Shaw v Sumo Constructions Pty Ltd (Civil Dispute)

[2016] ACAT 124

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

SHAW v SUMO CONSTRUCTIONS PTY LTD (Civil Dispute) [2016] ACAT 124

XD 215/2016

Catchwords:              CIVIL DISPUTE – whether judgment can be entered against a de-registered company or a company in liquidation- section 471B Corporations Act 2001- section 601AD Corporations Act 2001 – whether a de-registered company can be joined as a respondent

Legislation cited:      Corporation Act 2001 ss 471B, 601AD

Cases cited:               Bhalla v One Stop Lighting [2001] VCAT 1976

Lawler v ABC Developmental Learning CentresPty Ltd [2010] FWA 7679
Plant v Pyrotronics Fire Protection Pty Ltd [2005] QIRComm 15

Tribunal:                   Senior Member A Anforth

Date of Orders:  17 November 2016

Date of Reasons for Decision:         17 November 2016

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL       )          XD 215/2016

BETWEEN:

PHILIP SHAW

Applicant

AND:

SUMO CONSTRUCTIONS PTY LTD

Respondent

TRIBUNAL:   Senior Member A Anforth

DATE:17 November 2016

ORDER

The Tribunal orders that:

1.The application is dismissed.

………………………………..

President L Crebbin

Delivered for and on behalf of the Tribunal

REASONS FOR DECISION

Summary

1.In this case the Tribunal found that Sumo Constructions Pty Ltd was indebted to the applicant for a sum at least equal to the jurisdictional limit of the Tribunal ($10,000). By the time the matter came on for hearing there was no serious contest on the facts and accordingly the reasons set out below do not go into the details of the evidence and submissions filed.

2.A problem arose in that Sumo Constructions Pty Ltd was de-registered before it was joined as a respondent to the present proceedings and hence before judgment could be entered in favour of the applicant.

3.The Tribunal expressed reservations concerning its power to enter judgment in these circumstances. The applicant argued that Sumo Constructions Pty Ltd had deliberately prolonged the process in the Tribunal with a view to de-registration before judgment could be entered. The applicant urged upon the Tribunal that it had the power to enter judgment against Sumo Constructions Pty Ltd. The matter was reserved for consideration on that point.

4.After considering the law the Tribunal concluded that the former Sumo Constructions Pty Ltd should never have been joined as a respondent post its de-registration and that no proceedings could be commenced or maintained against Sumo in these circumstances. The fuller logic is set out below.

The procedural history in the Tribunal

5.The applicant filed his application in the Tribunal on 24 February 2016 claiming the sum of $7699.00 plus interest. The application named Jag Pumping Pty Ltd (Jag) as the respondent. An attached company search showed Glenn Kennedy to be the director of Jag.

6.The application alleged that the applicant had entered a contract with Sumo Constructions Pty Ltd (Sumo) for building work on his residential premises which included a carport and a front and rear retaining wall. The agreed cost of the retaining walls was $6500 for the rear wall and $1000 for the front wall.

7.Sumo is said to have sub-contracted the retaining walls work to Jag.

8.The applicant alleged that the retaining wall work was poor. He asked both Sumo and Jag to fix the work. Jag attended the premises and undertook some rectification work that was not agreed with the applicant or satisfactory to the applicant. Sumo did not respond to the request to remedy the work.

9.The applicant incurred the cost of having a third party (Das Civil) remedy the work for both retaining walls in the sum of $15,137. The applicant carried out other work himself and hired other bricklayers.

10.There was a claim for damage to a wheel barrow and removal of rubbish from the site for $50 each being a total of $100.

11.The applicant claimed the sum of $15,237 from which he offset the outstanding claim by Jag for its work in the sum of $7,500 giving a net claim by the applicant of $7537.00 (sic - which should have been $7737.00).

