T J Sampson Pty Ltd v Carmody Contractors Pty Ltd - [2018] WADC 178

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   T J SAMPSON PTY LTD -v- CARMODY CONTRACTORS PTY LTD [2018] WADC 178
CORAM:   TROY DCJ
HEARD:   5 NOVEMBER & 20 DECEMBER 2018
DELIVERED          :   25 JANUARY 2019
FILE NO/S:   APP 56 of 2018
BETWEEN:   TIMOTHY JOHN SAMPSON
First Appellant
T J SAMPSON PTY LTD
Second Appellant
AND
CARMODY CONTRACTORS PTY LTD
First Respondent
JAMES FRANCIS SWANN
Second Respondent

ON APPEAL FROM:
Jurisdiction              :   MAGISTRATES COURT OF WESTERN AUSTRALIA
Coram:   MAGISTRATE JOHNSTON
File Number             :   AL GCLM 377 of 2014

Catchwords:

Appeal - Abatement of proceedings when company deregistered - Effect of reinstatement - Construction of s 601AH of the Corporations Act 2001 - Difference between s 601AH and s 574 of the Corporations Law - Solicitor's liability for costs

Legislation:

Corporations Act 2001, (Cth) s 601AH(3), s 601AH(5)
Corporations Law, s 574
Magistrates Court (Civil Proceedings) Act 2004, (WA) s 17(1), s 17(2), s 18(1)

Result:

Appeal allowed
Judgment for appellants
Order that the second respondent pay the appellants' costs of this appeal relating to the question of the costs of the Magistrates Court proceeding

Representation:

Counsel:

First Appellant	:	Mr D H Solomon
Second Appellant	:	Mr D H Solomon
First Respondent	:	Mr P D Lochore
Second Respondent	:	No appearance

Solicitors:

First Appellant	:	Solomon Brothers
Second Appellant	:	Solomon Brothers
First Respondent	:	Taylor Smart Lawyers
Second Respondent	:	Not applicable

Case(s) referred to in decision(s):

Amcus Pty Ltd v Hurst Rentals Pty Ltd [No 2] [2010] NSWSC 239
Australian Workers Union v Bowen (1946) 72 CLR 575
Bell Group Ltd v Australian Securities and Investments Commission (2018) 358 ALR 624
Brown v Hodgkinson [2008] NSWSC 625
CGU Workers Compensation (NSW) Ltd v Rockwall Interiors Pty Ltd (2006) 201 FLR 296
Commonwealth of Australia v Davis Samuel Pty Limited (No 11) (2017) 316 FLR 159
Cuong Ly; HIH Insurance Ltd (In Liq), Re v HIH Insurance Limited (In Liq) [2017] NSWSC 380
Devren Pty Ltd v Miller & Anor [2016] FCCA 1194
Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq) (2007) 215 FLR 392
GIO General Ltd v Sabko Pty Ltd (2007) 70 NSWLR 743
Harry S Bagg's Liquidation Warehouse Pty Ltd v Whittaker (1982) 44 NSWLR 421
Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd (No 2) [1995] 1 Qd R 612
Oates v Consolidated Capital Services Pty Ltd [2007] NSWSC 680
Re Data Tech Communications (Aust) Pty Ltd [2009] NSWSC 402
Riveria Hotels Pty Ltd v Stalwart Holdings Pty Ltd [2012] WADC 100
Rodwell v Hutchinson [2010] WASCA 197
Silverstone Holdings Pty Ltd (as trustee for the Devereux Property Trust) v American Home Assurance Co (1997) 18 WAR 516
Stork ICM Australia Pty Ltd v SFS 007.298.633 Pty Ltd (Formerly Stork Food Systems Australasia Pty Ltd), in the matter of Stork ICM Australia Pty Ltd (Deregistered) [2010] FCA 53; (2010) 77 ACSR 517
Total Eden Pty Ltd v Pipeline Properties Pty Ltd (1990) 8 ACLC 1075
Tymans Ltd v Craven [1952] 1 All ER 613
Video Excellence Pty Ltd v Cincotta (1998) 44 NSWLR 742
White v Baycorp Advantage Business Information Services Ltd (2006) 24 ACLC 969

TROY DCJ:

Introduction

On 12 December 2014 the first‑named respondent Carmody Contractors Pty Ltd (Carmody) filed a general procedure claim in the Magistrates Court. At that time Carmody was a registered company with its sole director being a Mr Gerald Carmody. The appellants filed a notice of intention to defend.
On 7 September 2015 Carmody was deregistered under s 60lAB of the Corporations Act 2001 (Cth) and remained so until 26 June 2017.
On 25 May 2016, during the period of deregistration, the second‑named respondent, Mr James Swann of Albany Legal, acting or purporting to act on behalf of Carmody, requested a pre-trial conference.
On 9 December 2016 Mr Swann filed a statement of general procedure claim purportedly on behalf of Carmody. On 6 February 2017 upon the non‑appearance of the parties at the listings conference, the court, of its own motion, dismissed the general procedure claim. Mr Swann applied to set aside that order. The court did so on 20 March 2017.
On 1 May 2017 the appellants filed and served their statement of defence. On 15 June 2017 the appellants applied for orders that Carmody's case statement be struck out and judgment entered for the appellants under s 17(1) and s 17(2) of the Magistrates Court (Civil Proceedings) Act 2004 (the MCCP Act). Alternatively, the appellants sought summary judgment under s 18(1) of the MCCP Act. The appellants also sought indemnity costs against the second respondent.
On 26 June 2017 ASIC reinstated Carmody's registration. Carmody did not at any time seek any order under s 601AH(3) by a court to validate anything done during the period of deregistration or make any other order it considered appropriate.
On 15 May 2018 having considered the appellants' application, her Honour Magistrate Johnston struck out Carmody's case statement but refused to enter judgment in favour of the respondents. Her Honour declined to hear the application in respect of indemnity costs.

