Industrial Relations Commission of New South Wales in Court Session CITATION : Mikhail Distribution Services Pty Ltd v Australia Post [2004] NSWIRComm 235 APPLICANT Mikhail Distribution Services Pty Ltd PARTIES : RESPONDENT Australia Post FILE NUMBER: 1511 of 2003 CORAM: Marks J CATCHWORDS : Interlocutory judgment on strike-out application - applicant company deregistered before commencement of proceedings - respondent sought to strike out proceedings - application to ASIC to reinstate registration of applicant company - application by previous sole director of applicant company to join proceedings - whether court can adjourn strike-out proceedings to give company opportunity to reinstate registration - whether proceedings a nullity - authorities reviewed - deregistered company has no power to do anything - proceedings instituted by a party which does not exist are a nullity - nullity constitutes an abuse of court processes - no discretion to adjourn proceedings - proceedings struck out - costs reserved. LEGISLATION CITED : Corporations Act 2001 (Cth) s 601AD 601AH Industrial Relations Act 1996 s 106 108(1) 108B Great Scott International v Cosmetic Suppliers [2004] NSWIRComm 139 Hunter Valley Community Investments Pty Ltd v Bell (2001) 46 ATR 375 Hunter Valley Community Investments Pty Ltd v Bell [2001] FCA 1148 CASES CITED : Larsen v Ondeo Nalco Australia Pty Ltd [2004] NSWIRComm 123 Morton v Vouris (1996) 21 ACSR 497 Sweeney and Vandeleur Pty Ltd v BNY Australia Limited (1993) 11 ACSR 356 United Service Insurance Co Limited v Lang (1935) 35 SR (NSW) 487 Video Excellence Pty Ltd v Cincotta (1998) 44 NSWLR 742 HEARING DATES: 08/11/2004 DATE OF JUDGMENT: 09/01/2004 APPLICANT Mr A Metcalfe of counsel Solicitor: Mr J Boghossian Employment Help Lawyers LEGAL REPRESENTATIVES: RESPONDENT Solcitor: Mr S Woodbury Blake Dawson Waldron JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Wednesday 1 September 2004 Matter No IRC 1511 of 2003 MIKHAIL DISTRIBUTION SERVICES PTY LTD v AUSTRALIA POST Application under s 106 of the Industrial Relations Act 1996 INTERLOCUTORY JUDGMENT ON STRIKE-OUT APPLICATION 1 These proceedings were commenced by summons filed in this Court on 18 March 2003. The applicant is named as Mikhail Distribution Services Pty Ltd, and the respondent is Australia Post. In the proceedings the applicant seeks certain relief under s 106 of the Industrial Relations Act 1996 ("the Act") with respect to a contract with the respondent which was terminated on or about 19 March 2002. 2 Prior to the commencement of the proceedings the sole director of the applicant, Mr Michael Youkhanna, took steps to have the applicant deregistered. This occurred on 30 September 2002. By s 601AD of the Corporations Act 2001 (Cth) a company ceases to exist on deregistration and all of its property vests in ASIC. By subsection (4) "ASIC has all the powers of an owner over property vested in it…". 3 The respondent has filed a motion seeking to have the proceedings struck out on the basis that they are incompetent. The respondent also seeks consequential orders for costs. 4 There are some additional factual materials which the parties made reference to during the course of submissions on this discrete point, which in summary form are as follows: 1. Mr Youkhanna has applied to ASIC to have the registration of the applicant company reinstated. By s 601AH of the Corporations Act , upon reinstatement "the company is taken to have continued in existence as if it had not been deregistered". It has been held in connection with a provision having similar effect that upon reinstatement the company will be deemed to have continued in existence as if its registration had not been cancelled (see NSW Court of Appeal Video Excellence Pty Ltd v Cincotta (1998) 44 NSWLR 742). 2. An application had been made by Michael Youkhanna and the applicant to amend the proceedings so as to join Mr Youkhanna as an additional applicant. That application is resisted by the respondent on the basis firstly that Mr Youkhanna was not a party to the contract as required by s 108(1) of the Act, and secondly that the application is out of time because s 108B of the Act requires the application to be made within 12 months of the termination of the contract. The parties have agreed to defer a hearing of this application until the disposal of appeals against judgments delivered by me covering each of these matters which are, respectively, Great Scott International v Cosmetic Suppliers [2004] NSWIRComm 139 and Larsen v Ondeo Nalco Australia Pty Ltd [2004] NSWIRComm 123. 5 One of the theoretical courses available to the Court would involve an adjournment of the strike-out application to give Mr Youkhanna the opportunity to have the registration of the applicant company reinstated. This would enable any current defect in the proceedings to be cured and would preserve the proceedings to enable the application for amendment to join Mr Youkhanna as an additional applicant. The strike-out of the proceedings would preclude both steps from being taken. 6 However, the respondent has submitted that, in effect, the proceedings are a nullity, constitute an abuse of the processes of the Court and should be struck out accordingly. In support of this submission the respondent relies on a line of authority exemplified by the judgment of Cole J in the Supreme Court of New South Wales in Sweeney and Vandeleur Pty Ltd v BNY Australia Limited (1993) 11 ACSR 356. The factual circumstances in those proceedings were similar to those which pertain in these proceedings. That is, a corporation seeking relief by way of Court process had been dissolved pursuant to provisions of the former Corporations Law with similar effect to deregistration of the applicant company. In those proceedings also, the plaintiff deregistered company sought an adjournment to allow re-registration. 