Makucha v Fairbrook PMA Pty Ltd
[2009] FMCA 577
•23 June 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MAKUCHA v FAIRBROOK PMA PTY LTD | [2009] FMCA 577 |
| BANKRUPTCY – Application to set aside a Bankruptcy Notice – order of the Supreme Court made pursuant to the Corporations Act 2001 (Cth) – company deregistered and subsequently re-registered pursuant to the Corporations Act 2001 (Cth) – question of whether the re-registration and the orders made validate a claim for interest during the period of deregistration. |
| Bankruptcy Act 1966 (Cth), s.40 Civil Procedure Act 2005 (NSW), ss.100, 101 Corporations Act 2001 (Cth), ss.601AA, 601AD, 601AH Public Trustee Act 1913 (NSW) Supreme Court Act 1970 (NSW), s.94 (repealed) |
| Diamond Hill International Pty Ltd v Xu [2001] FCA 531 Eyles v Curved Plywood Products Pty Ltd [2004] NSWSC 257 Fairbrook PMA Pty Ltd (Formerly known as Porter Modeals (Australia) Pty Ltd) v Paul Makucha (Unreported, Local Court of New South Wales, Clisdell SM, 8 September 2008) GIO General Ltd v Sabko Pty Ltd [2007] NSWSC 251 Mitzev v Foxman [2007] NSWCA 273 Piccoli Tesori Pty Ltd (Deregistered); Ex parte Bertuol [2006] FCA 462 Pilarinos v Australian Securities and Investment Commission [2006] VSC 301 White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441 |
| Applicant: | PAUL MAKUCHA |
| Respondent: | FAIRBROOK PMA PTY LTD |
| File Number: | SYG 684 of 2008 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 23 March 2009 |
| Delivered at: | Sydney |
| Delivered on: | 23 June 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr B J Skinner |
| Solicitors for the Applicant: | Bowles Lawyers |
| Counsel for the Respondent: | Mr A Iuliano (solicitor) |
| Solicitors for the Respondent: | Champion Legal |
ORDERS
The application seeking to have the Bankruptcy Notice NN672/2008 set aside is dismissed.
The applicant debtor is to pay the respondent creditor’s costs to be agreed or, in the absence of agreement, to be assessed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 684 of 2008
| PAUL MAKUCHA |
Applicant
And
| FAIRBROOK PMA PTY LTD |
Respondent
REASONS FOR JUDGMENT
The proceedings
By an application filed on 20 March 2008 Paul Makucha, the applicant debtor, seeks an order that Bankruptcy Notice NN672/2008 issued by Fairbrook PMA Pty Ltd (“Fairbrook”), the respondent creditor, be set aside.
Mr Skinner of counsel, appearing for the applicant debtor, moved on an amended application dated 13 October 2008 and filed in Court on 14 October 2008. The amended application contains the following grounds:
(i) Not pressed.
(ii) Not pressed
(iii) The amount specified in the Bankruptcy Notice (“the Bankruptcy Notice”) exceeds the amount in fact due.
(iv) The Bankruptcy Notice includes in the judgment debt an amount for interest calculated during the period from 23 July 2006 to 3 May 2007 during which time the respondent was deregistered and ceased to exist under the Corporations Act, 2001.
(v) An order made by the Supreme Court of New South Wales on 3 May 2007 pursuant to the provisions of s.601AH(2) of the Corporations Act, 2001 did not have the effect of validating a claim for interest made by the respondent during the period from 23 July 2006 to 3 June 2007 during which time the respondents ceased to exist.
The Bankruptcy Notice was issued on 27 February 2008 and served on 5 March 2008. Fairbrook, formerly known as Porter Models (Australia) Pty Ltd, claimed a debt of $65,991.95 based on a judgment order of the Local Court of New South Wales entered on 25 June 2007. The debtor was required to pay the creditor the amount of the debt within 21 days of that date, or make arrangements for settlement of the debt.
