Civil & Civic Pty Ltd v R W Bass Pty Ltd

[1996] FCA 244

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION  No NG 3550 of 1995

BETWEEN:
                 CIVIL & CIVIC PTY LIMITED

Applicant

-and-

R.W. BASS PTY LIMITED

Respondent

Coram:    Olney J

Place:    Melbourne (Heard in Sydney)

Date:     17 April 1996

MINUTE OF ORDER

THE COURT ORDERS THAT the proceeding stand adjourned sine die.

AND DIRECTS THAT:

1. the parties confer with a view to reaching agreement on the form of the orders that should be made to give effect to the reasons for judgment published this day;

2. the parties have leave if so advised to make further submissions in writing;

3. the proceeding be relisted for the making of final orders upon the written request of either party.

NOTE:     Settlement and entry of orders is dealt with in rule 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION  No NG 3550 of 1995

BETWEEN:
                 CIVIL & CIVIC PTY LIMITED

Applicant

-and-

R.W. BASS PTY LIMITED

Respondent

Coram:    Olney J

Place:    Melbourne (Heard in Sydney)

Date:     17 April 1996

REASONS FOR JUDGMENT

THE PROCEEDING

On 29 September 1995 the applicant (Civil & Civic) commenced this proceeding seeking, inter alia, an order pursuant to s 571 of the Corporations Law that the dissolution of R.W. Bass Pty Limited (R.W. Bass) be declared void.   Other relief is also sought.

It would probably have been more appropriate if the application had been made in the proceeding in which the order for dissolution was made but as it happens all the necessary parties are before the Court and no objection has been raised as to the form of the proceeding.

On 3 November 1995 leave was granted to amend the application which now seeks the following orders pursuant to s 571 and s 471B of the Corporations Law:

1. That the dissolution of R.W. Bass on 4 March 1994, pursuant to a court order made under section 481(6) of the Corporations Law, be declared void. 

1. That the declaration sought in paragraph 1 have  retrospective effect and that the dissolution of R.W. Bass is void ab initio.

1. That Civil & Civic be granted leave to commence proceedings No 20390 of 1994 in the Supreme Court, Common Law Division and that such leave take effect from 21 June 1994.

The amended application asserts that the nature of Civil & Civic's interest is as a contingent creditor of R.W. Bass and that it relies upon the following grounds:

a)Civil & Civic is a contingent creditor of R.W. Bass;

b)R.W. Bass is insured; and

c)To take advantage of such insurance it is necessary that R.W. Bass be reinstated.

Subsequently, on 7 December 1995 Civil & Civic filed a notice of motion seeking orders, inter alia:

1. That [Civil & Civic] be granted leave nunc pro tunc to commence proceedings numbered 20390 of 1994 in the Supreme Court, Common Law Division against R.W. Bass Pty Limited (in liquidation) and that such leave take effect from 21 June 1994.

1. Further, or in the alternative, that [Civil & Civic] be granted leave to proceed with proceedings numbered 20390 of 1994 in the Supreme Court, Common Law Division against R.W. Bass Pty Limited (in liquidation) notwithstanding that such proceedings were commenced on 21 June 1994 without leave.

1. That all steps already taken and taken hereafter in those proceedings be valid notwithstanding the order for winding up and notwithstanding that such proceedings were commenced
   without leave on 21 June 1994, and that those proceedings proceed to judgment notwithstanding the order for winding up and notwithstanding that such proceedings were commenced without leave on 21 June 1994.

The amended application and motion were heard together on 5 March 1996.

On 12 December 1995 Messrs Vandervords filed an appearance "on behalf of the respondent".   Clearly at that time, and indeed throughout the present proceeding, "the respondent" (R.W. Bass) had no legal or other existence.   The appearance has in the circumstances been treated as an appearance in the interests of FAI Traders Insurance Company Limited (FAI) R.W. Bass's insurer at the relevant time.

In the event that the Court declares the dissolution of R.W. Bass void, it will regain the status it had at the time the order for dissolution was made, namely a company in liquidation. Accordingly, before the applicant can proceed further against it in the action referred to in the amended application and the notice of motion it will require leave in accordance with s 471B of the Corporations Law.

THE DISSOLUTION OF R.W. BASS
R.W. Bass was incorporated in South Australia under the Companies Act 1962-1981 (SA) on 8 April 1982. On 14 April 1992 FAI Workers' Compensation (NSW) Limited made application in the Federal Court NSW Registry for it to be wound up pursuant to s 460(1) of the Corporations Law.   A winding up order was made on 29 May 1992.   Richard Anthony Fountayne
England was appointed by the Court as liquidator. On 6 December 1993 the liquidator made application pursuant to s 480 of the Corporations Law for orders that he be released and the company be dissolved.   Such orders were made by Einfeld J pursuant to s 481 on 4 March 1994.

The effect of the order releasing the liquidator is that the release operates as a removal from office (s 481(4)).   The effect of the order that the company be dissolved is that from the date of the order the company is dissolved (s 481(6)).

