Devren Pty Ltd v Miller
[2016] FCCA 1194
•18 May 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DEVREN PTY LTD v MILLER & ANOR | [2016] FCCA 1194 |
| Catchwords: BANKRUPTCY – Creditor's petition – where petition issued in name of company – where company was deregistered when petition signed – effect of deregistration – where company subsequently reinstated – effect of reinstatement – creditor's petition invalid – petition dismissed. |
| Legislation: Bankruptcy Act 1966, ss.308(a) Corporations Act 2001, ss.57, 58AA, 601AD(1), 601AD(1A), 601AD(2), 601AH(5) |
| Cases cited: Australian Super Pty Ltd v Woodward (2009) 262 ALR 402 Cachia v Hanes (1994) 179 CLR 403 CGU Workers Compensation (NSW) Ltd v Rockwall Interiors Pty Ltd (2006) 201 FLR 296 Deputy Commissioner of Taxation v Boxshall(1988) 19 FCR 435 Dudzinski v Kellow [2003] FCA 103 Dudzinski v Kellow [2003] FCAFC 207 Foxman v Credex (2007) 215 FLR 392 Mbuzi v Favell (No.2) [2012] FCA 311 Mbuzi v Favell (No.3) [2012] FCA 1078 Miller & Anor v Devren Pty Ltd [2015] FCCA 1062 Oates v Consolidated Capital Services Pty Ltd [2007] NSWSC 680 Schokker v Commissioner of Taxation [1999] FCA 1311 Visscher v Teekay Shipping (Australia) Pty Ltd (No 3) [2012] FCA 212 Von Reisner v Commonwealth of Australia (No 2) [2009] FCAFC 172 White v Baycorp Advantage Business Information Services Pty Ltd (2006) 24 ACLC 969 |
| Applicant: | DEVREN PTY LTD |
| First Respondent: | PETER JOHN FRANCIS MILLER |
| Second Respondent: | SUSAN MARY MILLER |
| File Number: | BRG 844 of 2015 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 16 December 2015 |
| Date of Last Submission: | 16 December 2015 |
| Delivered at: | Wollongong |
| Delivered on: | 18 May 2016 |
REPRESENTATION
| Solicitor for the Applicant: | Mr Loudon |
| Solicitors for the Applicant: | Lillas and Loel Lawyers |
| The Respondents appeared in person. |
ORDERS
The creditor’s petition filed on 15 September, 2015 is dismissed.
Within 21 days of the date of these orders, the respondents file and serve any submissions that they wish to make about whether an order for costs should be made against the petitioning creditor or the solicitor who signed the creditor’s petition, or both;
Within 42 days of the date of these orders, the petitioning creditor and the solicitor who signed the creditor’s petition file and serve any submissions that they wish to make about whether an order for costs should be made against the petitioning creditor or the solicitor who signed the creditor’s petition, or both.
The question of the identity of the party against whom a costs order ought to be made be adjourned to a date to be fixed pending the receipt of the written submissions set out above.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG844 of 2015
| DEVREN PTY LTD |
Applicant
And
| PETER JOHN FRANCIS MILLER |
First Respondent
| SUSAN MARY MILLER |
Second Respondent
REASONS FOR JUDGMENT
On 5 December, 2014 the petitioning creditor obtained a costs order against Mr and Mrs Miller in litigation in the Supreme Court of Queensland. A bankruptcy notice based upon that judgment was issued against Mr and Mrs Miller on 5 February, 2015. They applied to have the bankruptcy notice set aside, but I refused that application on 29 April, 2015: see Miller & Anor v Devren Pty Ltd [2015] FCCA 1062.
The Millers did not comply with the terms of the bankruptcy notice and have committed an act of bankruptcy.