The following evidence was filed in these proceedings:
a)Affidavit of Paul Makucha sworn 20 March 2008 (paras. 4-6 were not read); and
b)Notice to Admit Facts and Authenticity of documents dated 13 November 2008 and filed in Court on 23 March 2009.
Background
The Notice to Admit Facts and Authenticity states that Fairbrook sued on a deed entered into between Mr Makucha and Porter Models (Australia) Pty Ltd (ACN 003 292 895) on 18 June 2004. The company changed its name on 28 January 2005 to Fairbrook PMA Pty Ltd (ACN 003 292 895). Proceedings were commenced by Fairbrook in the Parramatta Local Court on 22 August 2005 and judgment was made in favour of Fairbrook against Mr Makucha by default on 18 June 2007. This judgment was subsequently entered on 23 June 2007.
On 8 May 2006, Fairbrook was deregistered voluntarily under sub-ss.601AA (1) and (2) of the Corporations Act 2001 (Cth). Fairbrook Pty Ltd commenced proceedings on 30 March 2007 in the Supreme Court of New South Wales seeking reinstatement. On 3 May 2007 orders were made by a Registrar of the Supreme Court under sub-ss.601AH(3) and 601AH(5) of the Corporations Act.
Applicant’s submissions
Mr Skinner referred the Court to Form 6010 of the Australian Securities & Investment Commission (ASIC), which is an application for voluntary deregistration of a company under s.601AA(1) and s.601AA(2). This form was completed on behalf of Fairbrook by Francoise Catherine Porter on 13 December 2005 and stamped on 10 May 2006. Contained within the form is a declaration that the company is not carrying on business and that it is not a party to any legal proceedings. Mr Skinner submits that there is a defect in that application as the signed declaration is incorrect.
The second attachment to the Notice to Admit Facts and Authenticity is an application for reinstatement under s.601AH of the Corporations Act. This initiating process was filed in the Supreme Court of New South Wales on 13 March 2007. The orders sought were:
1. An order that the defendant reinstate Fairbrook PMA Pty Ltd (ACN 003 292 895).
2. An order that all acts of Fairbrook PMA Ltd (ACN 003 292 895) between the date of deregistration and the date of the orders be validated.
Mr Skinner submits that whatever acts the company might have performed, one thing re-registration could never do was validate a claim for interest by the company during the period in which it was deregistered. He submits that this is the ultimate issue for determination by this Court.
The third document attached to the Notice to Admit Facts and Authenticity is a copy of the orders of the Supreme Court of New South Wales, Equity Division (proceeding number 2069 of 2007), made and entered on 3 May 2007:
1. That the Australian Securities and Investment Commission reinstate the registration of Fairbrook PMA Pty Ltd (ACN 003 292 895) under s.601AH(2) of the Corporation Act 2001 (Cth).
2. That all acts of Fairbrook PMA Ltd (ACN 003 292 895) between the date of deregistration and the date of these orders be validated.
Mr Skinner submits that this Court is required to determine whether these orders could validate a claim for interest during the period that the company was deregistered.
Mr Skinner indicated that an application was made to the Local Court to set aside the judgment based on two grounds. First, on irregularity of the judgment because of the issues set out above. In addition, submissions were made to the presiding Magistrate that the fact that the judgment included interest during the period the company was deregistered rendered it nugatory. Mr Skinner submits that the application to set aside the judgment was unsuccessful. Magistrate Clisdell held that the question ought to have been determined in the Supreme Court and said the following in Fairbrook PMA Pty Ltd (Formerly known as Porter Modeals (Australia) Pty Ltd) v Paul Makucha (Unreported, Local Court of New South Wales, Clisdell SM, 8 September 2008) 5:
10. Clearly Austin J was of the view that the proceedings were not fatally flawed by the deregistration of the defendant PRIOR to the commencement of the proceedings and that a defect of that nature could be cured by an order under s.601AH(3). That is essentially what happened here. The plaintiff followed the direction given by Campbell J in White v Baycorp Advantage Business Information Services Ltd and in seeking re-registration approached the Supreme Court for appropriate orders. The Supreme Court exercised a discretion to make the orders sought. If the defendant is agreived by that decision he should seek relief in that Court.