12.The application annexed:

(a)detailed particulars of the rectification costs incurred;

(b)the original quote from Sumo in the sum of $35,475 to build the carport and retaining walls;

(c)email correspondence between the applicant and Mathew Fleming, the director of Sumo for the period 9 November 2015 to 16 November 2015 which records the agreement between the parties and the payment of the deposit to Sumo. No mention of Jag appears;

(d)a tax invoice from Jag Pumping dated 28 November 2015 in the sum of $8934.89 for the supply of concrete, equipment and labour;

(e)a series of emails from 16 December 2015 to 3 February 2016 between the applicant and Jag in which Jag made a claim for its invoice directly to the applicant. Jag asserted that Sumo had advised them to make the claim directly to the applicant. Jag asserted that they had a contract directly with the applicant. The applicant denied any contract with Jag and declined to pay until the rectification work was undertaken;

(f)a set of 56 photographs of the retaining walls;

(g)a quote of 19 December 2015 from Sumo to fix the rear retaining wall in the sum of $11,506;

(h)a quote from DAS Civil of 19 December 2015 to fix the rear retaining wall in the sum of $11,880; and

(i)a series of emails between the applicant and Jag from 16 December 2015 and 27 January 2016.

13.The letterhead of Sumo described it as a proprietary limited company with an ABN of 41339908279. It did not specify any ACN.

14.Jag filed a response on 4 April 2016 in which it agreed to pay for the wheelbarrow and rubbish removal but otherwise denied the applicant’s claim.

15.The matter was listed for a conference on 3 May 2016 before another member of the Tribunal. Sumo was joined as a respondent and other orders were made for the filing of evidence. A hearing date of 20 June 2016 was set.

16.On 16 May 2016 Jag filed an application to set aside the hearing date. Orders were sought to access the applicant’s premises by Jag’s experts. On 27 May 2016 the Tribunal made the orders for access by the experts but did not abort the scheduled hearing.

17.On 7 June 2016 Jag filed:

(a)a statement from Glenn Kennedy, director;

(b)a statement from Wayne Milkins, employee of Jag Pumping;

(c)a second statement from Wayne Milkins; and

(d)an expert report from Richard Bumpus, civil contractor dated 7 June 2016.

18.On the same day Jag filed an application for summary dismissal of the claim against it and for judgment in the sum of $8,934.89 by way of cross claim.

19.On 7 June 2016 Sumo filed a response. It asserted that the contract for the retaining walls was between the applicant and Jag and not with itself. The covering email to the Tribunal referred to Mr Mathew Fleming, director, as having “serious medical issues” and requested that correspondence be directed to Katie Fleming.

20.The applicant filed an undated chronology setting out setting the history of dealings with the two respondents.

21.On 7 June 2016 the applicant filed further submissions which included:

(a)a transcript of a telephone conversations between the applicant and Mr Glenn Kennedy of Jag occurring on 15 December 2015, 16 December 2015 and 17 December 2015;

(b)an email of 16 March 2016 from the applicant to Sumo advising that the contract was being terminated for default on Sumo’s part;

(c)an invoice for the brickwork by S Fisher of $1200;

(d)photographs of the retaining walls;

(e)a statement by Mr Shaw; and

(f)submissions denying any contract with Jag.

22.Jag emailed the Tribunal on 17 June 2016 challenging the lawfulness of the telephone transcripts under the Listening Devices Act 1992 which were said to have been recorded without Mr Kennedy’s consent.

23.On 17 June 2016 Ms Katie Fleming advised the Tribunal that Mr Mathew Fleming was ill and would not be able to attend the hearing scheduled for 20 June 2016.

24.At the hearing on 20 June 2016 the applicant appeared in person, Mr Glenn Kennedy and Ms Emma Kennedy appeared for Jag and Mr Wayne Milkins was present. The matter was adjourned until 22 July 2016. Orders were made that Sumo must appear on the next occasion.

25.On 22 July 2016 the matter was heard by another member of the Tribunal. The applicant appeared in person and Mr Glenn Kennedy and Ms Emma Kennedy appeared for Jag. There was no appearance for Sumo.