Status of proceedings by a deregistered corporation

Proceedings cannot be maintained by a deregistered corporation which legally has no further existence. Proceedings brought in the name of such a corporation are to that extent a nullity and lapse or abate, see for example Cuong Ly; HIH Insurance Ltd (In Liq), Re v HIH Insurance Limited (In Liq) [2017] NSWSC 380 [20] (Brereton J). Under s 601AD of the Corporations Act, on deregistration a company ceases to exist.
As noted by Refshauge ACJ in Commonwealth of Australia v Davis Samuel Pty Limited (No 11) (2017) 316 FLR 159 [217] - [218]:
[abatement]…. is not quite equivalent to the death of an individual for, under s 601AH of the Corporations Act, a deregistered company may be re-instated and, in so ordering, a court may validate anything done between the deregistration of the company and its re-instatement. …
Thus, the process of deregistration is, unlike the death of an individual, more akin to the description given by Lord Blanesburgh in Morris v Harris [1927] AC 252 at 269, as follows:
'When the former dissolution of a company is declared void, the company is restored to life as from the moment of dissolution but, continuing a convenient metaphor, it remains buried, unconscious, asleep and powerless until the order is made which declares the dissolution to have been void, then, and only then, is the company restored to activity.
In Amcus Pty Ltd v Hurst Rentals Pty Ltd [No 2] [2010] NSWSC 239 Slattery J held that, having regard to Total Eden Pty Ltd v Pipeline Properties Pty Ltd (1990) 8 ACLC 1075, s 601AD(2) did not vest the cross-claim in the proceedings under consideration in ASIC. The cross‑claim abated as a result of deregistration. Only the cause of action pursued in the cross-claim could vest in ASIC not the cross‑claim.

The issue in this appeal

The fundamental issue is whether when a company has commenced proceedings, is deregistered and then subsequently reinstated by ASIC, but never seeks an order by a court under s 601AH(3), the proceedings are taken, as the appellants contend, to have abated.

Section 574 of the Corporations Law

I begin by considering the position under the old section, s 574 of the Corporations Law. Section 574 was entitled 'Power of Commission to deregister defunct company' and relevantly read as follows:
s 574(1)At the end of the time mentioned in a notice sent by the Commission under subsection 572(2) or (3) or published under subsection 573(5), the Commission may, unless cause to the contrary is previously shown, by notice in writing published in the Gazette, cancel the registration of the company and, on the publication in the Gazette of the last‑mentioned notice, the company is dissolved, but:
(a)the liability (if any) of every officer and members of the company continues and may be enforced as if the company had not been dissolved; and
(b)nothing in this subsection affects the power of the Court to wind up a company the registration of which has been cancelled.
(2)If the Commission is satisfied that the registration of a company was cancelled as the result of an error on the part of the Commission, the Commission may reinstate the registration of the company, and thereupon the company shall be deemed to have continued in existence as if its registration had not been cancelled.
(3)If a person is aggrieved by the cancellation of the registration of a company, the Court, on an application made by the person at any time within 15 years after the cancellation, may, if satisfied that the company was, at the time of the cancellation, carrying on business or in operation or otherwise satisfied that it is just that the registration of the company be reinstated, order the reinstatement of the registration of the company.
(4)On the lodging of an office copy of an order under subsection (3), the company shall be deemed to have continued in existence as if its registration had not been cancelled.
(5)The Court may, in an order under subsection (3), give such directions and make such provisions (including directions and provisions relating to the retransfer of property vested in the Commission under section 576) as seem just for placing the company and all persons in the same position, so far as possible, as if the company's registration had not been cancelled.
….
It can be seen that the Commission could reinstate the registration of the company if its registration was cancelled as the result of an error, in which case the company was deemed to have continued in existence as if its registration had not been cancelled: s 574(2). Similarly, if satisfied that it is just to do so the court could order the reinstatement of the registration of the company, whereupon the company would again be deemed to have continued in existence as if its registration had not been cancelled: s 574(3) and s 574(4).

The present regime

Without reciting the section, s 601AB is entitled 'Deregistration‑ASIC initiated' and sets out at s 601AB(1) and (2) the circumstances in which ASIC may deregister and at s 601AB(3) ‑ (7) the deregistration procedure.
Section 601AD relevantly provides:
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.
(1A) Trust property vests in the Commonwealth
…
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.
(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.
I note that s 9 of the Act defines 'property' to mean any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action.
Section 601AH is the vital section in this appeal and I set it out in full.
601AH Reinstatement
Reinstatement by ASIC
(1)ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered.
(1A)ASIC may reinstate the registration of a company deregistered under subsection 601AB(1B) if:
(a)ASIC receives an application in relation to the reinstatement of the company's registration; and
(b)the levy imposed on the company by the ASIC Supervisory Cost Recovery Levy Act 2017 is paid in full; and
(c)the amount of any late payment penalty payable in relation to the levy is paid in full; and
(d)the amount of any shortfall penalty payable in relation to the levy is paid in full.
Reinstatement by Court
(2)The Court may make an order that ASIC reinstate the registration of a company if:
(a)an application for reinstatement is made to the Court by:
(i)a person aggrieved by the deregistration; or
(ii)a former liquidator of the company; and
(b)the Court is satisfied that it is just that the company's registration be reinstated.
(3)If:
(a)ASIC reinstates the registration of a company under subsection (1) or (1A); or
(b)the Court makes an order under subsection (2);
the Court may:
(c)validate anything done during the period:
(i)beginning when the company was deregistered; and
(ii)ending when the company's registration was reinstated; and
(d)make any other order it considers appropriate.
Note: For example, the Court may direct ASIC to transfer to another person property vested in ASIC under subsection 601AD(2).
ASIC to give notice of reinstatement
(4)ASIC must give notice of a reinstatement in the Gazette.
(4A)If an application was made to ASIC for the reinstatement of a company's registration, ASIC must give notice of the reinstatement to the applicant.
Effect of reinstatement
(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.
It is important to note that s 601AH(1A) and (4A) were added in 2012, following the criticisms of s 601AH as originally enacted in Foxman v Credex National Australian Trade Exchange Pty Ltd(in liq) (2007) 215 FLR 392. Further, subsection (3) was also amended to permit reinstatement by ASIC as well as a Court, because it previously read:
(3)If the Court makes an order under subsection (2) it may:
(a)validate anything done between the deregistration of the company and its reinstatement; and
(b)make any other order it considers appropriate
The appellants submit that these amendments were made as a consequence of the decision in Foxman.
The appellants submit that it is uncontroversial that by operation of s 601AD(2), from 7 September 2015 onwards Carmody's cause of action was vested in ASIC. As a consequence, the appellants submit that the proceedings are abated and can only be continued by an order of a Court (with a capital 'C') under s 601AH(3)(c) or (d). Carmody submits that because of s 601AH(5) such an order is not required. This, as I have noted, is the fundamental issue in this appeal.
Section 58AA of the Corporations Act 2001 provides that the reference to the 'Court' in the 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.
Section 58AA(2) provides that except where there is a clear expression of a contrary intention (for example, by use of the expression 'the Court'), proceedings in relation to a matter under this Act may, subject to Part 9.7, be brought in any court. Under s 601AH(3) there is that clear expression of a contrary intention.

