Does the former liquidator automatically resume office?
20That leaves for resolution whether Mr Fiorentino or some other liquidator should be appointed. There is some controversy in the authorities as to the effect of a reinstatement order in the context of a company in liquidation, so far as concerns the status of the liquidator. All agree that a company in liquidation, upon a reinstatement order being made, continues in liquidation. However, there is disagreement as to whether the former liquidator automatically resumes the office of liquidator (as is the case with directors). Section 601AH(5) provides as follows:
If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstate the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim.
21It is significant, as the cases indicate, that while the subsection makes provision for a former director to resume office, it does not make provision for a former liquidator to do so - notwithstanding that subsection (2)(b) expressly confers standing to make an application on a "former liquidator".
22The following statement in McPherson, The Law of Company Liquidation (4th ed, 1999) (at 678) was influential in earlier cases on this point under s 601AH:
It is likely that, as under the previous law, if a company that is reinstated had been wound up, the liquidator would be restored to of office on reinstatement, if not released before deregistration.
23For that proposition, the author cited Kenney v McCann (1992) 7 WAR 329; sub nom Re Steelmaster Pty Ltd (in liq) (1992) 10 ACLC 176; and Civil & Civic Pty Ltd v R W Bass Pty Ltd (1996) 20 ACSR 16. In Kenney v McCann, Owen J in the Supreme Court of Western Australia held that a company which had been dissolved upon completion of a voluntary liquidation would, upon the dissolution being declared void, be reinstated as a company in voluntary liquidation. While his Honour did not find it necessary to make a fresh appointment of a liquidator, he nonetheless included in his orders directions as to what the liquidator might do. In Civil & Civic, Olney J in the Federal Court of Australia concluded that where the liquidator in a court-ordered winding up had been released by order at the time of the dissolution, he no longer held office, and that in those circumstances it was necessary to appoint a new liquidator. As has been pointed out in later cases, those cases dealt with legislation and concepts not identical to s 601AH(5) - specifically, declaring a dissolution void.
24The view that the liquidator automatically resumes office upon reinstatement of the company is supported by observations of Austin J in Australian Competition & Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; (2000) 174 ALR 688; (2000) 34 ACSR 232. His Honour said (at [49]):
A company may be deregistered in various circumstances set out in Chapter 5A of the Corporations Law. The deregistration may follow a winding up (s601AC(1)(c)), but it may occur in cases where no process of liquidation is on foot. Reinstatement puts the company back into the position in which it stood immediately before the deregistration occurred. If the company was under the control of its directors, reinstatement returns the company into their hands. If it was under the administration of a liquidator, reinstatement returns the company to the liquidator. The liquidator's continuation in office is then governed by Pt5.5 of the Corporations Law.
25The same view was espoused by Hamilton J in Brownlie v TTPM Pty Ltd [2003] NSWSC 480; (2003) 21 ACLC 1204:
[3] Curiously, the question of the status of a company restored to the register which was in liquidation when it was removed is not entirely clear, although restoration of deregistered companies is a common occurrence. Prior to 1998 there were two procedures by which a company left the register. The first was dissolution, which was the formal act at the end of a winding up. Usually associated with dissolution was the release of the liquidator, which had the effect of the liquidator leaving office. The other method was administrative deregistration, which was used in the case of companies which, whether in liquidation or not, had simply become defunct and ceased to function. In 1998, the process of dissolution was abolished and, since then, there has been only one process for the removal of companies from the register, being deregistration, which is used even where a winding up has been completed. The company was deregistered in 2001 under this uniform procedure.
26His Honour then referred to the statement in McPherson, set out above, and the authorities cited for it, and continued:
[5] In my view, the statement made by the learned editors of McPherson on Company Liquidation and cited above is correct. I rely on that authority and also on the words of s 601AH(2) that the Court "may make an order that ASIC reinstate the registration of a company". The import of those words appears to be that the company is put back on the register in precisely the state in which it left it.
27Later cases have cast doubt on the proposition that the effect of reinstatement is to return the company to the precise position in which it was before deregistration: as will be seen, the section provides that the company continues in existence, but says nothing as to its form. In any event, as the current legislation continues to enable a liquidator to obtain a release prior to deregistration, it is difficult to see how a liquidator having been released would be automatically returned to office on reinstatement.