The creditor now petitions the Court for a sequestration order against Mr and Mrs Miller’s estates. The Millers oppose the making of a sequestration on three grounds specified in in a notice of opposition to the petition filed on 12 October, 2015 namely:
1. }The Applicant is a company that was deregistered on 29 August 2015. The petition was filed on 15 September 20 15. The Respondents say that the Applicant has no authority to bring this petition;
2. }The Respondents have paid money to the Applicant and has off-settable claims against the Applicant. The sum of these exceeds the amount claimed by the Applicant;
3. }The Applicant was responsible for preventing the Respondents from obtaining access to their funds, and consequently in incapable of bringing this petition under s.40(1)(g) of the Bankruptcy Act 1966
As to the first ground, there is no dispute that the petitioning creditor was deregistered as a company by ASIC on 29 August, 2015. There is evidence, which I accept, that shows that the petitioning creditor was reinstated to the register on 14 October, 2015.
Upon deregistration a company ceases to exist: s.601AD(1) of the Corporations Act 2001 (Cth). All property held by a company, either as trustee or otherwise, vests in the Australian Securities and Investments Commission upon the company’s deregistration: ss.601AD(1A), 601AD(2). ASIC has all of the powers of an owner over property vested in it upon a company’s deregistration.
A deregistered company may be reinstated to the register. Reinstatement might be effected by administrative action by ASIC (s.601AH(1) of the Corporations Act) or by an order of a court (s.601AH(2) of the Corporations Act).
Subsection 601AH(5) of the Corporations Act deals with the effect of reinstatement of a deregistered company. As at 15 October, 2015 that section provided:
(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 petitioning creditor points to s.601AH(5) of the Corporations Act and argues that any defect in the proceedings caused by the deregistration of the petitioning creditor has been cured by its reinstatement. Indeed, that might be a conclusion reached quickly if regard is had only to the first sentence of s.601A(5) set out above.
However, the following sentences qualify the first. Whilst the first sentence will operate according to its terms to continue the existence of the company over the period of deregistration, the following sentences make it clear that:
a)during a period of the deregistration, the company is without directors (and thereby without anyone who had authority to, for example, give instructions on behalf of the company); and
b)it held no title to property (by way of trust or otherwise).
These issues raised by s.601AH(5) of the Corporations Act were considered by the Supreme Court of New South Wales (White J) in Foxman v Credex (2007) 215 FLR 392. At [42] his Honour said:
42 It is far from clear what is the intended effect of reinstatement under s 601AH(5). The first sentence of s 601AH(5) re-enacts language which had a settled meaning in earlier legislation. Consistently with the meaning attributed to those words in earlier cases, and on the plain language of the sentence, one would expect that as the company, on reinstatement, is taken to have continued in existence as if it had not been deregistered, and as a company has shareholders and directors, the effect of reinstatement would be that the company is taken to have continued in existence with directors and shareholders, and that those things purportedly done by or on behalf of the company, or by third parties in relation to the company, should have the effect they would have had if the company had remained in existence. But as the authorities recognise, it is difficult to maintain that construction in the face of the sentences which follow. In particular, the second sentence appears to mean that the company is not taken to have had directors during the period of deregistration. As it is the directors who have the power to manage the affairs of the company, if the company, although taken to have been in existence, is not taken to have had directors, even though there were persons who may have purported to act as directors during the period of deregistration, then it is difficult to see how anyone could be taken to have had authority to act on behalf of the company. Prima facie, the third sentence suggests that property which revests in the company is property which is still vested in ASIC immediately before reinstatement. Again, that suggests that, notwithstanding the first sentence of s601AH(5), although the company is taken to have continued in existence as if it had not been deregistered, it is not taken to have continued to have had the property which it had immediately before deregistration, or to have dealt with the property in a way it may purportedly have appeared to deal with it. The authorities on s 601AH(5) show that the first sentence is indeed qualified by the following sentences.