Construction of s 601AH(5)

There is an apparent tension between, on the one hand the first sentence of s 601AH(5) and on the other hand the following three sections of that sub-section. As noted in a number of authorities, the first sentence, on its face, indicates that a company returns to the position it was in prior to deregistration (in the present case 7 September 2015) as if deregistration had never occurred. This is the position contended for by Carmody. The remaining sentences, however, suggest that the company only regains its pre-existing rights as of the date of reinstatement. This is the position taken by the appellants.
If the latter sentences dictate the position then in this case there was a state of limbo between a time when Carmody could undoubtedly prosecute these proceedings, 6 September 2015, and a resumption of its entitlement to pursue these proceedings, 26 June 2017.
The appellants submit that Carmody's actions in the intervening period can only be validated if it seeks and obtains an order under s 601AH(3).

Retroactive nature of reinstatement under s 574 and its English equivalent

It is clear from the authorities that have considered s 574 and its English equivalent that the effect of a provision that the company should be 'deemed to have continued in existence as if its name had not been struck off,' was not only that the corporate existence of the company was preserved, but was also retroactive so that post‑reinstatement the company was to be regarded as never having been dissolved. See Tymans Ltd v Craven [1952] 1 All ER 613.
So, where a company was deregistered during the course of proceedings but was reinstated before the proceedings concluded, the wording of s 574 meant that such reinstatement had the effect of curing any lack of capacity on the part of the company and any 'consequential defect in the proceedings,' as Mackenzie J put it in Jekos Holdings Pty Ltd v Australian Horticultural Finance Pty Ltd (No 2) [1995] 1 Qd R 612.
In considering this appeal it is necessary to bear in mind the differences in the wording between the old s 574 and the new s 601AH. It seems to me that the perceived internal inconsistency in s 601AH(5) did not manifest itself in s 574.

Relevant cases considering s 574

The Silverstone case

Carmody places some reliance on Silverstone Holdings Pty Ltd (as trustee for the Devereux Property Trust) v American Home Assurance Co (1997) 18 WAR 516 where the full Court unanimously allowed the appeal. The lead judgment was delivered by Parker J with whom Kennedy J agreed. Kennedy J also agreed with the reasons of White J, but subject to the reasons of Parker J.
In his judgment at 534 Parker J cautioned against misconstruing a line of authorities so as to conclude that proceedings instituted by a corporation which is later dissolved thereby become a nullity.
In argument before me, Mr Solomon stressed that the appellants in this case are not so contending. Rather the submission for the appellants is that the proceedings were not a nullity per se, but that they could only be reinstated by an order under s 601AH(3), which was never sought and therefore never made.
As a consequence of the judgment of Parker J (with whom as I have observed Kennedy J agreed) at 534, Silverstone is authority for the proposition that firstly where a dissolved company purports to institute proceedings, those proceedings would be a nullity. That is not the situation in the present case.
Secondly, where a company is dissolved after it has competently instituted proceedings, the proceedings to the point of dissolution are competent. While they might lapse if there was no other party competent to continue them after the dissolution of the company, where there is another party competent to continue them, eg, the ASC pursuant to the former s 576(1), that party might be substituted and the proceedings continued. Otherwise the cause of action might be statute barred.

In the present case no other competent party continued the proceedings following the deregistration of Carmody.
I also note that in Silverstone the registration of Silverstone was cancelled on 10 July 1992, but Silverstone was reinstated under s 574(2) on 15 April 1993 and on the same date the writ in the proceedings was issued. The statement of claim was then filed on 24 February 1994. The proceedings were therefore commenced on Silverstone's reinstatement to the register.

The Video Excellence case

Another case relied upon by Carmody is Video Excellence Pty Ltd v Cincotta (1998) 44 NSWLR 742. Video Excellence Pty Ltd instituted proceedings against the defendant. The statement of claim was dated 19 May 1994 and sworn on 25 June 1994. The claimant was then deregistered on 6 July 1994. The statement of claim was filed on 28 July 1994. The case came before the primary judge on 13 March 1998, when Video Excellence Pty Ltd was still deregistered. The primary judge was informed that an application had been made to the Australian Securities Commission for reinstatement to the register. However, no decision had then been made by the ASC. No application had been made under s 574(3) to the court for reinstatement. The primary judge dismissed the proceedings.
On 24 March 1998, the Australian Securities Commission restored the registration of the company.
On appeal, Spigelman CJ observed that at the time that the matter was before the primary judge, the plaintiff did not exist and, at the very least, it was appropriate for the court to take no further steps. By reason of the retrospective operation of the deeming provision s 574(2), the claimant/plaintiff was deemed never to have lost its separate legal personality. It had such personality at the time of the appeal. It was entitled to pursue the proceedings before the Court of Appeal.