26.The Tribunal held that the contract was between the applicant and Sumo and there was no contract between the applicant and Jag upon which either could sue. The Tribunal dismissed the applicant’s claim against Jag save for the admitted $100 for the wheelbarrow and rubbish. The counter claim by Jag against the applicant was also dismissed.

27.The remaining matter between the applicant and Sumo was adjourned for hearing on 18 October 2016. Orders were made for the filing of evidence and submissions. Sumo was advised that a failure to comply with the orders and appear at the hearing may result in an order being made in its absence.

28.On 22 August 2016 the applicant filed further evidence and submissions in response to the above orders, including statements from himself dated 29 August 2016 and from Vanessa Shaw of the same date.

29.On 21 September 2016 Ms Katie Fleming emailed the Tribunal and said that Sumo would not be filing any further documents. She said that she was intending to approach the applicant to come to some arrangement with him.

30.On 17 October 2016 Ms Katie Fleming emailed the Tribunal and advised that there would be no appearance by Sumo at the hearing on 20 October. She said that the company was no longer solvent and has been de-registered. In an attached email of 9 October 2016 to the applicant, Ms Fleming outlined the financial difficulties of Sumo and Mathew Fleming. She apologies for the inconvenience caused to the applicant and admitted that Sumo sub-contracted the work to Jag.

31.At the hearing on 20 October 2016 the applicant appeared. There was no appearance of Sumo.

32.An ASIC search showed that Sumo had an ACN of 167074053 and an ABN of 13167074053 which is not the ABN shown on its letterheads. The company had been de-registered as at 1 May 2016 at which time Mr Mathew Fleming and Ms Kathryn Fleming were directors.

33.The Tribunal noted the previous ruling that the applicant had contracted with Sumo and not Jag from which there had not been an appeal. The present Tribunal was independently satisfied of this fact.

34.At the hearing the Tribunal briefly reviewed the evidence filed in the matter. The absence of any rebuttal or defence from Sumo was noted. The photographs showed what appeared to be very poor quality work. Mr Fleming had himself quoted to fix the work in the sum of $11,500 which must be taken to be an admission that the work needed fixing.

35.The Tribunal was satisfied that the applicant had fairly presented the rectification costs of $15,137. In his claim against Jag, the applicant had been prepared to allow Jag credit for its outstanding account of $7,500.00 but that concession was based on the premise that the applicant had a contract with Jag. The earlier constituted Tribunal held that no such contract existed and dismissed both claims, that is, including the counter claim by Jag. Accordingly there is no credit to be given by the applicant to Sumo for the work done by Jag. The issue of Jag’s outstanding account is a matter between these two companies.

36.The claim for $15,137 plus interest exceeded the jurisdictional limit of the Tribunal. The applicant indicated at the hearing that he chose to abandon the excess rather than to take his claim elsewhere. Accordingly any judgment would be limited to $10,000. The applicant said he understood and accepted this position.

37.The Tribunal expressed its reservations that judgment could be entered against a de-registered company (Sumo). The applicant urged on the Tribunal that this was not a correct understanding of the law and that judgment could be entered for $10,000 albeit there may be issues with its enforcement. There was discussion about the power of the Supreme Court (but not the Tribunal) to re-register the company and the right of the applicant to file his debt with any liquidators. The Tribunal told the applicant that these were issues beyond the Tribunal’s role which was limited to whether judgment should or should not be entered in the circumstances.

38.The applicant was invited to lodge submissions with the Tribunal concerning its power to enter judgment against a de-registered company. He has not done so.

39.The applicant argued that Sumo had deliberately prolonged the proceedings in the Tribunal with the view to de-registration prior to judgment. There is no doubt that Sumo did not respond to the Tribunal’s orders and sought an adjournment; but the allegation is not consistent with the fact that the de-registration was in early May 2016, before the scheduled hearing in June 2016.

40.There is evidence that Mr Fleming (the director of Sumo) was ill and in difficult financial circumstances at the relevant time. There is no evidence that he or Ms Fleming deliberately manipulated the Tribunal processes.