Section 571(1) of the Corporations Law gives the Court the power to declare the dissolution of a company void.   The section provides as follows:

1. Where a company has been dissolved pursuant to subsection 481(6) or 509(5), the Court may at any time, on application of the liquidator of the company or of any other person who appears to the Court to be interested, make an order declaring the dissolution to have been void, and the Court may by the order give such directions and make such provisions (including directions and provisions relating to the re-transmission of property vested in the Commission under section 576) as seem just for placing the company and all other persons in the same position as nearly as may be as if the company had not been dissolved.

THE BACKGROUND

R.W. Bass was engaged in the building industry as a contract bricklayer.   In 1985 it had a contract with Civil & Civic (a major building contractor) to work at the Casuarina Shopping Centre extension in Darwin.   Peter Brearton (Brearton) was  employed by R.W. Bass as a bricklayer and worked on this job. On 14 June 1985 Brearton sustained severe personal injuries in the course of his employment whereupon he became entitled to be paid, and was paid, compensation under the NT workers' compensation legislation.   R.W. Bass was insured with FAI and compensation payments were in fact sourced from the insurer.   On 30 July 1990 Brearton commenced proceeding No R400129 of 1990 in the Supreme Court of NSW (the damages proceeding) claiming damages from both R.W. Bass and Civil & Civic.    On 3 May 1991 R.W. Bass filed a notice of motion in the damages proceeding seeking orders that the proceeding against it be stayed or dismissed generally and on 14 June 1991 judgment was entered by consent in favour of R.W. Bass against Brearton.   It is said, and it appears to be the case, that by virtue of a provision of the Workers' Compensation Act 1971-74 (NT) Brearton's action against his former employer was statute barred.

Civil & Civic also argued that Brearton's action against it was statute barred but on 22 June 1992 Ireland J in the Supreme Court of NSW held to the contrary.   Civil & Civic appealed against Ireland J's decision.   On 13 July 1992 solicitors acting for Civil & Civic wrote to Brearton's solicitors confirming the terms of an agreement apparently reached on 25 June 1992 to the effect that the quantum of damages and costs in the damages proceeding had been agreed at $400,000 but that payment of the agreed sum by Civil & Civic was dependent upon an unsuccessful outcome of the appeal against Ireland J's decision of 22 June 1992.   The Court of Appeal dismissed the appeal on 29 April 1993.   It is common cause that Civil & Civic thereupon paid Brearton the agreed sum.   On 21 June 1994 Civil & Civic commenced proceeding No
20390 of 1994 in the Supreme Court of NSW against R.W. Bass and Brearton (the contribution proceeding).   The applicant claims that it is entitled to contribution from R.W. Bass for part or the whole of the amount it paid to Brearton.   It appears that no progress had been made in the contribution proceeding by 27 June 1995 when the solicitors acting for Civil & Civic became aware for the first time of the status of R.W. Bass.   Since then attention has been directed to the reinstatement of the company to facilitate further progress in the contribution proceeding.

R.W. Bass had at all times held workers' compensation insurance with FAI and at all times Messrs Vandervords acted for it.   Civil & Civic was not aware that R.W. Bass had been wound up and dissolved until informed of these facts by its (Civil & Civic's) solicitors in July 1995.   In April 1995 Civil & Civic's solicitor had sought an indication from Messrs Vandervords as to whether they would accept service in the contribution proceeding on behalf of R.W. Bass.   No immediate reply was received but on 16 October 1995 they advised that they had instructions to accept service of the statement of claim and on 20 October 1995 they purported to appear for R.W. Bass in the contribution proceeding by filing an appearance in the name of the company.

Counsel appearing in the interests of FAI concedes that in the event of Civil & Civic being in a position to prosecute the contribution proceeding, FAI would have the conduct of the action on behalf of R.W. Bass and that FAI would become liable to indemnify R.W. Bass against any judgment obtained by Civil & Civic.

THE LIQUIDATOR
In the course of argument counsel assumed that one effect of an order declaring the dissolution of a company void under s 571 would be automatically to reinstate the liquidator in his former position. Counsel referred to and relied upon the decision in Re Steelmaster Pty Ltd (in Liq);  Kenney v McCann 6 ACSR 494 in which Owen J, in an application under s 571(1) of the Corporations Law said (at p 496) that on the making of a declaration, the liquidator will be restored to office.   Whilst not doubting the accuracy of that statement in the context in which it was made, it is not in my opinion applicable in the present case.   In Steelmaster  the  company  had  been  dissolved  by operation of s 509(5) and not by an order of the Court.   The present case is quite different.   Here, not only was the company dissolved by order of the Court but in addition the Court ordered that the liquidator be released.   The effect of the release is the same as if the liquidator had been removed from office (s 481(4)) and accordingly, if the company is reinstated, there will be a vacancy in the office of a liquidator appointed by the Court which must be filled by the Court (s 473(7)).