Mr Skinner indicated that the above material formed the totality of the Notice to Admit Facts in the documents to which his instructing solicitors sought authenticity.
Mr Skinner submits that s.40(1)(g) of the Bankruptcy Act 1966 (Cth) gives the circumstances in which an act of bankruptcy is committed:
(1) A debtor commits an act of bankruptcy in each of the following cases:
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia--within the time specified in the notice; or
(ii) where the notice was served elsewhere--within the time fixed for the purpose by the order giving leave to effect the service;
Section 40(3) of the Bankruptcy Act interprets s.40(1)(g). Particularly, s.40(3)(b) states:
(3) For the purposes of paragraph (1)(g):
(a) …
(b) a judgment or order that is enforceable as, or in the same manner as, a final judgment obtained in an action shall be deemed to be a final judgment so obtained and the proceedings in which, or in consequence of which, the judgment or order was obtained shall be deemed to be the action in which it was obtained;
Mr Skinner submits that a Bankruptcy Notice which relies upon a judgment, and includes interest calculated during a period of time when the creditor is deregistered, is not a final judgment or final order that is enforceable. In respect of the proposition that on deregistration a company ceases to exist, Mr Skinner referred to Diamond Hill International Pty Ltd v Xu [2001] FCA 531 at [5] per Stone J:
[5] A company only "comes into existence" as a body corporate at the beginning of the day on which it is registered and "ceases to exist" on deregistration; Corporations Law s119 and s601AD(1). The reregistration of a deregistered company is retrospective so that, under s601AH(5) of the Corporations Law, "the company is taken to have continued in existence as if it had not been deregistered". Mr Young, relying on the decision of Senior Master Mahony in DFC of T v Action Workwear Pty Ltd (1996) 14 ACLC 1,335 ("Action Workwear"), argued that reinstatement under s601AH(5) was not retrospective for all purposes.
Mr Skinner submits that there can be no argument as to what deregistration means. However, the issue in this case is what the effect of re-registration is. Mr Skinner argues that re-registration is not retrospective in a complete sense. This Court must determine whether retrospectivity would permit a claim for interest to be made when the company was deregistered.
In Diamond Hill International Pty Ltd v Xu at [8], Her Honour stated:
…Rather, the applicant complains of a lost opportunity to make submissions concerning the bills of costs that were the subject of the taxation process. While s601AH(5) deems the company, once reregistered, to have had a continuous existence, it clearly cannot in any sensible way deem the company to have had the opportunity to make submissions in a proceeding that concluded before reregistration.
Her Honour further said in Diamond Hill International Pty Ltd v Xu at [11]:
[11] It is not disputed that the applicant was deregistered because of its neglect to lodge its annual returns. The chronology in para[3] above indicates that the company was deregistered for a period of more than 6 months. By his own admission, the applicant's solicitor was aware of the deregistration by 20 November 2000. It is not clear to me exactly when the application for registration was lodged, but from Mr Junn's evidence, it must have been some time after 28 February 2001. Mr Young explained this delay by pointing out that between November 2000 and January 2001 the applicant's solicitor was attempting to negotiate a settlement of the dispute over the Subpoenaed parties' costs and also that it was necessary to obtain a statutory declaration from Ms Liu who was out of the country. Neither of those explanations appear to me to be sufficient in the circumstances. It is not uncommon that parties caught up in settlement negotiations neglect to take formal steps to protect their interests in case those negotiations fail. It is, however, common for parties to regret having done so. The comments of Senior Master Mahony in Action Workwear, in a passage not referred to by Mr Young, are pertinent:
"If, on the other hand, there were some disadvantage, it is to [be] recalled that they brought their current position on themselves by failing to perform their duty as directors and ensure the continued existence of the company; and failing to perform their consequential duty to remedy the situation when, through their breach of the first and fundamental duty, the company was deregistered. The delay and inaction of persons in their position is a relevant factor ..."
