular meeting of the company was convened on 17 August 2000 is a matter of which Mr Chalker must himself have been aware at or about the time, both as a member and a creditor of the company intimately concerned with its affairs. It was in turn susceptible to timely action by his trustee in bankruptcy, in whom his rights as a creditor of the company had vested pursuant to the provisions of the Bankruptcy Act 1966.
This is not a case where Mr Chalker seeks to substitute the company for himself in existing proceedings instituted bona fide by him, within time, in circumstances where only the company was entitled to sue.[10] Rather, as I have said, Mr Chalker is presently entitled to sue, and there are no existing proceedings issued within time. If the company is reinstated, it will be taken to have continued in existence as if it had not been deregistered: see s 601AH(5). Yet the effect of the order sought will be to deprive third parties of limitation defences accruing to them during the period in issue.[11] The Statute of Limitations gives the objectors a good defence to any claim by Mr Chalker as a trustee. His Honour was entitled to conclude as he did that no sufficient reason has been established for allowing Mr Chalker to attempt to cloak his claim in the body of the company and revive it.
[10]Cf Lillecrap v State of South Australia (1996) 14 ACLC 1, 540.
[11]Cf Re Piccoli Tesori Pty Ltd (Deregistered): Ex parte Bertuol, unreported, Federal Court of Australia, WAD, 78 of 2006, [28].
The power under s 601AH(3)(b) is one which allows the court to make orders ancillary or complimentary to the reinstatement of a company.[12] It is for the applicant to persuade the court that it is just to do so in all the circumstances of the case. Whelan J was not so persuaded. The appeal should be refused. It was open to the trial judge to conclude (a) the position of the NAB rendered the reinstatement of little or no utility; (b) the purpose of the application is entirely speculative; and (c) the proposed cause of action is in any event statute barred and no proper basis has been advanced for an order seeking to avoid the effect of the effluxion of time. In turn, as his Honour found, each of the above matters justified the exercise of the discretion adversely to the appellant.
[12]See the observations of the Master of the Rolls in Tymans, Ltd v Craven (1952) 1 All ER 613 at 619.
DODDS-STREETON JA:
I agree with Osborn AJA. I add that, in my view, the observation of Gillard J in Pilarinos v ASIC[13] (‘Pilarinos’) at [103], namely:
[13](2006) 24 ACLC 775
Indeed, in my view, it follows, once the court comes to the view that the first and third plaintiffs are persons aggrieved by the deregistration, in that there is a valuable right which each wishes to establish in a court or tribunal, that in the circumstances it would be just that the company's registration be reinstated.
was not intended, and cannot be applied, as an inflexible rule of general application in the exercise of the discretion under s 601AD(2) of the Corporations Act 2001 (Cth). His Honour's statement was clearly applicable to the particular case and does not preclude consideration of all factors reasonably relevant to the question whether it is just that a company's registration be reinstated. A general and literal application of the statement would impose a limitation not stated in the sub-section and would artificially constrain and abbreviate the court's consideration of relevant matters.
Indeed, in Pilarinos, Gillard J proceeded to consider the relevance of the possible utility of reinstatement because the proposed cause of action was doomed to fail to the exercise of his discretion.
MAXWELL P:
For the reasons given by Osborn AJA, I too would dismiss the appeal. I add these brief remarks for myself.
The power which is conferred on the court to order reinstatement is a discretionary power, to be exercised according to the justice of the case. The discretion could hardly be broader. As with any appeal from a discretion, it is not sufficient simply to argue that a different conclusion should have been arrived at. The appeal from a master to a judge on a reinstatement application is a re-hearing on the merits. On an appeal from the judge, however, there needs to be demonstrated clear legal error of one of the requisite kinds before the appellate court will interfere.
Quite properly, counsel for the appellant sought to argue recognised grounds of appeal from an exercise of discretion. He submitted that his Honour's decision was vitiated by taking into account irrelevant considerations and matters which were foreign to the purpose for which the power was conferred; and that the decision to refuse reinstatement was so unreasonable that no reasonable decision-maker in his Honour's position could have so decided. None of those grounds was made out, for the reasons which Osborn AJA has given.