After undertaking, with respect, a thorough and comprehensive review of the history of s.601AH(5) of the Corporations Act and the approach taken by various courts to the interpretation of its predecessors, White J continued:
59 Why it should have been thought appropriate to suspend directors’ liability during the period of deregistration is a mystery. However, the intention is clear. It does not appear that the Task Force thought there would be any difficulties for any person if a company which carried on business were deregistered and reinstated, even if the reinstatement were effected by ASIC. The only circumstances in which the Task Force envisaged that the ASC would not exercise its power of reinstatement would be if third parties had acquired rights as a result of dealings with the property of the deregistered company. The adoption in the first sentence of subs 601AH(5) of language to the same effect as in the formers subss 574(2) and (4) prima facie indicates that it was intended that reinstatement should have the same consequences as had been the case under the former provision.
60 However, the remainder of subs 601AH(5) indicates a contrary intention, particularly by the provision that persons who were directors immediately before deregistration become directors again only from the time of reinstatement, so that the company is not taken to have had directors during the period of deregistration.
Section 601AH(5) provides only limited retrospectivity upon the reinstatement of a deregistered company: White v Baycorp Advantage Business Information Services Pty Ltd (2006) 24 ACLC 969; CGU Workers Compensation (NSW) Ltd v Rockwall Interiors Pty Ltd (2006) 201 FLR 296 and Oates v Consolidated Capital Services Pty Ltd [2007] NSWSC 680.
At the time that the creditor’s petition was presented in this case, the petitioning creditor was without directors to manage the affairs of the company. There was no person who could have given instructions to the creditor’s solicitors on behalf of the company to present the creditor’s petition.
The petition purports to be signed by the petitioning creditor’s solicitor. The relevant form prescribed by the Federal Circuit Court (Bankruptcy) Rules 2006 (the rules that applied at the time the petition was issued) permitted a creditor’s petition to be signed by the creditor’s solicitor (see r.4.02(1) and Form 6). Further, s.308(a) of the Bankruptcy Act 1966 provides that subject to the Act, a corporation may, for the purposes of the Act, “act by any person duly authorized in that behalf by the corporation”. The expression “duly authorized” as used in s. 308 was considered by the Full Court of the Federal Court of Australia in Deputy Commissioner of Taxation v Boxshall(1988) 19 FCR 435. “Due authorization” involves the giving by the corporation of formal approval to the acts in question.
The solicitor who signed the petition could only have signed the petition with the authority of the petitioning creditor to do so (see Australia & New Zealand Banking Group Ltd v Hubner [1999] FCA 1346, applied in Dudzinski v Kellow [2003] FCA 103 at [49] and approved on appeal in Dudzinski v Kellow [2003] FCAFC 207 at [44] and [47]). There is no evidence of the authority given or purportedly given to the solicitor to sign the present petition. That is unsurprising given that there was no person who could have given such authority on behalf of the petitioning creditor while the company was deregistered.
Not only was there no person who could authorise the solicitor to sign the petition at the time of its issue, given that the entitlement to enforce the costs order had vested in ASIC at the time the creditor’s petition was presented, it cannot be said that the petitioning creditor was a creditor of the Millers. Whilst the debt created by the perfected costs order has now re-vested in the petitioning creditor, that alone is not sufficient to validate the proceedings which were issued when it was deregistered.
Since July, 2012 s.601AH(3) has provided for “the Court” to validate anything done during the period for which a company was deregistered. That power might be exercised irrespective of whether the company’s reinstatement comes about by administrative action or order of “the Court”. The reference to the “Court” in the Corporations Act is a reference to:
a)the Federal Court;
b)the Supreme Court of a State or Territory;
c)the Family Court of Australia;
d)a court to which s.41 of the Family Law Act 1975 applies because of a Proclamation made under s.41(2) of that Act
(s.58AA of the Corporations Act).
This Court is not one of those courts, and so has no power to make an order under s.601AH(3) of the Corporations Act validating the current proceedings. In any event there was no application for such an order. There is no evidence of any order of a relevant Court which validates the issuing of the creditor’s petition during the company’s deregistration.
In my view, the creditor’s petition was issued without the authority of the entity entitled to the debt represented in the perfected costs order – namely ASIC. It was issued without the authority of the company. That is not merely a formal defect in the proceedings cured by s.57(1) of capable of cure by the application of s.57(2) of the Federal Circuit Court Act 1999 (Cth).
