Arnold World Trading Pty Ltd v ACN 133 427 335 Pty Ltd

Judgment 1By application made on 19 December 2012, the Applicant, Ms Gail Hughes, applies under s 601AH of the Corporations Act 2001 (Cth) for reinstatement of Gia Firenze Investments Pty Limited ("Company"). Ms Hughes also seeks an order under s 601AH(3) of the Corporations Act that the Court validate the procedural steps taken in certain other proceedings in the Court ("Proceedings") since the deregistration of the Company since 13 October 2012, including specified steps. 2By way of background, the Company was appointed as the trustee of the Gia Firenze Trust ("Trust") on 8 February 2007. Ms Hughes is the appointer and sole-named beneficiary of the Trust. The Company was also appointed as trustee of the GFH Superannuation Fund ("Fund") on 20 February 2007 and Ms Hughes is the sole member of the Fund. Immediately prior to the Company's deregistration, Ms Hughes was the sole director and shareholder of all of the capital issued by the Company. 3Ms Hughes' evidence is that, in April 2011, she had a discussion with her accountant relating to a saving on accounting fees if the Trust was closed. 4In July 2011, Ms Hughes and the Company commenced the Proceedings in this Court against Mark Kendrick Bryen and Bryen Services Pty Limited (together, "Bryen") to which Ord Minnett was later joined as third defendant. The Proceedings involve a claim by Ms Hughes and the Company against Bryen and Ord Minnett for damages in respect of financial advice that, it is alleged, was provided in breach of contract, negligently, or involved misleading and deceptive conduct or breach of fiduciary duty. Ms Hughes verified a Statement of Claim filed by the Company in the Proceedings in July 2011. 5In June 2012, Ms Hughes sent an email to her accountant asking whether she could save accounting fees and wind up the Trust as the majority of the assets in the Trust had been sold and money spent on her day-to-day living expenses. Ms Hughes received documents from her accountant in order to commence the deregistration process for the Company. Ms Hughes then completed the form necessary for deregistration, which stated that the Company's assets were worth less than $1,000 and "the Company is not a party to any legal proceedings". Ms Hughes' evidence is that: "I did not fully appreciate the statements and failed to realise that [the Company] as the trustee of the Trust and the Super Fund is the second and third plaintiff, respectively, in Supreme Court proceedings described below." 6Ms Hughes' evidence is that she believes her accountant was aware that the Company was a party to the Proceedings and it was an oversight on his part not to advise her that the Company could not and should not be deregistered while the Proceedings were ongoing, and it was also an oversight on her part and she should have sought further advice from her solicitors. Ms Hughes' evidence is also that she failed to realise at that time that the Fund held assets of more than $1,000 including shares in ASX listed companies. There was no direct challenge to that evidence in this application, since there is no opposition to the application for reinstatement. 7At the time of the deregistration on 13 October 2012, the Company held a relatively small amount of cash in a bank account as trustee of the Trust and an amount of cash in a bank account and a more substantial value of ASX listed company shares as trustee of the Fund. Various steps have been taken in the Proceedings in the period since the Company's deregistration, including the filing of an Amended Statement of Claim to which the Company is party in October 2012 and the filing of Defences by Bryen and by Ord Minnett. 8The Court may, under s 601AH(2) of the Corporations Act, order that the Australian Securities and Investments Commission ("ASIC") reinstate a company that has been deregistered if it is satisfied that the application for orders reinstating the deregistered company is made by "a person aggrieved by the deregistration and it is just that the company be reinstated": s 601AH(2). If the Court makes such an order, it may also, under s 601AH(3) of the Corporations Act, make an order validating anything done between the deregistration of the company and its reinstatement and any other order it considers appropriate. 9Ms Hughes, as a director and the sole shareholder of the Company, is a person aggrieved by its deregistration, in the sense that the deregistration would adversely affect rights of value or potential value: Arnold World Trading Pty Ltd v ACN 133 427 335 Pty Ltd [2010] NSWSC 1369; (2010) 80 ACSR 670 at [43]. I am satisfied that, subject to the issue of the costs of Bryen and Ord Minnett to which I refer below, it is just to reinstate the registration of the Company, since the circumstances in which it was deregistered appear to involve an error of failing to recognise the potential impact of deregistration on the Proceedings and the purpose of the reinstatement is to maintain those Proceedings; there is no suggestion that the Company is insolvent or that any person or the public interest would be prejudiced by the reinstatement; and Ms Hughes' evidence is that, and I accept, that the Company will suffer prejudice if it is not reinstated, namely that it will be unable to pursue its claims in the Proceedings. Notice of the application has been given to the ASIC, which does not oppose the application on certain conditions. The terms of the orders sought and undertakings given by Ms Hughes mean that those conditions will be satisfied. 