ASH STREET PROPERTIES PTY LIMITED v POLLNOW SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL HANDLEY JA 1 September 1995 [1995] NSWCA 25 Handley JA. This is a notice of motion filed on 16 March 1995 on behalf of Errol Pollnow which seeks orders staying execution on three certificates of taxation and setting them aside. Execution on the certificates has been stayed. The original proceedings in the Equity Division were decided by McLelland J on 31 July 1985. The opponents appealed to this Court which on 18 July 1987 allowed the appeal and ordered the claimant to pay the opponents" costs of the appeal and of the proceedings in the Division. The claimant sought special leave but this was refused on 11 December 1987. As a result the opponents were entitled to tax their costs of the proceedings in the Division and this Court. No steps were taken to tax those costs until 9 June 1992 when the opponents" bill of costs was filed in this Court. The following day their bill of costs was filed in the Division. The filing of these bills provoked an application by the claimant to this Court for a permanent stay of the taxations. This motion was dismissed by me on 26 October 1992 for reasons then given and the claimant wasordered to pay three-quarters of the opponents" costs of the motion. The opponents filed their bill of costs pursuant to this order on 25 November 1992. The taxation of the three bills took place before Registrar Howe on 20 September 1994 and the certificates of taxation issued on 12 October. In the meantime the ASC had taken action under s 574 of the Corporations Law in respect of two of the opponents, Rosalind Gardens Pty Limited and Lake Village Apartments Pty Limited. On 27 February 1992 Rosalind was dissolved pursuant to that section and under s 576 its property vested by operation of law in the ASC. On 10 July 1992 Lake Village Apartments Pty Limited was also dissolved under s 574 and its property vested in the ASC. The orders for costs made by this Court on 18 July 1987 and 26 October 1992 were in favour of seven opponents. Australian Workers Union v Bowen (1946) 72 CLR 575 establishes that they were jointly entitled to the benefit of those orders. When the solicitors purporting to act for all opponents filed the bills on 9 and 10 June 1992 one of their clients had ceased to exist and its interest in the costs had passed to the ASC. When the same solicitors filed the third bill on 25 November two of their clients had ceased to exist and their interests in the costs had passed to the ASC. The solicitors had no authority to act for the ASC in relation to the taxation. Mr Garnsey QC for the claimant submitted that the filing of the bills involved either the commencement of proceedings in the Court or at least the taking ofprocedural steps in existing proceedings. See SCR Pt 52 r 50. He further submitted that the solicitor's retainers from the opponents did not, without more, authorise them to commence such proceedings or take such steps. In the alternative he submitted that as a result of the dissolution of the two companies and the absence of instructions from the ASC the solicitors did not have instructions from all joint creditors and the filing of the bills were nullities. 2 UNREPORTED JUDGMENTS Mr Garnsey also contended that Willoughby Road Apartments Pty Limited was one of the joint creditors and that the solicitors had no instructions to act for it either. However it transpired that this company was not one of the joint creditors, and Mr Garnsey withdrew this objection. In my opinion the filing of the bills involved procedural steps in existing proceedings which the solicitors would normally be authorised to take by virtue of their general retainers in those proceedings without express instructions or special authority. See In Re Newen (1903) 1 Ch 812 at 818 and Ex parte Maxwell (1955) 72 WN (NSW) 333 at 336. Mr Sexton for the opponents conceded that the objections based on the dissolution of one or both of the companies would ordinarily have been fatal but he submitted that orders made by Burchett J of the Federal Court reinstating these companies pursuant to s 574(3) having the effect stated in s 574(4) validated all procedural stepstaken in their name while they had been deregistered including the lodgment and taxation of these bills. The orders of Burchett J were made on 21 September 1994 and on 23 September office copies were lodged with the ASC and the orders took effect. See s 574(4). Burchett J made special orders pursuant to s 574(5) to ensure that the reinstatement of the companies did not validate a bankruptcy notice which solicitors purporting to act for the opponents had caused to be served on the claimant or affect any remedy which he might otherwise have against those solicitors. However no orders were made or even sought by either party in relation to the filing of the bills and the taxation of the costs to cut down the general effect of the orders for reinstatement provided for in s 574(4). Mr Sexton submitted that in these circumstances s 574(4), operating in accordance with its terms, 'deemed' the two companies 'to have continued in existence as if (their) registration had not been cancelled.' Accordingly all steps taken by the solicitors in connection with the lodgment of the bills, the taxation of the costs and the issue and service of the certificates were validated. It was not clear to me that the motion, insofar as it related to costs incurred in the Division, should have been heard by a Judge of this Court. I was concerned at the possibility that under the Rules of Court the motion, relating as it did to the taxation of costs, should have been heard by a Master in any event. I was also concerned at the possible multiplication of proceedings that wouldoccur if the claimant challenged the certificates of taxation, on quantum or otherwise, by an appeal to a Master. After I raised these difficulties with counsel Mr Garnsey was able to inform me that he had instructions that the claimant did not seek to challenge the quantum of the bills and both counsel joined in asking me to hear the whole