Mr Skinner submits that in the matter before this Court, Fairbrook made a declaration which was plainly wrong (that there were no legal proceedings on foot), allowed itself to be deregistered and then got re-registered. Fairbrook also made a claim for interest against another party when the company did not exist. All of this is the responsibility of the directors themselves.
Mr Skinner then referred to Mitzev v Foxman [2007] NSWCA 273 per Tobias, McCall and Basten JJA which was an appeal from Hamilton J concerning what effect deregistration and re-registration of a company had on a claim made by the respondent. The decision of Baston JA (with whom Tobias and McCall JJA agreed) at [24]-[25] stated:
[24] In this Court, the Appellant sought to resist this conclusion by tendering evidence to demonstrate that Exchange Ltd had been reinstated to the register on 18 September 2006. However, that fact had never been in doubt, having been conceded by counsel for Ms Foxman below and acknowledged in the course of argument before the primary judge: Tcpt, 08/12/06, p 3U-4L. When his Honour said that the company had been deregistered “at all material times”, he clearly intended to refer to the period from the date on which the contract of sale was executed through to the date on which it was completed, in May 2002. It was not the fact but the legal consequence which was in issue. Relying on the language of s 601AH(5) of the Corporations Act 2001 (Cth), counsel for the Appellant contended that where a company is reinstated on the register, it is “taken to have continued in existence as if it had not been deregistered”.
[25] This argument is based on a fallacy. As s 601AH(5) itself recognises, the past can only partly be undone. Thus, a person who is a director immediately before deregistration becomes a director again “from the time when ASIC or the Court reinstates the company”. Similarly, property of the company that is “still vested in ASIC revests in the company”. If the company was insolvent immediately prior to its deregistration, its reinstatement will not result in it having traded during a period after deregistration, when insolvent. Similarly, if the company operated a trading exchange up to the time of its deregistration, its reinstatement does not mean that it continued, by some fictional means, to carry on a business which in fact was not being carried on. The effects of s 601AH(5), as counsel for Ms Foxman submitted, were sufficiently identified in White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441 ; (2006) 200 FLR 125 at [115]–[129] (Campbell J); CGU Workers Compensation (NSW) Ltd v Rockwall Interiors Pty Ltd [2006] NSWSC 690 ; (2006) 201 FLR 296 at [12]–[17] (Barrett J) and GIO General Ltd v Sabko Pty Ltd [2007] NSWSC 251 ; (2007) 25 ACLC 935 at [11]–[13] (Austin J).
Mr Skinner submits that an order for reinstatement does not have a total retrospective effect and referred to GIO General Ltd v Sabko Pty Ltd [2007] NSWSC 251 at [11] per Austin J:
[11] The plaintiff says that upon the reinstatement of the company, s 601AH(5) has the effect that the debt upon which it relies is taken to have been incurred by an existing company. However, as Campbell J pointed out in White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441, at [115] and [127], s 601AH(5) achieves only a limited measure of retrospectivity, indeed more limited than its predecessor, s 574. The first sentence of subs (5) says that the company is taken to have continued in existence as if it has not been deregistered, but as Campbell J remarked (at [115]), "that does not mean that anything which purported to be done on behalf of [the company] during the period of its deregistration is thereby regarded as valid". If that were so, the power to make a validating order under subs (3)(a) would be otiose. The limited operation of the first sentence of subs (5) is underlined by the succeeding sentences, which make it plain that a director regains office and property revests in the company only from the time of reinstatement (see also CGU Workers Compensation (NSW) Ltd v Rockwall Interiors Pty Ltd [2006] NSWSC 690, at [17] per Barrett J).