7 In the course of his judgment Cole J reviewed a number of authorities dealing with similar legislation, within Australia and also in England. Those authorities, and the conclusion to which Cole J came, have not been disputed in these proceedings. Accordingly I can summarise his Honour's conclusions shortly. These are to the effect that whilst a company remains deregistered it has no power to do anything. Accordingly, it has no power to commence proceedings. Not only does it have no power to commence proceedings but it has no power to instruct anyone to commence proceedings on its behalf. Accordingly, it has no standing to pursue any orders. This was despite the fact that there was power given to others to seek reinstatement of the registration of the company. 8 His Honour put the matter as follows (at p.360): "The fact that there exists a statutory provision which may result at some future time in a resurrection from dissolution effective, because of the statutory provision, from the date of dissolution does not mean that, pending that future occurrence flowing from a possible future exercise of the statutory power to resurrect, the company continues to exist. It follows, in my view, that the summons must be struck out. There was no power for Mr Moustacas to issue the summons on behalf of the company. Nor was there any right for counsel to appear on its behalf because it does not exist. For similar reasons there was no power in the company to issue the notice of motion seeking orders for the joinder of other parties. The consequence, in my view, is that the summons must be struck out as an abuse of process of the court being proceedings instituted on behalf of a non-existent entity". 9 Cole J then dealt with the application for an adjournment of the strike out motion. The adjournment had been sought inter alia to permit reinstatement of the company to be pursued. His Honour, without deciding, doubted whether he had jurisdiction to grant an adjournment in respect of proceedings commenced on behalf of a non-existent entity. Even if he did have such jurisdiction, his Honour concluded that he would exercise it against the interests of the deregistered company even though to do so would preclude commencement of fresh proceedings because of the expiry of a limitation period. This is because the company in those proceedings had permitted itself to be dissolved. That is, dissolution occurred not as a result of the voluntary action on the part of the company's directors or officers but because it had failed to lodge certain documents as required under the relevant statute. 10 I was also referred to two decisions of Sackville J in the Federal Court of Australia. The first is Morton v Vouris (1996) 21 ACSR 497. Citing Sweeney and other authorities, Sackville J concluded that upon dissolution a company ceased to be a legal person and that "Upon the court becoming aware that the plaintiff or applicant is a non-existent person, it will not allow the action to proceed". 11 The second decision of Sackville J is Hunter Valley Community Investments Pty Ltd v Bell (2001) 46 ATR 375. In those proceedings a number of applicants had commenced a representative proceeding against certain defendants based on causes of action under the trade practices legislation. One of the applicants was a deregistered company. His Honour was dealing with a motion seeking leave to replead certain aspects of the cause of action. With respect to the deregistered corporate applicant his Honour had been informed that an application had been made to the Supreme Court of New South Wales for an order for reinstatement of registration. 12 After citing his Honour's decision in Morton, his Honour declined leave to the deregistered corporate applicant to replead its case. This was because it had ceased to be a legal person. Accordingly, no leave could be given to that applicant to replead until after it had been reinstated. 13 It should be pointed out that Sackville J was not dealing in those proceedings with an application to strike out the claim brought by the deregistered corporate applicant. However, in Hunter Valley Community Investments Pty Ltd v Bell [2001] FCA 1148, Sackville J dealt with an application to remove that applicant from those proceedings. The circumstances in those proceedings were materially different from those in these proceedings. The corporate applicant had been deregistered after the proceedings had commenced and accordingly, any cause of action which it had vested in ASIC by virtue of s 601AD of the Corporations Act. His Honour was therefore not called upon to consider the status of those proceedings at the time they were commenced. 14 In resisting the strike out application Mr A Metcalfe of counsel, who appeared for the applicant, relied substantially on the decision of the New South Wales Court of Appeal in Video Excellence, and in particular on the judgment of Spigelman CJ with whom Priestley and Sheller JJA agreed. Video Excellence had commenced proceedings in the Supreme Court of New South Wales which were ultimately transferred to the District Court. At the time that the statement of claim was filed, it had been deregistered. A Judge of the District Court dismissed the proceedings on an interlocutory application. The basis was that the plaintiff was a non-existent person. Eleven days later the plaintiff company was re-registered. It instituted an appeal to the New South Wales Court of Appeal. Because of provisions of the Supreme Court Act, that appeal was by way of re-hearing and the Supreme Court on appeal was required to determine the matter on the basis of the circumstances as they applied at the date of appeal. This included the retrospective effect of re-registration of the plaintiff. 