Counsel for the appellant dealt candidly with the issues raised by the Court, particularly in relation to the limitation period question. First, Mr Herbert readily conceded – as he had done in the previous proceeding in this Court – that the causes of action on which the company could rely (in the action sought to be assigned) are statute-barred. Secondly, he acknowledged that the expiry of the limitation period was seen as an insuperable obstacle to the cause of action being litigated by his client as the successor trustee to the company. That was why this application for
reinstatement was brought. The advantage which this procedural course offered over that which had been rejected – that is, his client suing as successor trustee – was that there appeared to be scope under s 601AH(3) for the lapse of time to be disregarded. In short, there appeared to be a means of circumventing the limitation problem by using the reinstated company as the vehicle for the litigation.
It follows that the application for reinstatement was a device to escape the application of a limitation period, in circumstances where the limitation period should operate to secure the purpose for which it is established, that is to say, to protect defendants against litigation being commenced too long after the events the subject of the litigation. I cannot imagine that a court would have allowed s 601AH(3) to be used in that way. It is even less likely that any such extension would have been granted where the proposed litigant was not the company itself but Mr Chalker as the putative assignee from the company. I do not see how the power could ever have been exercised for that purpose, which seems to be extraneous to the purpose of the reinstatement power itself.
Counsel for the appellant said everything which could have been said on his behalf. It is clear that his client has a strong sense of grievance but, for policy reasons which are apparent on the face of the limitation statute, actions which are statute-barred cannot be prosecuted except in quite exceptional circumstances. Eventually that reality has to be accepted.
The submission was made that Mr Chalker was confused about his Honour's reasons, unsure whether, separately from the National Australia Bank point, the limitation period point had in fact been a ground of decision. It is important that any lingering confusion be dispelled. As Osborn AJA's reasons make clear, we take the view that the limitation period was a ground of decision in itself, separate from the National Australia Bank issue. The limitation period had the very powerful significance for this application that the reinstatement would be futile, since it was inconceivable that there would be an extension of time.
To have reinstated a company to enable a former director of the company to seek to acquire from it a cause of action which could never be litigated would have been, in my opinion, a wholly unreasonable exercise of the power. There was no basis for reinstatement. His Honour's conclusion was not only reasonably open on the material but, in my opinion, it was the only conclusion reasonably open on the material.
In the Court's view, the appellant should pay the costs of the interested parties, who are the respondents. Our reasons for that view are as follows. Mr Chalker was a person aggrieved because of the interest which he sought to advance in connection with the reinstatement. Likewise, the interested parties were persons directly affected by the reinstatement application. Indeed, they could have hardly have been more directly affected, given that they are named as defendants in the draft statement of claim, which defines the action which Mr Chalker would bring if there were reinstatement and an assignment.
We are told that the interested parties were granted leave to make submissions and that they provided evidence, but were not formally made parties. In our view, the substance of the matter is that they were allowed to intervene, and have intervened, in the proceeding and have participated as the only active respondents to both the application and to this appeal. There would have been no contradictor but for the presence of the interested parties.
Had it fallen to us to decide, we would have granted them leave to intervene formally in the appeal for that purpose. Not only did they have a proper interest to assert, and proper submissions to make about why the appeal should fail, but it was in the public interest that there be a contradictor for the assistance of the court.
It follows that the interested parties would have been exposed to costs if, having opposed the appeal, it had succeeded. Accordingly, having opposed the appeal successfully, they should have their costs of the appeal in the usual way. That accords with the view taken on the only other occasion when this matter was in
this Court, that is, on 23 February last year, when orders were made extending time for filing a notice of appeal. The applicant was then ordered to pay what were described as the respondents' costs. That can only have been a reference to the interested parties represented by Mr Scott.
For those reasons, the orders of the Court are as follows:
1. Appeal dismissed.
2.The appellant pay the costs of the interested parties.
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