Pilarinos v ASIC [2006] VSC 301

What the court decided

A Master had dismissed the plaintiffs' application to reinstate Palais de Danse Pty Ltd with costs [2]. The appeal from the Master was a rehearing de novo [1]. The company had been deregistered on 21 February 1998 [32]. The State of Victoria was seeking possession in VCAT of St Kilda premises held by the third plaintiff, Bradto Pty Ltd, under a 50 year lease that had expired [20]. Bradto wished to reinstate the company and rely on an alleged equitable lease as an alternative defence [21]. By a deed of sale of shares made on 24 December 2005, the first plaintiff, Mr Pilarinos, agreed to buy shares in the company [64]. Mr Pilarinos later nominated Bradto as the substitute purchaser under the deed [66]. The State relied on the fact that Mr Pilarinos and Bradto knew of the deregistration when the agreement was made [108].

The State was not a party and had no right to be heard [9]. Before the Master, ASIC and the State opposed the application on the ground that the plaintiffs were not aggrieved persons [5]. Gillard J reluctantly granted the State leave to appear on the appeal, but considered that it should not have been granted leave to argue that the proposed claim against it would fail and, as ASIC was already opposing on standing, should not have been granted leave to appear [30]. In his Honour's view, the mere reinstatement of the company did not of itself prejudice or affect the State's rights, although the reason advanced was to enable the company to sue the State [25]. The proper place for that dispute was not an application for reinstatement [26]. His Honour said that notice should be given where the order for reinstatement would affect the rights of another, such as former shareholders, directors or employees [28]. As a general guideline, where it is proposed to sue the company and the cause of action is hopeless, it may be appropriate to require notice to the potential litigant, but only "in the clearest of clear cases" [29].

His Honour held that nothing in the legislation requires the applicant to have been aggrieved at the time of the deregistration, as the sub-section requires a causal link but no temporal restriction [49].

His Honour held that whether a person is aggrieved is to be determined at the date of the hearing [94]. The questions he then stated were whether, as at the date of the application, the facts show that the applicant is aggrieved by the deregistration and, if so, whether the grievance is genuine, real and not merely theoretical, petty or fanciful [94]. His Honour regarded the remarks of Buckley J in Re New Timbiqui Gold Mines Ltd about an "officious interloper" as not necessary to his Lordship's decision, and had difficulty with their reasoning [100]. His Honour said that knowing that a company has been deregistered and then acquiring a valuable right does not mean that the person is not aggrieved [100].

His Honour held that Mr Pilarinos and Bradto were aggrieved, because the deregistration deprived them of the valuable right they claimed, an agreement for a lease for 60 years [101]. The second plaintiff, Mr Hyams, who would receive a proportion of $100 under the deed, was not a person aggrieved [102]. No argument was put that reinstatement would not be just, and his Honour held that it followed that it would be just [103].

The State argued that the court should, in the exercise of its discretion, refuse reinstatement because the company's proposed action was doomed to fail [105]. His Honour declined to determine on affidavit the likely outcome of a proceeding raising disputed and fact sensitive matters [106]. In his Honour's view, on the material the proceeding could not be said to be hopeless [71], [107]. He found no discretionary grounds for refusing relief and held that the appeal must be allowed, with orders and costs to be heard later [110], [111].

Why it matters

This single judge decision gives a broad test of standing to seek reinstatement: a genuine and real grievance caused by the deregistration, even where it arose from dealings after deregistration made with knowledge of it [94], [100]. It also signals that a reinstatement application is not the place to try the merits of claims involving the reinstated company, and that notice to a potential litigant because the proposed claim is hopeless is for the clearest of clear cases [26], [29]. His Honour's statement of the test refers to both the date of the hearing and the date of the application [94].

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.