Mr Skinner submits that while a company is deregistered, it does not have any directors and ceases to exist. When it became re-registered, it was re-registered with limited effect only. There is provision for acts of the company to be validated, but in this case there is no order validating a claim for interest by a company against another during the relevant period. In terms of validating any act which might have been done, clearly the power would not contemplate making a claim for interest when the company did not exist.
Submissions for the respondent creditor
Mr Iuliano, for the respondent creditor, submits that the common law tradition does not tolerate a lacuna in the ownership of property rights. An example appears in the Public Trustee Act 1913 (NSW) that between the date of death of a person and the obtaining of letters of administration the property of a deceased vests in a public trustee. That concept has also been translated into the corporations law. Section 601AD(2) of the Corporations Act explains that on deregistration all company property vests in ASIC. Section 601AH(5) states that any property of a company that is still vested with ASIC reversed to the company on re-registration. The claim for interest was a statutory right under s.94 (repealed) of the Supreme Court Act 1970 (NSW) before the introduction of s.100 of the Civil Procedure Act 2005 (NSW). Mr Iuliano submits that the chose in action is the property of the company. That chose in action was made subject to a statement of claim in the Local Court proceedings on 22 August 2005 when Fairbrook commenced proceedings which ultimately resulted in the judgment debt upon which the Bankruptcy Notice was based.
Mr Iuliano submits that Fairbrook always had the right to claim interest before, during and after deregistration and it is that property right which reverts to the company once the company is reinstated. Mr Iuliano claims that Diamond Hill International v Xu can be distinguished from this case. In support of this contention, he referred to White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441 at [128]-[129] where Campbell J stated:
[128] In the present case, if, upon reinstatement, someone had wanted to have the issuing of the notices during the period when Capital Corporate was deregistered treated as though such notices were valid, it would have been necessary to apply to the Court for the reinstatement, rather than to ASIC, and on that application to the Court for reinstatement to make application under s 601AH(3) for a specific order for the validation of that Act. That course was not followed.
[129] The conclusion at which I have arrived is consistent with the legislative intent in introducing the new regime for reinstatement of deregistered corporations. The Explanatory Memorandum for the Company Law Review Bill 1997 said:
It is envisaged that the ASIC will only exercise its reinstatement power where no dealings with the property of a deregistered company which give rise to third party rights have been carried out during the intervening period. If third parties have become involved, it is expected that reinstatement will generally need to proceed through the Court.
Mr Iuliano submits that the right to claim interest does not stop and start as it is a statutory chose in action which remains. Section 601AH(3) of the Corporations Act enables Fairbrook to continue with its claim as if it had never been deregistered. Mr Iuliano further submits that the claim is bolstered if s.601AD(2) and s.601AH(5) are read together there is no lacuna or absentee title holder of that chose in action. It is an item of property belonging to the company and which enables it to prosecute in the Local Court. It is submitted that ownership has never changed statutorily as it went from Fairbrook to ASIC, remained with ASIC during the period of deregistration and, upon reinstatement, reverted back to Fairbrook.
Mr Iuliano submits that s.601AH(5) of the Corporations Act should be read in the context that if a company is reinstated, that company is taken to have a continued existence as if it had not been deregistered. This means that it always holds the right to maintain Local Court proceedings and it always to claim interest in those proceedings. Mr Iuliano further argues that reference to the director’s powers is irrelevant to what is being determined in these proceedings because a director has no role in the deregistration and/or any reinstatement process. The Court was then referred to Eyles v Curved Plywood Products Pty Ltd [2004] NSWSC 257 at [8] per Austin J:
[8] I am satisfied that the appropriate course in the present circumstances is for this Court to do what is necessary to make it clear that the District Court proceeding is to be treated as if the defendant were a corporation in existence at all relevant times. There is a substantive question for the District Court as to whether leave should be granted to the plaintiff, nunc pro tunc, to extend the time under the Workers' Compensation Act for commencement of that proceeding. I say nothing about the merits of that matter. It seems to me, however, that it is that matter that should be addressed on its merits and the District Court ought not to be distracted by the additional complication arising out of the non-existence of the defendant.