Conclusions on the operation of s 574

In my view the effect of s 574(2) was that if a company commenced proceedings whilst it was entitled to do so, was then deregistered, but then reinstated, the company was deemed to have been in existence during the course of the proceedings. That is so even if it had been deregistered for a period. No issue is taken as to that by the appellants. The point taken is that this situation does not apply under the new legislation.

Cases considering s 601AH of the Corporations Act

I now move to consider the cases that consider s 601AH. The Company Law Review Act 1998 (Cth) introduced Ch 5A into the Corporations Law, including s 601AH.

The Foxman case

The decision of Foxman v Credex National Australian Trade Exchange Pty Ltd (in liq) is of fundamental importance to the resolution of this appeal. The appellants rely upon it and assert that there are passages that constitute a clear ratio which I should follow. Carmody submits that the passages relied upon are obiter and are in conflict with other decisions that I should instead follow.
Foxman is a decision of White J in the Supreme Court of New South Wales concerning the federal legislation under consideration in the present case, subject to the amendments I have mentioned.
His Honour dismissed an application to set aside examination summonses issued on the application of the liquidator of Credex, referred to as 'CNATE' and associated relief. CNATE had been incorporated on 19 August 1997. The applicants had been ordered to attend for examination about the examinable affairs of CNATE. The applicants contended that the predominant purpose of the liquidator in applying for the issue of examination summonses was to advance the private interests of the creditors of CNATE, in particular the second respondent Ms Foxman.
CNATE was deregistered on 18 February 2002 but it continued to carry on business. CNATE was reinstated by the Court under s 601AH(2) on 18 September 2006 on Ms Foxman's application.
White J accepted the evidence of the liquidator that his predominant purpose in seeking to hold the examinations and for obtaining orders for production of records, was to be able to get a full picture of the affairs of the company: [31]. The applicant's submission that the liquidator was motivated by an improper purpose failed on a number of grounds: [33] et seq.
Counsel for the applicants submitted that although the effect of reinstatement was that CNATE was taken to have continued in existence as if it had not been deregistered, this did not mean that any person could have acquired any right against CNATE or become subject to any liability to CNATE during the period of deregistration.
White J held that for reasons he then set out that may well be the effect of s 601AH(5), but that did not mean that these were not legitimate areas for inquiry. It would be open to the liquidator to apply for an order under s 601AH(3). Such an order would be to the effect that the company is to be taken to have the same rights and to be subject to the same liabilities, as it would have had if it had not ceased to exist on deregistration: [36].
I accept that the fundamental ratio of this decision is that the application to set aside examination summonses failed because it was held that the liquidator was endeavouring to hold the examinations to get a full picture of the affairs of the company and not because of any improper purpose.
His Honour's observations from [37] onwards are entitled 'effect of Deregistration and Reinstatement.' They commenced with the observation 'the applicants' submissions highlight the unsatisfactory drafting of s 601AH.' The observations from [37] could be regarded as obiter, although no case subsequently referring to Foxman has so characterised them. I regard his Honour's holdings as inextricably connected to the primary issue resolved in this case as I have just noted it to be.
His Honour noted at [40] that the effect of deregistration is that the company ceases to exist and that on deregistration, all the company's property vests in ASIC. His Honour then criticised the drafting of s 601AH(5) in a way that the appellants submit is significant. It is necessary to set out his Honour's holding at [42] in full:
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 s 601AH(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.
His Honour then suggested at [43] that the results from the structure of this subsection could be remarkable. His Honour held at [44] that the adverse consequences he identified would appear to flow unless the ourt made a validating order, or some other appropriate order, under s 601AH(3). However, a court could only make an order under that subsection if it also made an order for reinstatement under s 601AH(2). If the company were reinstated by ASIC, because ASIC was satisfied that it should not have been deregistered, the court would not be empowered to make an order under s 601AH(3).
His Honour referred to the effect of s 574(2) ‑ (4) and noted that their effect was authoritatively stated by the English Court of Appeal in Tyman's Ltd v Craven and consistently applied in Australia.
His Honour then observed at [57] that it would be highly surprising if Parliament, or the Task Force charged with simplifying the Corporations Law, intended to reverse this position which obtained up to 1998.
His Honour referred at [58] to aspects of the task force report. His Honour commented that the adoption in the first sentence of s 601AH(5) of language to the same effect as in the formers s 574(2) and s 574(4) prima facie indicated that it was intended that reinstatement should have the same consequences as had been the case under the former provision: [59].
However his Honour observed at [60] that the remainder of s 601AH(5) indicated 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.
This is the apparent tension I referred to at [23].
His Honour then cited at [61] the case of White v Baycorp Advantage Business Information Services Ltd (2006) 24 ACLC 969, where Campbell J observed that s 601AH(5) provided only a limited measure of retrospectivity concerning title to the property of the company. The company's property is restored to it not from the moment it lost its property on deregistration but only as at the date of reinstatement.
His Honour further noted at [61] that in CGU Workers Compensation (NSW) Ltd v Rockwall Interiors Pty Ltd (2006) 201 FLR 296 Barrett J applied the judgment in White v Baycorp, in holding that s 601AH(5) created only a limited form of retrospectivity. It did not give efficacy to active steps taken in relation to a company which because of the company's non-existence were, when taken, devoid of legal effect (at 300). It would only be if an order validating the service of the supposed statutory demand were made under s 601AH(3) that such service would be effective.
In White v Baycorp Barrett J observed at [18] - [19] that where the company's controllers are unaware of the deregistration and continue to conduct the company's business, s 601AH(3) might be used to put beyond doubt the validity of transactions supposedly undertaken by the company during the period of non-existence by means of things actually done purportedly by and for it. Section 601AH(5) would not, in general, be appropriately used to visit adverse effects upon the company by reason of the inactivity necessarily stemming from its non‑existence.
White J observed [62] that he followed this line of authority in Oates v Consolidated Capital Services Pty Ltd[2007] NSWSC 680 in holding that reinstatement of a deregistered company did not mean that originating process delivered to an office, which had been the company's registered office prior to deregistration, was to be taken retrospectively to have been effectively served.
Importantly his Honour stated at [64]:
That does not deny the possibility of orders being made under s 601AH(3), either to validate the effect of particular transactions, or to make any other order considered appropriate. Where, to all appearances, the company has continued to carry on business and third parties would be prejudiced if they were not able to prove in a liquidation for claims apparently arising against the company during the period of deregistration, or if the company could not recover debts apparently incurred during the period of deregistration, then it may well be appropriate to make an order pursuant to s 601AH(3)(b) that the company be taken to have such rights and be subject to such liabilities as it would have had had it not ceased to exist on its deregistration.
His Honour then observed at [65] that s 601AH is a law reform measure itself in need of reform. Whilst the adverse consequences of there being only a limited measure of retrospectivity (under s 601AH(5) - my emphasis) could be at least partially cured, in an appropriate case by an order under s 601AH(3), that would not render a person liable as a director for acts purportedly done by him or her as a director during the period of deregistration. There was no such power if the company is reinstated by ASIC rather than by the court.
His Honour thought that this suggested that if there is any prospect of the company having carried on business during the period of its deregistration, reinstatement should be effected by the court rather than by ASIC. His Honour observed that this may defeat the purpose of s 601AH(1). However, that may be the only prudent course to take, given that, consistently with the authorities referred to, and the balance of s 601AH(5) (my emphasis): [64].
His Honour suggested that the effect of the first sentence of s 601AH(5) may be merely to preserve the identity of the company as the same legal personality as that which was previously dissolved so that the legal effect of dealings prior to deregistration can be resuscitated: [65].
Returning to the fundamental question that arose in Foxman, White J concluded at [67] that the transactions purportedly carried out in CNATE's name, albeit during the period of deregistration, formed part of its examinable affairs.
Foxman is a single judge decision, albeit of the Supreme Court, as opposed to a decision of an intermediate appellate court. In my view, unless over-ruled, Foxman is highly persuasive, although not binding, authority for the proposition that that the new provision, s 601AH(5) does not have the same effect as its predecessor, s 574. Accordingly, unlike the learned magistrate I find Foxman to be more applicable to the resolution of this appeal than Silverstone and Video Excellence PtyLtd (and for the same reason Riveria Hotels Pty Ltd v Stalwart Holdings Pty Ltd [2012] WADC 100 which is considered below).