motion. This I agreed to do in view of the importance of the issues raised in relation to s 574 of the Corporations Law. Section 574 can be traced back to UK legislation first passed in 1880 and it has formed part of Australian company legislation for a very long time. The present question arose for decision for the first time in Tyman's Ltd v Craven [1952] 2 QB 100 before the Court of Appeal. On 10 November 1950 the appellant had been struck off the register for failure to file annual returns. It carried on a retail business in leased property and had 'continued to trade' after it had been deregistered. On 23 July 1951, the second last day of a fixed period allowed for this purpose, an application was made in the company's name to the County Court for a new lease of its premises. Those purporting to act on behalf of the company became aware that it had been deregistered and an application was made for it to be restored. An order to this effect was made on 26 October 1951. URJ ASH STREET PROPERTIES PTY LIMITED v POLLNOW (Handley JA) 3 When the proceedings came on for hearing in the County Court on 31 October 1951 the lessor took a preliminary objection based upon the non-existence of the company when the proceedings were commenced. The CountyCourt judge upheld this objection but an appeal to the Court of Appeal was allowed, the majority holding that the order for reinstatement retrospectively validated the proceedings. Mr Garnsey, founding on comments by Burchett J when he ordered the reinstatement of the two companies (Re Pollnow (1993) 12 ACLC 88) submitted that Tymans Ltd v Craven was wrongly decided and invited me to prefer the dissenting judgment of Jenkins LJ The majority view of the effect of an order restoring the registration of a company was based on language now found in s 574(5) 'the company shall be deemed to have continued in existence as if its registration had not been cancelled'. As Evershed MR said of the equivalent provision in Tyman's Ltd v Craven at 110: ... [have found it impossible to formulate the qualification that would have to be read into the general words of the subsection, or to find any satisfactory basis for holding that those general words were ... retroactive to a limited extent only. The passages relied upon by Mr Garnsey in Re Pollnow appear at 94 and 95. In the first Burchett J said: There is nothing in section 574 to suggest that an order of reinstatement of a company reverses any consequence of the effluxion of time, or has the effect of putting back into office a director whose term has expired. A corresponding point was noticed in the judgment of French J ... in McAusland v DCT ((1993) 47 FCR 369 at 385) ... That case concerned the consequences of a particular order for the termination of a winding up. French J said: "The suspension of the director's powers does not cause time to stop running so far as the continuance of their terms is concerned. If while a winding up order is in effect, a director's term of office comes to its end by force of the Articles of the company, there is nothing about the winding up process or the relevant statutory provisions which would prevent that event. So it may happen that prior to a termination order all offices may have been vacated by effluxion of time." In the latter the Judge said: In my opinion, ... the court should have regard to the consequences for other persons of the retrospective effects which the statute gives to an order of reinstatement ... | am not "satisfied" it is "just" that my discretion should be exercised so as retroactively to change the rules by which the actions of the parties should be judged. Particularly is that so when it is not clear that, even if the companies should be deemed to have existed at the relevant time, there would have been any directors entitled to set proceedings in train on their behalf; indeed, it is probable there would not have been any. In my opinion, with respect, those remarks involved no criticism of the decison in Tyman's Ltd v Craven, but explore matters not considered in that case. So understood those remarks provide no support for Mr Garnsey's invitation to me to refuse to follow that decision. The decision has not been the subject of judicial or academic criticism during the intervening forty three years. It is referred to in the leading UK and Australian text books on company law. Since the decision there has been much legislative activity from Australian parliaments dealing with company law but the section has been re-enactedsubstantially unchanged. There is a presumption in such circumstances, of variable strength, that Parliament thereby endorsed the decision. See Re Alcan Australia Ltd (1994) 181 CLR 96 at 106. This presumption is of some strength in the present case. 4 UNREPORTED JUDGMENTS In these circumstances I consider I should follow Tymans Ltd v Craven. 1 do not do so with any reluctance because I prefer the majority judgments in any event. Mr Garnsey's final submission was that the deregistrations removed from office the remaining directors, if any, and if they did not vacate office then their terms of office continued to run while the companies were deregistered causing them to vacate their offices by effluxion of time. The first submission is answered by Tymans Ltd v Craven. The second was answered on the facts when Mr Sexton tendered the Memorandum and Articles of Association of both companies. The Articles of each company provided for directors to hold office for indefinite terms. Accordingly none of the directors vacated office by effluxion of time while the companies were deregistered. I conclude therefore that the reinstatement of the companies validated all intermediate steps taken in their names to quantify the costs the subject of the relevant orders. I make the following orders: 1. Motion dismissed with costs. 2. Existing stays of execution are continued until fourteen (14) days after the making of these orders. 3. The exhibits comprising the Memorandum and Articles of Association of Rosalind Gardens Pty Limited and Lake Village Apartments Pty Limited may be returned. Orders accordingly.