Mr Iuliano submits that the issue addressed in the decision above is exactly what effect deregistration has had on Fairbrook in the matter before this Court.
Mr Iuliano submits that upon re-registration, Fairbrook is to be treated as being a corporation in existence at all relevant times during the Local Court proceedings. If the company is deemed to have been in existence then it would have continued and maintained proceedings commenced prior to being deregistered. Justice Campbell dealt with the relationship between s.601AH(5) and s.601AH(3) in White v Baycorp and Mr Iuliano submits that s.601AH(3) was created for the purpose of Notices issued before a company is deregistered. The issue in White v Baycorp was whether certain Notices issued by the company during deregistration were valid Notices. Mr Iuliano submits that those Notices were not issued before the company was deregistered. The right to claim interest was in existence before the company was deregistered. It was not a right created during the period of deregistration.
Consideration
I do not believe that there is any contention that a judgment debt and the interest payable on the debt are other than choses in action, which is an incorporeal or intangible personal property right incapable of being taken into physical possession but susceptible to enforcement by legal or equitable action. The interest in respect of the period after the judgment can only be recovered under the judgment, as the latter operates as a bar to a separate claim. If the judgment becomes unenforceable, so does the claim to subsequent interest.
Nor is there any dispute between the parties that a company ceases to exist on deregistration. This does not affect the liabilities of individuals or entities associated with the deregistered company prior to deregistration. The property of the company vests in ASIC on deregistration. The deregistered company’s directors are under a statutory obligation to keep the company’s books for three years after deregistration.
A deregistered company may be reinstated by ASIC if it is satisfied that the company should not have been deregistered: s.601AH(1) of the Corporations Act. Under s.601AH(2), the Court also has the power to order ASIC to reinstate a deregistered company if it is satisfied that it is just to do so. Such a reinstatement application can be made by a person aggrieved by the deregistration or a former liquidator of the company. A person’s status as a shareholder or director is not enough to establish standing as a person aggrieved: Piccoli Tesori Pty Ltd (Deregistered); Ex parte Bertuol [2006] FCA 462. In the absence of a person establishing themselves as an aggrieved party, it will generally be for the Court to order re-instatement: Pilarinos v Australian Securities and Investment Commission [2006] VSC 301. ASIC has the power to reinstate companies which have been inadvertently deregistered avoiding the expense of Court applications. However, ASIC exercises these reinstatement powers only when no dealings with the property of the company have been carried out and no third party has established a claim. If a third party’s rights are involved, reinstatement requires a Court application.
The mechanics of deregistration involve transfer of all the company’s assets to ASIC and they remain with that organisation. On the approval of re-registration, all of those assets are returned to the corporate structure. The argument advanced by Mr Skinner suggests a segmented right to claim interest. That is, the right to claim interest ceases on deregistration and only recommences with the Court’s approval of re-registration. This results a suspension of the statutory right to interest during the period when the assets are held by ASIC.
There is nothing before the Court in the form of evidence or submissions to suggest that the judgment has become unenforceable and any claim for interest has ceased. Neither party, nor the Court, was able to locate any authority which specifically addresses the accrual of interest on a judgment debt while a company is deregistered.
The relevant statutory provision in respect of the right to interest on a judgment debt is contained in s.101 of the Civil Procedure Act:
101 Interest after judgment
(cf Act No 52 1970, section 95; Act No 9 1973, section 85; Act No 11 1970, section 39)
(1) Unless the court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid.
(2) Interest under subsection (1) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:
(a) the date on which the judgment takes effect, or
(b) such later date as the court may order.
(3) Despite subsection (1), interest is not payable on the amount of a judgment if the amount is paid in full within 28 days after the date on which the judgment takes effect, unless the court orders to the contrary.
(4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs.
(5) Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:
(a) the date or dates on which the costs concerned were paid, or
(b) such later date as the court may order.