28The view that the liquidator did not automatically resume office on reinstatement was doubted by Barrett J, as his Honour then was, in Ramantanis v G&M Excavations Pty Ltd [2003] NSWSC 1250; (2004) 22 ACLC 22. As his Honour's judgment articulates many of the considerations, and has been influential and cited extensively in later cases, it is appropriate to quote it in some detail:
[5] There is, however, one point that requires attention. Each company was, at the time of deregistration, in liquidation, in one case by way of winding up by the court and in the other under a creditors voluntary winding up. Section 601AH(5) says that, if a company is reinstated, it is taken to have continued in existence as if it had not been deregistered. In Brownlie v TTPM Pty Ltd (2003) 21 ACLC 1204, Hamilton J held that reinstatement of the registration of a company which had at the time of deregistration been in liquidation brought the company back to life in such a way that the continuity effected by s 601AH extended not only to its status as a company in liquidation but also so that the liquidator was still in office, with the result that it was unnecessary to reappoint that liquidator. His Honour approved the following statement at p 678 of the fourth edition (1999) of McPherson's "The Law of Company Liquidation":
It is likely that, as under the previous law, if a company that is reinstated had been wound up, the liquidator would be restored to office on reinstatement, if not released before deregistration.
[6] The cases cited by the learned author of McPherson in support of that proposition are Re Steelmaster Pty Ltd (1992) 6 ACSR 495 and Civil & Civic Pty Ltd v R W Bass Pty Ltd (1996) 20 ACSR 16. But, as the text indicates, they were cases under earlier legislation, being s 571 of the Corporations Law as it stood before the commencement of the Company Law Review Act 1998 which repealed that s 571 and inserted ss 601AA to 601AH which make up the present Ch 5A. Dealing with the case where a company had been dissolved under the former s 481(6) or 509(5) (each of which was also superseded by the Act of 1998), the former s 571 empowered the court to make an order "declaring the dissolution to have been void". That concept is to be contrasted with that embodied in the present s 601AH. The concept reflected by the present legislation is one of reinstatement of registration carrying with it a deemed continuity, under s 601AH(5), of the company's existence (no doubt with the attributes it possessed at the time of deregistration) but without, it seems, all the other consequences that would follow if the cessation of the company's existence was simply made "void", as under the former s 471.
[7] I have doubts about the applicability of the earlier case law to produce, under the current provisions, the result referred to by Hamilton J. This is because of part of the current s 601AH which, after referring to the deemed continuity of existence, says:
A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company.
This suggests that, in the case of a director, the deemed continuity of existence of the company is not sufficient to cause a director to resume his former position upon reinstatement of the registration. It seems to be recognized that, if the company's existence comes to an end, so too does the tenure of each person who is then as a director: hence the need to have the statute cause each such person to become a director again. By like reasoning, it may well be that a reinstatement order, combined with the statutory deeming of continuity of existence of the company, is not sufficient to cause a liquidator in office at the time of deregistration to go back into office automatically on reinstatement of the company's registration.
29However, his Honour also stated that as a matter of policy, a pre-existing undischarged liquidator should resume office upon reinstatement, and power to effect this was to be found in the power of the Court in s 601AH(3)(b), when making an order for reinstatement, to make "any other order it considers appropriate":
[8] As a matter of policy, however, a pre-existing and undischarged liquidator should resume office upon reinstatement of registration. Section 601AH(3)(b) empowers the court to make "any other order it considers appropriate", when making an order for reinstatement. I consider that that provides a suitable means of dealing with a situation where, as here, a liquidator was in office at the time of deregistration. The plaintiff has, in each case, approached the person who was the liquidator at the time the company was deregistered and has tendered a letter from that person. In each case, the person is content to continue as liquidator if the registration is reinstated, subject to protection in relation to costs. The plaintiff has also produced a consent to act signed by another official liquidator in relation to each company.
[9] In view of the continuity that s 601AH(5) is intended to produce (which, in my view, entails continuity of that aspect of the company's characteristics which causes it to be in the course of winding up), the orders that the court makes should, in each case, put beyond doubt the ongoing tenure of the original liquidator. There are detailed provisions in the Act as to the resignation and replacement of liquidators. If a new liquidator is to be substituted, those provisions should be observed.
30Barrett J adhered to and reiterated those views in Donmastry Pty Ltd v Albarran [2004] NSWSC 632; (2004) 49 ACSR 745. However, in circumstances where the former liquidator did not wish to continue in office and consented to another being appointed, and this accorded with the wishes of the creditors that a new liquidator review matters, his Honour made orders appointing a new liquidator.
31In Best v Yellow Express Carriers Ltd [2004] NSWSC 666, Young CJ in Eq, as he then was, appears to have adopted the McPherson approach, saying (at [4]) that as the company was in voluntary winding up rather than court ordered winding up, there had never been an order discharging the liquidator so that Civil & Civic Pty Ltd v R W Bass Pty Ltd did not apply and it would seem that if the company was restored the former liquidator would continue to be the liquidator. However, as the former liquidator had shown no interest in the matter, sufficient cause was shown under s 503 to remove that liquidator and appoint another, as "a mere matter of expediency in the interests of the company and its creditors". His Honour does not appear to have been referred to the other authorities mentioned above.
32In JP Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu [2008] FCA 433; (2008) 167 FCR 212; (2008) 65 ACSR 636; Stone J in the Federal Court of Australia, after referring to the above authorities (other than Best v Yellow Express), said (at [10]):
I respectfully agree with Barrett J as to the implication to be drawn from the fact that s 601AH(5) specifically provides for the continuity of directors of a re-registered company. In my view the better construction of the subsection is that on re-registration of a company the liquidator who was in office at the time of his deregistration is not automatically reinstated and therefore, it is necessary for the Court to make a new appointment to take effect on re-registration.
33However, conformably with what Barrett J had said, her Honour also expressed the view that "all other things being equal, it is preferable that the same liquidator be appointed".
34In Gorman v ASIC [2008] FCA 962, Jacobson J (at [5]) referred to Australian Competition and Consumer Commission v Australian Securities and Investments Commission; Ramantanis v G and M Excavations; Murray Halstead v CTS Quality Building Products Pty Ltd (in liq) [2006] NSWSC 1022 (at [12]); and JP Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu, observing that with the exception of Austin J's decision in ACCC v ASIC, all supported the proposition that on reinstatement, the liquidator who was in office at the time of deregistration is not automatically reinstated. However, without deciding the question, his Honour followed Best v Yellow Express (at [8]):
It follows, in my view, that the appropriate course is not to seek to express any view as to the difference of opinion which has emerged in the cases to which I have referred, but, rather, to follow the expedient and practical course endorsed by Young CJ in Eq.
35In Deputy Commissioner of Taxation, Re; James Hardie Australia Finance Pty Ltd (deregistered) [2008] FCA 1181; (2008) 170 FCR 545; (2008) 67 ACSR 497; Lindgren J reached the same conclusion as had Stone J in JP Morgan:
[6] ... As noted earlier, upon deregistration JHAF ceased to exist. Clearly, Mr Green is no longer in office as its liquidator. It is therefore not quite appropriate to speak of his being "replaced". Although I reached this view before becoming aware of Stone J's decision in JP Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu [2008] FCA 433; (2008) 167 FCR 212, I note that it is totally in conformity with her Honour's.
[7] Section 601AH(5) provides expressly that upon a reinstatement, a person who was a director immediately before the reinstatement "becomes a director again as from the time when ASIC or the Court reinstates the company". The existence of this provision suggests, first, that in the absence of such a provision persons in office at the time of deregistration are not automatically reinstated, and, second, that all that is at issue is whether a person should be appointed to an office as from the time of the reinstatement.
36In Stone v ACN 000 337 940 Pty Ltd [2008] NSWSC 1058;(2008) 68 ACSR 242; Barrett J endorsed Stone J's statement that all other things being equal, the previous liquidator be reappointed:
[24] Immediately before deregistration, however, Rigby Jones was subject to members voluntary winding up. A liquidator was in office. If and when reinstated, the company will again be a company in liquidation. However, the person who was the liquidator at the time of deregistration will not resume office as liquidator upon reinstatement: see J P Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu [2008] FCA 433 ; (2008) 65 ACSR 636 and cases there discussed. It will be necessary, therefore, that a liquidator be appointed. This is another aspect of stewardship.
[25] Generally speaking, it is desirable that the previous liquidator be put back into office: J P Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu (above), Ramantanis v G & M Excavations Pty Ltd [2003] NSWSC 250 ; (2004) 22 ACLC 22; Gorman v Australian Securities and Investments Commission [2008] FCA 962. As Stone J said in the J P Morgan case at [10]:
[A]ll other things being equal, it is preferable that the same liquidator be appointed.
[26] And as was said in the Ramantanis case at [8], s 601AH(3)(b) provides a basis for appointing a liquidator upon reinstatement where a liquidator was in office at the time of deregistration.
37The power to make such an order appointing a liquidator under s 601AH(3)(b) was also invoked by Ward J, as her Honour then was, in Auzhair Supplies Pty Ltd (a deregistered company) and Auzhair 1 Pty Ltd, Re; Greenaway v Auzhair 1 Pty Ltd [2010] NSWSC 1339; (2010) 80 ACSR 538 (at [83]):
The court may appoint the liquidator with effect from the company's reinstatement (J P Morgan Portfolio Services Ltd v Deloitte Touche Tohmattsu (2008) 167 FCR 212 and see other authorities cited in Austin & Black at [85,161]).
38Stone J returned to the matter in Binetter v Commissioner of Taxation [2011] FCA 1195; (2011) 198 FCR 49, stating that s 601AH(5) provides for continuity of existence not continuity of form, although in the absence of any contrary order, continuity in form would follow reinstatement:
[21] Counsel for Mr Binetter, Ms R Seiden, submitted that s 601AH(5) provides that when a company is reinstated "it is deemed to come back in existence in the form it was in before it was deregistered". That is not, in fact, what the section says. It states:
...
[22] It can be seen that the section provides for continuity of existence not continuity of form however, in the absence of any contrary order, continuity in form would follow reinstatement. For example, in Ramantanis v G & M Excavations (2004) 22 ACLC 22 the Supreme Court of New South Wales held that a company that had been in liquidation at the time it was deregistered continued in liquidation on reinstatement. In relation to the position of liquidator, Barrett J observed that the reinstatement of the company might well be insufficient to reinstate automatically the liquidator who held office at the time of deregistration. ...
[23] In JP Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu [2008] 167 FCR 212 at [7]-[9] I discussed the conflicting authorities on the question of automatic reinstatement of a liquidator. In [10] I expressed my preference for the construction propounded by Barrett J in Ramantanis and Donmastry Pty Ltd v Albarran (2004) 49 ACSR 745 over that in Brownlie v TTPM Pty Ltd (2003) 21 ACLC 1,204. In Ramantanis the court was satisfied by the evidence that in each case the person who was the liquidator at the time the company was deregistered had agreed to continue as liquidator on reinstatement. The orders for the liquidator to continue were made at the same time as the order for reinstatement. There was no suggestion that on reinstatement the company was without a liquidator even for an instance. In fact the court took care to ensure that all details concerning the continuity of the liquidator, such as consent, were attended to before making the orders.
39Her Honour's view was echoed by Heydon J in the High Court of Australia in ACN 078 272 867 Pty Ltd (in liq) (formerly Advance Finances Pty Ltd) v Deputy Commissioner of Taxation; Binetter v Deputy Commissioner of Taxation [2011] HCA 46; (2011) 86 ALJR 4; (2011) 85 ACSR 247 (at [41]):
There is one other argument of the plaintiffs which should be referred to. The plaintiffs submitted that s 601AH(5) provides that when a company is reregistered it comes back into existence in the same form as it was on deregistration. The plaintiffs relied on JP Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu. In fact s 601AH(5) does not provide that the company comes back into existence in the same form. Rather it provides that it is taken to have continued in existence as if it had not been deregistered. That does not preclude a court order being made so that its new form will differ from its old in that its new form will be as a company in liquidation.
40In my view, it can now be said that reinstatement does not result in the automatic resumption of office by a liquidator who was in office at the time of deregistration. The effect of reinstatement is that the company is taken to have continued in existence as if it had not been deregistered, not that it comes back into existence in the same form. However, upon the reinstatement of a company that was at the time of deregistration in liquidation, it remains in liquidation unless the court otherwise orders. Under s 601AH(3)(b), the court can, when ordering reinstatement, reappoint the former liquidator, or appoint a new liquidator. While, all other things being equal, reappointment of the former liquidator is preferable, it will not be the appropriate course where there are considerations militating against that course.