The law

41.Upon the de-registration of a company it ceases to exist as a legal entity and its remaining assets vest in the Commonwealth or ASIC. Section 601AD Corporation Act 2001 provides:

601AD  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.

42.The Corporations Act 2001 does not actually say that a de-registered company cannot be sued or have judgment entered against it, but this conclusion follows logically from two other considerations.

43.First, if the company ceases to exist then there is no legal entity to enter judgment against. Even if judgment were entered, the company has no assets. Assets have vested in either the Commonwealth or ASIC, neither of which is a party to these proceedings.

44.In the present instance the Tribunal ordered the joinder of Sumo as a respondent on 3 May 2016 but Sumo had been de-registered two days earlier. There is no evidence that the Tribunal knew of this fact.

45.Secondly, in order to be de-registered a company must first go through a winding up process, voluntary or otherwise. This Tribunal has no evidence of that process in Sumo’s case but it is inferred that a winding up process must have occurred. Section 471B Corporations Act 2001 provides that all actions against a company that is being wound up are stayed and no new actions can be commenced:

471B  Stay of proceedings and suspension of enforcement process

While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

(a)     a proceeding in a court against the company or in relation to property of the company; or

(b)     enforcement process in relation to such property;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. (emphasis added)

46.Section 471B stays proceedings in ‘a court’ (lower case for ‘court’) without leave of ‘the Court’ (upper case for the Court). The Court (upper case) is defined in section 58AA and does not include any tribunal including this Tribunal. It is therefore not open to this Tribunal to grant leave to bring or continue an action against a company that is being wound up (or in liquidation).

47.The use of the term ‘a court’ in lower case is not defined in the Corporations Act 2001. It could be construed as limiting the sections operation to courts as opposed to tribunals, whatever that distinction may be. In this event it would follow that section 471B would stay actions against a company in liquidation (or winding up) in the Magistrates and Supreme Courts of the ACT but not in ACAT. It is difficult to see any rational policy for such a construction.

48.Whether ACAT is a ‘court’ for the purposes of section 471B may be debatable but this is a debate to be had at a higher judicial level and upon fuller argument than pertains in these proceedings.

49.The present Tribunal notes that the same issue has been considered by the Queensland Industrial Relations Commission (Plant v Pyrotronics Fire Protection Pty Ltd [2005] QIRComm 15), Fair Work Australia (Lawler v ABC Developmental Learning Centres Pty Ltd [2010] FWA 7679) and the Victorian Civil and Administrative Tribunal (Bhalla v One Stop Lighting [2001] VCAT 1976) and in each case it was held that the body in question was a ‘court’ for the purposes of section 471B.

50.There may be different Constitutional considerations arising between ACAT and the bodies referred to above in terms of whether they are ‘a court’. This would obviously turn in substantial part on the construction accorded to the term ‘court’. Be that as it may, the present Tribunal is of the view that the term ‘court’ in section 471B can only be sensibly construed as including any adjudicative body capable to pronouncing a lawfully binding judgement against a company in liquidation (or being wound up).

51.Even if the Tribunal is wrong on its construction of section 471B, it is still the case that de-registration had in fact occurred before Sumo was joined as a respondent. That joinder was unlawful in that context and so hence Sumo at no stage became a respondent to the proceedings.

………………………………..

President L Crebbin

Delivered for and on behalf of the Tribunal

HEARING DETAILS

FILE NUMBER:	XD 215/2016
PARTIES, APPLICANT:	Philip Shaw
PARTIES, RESPONDENT:	Sumo Constructions Pty Ltd
COUNSEL APPEARING, APPLICANT	N/A
COUNSEL APPEARING, RESPONDENT	N/A
SOLICITORS FOR APPLICANT	Self-Represented
SOLICITORS FOR RESPONDENT	No Appearance
TRIBUNAL MEMBERS:	Senior Member A Anforth
DATES OF HEARING:	18 October 2016