The petition is a nullity because the petitioning creditor was deregistered when the petition was issued. It was signed by the petitioning creditor’s solicitors without authority and for that reason, the petition ought to be dismissed.
In the event that my conclusion about that is in error, it is necessary to consider the other grounds relied upon by the Millers.
The cost orders that founded the bankruptcy notice is but one costs order made in lengthy litigation between these parties in the Supreme Court of Queensland. In my earlier judgment, I summarised that litigation as follows (the Millers are described as the applicants and the petitioning creditor as the respondent):
3. The costs order against the applicants arose out of some unsuccessful proceedings in the Supreme Court of Queensland wherein the applicants sought a winding up order against the respondent. That litigation was part of broader litigation which has ensued between the parties and which arose out of a joint venture agreement entered into by a corporate entity, Tenth Zecore Pty Ltd associated with the applicants and the respondent in about 2008. The joint venture was for the development of some residential land. The joint venture parties were to be equally entitled to the profits of the project.
4. The aim of the joint venture has been all but completed. All but two lots of the residential subdivision have been sold. The remaining two lots have been retained on a temporary basis as a drainage detention basin to meet local government requirements. The two lots retained as the drainage detention basin were the subject of special provision in the joint venture agreement. Without delving into the particulars of that agreement, it seems that in the event that neither lot could be sold, one lot would be given to the respondent in these proceedings and the other to the applicants, or to an interest controlled by them.
5. The applicants in these proceedings are the directors and shareholders of the company which owned the land the subject of the joint venture agreement – Old Coach Developments Pty Ltd. As I understand the evidence, Old Coach Developments Pty Ltd remains the registered proprietor of the two retained lots. The applicants are also the directors and shareholders of Tenth Zecore Pty Ltd. The applicants assert that Tenth Zecore has an interest in the relevant land or the “equity” in the joint venture, as some of the material puts it.
6. The life of the joint venture was far from trouble free. There was dispute between the joint venture parties and dispute between the sometime directors of the respondent company. From time to time, a Mr Hobson and a Mr Clair were the directors and shareholders of the respondent. They fell into dispute with each other and initially Mr Clair ceased to be a director of the respondent. He was later reappointed when the two settled their differences. The joint venture continued, but all the while Messrs Hobson and Clair intended to bring action against the applicant’s (using the respondent company) for alleged mismanagement of the joint venture project. The evidence suggests that the applicants knew nothing of the plan by Messrs Hobson and Clair to sue the applicants or their companies.
7. As the joint venture project neared completion, funds were required to finish the remaining work. Mr Miller was persuaded to fund the remaining development costs in return for a one half share in the respondent’s entitlement to the remaining joint venture profits. Thus Tenth Zecore would become entitled to 75% of the profit to be realised from the remaining work and the respondent 25%.
8. Messrs Clair and Hobson fell out again. Mr Clair was removed as a director of the respondent company, but the applicants were not informed of that fact. The parties had by this time tired of each other’s company and an agreement was struck whereby the applicants would surrender their (or their company’s interest) in the joint venture agreement to the respondent in exchange for $15,000. The parties reduced their agreement to writing and it was executed by each of them. However, it was executed by Mr Clair for the respondent at a time when he was not a director of that company.
9. In June, 2012 the respondent commenced proceedings in the Supreme Court of Queensland against the applicants, Old Coach Developments and Tenth Zecore. The proceedings were supplemented by other proceedings between the parties – the applicants unsuccessfully applied to have the respondent wound up. They also unsuccessfully applied to have a caveat lodged by the respondent over the title to land in which the applicants or one of their corporate vehicles had an interest removed. That application too was unsuccessful.
10. The substantive proceedings between the applicants, their related entities, and the respondent has now been finalised by a judgment of the Supreme Court of Queensland: Devren Pty Ltd v Old Coach Developments Pty Ltd and Ors [2015] QSC 53. The applicants’ position was vindicated and the respondent’s position found to be untenable by the trial judge. However, the trial judge ordered that there be no order as to costs for those proceedings.
