Tarkington Pty Ltd v Kingdrake Pty Ltd
[2001] VSC 126
•2 May 2001
SUPREME COURT OF VICTORIA
PRACTICE COURT Not Restricted
No. 6621 of 2000
| TARKINGTON PTY LTD (ACN 006 368 378) | Plaintiff |
| V | |
| KINGDRAKE PTY LTD (ACN 005 067 804) | Defendant |
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JUDGE: | Balmford, J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 April 2001 | |
DATE OF JUDGMENT: | 2 May 2001 | |
CASE MAY BE CITED AS: | Tarkington v Kingdrake | |
MEDIA NEUTRAL CITATION: | [2001] VSC 126 | |
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Appeal against an order made under Order 23 of the Supreme Court (General Civil Procedure) Rules 1996 – Proceedings were successfully brought against Tarkington by Kingdrake after Tarkington defaulted under a loan agreement. Tarkington appealed the decision to the Court of Appeal. During this proceeding it was revealed that Tarkington had been deregistered under section 601AD(1) Corporations Law and was therefore no longer in existence, so that the appeal by Tarkington was dismissed. Tarkington was later reinstated by the Australian Securities and Investments Commission – What is the effect of a deregistered company with property which is subject to an interest or claim, being reinstated – Whether an application made by a company whilst it is deregistered can be ratified - Res judicata and issue estoppel
Corporations Law – ss 601AD(1)(5).
Supreme Court (General Civil Procedure) Rules 1996 - Order 23.
ACCC v ASIC [2000] NSWSC 316
Holli Managed Investments v ASC [1998] FCA 1657
Jackson v Goldsmith (1950) 81 CLR 446
Shillito v Bent [1973] VR 762
Tymans, Ltd v Craven (1952) 1 All ER 613
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr A Blackman | Buxton & Associates |
| For the Defendant | Mr J Wilson | Kliger Partners |
HER HONOUR:
This is an appeal by the plaintiff from an order of Master Evans made under Order 23 of the Supreme Court (General Civil Procedure) Rules 1996, that proceeding No 6621 of 2000 (“the present proceeding”) be dismissed as an abuse of the process of the Court and the plaintiff (“Tarkington”) pay the costs of the defendant (“Kingdrake”), including the costs of the application for the order and reserved costs. The submission of the defendant is that in the present proceeding the plaintiff seeks to litigate again matters which were dealt with in proceeding Number 4614 of 1994 (“the earlier proceeding”).
In August 1989 Tarkington and Faouzi Nashaar (“Nashaar”) agreed to borrow $400,000 from Holly Park Investments Pty Ltd (“Holly Park”) on the security of a debenture over the assets and undertaking of Tarkington, and mortgages of leases held by Tarkington and Nashaar over several properties. Shortly afterwards Holly Park assigned to Kingdrake all its right, title and interest as creditor under the loan agreement and as mortgagee under the debenture and the mortgages of the leases.
Tarkington defaulted under the loan agreement and Kingdrake served Notices of Default and sought to exercise its rights under its securities, selling several of the securities under its power of sale. Difficulties arose and Kingdrake brought the earlier proceeding against Tarkington and Nashaar to protect its security over one of the properties. In that proceeding Tarkington and Nashaar counterclaimed, on the ground that the power of sale had been improperly exercised. The matter was heard by Smith J, who gave judgment on 9 October 1998, finding for Kingdrake on the principal claim and dismissing the counterclaim.
Tarkington and Nashaar appealed to the Court of Appeal against the judgment of Smith J. At the hearing before it on 31 May 2000 the Court of Appeal was informed that Tarkington had been deregistered under section 601AD(1) of the Corporations Law on 4 March 1996 and accordingly had ceased to exist from that date. That being so, the Court of Appeal held, the appeal by Tarkington was incompetent and must be dismissed on that ground. The appeal was thus prosecuted by Nashaar only. A number of the grounds of appeal were abandoned, and those which were maintained were dismissed (save as to certain matters relating to costs and not here relevant) by order of the Court of Appeal on 1 June 2000.
On 27 June 2000 the registration of Tarkington was reinstated by the Australian Securities and Investments Commission. Section 601AH(5) of the Corporations Law reads:
601AH(5) Effect of reinstatement. 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 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.
I was referred to several authorities on the effect of that section. In Tymans, Ltd v Craven (1952) 1 All ER 613 the English Court of Appeal considered the corresponding English provision. A county court judge found that an order restoring a company to the register did not have a retroactive effect, and accordingly that since the time for making an application for a new tenancy had expired, an application made by the company during its period of deregistration, and before the expiry of the time, could not be ratified. The Court of Appeal held, by a majority, that the company was to be regarded as never having been dissolved, and it was not open for the landlord to object that no application had been made within time.
