The Lazarus action Law Reporter

The regulators have a fight in the courts

In Australian Competition and Consumer Commission v Australian Securities and Investments Commission ((2001) 18 ACLC 341), we have witnessed the unusual situation where the ACCC regulator sued the ASIC regulator in order to enable the former to carry out its task. As readers may be aware, the Trade Practices Act is based on the proposition that usually corporations breach the legislation. What happens, however, if the corporation is no longer in existence - ie it has been wound up or is dissolved? The ACCC needs to sue the corporation in order to ensure that it can become in effect a "creditor" in the appropriate circumstances. When a company is dissolved ASIC is given discretion to reinstate the corporation as a "live person" in some circumstances - eg in order that proceedings can be brought against that corporation. If ASIC refuses to reinstate the corporation, then persons can apply to the court for an order under section 601AH to have the corporation reinstated. In this case the ACCC wanted to sue ABB Power Transmission Pty Ltd (PT) so that it could be joined as a defendant in proceedings brought in the Federal Court for various breaches of the Trade Practices Act.

On 1 January 1996 the assets of PT had been transferred to other companies in the group, the company was wound up as it had no more assets. The ACCC did not contend that the winding up had been to defeat creditors, but believed it needed to reinstate the company in order to establish evidence that there had been collusion between some manufacturers of power and distribution companies. The ACCC wanted to sue PT which was no longer in existence. For the action to be successfully pleaded, the ACCC believed that it was necessary to reinstate the corporation. ASIC did not believe that the grounds argued for by the ACCC fall within the current policy of ASIC in relation to reinstating corporations. The ACCC thus brought the relevant action. The officers of ASIC argued it would be unjust to reinstate the company with no assets so it could be made the subject of punitive proceedings which it would not be able to afford to defend and to pay a penalty which could not be paid. That, Austin J suggested, was a question for the Federal Court in the appropriate proceedings brought by the ACCC.

In evaluating the power of the court to reinstate companies Austin J was concerned that the reinstatement was not futile. If reinstated companies are left in liquidation without the funding necessary to permit the liquidator to carry out the necessary tasks this would be a futile reinstatement. Also, what orders should be made, if any, in relation to costs to be paid by the company once reinstated in relation to litigation? The purpose of the reinstatement would inevitably be to allow the company to do something or to have something done to it. Reinstatement must imply that the affairs of the reinstated company have not been fully wound up and that a liquidator can be placed in charge to ensure that all necessary steps in that context are taken. Austin J was also concerned that if the company did not have a liquidator its directors would have to be reappointed - they would have no power or money to run the company in effect and might be guilty of insolvent trading if they did. In those circumstances it seemed clear that a liquidator should be appointed to ensure that the extent to which the company was allowed to operate was consistent with the purpose of its reinstatement - to make it a party to the relevant litigation.

Was the ACCC a person that was "aggrieved by the deregistration" to use the terms of the section? Austin J held that the ACCC was such a person. It had a public duty to improve competition and efficiency and it had satisfied the court that it needed PT to be reinstated as a corporation so that it could, if necessary, be joined as a party to the proceedings. Austin J ordered that the company be reinstated, that the ACCC pay the costs of the relevant court orders, and that it also pay the costs and disbursements of any liquidator that was appointed as a result of the reinstatement. The ACCC success may well prove to be a very costly one.

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.