THE LIQUIDATOR'S REPORT
The report filed by the former liquidator of R.W. Bass in support of his application for orders that he be released and the company be dissolved contains a reference to proceedings begun in 1993 by Mr Bass (a former shareholder and director of R.W. Bass) and (with the liquidators consent) R.W. Bass "against a number of parties for damages caused to Mr Bass and the company as a result of the respective parties' action".   It is said in the report that Mr Bass believes it was the actions of these parties which caused the demise of the company and the exclusion of Mr Bass from the building industry.   It appears however that as a consequence of the solicitors acting for Mr Bass and R.W. Bass failing to provide information to the liquidator, his consent was subsequently withdrawn.   The report contains no further reference to the proceedings.   Indeed, it is not altogether clear whether any proceedings were ever instituted.

As the liquidator's report was not adverted to at the hearing on 5 March 1996 I invited counsel for the parties to seek instructions as to whether the proposed avoidance of the dissolution of R.W. Bass might have any unexpected consequences in relation to the proceedings referred to in the report.   I was particularly concerned that Civil & Civic may have been a party to those proceedings and that same could have been settled on a basis that might have a bearing upon other claims between Civil & Civic and R.W. Bass.

The solicitor for Civil & Civic has since filed an affidavit which I accept as adequate proof, that Civil & Civic has no knowledge of any proceedings of the type referred to in the liquidator's report.   In the circumstances it is unnecessary to pursue the matter further.

THE COURT'S POWERS
The provisions of s 571(1) are set out earlier in these reasons. Whilst in the past, under a different statutory regime, it has been held that proceedings commenced after a company is dissolved are not validated in the event of the company being restored (Morris v Harris (1927) AC 252; Solla v Scott (1982) 2 NSWLR 832) the latter part of s 571(1) empowers the Court to make orders and give directions to ensure that the company and all other persons are placed in the same position as nearly as may be as if the company had not been dissolved.

Under the present legislation an order declaring the dissolution of R.W. Bass to be void would mean that at the date of the commencement of the contribution proceeding R.W. Bass was a company in liquidation but by virtue of s 471B of the Law Civil & Civic would not have been able to commence the proceeding without the leave of the Court.

The power of the Court to grant leave under s 471B is at large and may be exercised subject to the imposition of such terms as the Court thinks fit. There is a substantial body of
authority which suggests that the Court has jurisdiction to grant such leave nunc pro tunc in respect of an action which has by reason of the absence of leave, been invalidly instituted.   A number of such authorities are referred to in the reasons of Nicholson J in Alcoa of Australia Ltd v Petmar (unreported:  Supreme Court of W.A.; 29 July 1994).

I am satisfied that the combination of the very wide powers conferred by s 571(1) and the power under s 471B to grant leave having retrospective effect empower the Court to make orders which will validate the initiation of the contribution proceeding.

It is clear that the continued existence of R.W. Bass as a corporate entity is not a matter which has exercised the minds of those who have conducted the affairs of FAI. Had the insured been a natural person no difficulty would have arisen. As recently as October 1995 FAI was prepared to deal with Civil & Civic as if R.W. Bass were indeed still an extant body. There is no suggestion that as a result of the dissolution of R.W. Bass, FAI has altered its position in such a way as to give rise to any prejudice in the event that the dissolution of R.W. Bass is declared void. On the other hand to fail to reinstate R.W. Bass would deny Civil & Civic the opportunity to litigate a claimed right of action against the company. As any damages awarded against R.W. Bass would be recoverable from FAI, the proceeding would not be nugatory. In the circumstances, as a matter of discretion, I am of the view that an order should be made pursuant to s 571(1) declaring the dissolution of R.W. Bass void. Whether or not Civil & Civic has a claim which remains enforceable is a matter for the Supreme Court.

Nor is there any suggestion that real prejudice would flow from the granting of leave under s 471B with retrospective effect. It is common cause that if Civil & Civic is unable to pursue the contribution proceeding presently instituted, the claim it seeks to make would be statute barred. It would in my opinion be oppressive to enable FAI to take advantage of such a circumstance and for that reason I would grant Civil & Civic leave with effect from 20 June 1994 to begin and proceed with proceeding No 20390 of 1994 in the Supreme Court of New South Wales against R.W. Bass.

THE APPOINTMENT OF A LIQUIDATOR
For the reasons I have expressed earlier I am of the view that it will be necessary for the Court to appoint a liquidator of R.W. Bass.   As it cannot be assumed that the former liquidator will be prepared to resume that position, I propose to delay making any formal orders in the proceeding until arrangements are in place for an official liquidator to be nominated and for the person so nominated to signify his or her willingness to accept appointment.   This is a matter which Civil & Civic should pursue in consultation with the Registrar.
CONCLUSION
For the time being the proceeding will remain adjourned sine die.  I will relist the matter for the making of final orders, including any order relating to costs, on the written request of either party.   In the meantime, apart from attending to the nomination of a liquidator, the parties are directed to confer with a view to agreeing on the exact form of order that should be made to give effect to my decision.   In the absence of agreement the parties have leave to make further submissions in writing.

I certify that this and the preceding 11 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney

Associate:

Dated:

Heard:    5 March 1996

Place:    Sydney

Reasons
 published:  17 April 1996. 

Appearances:

Mr N. Perram (instructed by Mallesons Stephen Jaques) appeared for the applicant.

Mr J.L. Sharpe (instructed by Messrs Vandervords) appeared for FAI Traders Insurance Company Limited.