In Holli Managed Investments v ASC [1998] FCA 1657 Finkelstein J heard an application for reinstatement of a deregistered company. He referred to a submission by the plaintiff that upon the dissolution of the company, its liability for a given debt had been extinguished, with a corresponding extinguishment of a right of indemnity. He noted (although in the end he did not have to decide the issue) that if that submission was correct:
. . .the reinstatement of the company would have retroactive effect and would enable [the plaintiff] to assert the continued existence of the debt and the right of indemnity: see generally Tyman’s Ltd v Craven [1952] 2 QB 100.
In ACCC v ASIC [2000] NSWSC 316 Austin J was dealing with an application by the ACCC to reinstate a deregistered company, on the ground that it proposed to join the company in proceedings seeking a pecuniary penalty against it. The company had been fully would up. His Honour said at paragraph 50:
If the liquidator has presented the final account required by s 509, the Court’s order [reinstating the company to the register] necessarily has the effect of countermanding ASIC’s statutory duty under s 509(5) to deregister the company at the end of three months. The purpose of the reinstatement will inevitably be to permit the company to do something or have something done to it. That being so, the reinstatement must imply that the affairs of the reinstated company have not been fully wound up, even though the liquidator fully discharged the duties of winding up before the company was deregistered.
And at paragraph 51:
Counsel for [the former officers of the company] submitted that if the affairs of a company have been fully wound up in a members’ voluntary winding up, the liquidator is functus officio at the end of that process, and the liquidation is at an end before the company is deregistered: Re London and Caledonian Marine Insurance Company (1879) 11 ChD 140, 144. In my opinion the effect of that case is overridden by s 601AH(5). As I have said, the reinstatement puts the company in the position of a company in liquidation whose affairs have not yet been fully wound up, and will not be wound up until the purposes of the reinstatement have been satisfied.
The present proceeding was commenced by writ on 25 August 2000. The contention of Kingdrake, which I accept, is that all of the issues raised in the present proceeding were determined against Tarkington in the earlier proceeding by Smith J and were determined against Nashaar both by Smith J and, effectively, by the Court of Appeal (see paragraph 17 of the reasons for judgment of Chernov JA, with whom the other two members of the Court of Appeal agreed). Accordingly, it is submitted, by virtue of the principles of res judicata and issue estoppel, those matters should not be litigated again. Mr Wilson, for Kingdrake, cited the passage from the judgment of Fullagar J in Jackson v Goldsmith (1950) 81 CLR 446 at 466 where His Honour said:
The rule as to res judicata . . . is a broad rule of public policy based on the principles expressed in the maxims “interest reipublicae ut sit finis litium” and “nemo debet bis vexari pro eadem causa”.
In Shillito v Bent [1973] VR 762 the Full Court (Winneke CJ, Gowans and Starke JJ) said at 765:
It is, in our view, plain that those issues have already been finally determined against the present plaintiffs in the former action, and to seek to relitigate them in the present proceeding is, we think, clearly an abuse of the process of the Court.
Mr Blackman, for Tarkington, submitted that the judgment of the Court of Appeal replaced the judgment of Smith J in all respects. It was the judgment of the Court of Appeal which must be the source of any estoppels, not the judgment of Smith J. That judgment must, until set aside, determine the mutual rights and obligations of the parties. Section 601AH(5) of the Corporations Law could not change that position. Thus there was no estoppel against Tarkington in respect of the issues raised in the present proceeding.
However, the Court of Appeal did not determine those issues against Tarkington on their merits. The Order of that Court records that it was common ground that Tarkington had been deregistered and ceased to exist; and orders that the appeal “to the extent that it purports to have been brought by Tarkington Pty Ltd is dismissed”. That order of the Court of Appeal cannot, in my view, be taken to have displaced the order of Smith J against Tarkington determining on the merits the issues raised in the counterclaim.
If I am wrong in that view, nevertheless the reinstatement of Tarkington has now changed the situation, with express retrospective effect. The effect of section 601AH(5), as appears from its clear terms and from the authorities to which I have referred, is that the factual basis for the decision of the Court of Appeal on the appeal by Tarkington has been removed. The reinstatement of Tarkington has the effect that Tarkington is in a position to apply to the Court of Appeal for leave to appeal out of time against the judgement of Smith J, and I was informed that it has in fact lodged such an application.
In all the circumstances, I find that, given the finding of Smith J on the counterclaim and the finding of the Court of Appeal on the appeal by Nashaar, the decision of the Master was a proper exercise of the discretion conferred upon the Court by Order 23.
For the reasons given, the appeal is dismissed. An order will be made in similar terms to the order of the Master. Counsel may wish to make submissions as to costs.
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