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Judgment - ex tempore 1By summons filed on 16 April 2014, Ms Sara Kovarfi, who was represented, by leave, by her daughter-in-law, Ms Edith Kovarfi, seeks an order reinstating Kata-Lyn Pty Ltd ("Company") under s 601AH(2) of the Corporations Act 2001 (Cth). 2The principles applicable to an application for reinstatement under that section are well-established and this application does not raise any novel issue as to those principles. The Court can order that a company's registration be reinstated if it is satisfied it is just so to do, on application by a person aggrieved by the deregistration under s 601AH(2) of the Corporations Act. The concept of "person aggrieved" includes a person who has been damaged in a legal sense by a deregistration or where deregistration has extinguished a right of some value or potential value. 3A person interested in a company's property may be a person aggrieved who can seek such reinstatement: Re Graf Holdings Pty Ltd [1999] NSWSC 217 at [28]. I will assume, without deciding, that Ms Sara Kovarfi is a person aggrieved, at least so far as there appears to be some evidence that she was the Company's last member prior to its deregistration, as well as the director of the Company prior to its deregistration. 4In order to reinstate a company under s 601AH(2) of the Corporations Act, it is necessary the Court be satisfied that it is just that the company's registration be reinstated. Relevant matters recognised in the case law include, for example, the purpose of the reinstatement; importantly, for present purposes, the company's solvency; whether any person is likely to be prejudiced by the reinstatement and the public interest generally: WorkCover Authority of NSW v Picton Truck and Trailer Repairs Pty Ltd (de-registered) [2004] NSWCA 371; (2004) 51 ACSR 102; Wedgewood Hallam Pty Limited v ASIC [2011] FCA 439 at [5]. Importantly, a company cannot be reinstated for a limited purpose and reinstatement is an "all or nothing affair": Re Anglo Coal (Drayton Management) Pty Ltd [2004] NSWSC 604; (2005) 23 ACLC 82 at [6]. The effect of reinstatement is therefore to place a company in a position where it can conduct business with members of the public, even if that is not the subjective intention of the person who proposes reinstatement. In some circumstances, the Court may reinstate an insolvent company, but it will typically only do so where a liquidator is appointed prior to the reinstatement and the Court has power to make a winding-up order, prior to the company's reinstatement, to take effect when the reinstatement takes place: ACN 078 272 867 Pty Ltd (in liq) v Deputy Commissioner of Taxation [2011] HCA 46; (2011) 282 ALR 607. 5These principles are important in this application, because they emphasise that the Court's jurisdiction, which is a statutory jurisdiction conferred on it under the Corporations Act, is not to be exercised solely by reference to the interests of the person seeking reinstatement, or indeed the opponent to reinstatement, but significantly by reference to the public interest in whether a company should be returned to commercial life. I will return to the application of those principles in the present case below. 6Other relief which was sought in the Summons filed by Ms Sara Kovarfi on 16 April 2014 was not pressed in the application before me, although I have had regard to it as background to the application. An Originating Process filed 17 July 2014 sought the same relief, by way of reinstatement of the Company, and also identified an intent that the Company (once reinstated) would apply to set aside a judgment delivered by this Court in earlier proceedings in 2010 ("2010 proceedings") to which it was not then party and seek to be joined to those proceedings as a proper party and to claim orders against the Defendants for negligence or, alternatively, seek to prove that the Defendants committed fraud with the intent to mislead the Company's lender and the Company. 7The Company relied on an affidavit of Ms Edith Kovarfi dated 17 July 2014. The respondent in the application, and the defendants in the earlier proceedings, relied on an affidavit of Ms Alexandra Bartlett dated 16 July 2014. 8By way of background, the Company had developed a property in Queenscliff and contends it suffered loss, that crystallised in 2004, because the Defendants had wrongly, and negligently, certified that a builder was entitled to certain amounts in excess of the amounts properly due to it, leading the lender to the Company to pay out those amounts to the builder, in turn exhausting the Company's facility limit and ultimately causing the sale of the uncompleted development in a mortgagee sale. 9Ms Edith Kovarfi and her husband were then directors of the Company, although Ms Sara Kovarfi was subsequently appointed its sole director. 10Prior to Ms Edith Kovarfi's resignation as a director of the Company, it had lodged a resolution recording its negative solvency with the Australian Securities and Investments Commission ("ASIC") in November 2004. 11Several years later, in September 2010, when Ms Sara Kovarfi was its sole director, the Company had applied for voluntary deregistration, and Ms Sara Kovarfi had certified, as the prescribed form required, that all members agreed to that deregistration, that the Company then had assets less than $1,000 and that it had no outstanding liabilities and was not party to legal proceedings. The Company was deregistered on 24 November 2010. 12In the meantime, Ms Edith Kovarfi, as a purported assignee of rights from the Company, had brought proceedings against the Defendants which were dismissed by McCallum J on 14 September 2012 ([2012] NSWSC 1101). In particular, her Honour had held that the action had been brought on a cause of action purportedly assigned by the Company more than six years before the commencement of the proceedings, and that it was statute barred. Ms Kovarfi then brought an application, subsequently heard by a Registrar, to set aside that decision, which was dismissed, and did not appeal from that decision. 13In 2013, Ms Edith Kovarfi, her husband and Ms Sara Kovarfi, who now applies to reinstate the Company, brought a further claim against the Defendants, by proceedings commenced in May 2013. Campbell J struck out certain claims for relief in those proceedings without prejudice to any right of the Company to seek such relief by way of proceedings recommenced by summons, and otherwise dismissed the proceedings under r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW). In delivering judgment ([2014] NSWSC 100), his Honour addressed certain matters that will also be necessary for me to refer to in this application. 14By her affidavit dated 17 July 2014 in support of the application, Ms Edith Kovarfi sets out the history of dealings between the Company and the builder of the Queenscliff property and its lender and the Defendants. She points to evidence which she says was provided to the lender of the fact that overpayments had been made to the builder. She notes that, in May 2004, long before the Company was deregistered, it had sold its choses in action to an associated entity and identifies the Company's losses as having occurred on 27 October 2004 when the lender sold the property to third party purchasers at a price that apparently did not fully pay out the facility. 15I note, at this point, there is no doubt that the Company and Ms Edith Kovarfi and her husband have suffered real loss as a result of these matters, including that guarantees given to the lender have been enforced against them. However, the fact those persons have suffered loss is not in itself a matter sufficient to give rise to an order to reinstate a company, which as I noted above must be exercised by reference to the statutory jurisdiction that is conferred on the Court in the relevant circumstances. 16Ms Kovarfi notes that prior to the Company's voluntary winding-up in 2010, Ms Sara Kovarfi had, she says, understood there had been an adjudication which approved a payment to the builder, which seems to have been a potential liability of the Company at the time of its deregistration. Mr Williams, who appears for the Defendants, refers to the likelihood that the Company also had an outstanding liability to its lender, at least to the extent that the debt owed to the lender had not been fully paid out by enforcement of the relevant guarantees. 17Ms Kovarfi in turn points to an undertaking given by the Company to do everything in its power to protect the assignees' rights in respect of the assignment of the cause of action to them, and also points to evidence that she contends may establish fraud against the Defendants, so as to seek to extend the limitation period under s 55 of the Limitation Act 1969 (NSW). That section applies where a cause of action is based on fraud or deceit or where a cause of action was fraudulently concealed. In particular, Ms Kovarfi's evidence is as follows: "On or about 9 September 2010 the successive assignee of the choses of action [the Company] had received a letter from the solicitor of that deed [sic] employee who approved the payment in accordance with the [First Defendant's] reports and influenced [the lender] to accept the 'Cost to Finish' report from [the First Defendant] (including all allegations and denying any explanation from [the Company] in relation to the report) gained employment with [the First Defendant]." On its ordinary meaning, I would understand this paragraph to indicate that the person who was at one point employed by the lender to the Company was subsequently employed by the company which is the proposed first defendant in the proceedings. At least at some points in submissions, Ms Kovarfi appeared to accept that that was the intended scope of the application. 18At other points, Ms Kovarfi appears to have put the allegation in a somewhat different way, consistent with that which is referred to by Campbell J in his 2014 judgment (at [47]-[48]) as follows: "As I understood the case Mrs Kovarfi outlined in argument, she and her husband were aware in 2004 that, according to the advice they had received from another valuer, the defendant may have overstated the value of the work performed up to 13th February 2014 and accordingly the amount necessary to complete the job had been wrongly stated in the report of May 2004. The only matter that they were not aware of was information relayed to them in October 2010 on behalf of the bank that a person they believed to be a bank officer in fact worked for the defendant. I am not sure - I interpolate - how that information makes any difference. I cannot see that the case sought to be made in relation to the erroneous contents of the reports, as alleged, becomes one of fraud, even if it is assumed that the person involved in fact worked for the valuers and not for the bank." His Honour's summary of the case of fraud put by Ms Kovarfi, which was also a case that sometimes appeared to be adopted in submissions, appears to involve a suggestion that the person involved worked for the Defendant rather than for the bank, although the Company or Ms Kovarfi had understood that he or she had worked for the bank. 19It seems to me there is much force in Campbell J's observation that the relevant conduct would not change its character depending upon the identity of the employer of the relevant person. It is also by no means apparent to me that any subsequent change of employment by a person is enough to turn conduct that was once alleged to be negligent into conduct that is fraudulent. However, it is ultimately not necessary to determine that matter given the views I have formed on other grounds. 20In the course of submissions, Ms Kovarfi also contended that the Defendants had deliberately and fraudulently misled the Company. However, no evidence was identified in the course of the application before me, other than the evidence as to the employee's position, to support such a claim. Ms Kovarfi also identified a claim for breach of fiduciary duty that might be put by the Company against the defendants in the proceedings. It is not altogether easy to see how a fiduciary duty would arise, where that normally depends upon an undertaking to act in the interests of another person, and it is difficult to see that a certifier providing information to a bank could have undertaken to act in the interests of the Company, where its interests and the bank's interests were potentially inconsistent. However, it is also not necessary to decide that matter given the views I have formed on other grounds. 21The Defendants submit that, first, leave should not be granted because the cause of action is statute barred. It seems to me one aspect of that submission is plainly correct. It seems to be that an application by the Company to set aside an earlier judgment, delivered in proceedings in which it was not party, and then be substituted into those proceedings, could not succeed. First, it does not seem to me the Company would have standing to set aside a judgment delivered in proceedings to which it was not party. Second, it does not seem to me the Company could substitute into the proceedings which do not now exist, because they have been dismissed. It is important to recognise these are matters of substance, not matters of form. The earlier proceedings were brought by assignees who claimed a right which existed because the Company's right had, it was suggested, been assigned to them and the Company was not party to those earlier proceedings because, on the case then put, it did not have the relevant right. The fact that that choice has now proved, with hindsight, to be incorrect does not mean it had any less been made at the time those earlier proceedings were brought. 22It also does not seem to me that a serious question as to fraud has been established, at least on the evidence before me. The evidence as to the change of the employee's position is, as I have noted, equivocal, and there is no evidence to support, at least on the materials before me, the suggestion of a deliberate attempt by the Defendants to mislead the Company. 23The second basis on which the Defendants seek to oppose reinstatement is that deliberately false statements had been made to ASIC when the Company was deregistered. I do not find it necessary to decide that matter, given the basis on which I have determined the application. It is plain that the deregistration of the Company was a deliberate act, and that certifications were in fact given that the Company had no substantial assets or liabilities. It is at least arguable that the latter certification was incorrect, but I do not need to decide that matter in order to determine this application. 24It seems to me that the fundamental difficulty with this application - and it is sufficient to determine the application on this basis alone - is that the Company will plainly be insolvent if it were reinstated. I have noted above there is a long list of authorities as to the importance of solvency in an application for reinstatement. Those authorities are cited, for example, in Austin and Black's Annotations to the Corporations Act [5A.601AH]. Mr Williams refers to the decision in Re Immunosearch Pty Ltd (1990) 2 ACSR 455 at 460, where Brooking J noted that solvency was a material consideration in such an application, although Ms Kovarfi distinguishes that decision on the basis that it also referred to misconduct by the relevant shareholders. That distinction may well be well-founded, so far as the particular case is concerned, but his Honour had there referred (at 460) to the other cases in the long line of authority which emphasised the importance of this matter, commencing with Re Mascot Home Furnishers Pty Ltd (in liq) [1970] VR 593 and Re Data Homes Pty Ltd [1971] 1 NSWLR 338. 25I have pointed to the fact that the Company cannot be reinstated for a limited purpose, namely, only to conduct litigation, because the Corporations Act does not authorise reinstatement only for a limited purpose. Even if the Company were only to conduct the litigation, it will necessarily incur costs, which will give rise to debts, including the annual fees which are charged by ASIC in respect of company registration, the filing fees which it would likely be charged by a Court in respect of the filing of proceedings or the filing of interlocutory processes in them, and any costs orders which may be made against it in the course of the proceedings. Ms Kovarfi refers to authority that the Court may dispense with an order for costs, but the authority to which she refers deals with applications for security for costs, as I understand it, not with orders for costs in respect of unsuccessful applications in proceedings. 26Ms Kovarfi points out that she may take up a personal loan to meet such costs and, implicitly, then contribute those funds to the Company, by way of loan or on some other basis. However, that submission seems to me to demonstrate, rather than to avoid, the depths of the Company's lack of solvency, by pointing out that it could only meet such debts, including even the annual filing fees charged by ASIC, if it were to be advanced funds to do so by Ms Kovarfi. 27It seems to me that the Company is plainly insolvent, and it is still plainly insolvent even if it were to have a claim which, if successful, would ultimately lead to a significant recovery. In these circumstances, the Court would only reinstate it if a liquidator could be appointed, prior to the reinstatement. A liquidator cannot be appointed, in the present case, because no consent of a liquidator to appointment has been tendered and neither the applicant nor Ms Edith Kovarfi offer any undertaking to pay a liquidator's fees, and they plainly could not do so given the evidence as to their poor financial situation, where each of them is dependent on the pension. I should add that there would also be no utility in the appointment of a liquidator, when the purpose of the Company's reinstatement is to permit the conduct of proceedings, where the liquidator is not funded to undertake such proceedings. 28I appreciate that the outcome of this application may be a matter of disappointment for Ms Kovarfi. I appreciate that the Company might have had, as to which I express no view, a meritorious claim had it been brought promptly after the relevant events, and it is unfortunate if that claim has been lost by events. I note that those events, however, in part involve the assigning of that claim to third parties, which were plainly not accidental, but involved strategic choices as to how the claim would be brought. In any event, the jurisdiction which is conferred on me is a jurisdiction under the Corporations Act; and it has regard to the public interest, and in particular, the public interest that insolvent companies should not be reinstated, without a liquidator being appointed to them, and that is itself sufficient to determine the application adversely to the applicant. For these reasons, I am unable to accede to the application that the Company be reinstated. 29I had, as a term of granting leave to Ms Edith Kovarfi to appear on behalf of Ms Sara Kovarfi in this application, accepted an undertaking that Ms Edith Kovarfi accepted liability for costs of the application, to the exclusion of Ms Sara Kovarfi. In these circumstances, I must order, consistent with the usual principle that costs follow the event, that Ms Edith Kovarfi pay the costs of the application, as agreed or as assessed.