The Brown v Hodgkinson case

Hammerschlag J, also of the NSW Supreme Court, considered Foxman in Brown v Hodgkinson [2008] NSWSC 625. On 14 September 2006, the second plaintiff ('the Company') entered into a contract to buy land from the third defendant, Palmer St Pty Ltd. On 8 October 2007 the Company lodged a caveat. On 23 December 2007, the Company was deregistered by ASIC.
On 3 March 2008 the third defendant procured the purported service of a lapsing notice on the Company (whilst it did not exist) in respect of the caveat. On or about 18 March 2008 the sole director and shareholder of the Company made an application to ASIC to have it reinstated.
On 25 and 27 March 2008 the primary judge, Nicholas J made orders extending the operation of the caveat. The third defendant then moved for orders that the order made by Nicholas J on 27 March be vacated.
On 8 April 2008, the Company was reinstated by ASIC. By a statement of claim issued on 2 May 2008, the Company commenced proceedings against the third defendant and various other parties.
I interpret [15] ‑ [19] of Hammerschlag J's judgment as a synopsis of the submissions by counsel for the defendants as opposed to a holding by his Honour.
Hammerschlag J noted that there was no issue between counsel that the caveat had by virtue of the reinstatement and the operation of s 605AH(5) continued throughout to have effect. Hammerschlag J accepted that during the period of its deregistration (including when the extension orders were made by Nicholas J) the Company ceased to have any interest in the land because for that period the land vested in ASIC. For that period it could not have validly sustained the caveat. But on its reinstatement, the Company was taken to have existed throughout. The caveat had been lodged before registration and the effect of reinstatement means that it has had a caveat lodged (whether it had an interest or not) during the whole time: [22] - [23].
Hammerschlag J held that if the Company had a caveatable interest before its deregistration, that caveatable interest had revested in it. In the meantime, orders had been made extending the caveat reflecting the very same interest. There was accordingly no good reason why those orders should now not operate or why they should be set aside: [27] ‑ [28].
Hammerschlag J did not distinguish or criticise Foxman, but he does seem to have placed reliance upon the first sentence of s 601AH(5) without tackling White J's point about the inconsistency with the succeeding sentences.

The Data Tech Communications (Aust) Pty Ltd case

Foxman (and Brown) was next considered in Re Data Tech Communications (Aust) Pty Ltd [2009] NSWSC 402. On or about 16 May 2004 ASIC deregistered a company called Data Tech and then reinstated it on 11 February 2009. The applicant sought an order to validate the reinstatement of Data Tech by ASIC on 19 February 2009 under s 601AH(1). Barratt J (who as noted gave the judgment in White v Baycorp Advantage Business Information Services Ltd) was not satisfied that the court had power to do so.
The applicant also sought an order under s 601AH(2) that ASIC reinstate Data Tech. As Barrett J pointed out, ASIC had already reinstated Data Tech's registration so that it would be meaningless and futile to purport to do it again.
The applicant further sought an order that the court make an order to validate anything done by Data Tech or any of its officers and its director between the deregistration of Data Tech and its reinstatement.
As to that, Barratt J observed at [16] that in Brown at [19], Hammerschlag J said that reinstatement does not have retrospective effect so far as concerns the revesting of the company' property. It does seem to me, with respect, that as I have noted Hammerschlag J was relating counsel's argument rather than expressing any view of his own. Barratt J also referred at [15] to the holding of White J in Foxman (at [42]) that it is far from clear what is the intended effect of reinstatement under s 601AH(5).
Barratt J held at [17]:
Where the court makes an order under s 601AH(2) directing ASIC to reinstate, the court may also make under s 601AH(3) an order validating anything done during the period of non-existence. The fact that restrospectivity under s 601AH(5) is not complete or perfect will often make such orders appropriate in those cases. (my emphasis).
Barratt J then observed at [18]:
The court has no such power in a case where, as here, the reinstatement is under s 601AH(1). In a case of this kind, the company and those interested in it must live with the results produced by s 601AH(5) alone, unassisted by any validating order of the court under s 601AH(3) or otherwise.

Amendments to the law following Foxman

Following Foxman, s 601AH(3) was amended by s 29 of the Corporations Amendment (Phoenixing and Other Measures) Act 2012 (No 48 of 2012).
Section 601AH(3) now empowers a court to make an order validating anything done during the period of time when a company was deregistered notwithstanding that the company may have been reinstated pursuant to s 601AH(I), s 601AH(1A) or s 601AH(2) of the Corporations Act thereby removing the lacuna identified in Foxman.

The appellants submit that s 601AH(3) was re-enacted after being judicially interpreted and so by a well-established rule of statutory construction the Federal Parliament is assumed to have approved the decision in Foxman. Of course in Foxman, White J pointed out an internal inconsistency in s 601AH(5) but nonetheless no amendment was made to that sub-section.

The Stork ICM case

Foxman was next considered in Stork ICM Australia Pty Ltd v SFS 007.298.633 Pty Ltd (Formerly Stork Food Systems Australasia Pty Ltd), in the matter of Stork ICM Australia Pty Ltd (Deregistered) [2010] FCA 53; (2010) 77 ACSR 517. Lindgren J noted that senior counsel for Stork FSA referred the court to what has been described as the limited nature of the retrospective effect for which s 601AH (5) provides. Senior counsel submitted that the second and third sentences of s 601AH (5) suggest that the first sentence has a limited effect: [28].
Lindgren J observed at [29] that the relevant issue addressed in cases such as Foxman and White v Baycorp was whether particular acts, conduct, states of mind or omissions were to be attributed to the deregistered company, or particular acts purportedly directed against it were to be treated as effective, in each case as at a time during the period of the deregistration.
Lindgren J held that:
The cases recognise that the mere retrospective effect of a reinstatement, without more, does not supply the additional facts necessary to make for a positive answer to such questions.

The Devren Pty Ltd case

In Devren Pty Ltd v Miller & Anor [2016] FCCA 1194, Judge Jarrett of the Federal Circuit Court observed at [8]:
The petitioning creditor points to s 601AH(5) 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.
His Honour continued at [9]:
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 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
(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)
His Honour noted at [10] that these issues were considered in Foxman v Credex.

The Bell Group Ltd v Australian Securities and Investments Commission case

Finally, and importantly, in considering the cases subsequent to Foxman, I come to the recent case of Bell Group Ltd v Australian Securities and Investments Commission (2018) 358 ALR 624 (McKerracher J). In that case the first plaintiff, The Bell Group Limited (in liquidation) (TBGL) was the holding company for a group of companies including the second to tenth plaintiffs all of which were currently in liquidation. The eleventh plaintiff was the liquidator of each of the plaintiff companies. The plaintiffs sought orders for reinstatement under s 601AH(2) of certain deregistered companies which were also various subsidiaries of TBGL. The Commissioner of Taxation opposed this application.
The issue before his Honour was whether the reinstatement of the Deregistered Companies, either by the ordinary operation of the provisions of the Corporations Act 2001, or by the Court making an order under s 601AH(3)(d), would make the eighth to tenth plaintiffs and other affected Bell Group companies part of the TBGL tax consolidated group during the taxation year 30 June 2014. Or, as the Commissioner contended, that those companies would only be eligible to be part of the TBGL tax consolidated group from the time of reinstatement.
His Honour noted that the primary provision falling for consideration in this dispute is s 601AH of the Corporations Act, although the deregistration of the Deregistered Companies occurred pursuant to s 574 of the Corporations Law: [29] and [31].
His Honour noted that the ancillary orders sought by the plaintiffs were intended to achieve the effect that the shares held by a number of the Deregistered Companies be deemed, and taken at all times from the date of dissolution of those companies, to have been beneficially owned by the companies. The Commissioner contended the Court was not empowered to make such an order because it would be contrary to the proper construction of s 601AH(5): [32] - [33].
His Honour observed that s 601AH(3) provides that on reinstatement of the registration of a company, pursuant to a court order or at the determination of ASIC, the court may validate anything done during the period beginning when the company was deregistered and ending when the company's registration was reinstated. Further, under s 601AH(3)(d), the court may 'make any other order it considers appropriate': [107].
His Honour examined both the legislative history and the cases from [112] et seq. His Honour referred to the observations of White J in Foxman at [58]. His Honour also referred to the decision of Stork ICMAustralia Pty Ltd, a case emphasised by the Commissioner. As I have noted, in that case, Lindgren J observed at [27], that s 601AH(3)(b) (now s 601AH(3)(d)) would not empower the Court to make an order denying to a reinstatement the retrospective effect provided for in s 601AH(5) of the Corporations Act.
McKerracher J stated at [117]:
that while this is an authority on which the Commissioner places much emphasis, the conclusion reached by his Honour was, with respect, unremarkable, but does not preclude one or more of the ancillary orders sought in this case. There is certainly no suggestion that the plaintiffs are seeking to deny the retrospectivity of s 601AH(5), which was precisely what was sought in Stork, and which would run counter to a fundamental purpose of reversing deregistration, reflected in the opening sentence of s 601AH(5), namely, the 'as‐you‐were' approach, which has been adopted for many years. I note the opening sentence of the section: If the company is reinstated, the company is taken to have continued in existence as if it had not been deregistered.
Like Brown v Hodgkinson therefore, this is a case where the judge considering these provisions placed emphasis on the first sentence of s 601 AH (5). See also his Honour's observations at [118].
His Honour noted at [119] that the Commissioner argued that there are two principles central to the operation of Pt 5A.1 of the Corporations Act:
•section 601AH(5) provides only a 'limited form' of retrospectivity upon the reinstatement of a deregistered company;
•on deregistration, the property of the company vests in ASIC by operation of s 601AD and if an order is made to reinstate the company pursuant to s 601AH(2), the property of the company revests only from the time of reinstatement, not from the time of deregistration.
His Honour noted that the Commissioner contended that these propositions are well established, relying on, amongst other authorities, White v Baycorp (Campbell J) at [115] and Foxman (White J) [59] ‑ [66]). The Commissioner submitted that the proposed orders were inconsistent with the 'limited' form of retrospectivity that is provided by s 601AH(5) of the Corporations Act as they seek to restore beneficial ownership of the property to the Deregistered Companies during the period of deregistration: [120] - [121].
McKerracher J held that the holding of Lindgren J in Stork that s 601AH(3)(b) does not empower the court to make an order denying to a reinstatement the retrospective effect provided for in s 601AH(5) supported, rather than detracted from, the court's power to make one or more of the orders sought by the plaintiffs: [124].
His Honour did not specifically deal with Lindgren J's observation that 'there is a question, however, precisely what that retrospective effect is'.
McKerracher J regarded the Commissioner's argument as depending on the correctness of the proposition that the orders would be inconsistent with subs (5): [129]. His Honour regarded as the real question the nature of the power conferred under s 601AH(3)(d), that is to make any other order the court considers appropriate.
I observe that in that case the plaintiff was actively seeking a court order under s 601AH(3). In the case before me Carmody has chosen not to seek such an order. McKerracher J's finding at [136] that it was unwarranted to limit the power in s 601AH(3)(d) in the manner contended for by the Commissioner is a criticism that does not apply in this appeal.
His Honour did deal with the Commissioner's contention that any of the proposed orders would be inconsistent with the limited form of retrospectivity provided for by s 601AH(5) because they seek to restore beneficial ownership of the property to the Deregistered Companies during the period of deregistration: [137].
His Honour acknowledged that the adjective 'limited' has been used by the courts in relation to the retrospectivity described in the first sentence of s 601AH(5), and then stated:
…but in my view, that retrospectivity underlies the whole purpose of reinstatement. Section 601AH(5) provides for a fictional deemed continuation of the company's corporate existence during the period of deregistration. There are no other automatic retrospective legal consequences, but that is why there is the facility within the Corporations Act to make both validating provisions and any other orders considered appropriate in the circumstances in conjunction with the reinstatement. Section 601AH(3)(d) clearly permits an ancillary order which has significant, not merely incidental, retrospective consequences.
I respectfully agree with those observations which in my view tell against Carmody's argument that s 601AH(5) in and of itself has the effect of re-instating the proceedings. In my view more is required, specifically an order under s 601AH (3).
That conclusion is fortified by my reading of [138] where his Honour noted that in White v Baycorp, Campbell J decided that the first sentence of s 601AH(5) provides for a 'limited' degree of retrospectivity and does not extend to the vesting of the property of the company from the time of deregistration. His Honour noted that the real difference between the mode of operation of s 574(4) of the Corporations Law and s 601AH(5) of the Corporations Act was that retrospectivity was given only to the date of reinstatement, rather than the date of deregistration (see [115] – [117]).
It is clear that McKerracher J felt that Campbell J might have reached a different conclusion if an order had been sought, but it was not. The same situation applies in the present appeal. The appellants are not contending that retrospectivity cannot be achieved. Rather it is contending that it can be achieved but only by the operation of s 601AH(3) and not purely s 601AH(5).
McKerracher J then noted at [140] the detailed examination by White J in Foxman, looking at the legislative history. White J noted that the intended effect of reinstatement under s 601AH(5) was far from clear, observing (at [42]) that the authorities show that the first sentence is qualified by the later sentences.
McKerracher J observed:
What is of importance in his Honour's analysis is the point, with which I would respectfully concur, is that it would be a surprising result if the amended legislation that gave rise to s 601AH narrowed the position. It is not at all inconsistent with the legislative history that at least one purpose of the enactment of s 601AH(3)(d) was to permit the Court to make an order to put the company in the same position as if deregistration had not occurred, as previously provided for under s 574(5) of the Corporations Law.'
Again, in my view these observations provide support for the proposition that retrospectivity can be achieved but that the avenue that must be taken is s 601AH(3).
McKerracher J regarded the observations of White J in Oates v Consolidated Capital at [34] as accepting the correctness of what Campbell J said about the first sentence of s 601AH(5): [142].
Similarly McKerracher J noted that Austin J in GIO General Ltd v Sabko Pty Ltd (2007) 70 NSWLR 743 referred to Campbell J's remarks and applied them at [11] – [12] in that case, but regarded GIO as a decision on the scope of the retrospective deeming in the first sentence of s 601AH(5). It was not a decision about the scope of the power in s 601AH(3): [143].

Conclusions

I am satisfied, having reviewed the authorities, that s 601AH(5) does not have the same effect as s 574. The operation of s 601AH(5) does not have the effect contended for by Carmody. Firstly because it is internally inconsistent. Secondly, because if it has the effect contended for by Carmody, subsections 601AH(3)(c) and (d) are otiose.
I accept the appellants' argument that the Magistrates Court Proceedings had already abated, and remain abated, unless and until a Validating Order is made. Carmody has shown no intention to apply for a Validating Order. Carmody has proceeded on the basis that no Validating Order is required. Contrary to Carmody's submissions, in my view only a Validating Order made under s 601AH(3) could have the effect of validating the incompetent steps taken in the Magistrates Court Proceedings during the period of deregistration.
With respect, Foxman, as well as the cases considering it, is of far greater assistance in resolving this appeal than Riveria Hotels Pty Ltd v Stalwart Holdings Pty Ltd. The learned registrar in Riveria did not refer to the decision of Foxman. In that case counsel for the Australian Securities and Investment Commission (ASIC) was invited to appear as amicus curiae. That invitation was declined. Further, the authorities relied upon by the registrar to reach his decision in Riveria were cases on the old s 574 and not the new s 601AH(5).
I would uphold ground one. The learned magistrate should have held that the proceedings abated and remain abated, in the absence of an order made by a court, pursuant to s 601AH(3) of the Corporations Act, retrospectively validating all steps purported to be taken by Carmody in the proceedings during the period when it was deregistered.
It is not necessary to determine grounds two, three and four which are in reality further arguments in support of ground one, as opposed to discrete grounds of appeal.

Costs application against second respondent

The appellants seek an order in these proceedings that the second named respondent pay the appellants' costs of the Magistrates Court Proceedings to be taxed by the Magistrates Court on an indemnity basis under s 25(10)(f) of the MCCP Act. The second respondent did not enter an appearance in the appeal before me.
In the hearing before me on 20 December 2018, however, counsel for the appellants and for the respondent both accepted that, applying Rodwell v Hutchinson [2010] WASCA 197 [36], it is not open to the Magistrates Court to make indemnity costs orders.
Where a solicitor has instituted proceedings in the name of a plaintiff without authority, the practice at common law is to allow the defendant to apply for an order that the solicitor pay the defendant's costs: Australian Workers Union v Bowen (1946) 72 CLR 575, 592 (Williams J) and Harry S Bagg's Liquidation Warehouse Pty Ltd v Whittaker (1982) 44 NSWLR 421, 430 ‑ 431 (Powell J).
The second respondent has identified in its written submissions at pars 75 ‑ 78 steps taken by the second respondent on behalf of the first respondent while it was deregistered. The second respondent has not adduced any evidence or made any submissions that he took those steps with the authority of ASIC, in whom the cause of action was vested. I am quite satisfied that ASIC did not authorise the second respondent to take steps in the proceedings while the company was deregistered. My conclusions in allowing the appeal on ground one compel the conclusion that that the second respondent acted for the first respondent in the Magistrates Court Proceedings without authority whilst the first respondent was deregistered.
As Judge Jarrett noted in Devren Pty Ltd v Miller at [9] during a time when a company was deregistered, it is without anyone who had authority to, for example, give instructions on behalf of the company.
It is not necessary for me to reach a conclusion as to whether the second respondent acted with a conflict of interest.
I am satisfied that due to the acts of the second respondent the appellants have incurred costs without reasonable cause as a result of the second respondent's prosecution of these proceedings after Carmody was deregistered and without having any authority to do so.

Appropriate orders

In the reasons that I proposed to publish on 20 December 2018 I stated that although I had allowed the appeal, I did not consider it appropriate to enter judgment without trial for the appellants as defendants, although I had the power to do so.
Rather, I proposed making orders that unless Carmody obtained a validation order under s 601AH(3) from a Court on or before a specified date, judgment would be entered for the appellants. In the event that Carmody did obtain a validation order by the specified date the matter would then be remitted to the Magistrates Court.
On 20 December 2018 Mr Solomon submitted that there was no power to make an order in those terms given s 43(7) of the MCCP Act, read in conjunction with s 36(7) of the Magistrates Court Act 2004.
In the alternative Mr Solomon contended that the order should not be made in those terms because the first respondent had from start to finish put its case on the basis that a validation order was unnecessary. As a consequence the appellants had received no notice that an order in the terms of [127] might be made or indeed contemplated.
On behalf of the first respondent, Mr Lochore submitted that the power to make the proposed order existed but, whilst not expressly conceding the point, acknowledged that there was force in Mr Solomon's alternative submission.
It is not necessary to decide the question of whether or not I had the power to make the order set out at [127]. I am persuaded that it would be inappropriate to do so given the absence of notice to the appellants that such orders might be contemplated.
Further, I accept Mr Solomon's argument that the dismissal of the Magistrates Court proceedings would not necessarily terminate the underlying dispute. The doctrine of res judicata does not apply because there has not been a decision on the merits of the case.
It was on that basis that I recalled the reasons that I proposed to publish on 20 December 2018 and made the following orders:
(1)The appeal be and hereby is allowed.
(2)Judgment be entered for the appellant pursuant to s 17(2) of the Magistrates Court (Civil Proceedings) Act 2004 in the following terms. The first-named respondent's claim against the appellants in proceedings GCLM377 of 2014 be and hereby is dismissed.
(3)The second-named respondent pay the appellants' costs of proceedings GCLM377 of 2014, the Magistrates Court proceedings to be assessed by the Magistrates Court.
(4)The first respondent is to pay the appellants' costs of this appeal to be taxed if not agreed excluding those relating to the question of the costs of the Magistrates Court proceedings.
(5)The second respondent is to pay the appellants' costs of this appeal relating to the question of the costs of the Magistrates Court proceeding to be taxed if not agreed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

MW
Associate to Judge Troy
25 JANUARY 2019