10However, a further complexity arises in this application because, on 21 December 2012, Ms Hughes' solicitors wrote to the solicitors for the Defendants in the Proceedings serving the Originating Process and Ms Hughes' supporting affidavit in respect of this application. By letter dated 15 January 2013, the solicitors for Ord Minnett responded that Ord Minnett would not oppose that application provided Ms Hughes paid their costs of the application. By letter dated 4 February 2013, the solicitors for Bryen responded that they would not oppose the application provided that the Company paid their costs thrown away by the amendments to the Amended Statement of Claim in the Proceedings, including costs of a Notice of Motion filed on 24 August 2011 and pay the costs necessitated by service of the Originating Process on them. By letter dated 21 January 2013, Ord Minnett's solicitors responded to a further letter of Ms Hughes' solicitors dated 18 January 2013 (which is not in evidence) that it was reasonable for their client to obtain legal advice as to the reinstatement application prior to deciding whether or not to oppose it, and Ms Hughes should be ordered to pay Ord Minnett's costs of the application. I infer that Ms Hughes did not agree to do so, and she opposed an order that she do so when the matter was listed before me. 11A relatively narrow dispute as to whether Ms Hughes should pay the costs of the defendants in the other proceedings in reviewing her application has therefore led all parties to incur further costs, since Bryen and Ord Minnett in turn sought and were granted leave to be heard under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW) in order to pursue their claim to costs of reviewing the application and their further claim to costs of appearing in order to pursue that claim. 12The parties did not draw my attention to, and I have not identified, any case which has considered the question whether a party served with an application for reinstatement, and expressly or impliedly invited to consider its position in that regard, was entitled to be paid its reasonable costs of undertaking that consideration. I approach that question as a matter of principle, noting that s 601AH(2) provides for reinstatement where it is "just" to make such an order. It seems to me that the Court would be entitled to impose conditions upon reinstatement to ensure that the order operates in a just manner, and these may, in an appropriate case, include an order for payment of costs of a third party incurred in considering the reinstatement application served upon it. Such a condition is routinely imposed in such applications to require payment of ASIC's costs of considering such applications. In other contexts where leave is sought from the Court, the applicant may be required to pay the costs of other interested parties that act reasonably in respect of the application: Chand v Azurra Pty Ltd (in liq) [2011] NSWCA 58, (2011) 82 ACSR 383. 13In the present case, it seems to me that Bryen and Ord Minnett, as Defendants to the Proceedings, had a proper interest in the reinstatement application and could properly wish to consider its implications for the Proceedings, particularly where Bryen had relied on the fact that the Company was deregistered as a defence to the Proceedings, and that it is appropriate that a condition requiring the payment of their reasonable costs of doing so be imposed in order to ensure that the reinstatement application operates justly. It does not follow that such an order would be made as a matter of course, and that may depend, among other matters, upon the extent of the interest of the party which was likely to be affected by the reinstatement application. Mr Smith, who appeared for Mrs Hughes, contended that if I were to make that order, I should limit the amount of costs to the amount claimed by ASIC for its costs of the reinstatement application. I do not propose to take that course, since there is no evidence before me, and no particular reason to think, that the reasonable costs incurred by Bryen and Ord Minnett are likely to be comparable to those incurred by ASIC in addressing different issues. 14A further question then arises as to whether Bryen and Ord Minnett should have their costs of their appearance today in order to be heard as to their claim for costs arising from the reinstatement application. Mr Smith draws attention to the decisions in Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; (2004) ACSR 681, where Barrett J (at [20]) observed that the Court had power to make an order to a party to proceedings in favour of non-parties, but also noted that a person who is granted leave to be heard without becoming party under r 2.13(1) of the Supreme Court (Corporations) Rules chooses a course that involves limited costs exposure to it and can have little expectation of being awarded costs, and that such an award, if appropriate, would be "extraordinary and exceptional" and require "some very special factor outside the ordinary and expected course of events and in gendering a justifiable expectation of compensation in the mind of the non-party". In Pan Pharmaceuticals, Barrett J held that such special factors were not present. On the other hand, in Re HIH Casualty and General Insurance Ltd [2006] NSWSC 6, Barrett J observed that parties heard under r 2.13 made separate submissions that where highly relevant to the task of the Court in reaching its decision and special and unusual circumstances therefore warranted a costs order in the particular circumstances, although his Honour considered that only one set of costs should be ordered in the particular circumstances. 15In this case, I am satisfied that unusual and special circumstances do exist that warrant an order for costs in favour of Bryen and Ord Minnett against Ms Hughes in respect of their appearances today. Ms Hughes had initiated the reinstatement application, after causing the deregistration of the Company while the Proceedings were on foot; she had in turn served the reinstatement application upon Bryen and Ord Minnett in circumstances in which they had a real interest in the question of reinstatement, by reason of their role in the Proceedings, in which at least one party had denied the Company's entitlement to relief on the basis that it was no longer a legal entity; and those parties' appearance today has been necessitated by Ms Hughes' unwillingness to accept that she should compensate those parties flor the costs that she has caused them to incur. In these circumstances, I am satisfied that I should make an order that Ms Hughes pay the costs of today. 16I consider that the preferable course is that, having delivered these reasons for judgment, I allow Ms Hughes 14 days in which to provide to my Associate short minutes of order, which have been agreed with Mr Bryen, Bryen Services and Ord Minnett as to the quantum of the costs payable to them. I would urge the parties to seek to reach agreement as to those matters, in order to avoid incurring further costs which are very likely to be disproportionate to the amounts involved in further dispute as to those matters. I will grant liberty to apply, should such agreement not be reached. 17I make the following orders: