Armitage v HXE Limited

CATCHWORDS : CORPORATIONS - application for orders under Companies Act 1961 (NSW), s 307 declaring dissolution of defendant void and s 366 for enlargement of time to bring proceedings - where plaintiff commenced proceedings against defendant for workers' compensation for mesothelioma said to arise from asbestos exposure when defendant's employee - where substantial effluxion of time since winding up of defendant and distribution of assets - where defendant required to be reinstated in respect of workers' compensation proceedings - dissolution of defendant declared void on terms - appropriate in circumstances to wind up defendant on just and equitable ground and dispense with procedural requirements for winding up

Workers' Compensation Act Amendment Act 1982 (SA) Companies Act 1961 (NSW) LEGISLATION CITED : Corporations Act 2001 (Cth) Corporations (New South Wales) Act 1990 (NSW) Companies (Application of Laws) Act 1981 (NSW)

CASES CITED : Baird v WJT Howes Investments Pty Ltd [2008] NSWSC 1232; (2008) 68 ACSR 485 City West Water Ltd v Mr D Investments Pty Ltd [2002] VSC 553; (2002) 43 ACSR 622

PARTIES : Plaintiff: Cyril Armitage Defendant: HXE Limited

COUNSEL : Plaintiff: A W Smith Defendant: n/a

SOLICITORS : Plaintiff: Turner Freeman Defendant: n/a

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

2010/259773 Armitage v HXE Limited JUDGMENT 1 HIS HONOUR: Between 1965 and 1972 the plaintiff was employed by a company then called Hawker Siddeley Electronics Limited ("the company") in its engineering division. The plaintiff is suffering from mesothelioma and has a life expectancy measured in months. He contends that in his employment with the company he was exposed to asbestos dust and fibres. He has commenced proceedings in the District Court of South Australia seeking damages in respect of his condition. 2 The plaintiff has made a claim against the Statutory Reserve Fund in South Australia pursuant to s 118d of the Workers' Compensation Act Amendment Act 1982 (SA). 3 On 8 July 2010 the solicitors for the Statutory Reserve Fund advised the plaintiff's solicitors that the Fund would concede liability to indemnify the company in respect of established workers' compensation liabilities to the plaintiff. 4 On 14 September 1979 the members of the company resolved that it be wound up voluntarily. Mr Alexander MacIntosh was appointed as liquidator. The company's directors made a declaration of solvency in accordance with s 257 of the Companies Act 1961 (NSW).

5 In January 1980 the liquidator filed a return reporting that the assets of the company had been distributed to its sole beneficial shareholder. Section 272 of the Companies Act provided that on the expiration of three months after the lodging of the liquidator's return showing the affairs of the company had been fully wound up, the company should be dissolved. 6 The solicitors for the Statutory Reserve Fund have advised the plaintiff's solicitors that it is necessary for the plaintiff to take steps to have the company reinstated in order to "validate" proceedings brought to establish a workers' compensation liability in respect of which the Statutory Reserve Fund is liable to indemnify the company. 7 The present application is for an order pursuant to s 307(1) of the Companies Act declaring the dissolution of the company to have been void and for consequential relief. The application is not brought pursuant to s 601AH of the Corporations Act 2001 (Cth). 8 Section 601AG of the Corporations Act is not a bar to the relief sought. It must be at least doubtful whether the statutory liability of the Fund would be within the section. It would not be just to subject the plaintiff to the task of ventilating such an issue, particularly where it is unnecessary to do so. 9 In Baird v WJT Howes Investments Pty Ltd [2008] NSWSC 1232; (2008) 68 ACSR 485, Barrett J followed City West Water Ltd v Mr D Investments Pty Ltd [2002] VSC 553; (2002) 43 ACSR 622 in holding that where a company had been deregistered under the Companies (New South Wales) Code, the provision of that Code remained applicable to applications for reinstatement. This was by virtue of s 85 of the Corporations (New South Wales) Act 1990 (NSW) pursuant to which the Code continued to apply by its own force in relation to matters arising directly or indirectly out of matters that arose before the commencement of that Act. 10 Section 20 of the Companies (Application of Laws) Act 1981 (NSW) provided that unless the contrary intention appeared all things and circumstances appointed or created by or under the Companies Act 1961 should, subject to the Companies (New South Wales) Code, continue to have the same status, operation and effect as they would have had if the Companies (Application of Laws) Act had not been enacted. 11 Hence the present application is made under the Companies Act. Section 307 of the Companies Act provides: " 307 (1) Where a company has been dissolved the Court may at any time within two years after the date of dissolution, on application of the liquidator of the company or of any other person who appears to the Court to be interested, make an order upon such terms as the Court thinks fit declaring the dissolution to have been void, and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved. "

12 The present application is brought 30 years after the dissolution of the company. But there is a path under s 366(4) of the Companies Act to enlarge the time for bringing a proceeding under s 307 where the justice of the case so requires. Given the long period of latency of the disease from which the plaintiff suffers, justice requires that time be extended and that an order be made declaring the dissolution. However, as provided for by s 307, that order should be made on terms that it not affect any steps taken in the voluntary liquidation of the company including any distribution of assets to members. 13 Mr MacIntosh has since retired. The question arises as to what, if anything, should be done upon the making of the order under s 307. If nothing further is done, the company will remain subject to the members' voluntary winding-up. But circumstances will have changed. If the plaintiff's claim is well founded, presumably the defendant company will be insolvent. A new liquidator would have to consider calling a meeting of creditors. Without a new liquidator the company would be without governance. 14 In the circumstances, it is appropriate that the company be wound up on the just and equitable ground by order of the Court and that all steps requiring service of a winding-up application, and advertising of such an application, be dispensed with. Such dispensation is warranted as the company has not existed for 30 years. There is no-one who could reasonably be thought of as having an interest in opposing the application. Because the plaintiff has standing as a contingent creditor, s 462(4) of the Corporations Act also needs to be considered. In the circumstances of this case, no security for costs of the application is required. A prima facie case for winding up has certainly been established. Indeed I am satisfied that the company should be wound up. 15 Notice of this application has been given to the Australian Securities and Investment Commission. ASIC has stated that it does not oppose the application if certain conditions are satisfied. The conditions include that the order sought for reinstatement be in terms that s 307(1) of the Companies Act require ASIC to void the dissolution of the company and that the company be wound up pursuant to s 222 of the Companies Act. 16 Section 601AH of the Corporations Act provides that the Court may make an order that ASIC reinstate the registration of the company if certain conditions are satisfied. Section 307 of the Companies Act is in a different form. If an order is made under s 307 declaring the dissolution to have been void, the consequence of voidness flows from the making of the order and not from any subsequent step to be taken by ASIC. It is not appropriate to make the order in the terms sought by ASIC. 17 Nor do I consider that the winding-up application is to be made pursuant to s 222 of the Companies Act. The winding-up is a discrete matter from the dissolution of the company and the avoidance of that dissolution. Whilst the provisions of the Companies Act apply to the dissolution and avoidance of the dissolution, I do not consider that those sections govern the winding-up order to be made. 18 It appears that the liquidator should have no work to do otherwise than as arises from the plaintiff's claim. There would be no purpose in the liquidator spending money in preparing a preliminary report under s 476 of the Corporations Act or in advertising the claims. 19 I will give a direction under s 479 of the Corporations Act that the liquidator would be justified in not taking any steps in connection with the liquidation other than as may be necessary or desirable in relation to the plaintiff's claim. 20 The plaintiff will also be given leave to proceed against the company on terms that he take no steps to enforce any judgment obtained against the company without further leave of the Court. Costs of the present application should be costs in the South Australian proceedings.

21 For these reasons I make the following orders: 1. Order that pursuant to subsection 366(4) of the Companies Act 1961 (NSW) the period for the making by the plaintiff of the application under s 307(1) of the Companies Act be enlarged to 5 August 2010 being the date of the filing of the originating process. 2. Subject to order 3 declare the dissolution of the defendant to have been void. 3. Order that order 2 not affect the validity or operation of any step in the voluntary winding-up of the defendant including any distribution to members. 4. Order that service of the application for an order for the winding-up of the defendant and the appointment of a liquidator to the defendant, the advertising of the application and the lodging of notice of the application pursuant to s 465A of the Corporations Act 2001 (Cth) be dispensed with. 5. Order pursuant to s 461(1)(k) of the Corporations Act that the defendant be wound up and that David Ian Mansfield of Moore Stephens Chartered Accountants be appointed liquidator of the defendant. 6. Direct pursuant to s 479 of the Corporations Act that the liquidator would be justified in not taking any steps in connection with the liquidation other than lodging notice of his appointment and otherwise taking such steps as may be necessary or desirable in relation to the plaintiff's claim. 7. Give leave to the plaintiff nunc pro tunc to commence and proceed with proceedings 723/10 against the defendant in the District Court of South Australia. 8. Direct that without the further leave of the Court the plaintiff take no steps to enforce any judgment obtained by him against the defendant in the District Court of South Australia otherwise than by resort to proceeds of insurance or indemnity. 9. Order that the plaintiff serve a copy of these orders upon the Australian Securities and Investments Commission forthwith after the orders are entered. 10. Order that the costs of these proceedings be costs in the proceedings 723/10 in the District Court of South Australia. 11. Note that the plaintiff's solicitor gives an undertaking to the court in terms of para 5 of the letter from the ASIC to the plaintiff's solicitors dated 24 August 2010 which is exhibit TT2 to the affidavit of Tina Tsiboukis sworn 15 September 2010. 12. These orders are to be entered forthwith.

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