The costs order made by the Supreme Court that the petitioning creditor relies upon in these proceedings was made in proceedings BS5938/2014 and was between Mr and Mrs Miller and the petitioning creditor.
In proceedings 5639/2012, Mr and Mrs Miller along with the other defendants in that proceedings, were the beneficiaries of costs orders against the petitioning creditor. In summary those orders and the amount assessed for costs are:
Order dated 1 October 2015 $9,117.67
4 Orders dated 13 October 2015 $1,131.65
$1,090.70
$1,047.70
$1,469.80
Total $13,857.52
Further, on 27 October, 2015 in proceedings CA3499/2015 the Supreme Court of Queensland made 2 orders that the petitioning creditor pay the costs of the parties to those proceedings totalling $4,167.82.
However, the parties to proceedings 5639/2010 and CA3499/2015 are different in that, as well as the Millers in their personal capacities, they are also defendants in their capacity as trustees of a trust. The companies Tenth Zecore Pty Ltd and Old Coach Developments Pty Ltd are also parties.
The parties seem to agreed that the Millers have also made one payment to the petitioning creditor which has not been deducted from the amount in the creditor’s petition. After deduction of that amount, the amount properly claimable in the petition is $16,666.82.
By resolutions of the directors of both Tenth Zecore Pty Ltd and Old Coach Developments Pty Ltd on 15 October, 2015 the benefit of the costs orders to which the companies were entitled was assigned to the Millers. Any difficulty that might have been occasioned by the costs orders in proceedings 5639/2010 and CA3499/2015 being joint costs orders in favour of parties that were not parties to the proceedings in which the costs order relied upon by the petitioning creditor seems to be cured by those assignments.
Having regard to the payment made by the Millers and the costs orders to which they are entitled against the petitioning creditor, the petitioning creditor owes the Millers $1,358.52.
I would dismiss the petition on this basis as well. I note that the petitioning creditor claims that the Millers will owe it more money for more costs orders that are yet to be assessed. But there is no evidence that they have been assessed, and so I have disregarded those claims.
As to the final ground raised by the Millers in opposition to the petition, I dealt with that claim in my reasons for refusing to set aside the bankruptcy notice. For those reasons, I would again reject their claims about those matters. There is nothing in any of the further material that the Millers have filed which would affect the outcome of that argument.
Conclusion
The petition must be dismissed with costs.
As to costs, because the Millers are unrepresented litigants no order for costs should be made notwithstanding that they have been successful: Cachia v Hanes (1994) 179 CLR 403 at 409, Australian Super Pty Ltd v Woodward (2009) 262 ALR 402 at [60]-[61]; Mbuzi v Favell (No.2) [2012] FCA 311 at [43].
However, as Collier J observed in Mbuzi v Favell (No.3) [2012] FCA 1078 at [12], “in respect of out of pocket expenses …, there is sound authority to the effect that Cachia v Hanes does not prevent a litigant in person from claiming out of pocket expenses actually, necessarily and reasonably incurred: Schokker v Commissioner of Taxation [1999] FCA 1311 at [3], Von Reisner v Commonwealth of Australia (No 2) [2009] FCAFC 172; (2010) 262 ALR 430 at [23], George v Fletcher (Trustee) (No 2) at [17], Visscher v Teekay Shipping (Australia) Pty Ltd (No 3) [2012] FCA 212 at [9].”
The Millers are entitled to an order for costs to the extent that they have actually, necessarily and reasonably incurred out of pocket expenses. The Millers should present a bill of their outlays in taxable form for that purpose if the amount cannot otherwise be agreed.
However, because the petition was presented by the solicitors without the authority of the petitioning creditor, a question arises as to whether the order ought to go against the petitioning creditor or the solicitors personally. I will take further written submissions on that issue.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 18 May, 2016.
Date: 18 May 2016
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