15 Spigelman CJ held that at the time that the matter was before the Judge of the District Court "the plaintiff did not exist and, at the very least, it was appropriate for the Court to take no further steps". His Honour then made reference to Sweeney and Morton, commenting that: "In subsequent cases proceedings have been struck out as an abuse of the process of the Court, being proceedings instituted on behalf of a non-existent entity". (at 746). 16 Spigelman CJ then commented that the appropriate order that should have been made in the District Court was for the proceedings to be struck out (which would have allowed them to be reinstated under the rules of the Court) rather than dismissed (which required new proceedings to be commenced). His Honour commented in this connection "…the proper exercise of discretion in circumstances in which the court does not adjourn a matter to await the outcome of any application for restoration to the register, would appear to favour a strike out rather than a dismissal. This has the effect that a District Court would be able to grant all necessary relief to a party, without the necessity for appeal to this Court". (at 746). Mr Metcalfe submitted that this observation of Spigelman CJ would seem to be indicative of the recognition of an ability of a Court to adjourn a matter even where the proceedings have been constituted by a non-existent party. 17 If this submission is correct, this statement by Spigelman CJ in Video Excellence is prima facie contrary to the judgment of Cole J in Sweeney. Cole J doubted whether he had any discretion to adjourn the proceedings, regarding them as being in the nature of a nullity. Sackville J seems to have taken a similar view. 18 In the course of his Honour's judgment Spigelman CJ referred with approval to the judgment of Jordan CJ in the Full Court of the Supreme Court of New South Wales in United Service Insurance Co Limited v Lang (1935) 35 SR (NSW) 487. Halse Rogers and Street JJ concurred in the judgment of Jordan CJ. In those proceedings the Full Court was called upon to determine an appeal from a judgment of the District Court which had entered a verdict for the defendant in proceedings brought against the defendant by a plaintiff corporation which had been deregistered. After considering relevant authorities Jordan CJ concluded that the "ostensible" plaintiff and appellant were non-existent. It was then necessary to consider what course the Court should take in dealing with an appeal in circumstances where the appellant who was the plaintiff in the action below did not exist. Jordan CJ said that the proper way in which the matter should be dealt with was by way of application to have the proceedings stayed, and that a Court, on becoming aware of the fact that a plaintiff was incapable of participating in the proceedings, should not allow the action to proceed. His Honour concluded "It having been ascertained that there is no appellant before us, we can do nothing except refrain from proceeding any further. The verdict for the defendant and the order for costs given by the learned District Court Judge are, of course, nullities, but in the absence of a plaintiff we have no more power to deal with them in the appeal than he had to make them in the action". (at 497). 19 I conclude from the judgment of Jordan CJ that proceedings instituted by a party which does not exist are a nullity. If they are a nullity then it follows in my respectful opinion that they constitute an abuse of the processes of the Court. Accordingly, any such purported proceedings should be either struck out or permanently stayed. This would not seem to permit the exercise of any discretion to adjourn the proceedings so as to enable them to be properly constituted by the retrospective reinstatement of registration of a deregistered corporation. This is consistent with the judgment of Jordan CJ in United Service Insurance and with the approach of Cole J in Sweeney. 20 Mr Woodbury, solicitor, who appeared for the respondent in support of the strike-out motion, submitted that the observations of Spigelman CJ concerning a discretion to adjourn proceedings to await the outcome of an application for restoration to the Register were obiter and not essential to a determination of the proceedings in Video Excellence before the New South Wales Court of Appeal. I respectfully agree. The basis for the decision of the Court of Appeal in Video Excellence was the fact that the appeal from the District Court was by way of re-hearing which required that Court on appeal to consider the state of affairs and circumstances existing as at the date of appeal. As at that date the reinstatement of the company with retrospective effect gave it standing. It was therefore not necessary for the Court of Appeal to embark on any analysis of the status (including the lack of status) of court proceedings instituted by a deregistered company. 21 In my opinion the logic of the judgment of Cole J in Sweeney is compelling, and is supported by the judgment of the Full Court in United Service Insurance Co. These proceedings have purported to be commenced by an applicant which does not exist. Accordingly, they are a nullity. Being a nullity, there is no power in the Court to adjourn them. Once this Court has become aware of the fact that the proceedings are a nullity, and that they thereby constitute an abuse of the proceedings of the Court, it follows that the proceedings should be struck out. I propose to do so. 22 The question of costs was not argued before me. The respondent may or may not wish to pursue Mr Youkhanna for costs. Accordingly, to the extent that I am able to do so, I formally reserve costs. Any cost application should be made within one month of this date. 23 ORDERS 1. The proceedings are struck out. 2. Costs are reserved. 3. Liberty to apply with respect to costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.