(6) This section does not authorise the giving of interest on any interest payable under this section.
(7) In this section, a reference to the "prescribed rate" of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section.
Sub-sections 101(2) and (3) devise the method of calculation, however, there is no reference in the section to suspension of the accrual mechanism while the value of the judgment debt remains unpaid.
Similarly s.601AD of the Corporations Act deals with the effect of deregistration:
Effect of deregistration
Company ceases to exist
(1) A company ceases to exist on deregistration.
Note: Despite the deregistration, officers of the company may still be liable for things done before the company was deregistered.
Trust property vests in the Commonwealth
(1A) On deregistration, all property that the company held on trust immediately before deregistration vests in the Commonwealth. If property is vested in a liquidator on trust immediately before deregistration, that property vests in the Commonwealth. This subsection extends to property situated outside this jurisdiction.
Other company property vests in ASIC
(2) On deregistration, all the company's property (other than any property held by the company on trust) vests in ASIC. If company property is vested in a liquidator (other than any company property vested in a liquidator on trust) immediately before deregistration, that property vests in ASIC. This subsection extends to property situated outside this jurisdiction.
Rights and powers in respect of property
(3) Under subsection (1A) or (2), the Commonwealth or ASIC takes only the same property rights that the company itself held. If the company held particular property subject to a security or other interest or claim, the Commonwealth or ASIC takes the property subject to that interest or claim.
Note: See also subsection 601AE(3)--which deals with liabilities that a law imposes on the property (particularly liabilities such as rates, taxes and other charges).
(3A) The Commonwealth has, subject to its obligations as trustee of the trust, all the powers of an owner over property vested in it under subsection (1A).
Note:Section 601AF confers additional powers on the Commonwealth to fulfil outstanding obligations of the deregistered company.
(4) ASIC has all the powers of an owner over property vested in it under subsection (2).
Note: Section 601AF confers additional powers on ASIC to fulfil outstanding obligations of the deregistered company.
Company books to be kept by former directors
(5) The directors of the company immediately before deregistration must keep the company's books for 3 years after the deregistration.
(6) Subsection (5) does not apply to books that a liquidator has to keep under subsection 542(2).
Note: A defendant bears an evidential burden in relation to the matter in subsection (6), see subsection 13.3(3) of the Criminal Code .
Strict liability offences
(7) An offence based on subsection (5) is an offence of strict liability.
The status of property rights transferred to ASIC is specifically addressed in s.601AD(3) and again there is no reference to the issue of suspension of the right of interest on an unpaid judgment debt. In the absence of any authority to the contrary, interest is a statutory cause of action and the effect of s.601AH(3) enables a party to continue with a claim for interest on an unpaid judgment debt as if deregistration had not occurred. In support of that view, s.601AH(2) and s.601AH(5) of the Corporations Act when read together establish no absence of a title holder or owner of the chose in action. Ownership by the company is statutorily changed when it is transferred from the company to ASIC. Ownership remains with ASIC during the period of deregistration and then on reinstatement which reverses back to the ownership by the company. There is no absence of a title holder at any time and no hiatus in ownership is established.
In support of this view I accept the submissions made by Mr Iuliano that Diamond Hill International v Xu (supra) can be distinguished from this case on the basis that the accrual of the interest on the judgment debt is not associated with any action by the company, its shareholders or directors. The interest accumulates as a result of a statutory order which is completely independent of the company and its associates. The accumulation of interest during the period of deregistration is not due to any action by Fairbrook, or any party associated with it. It does not fall within the category of acts which require validation. Interest on the judgment debt accrues as a result of a statutory chose in action.
Conclusion
Consequently for the reasons set out above I am satisfied that the Bankruptcy Notice does not exceed the amount that is due by the inclusion of interest calculated during the period from 23 July 2006 until 3 May 2007 while a company was deregistered and the accrual of this interest does not require validation. The application seeking to have the Bankruptcy Notice NN672/2008 set aside should be dismissed.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 23 June 2009
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