- Australian Securities Commission v AS Nominees Ltd

Supreme Court of NSW|2023-01-30|Before: Black J

Solicitors: King & Wood Mallesons (Plaintiff) (both proceedings) File Number(s): 2022/348349 2023/15405

Nature of the application as to Human Group Pty Ltd

By Amended Originating Process filed 25 January 2023, the Plaintiff, National Australia Bank Limited ("NAB") seeks orders under s 601AH(2) of the Corporations Act 2001 that the Defendant, the Australian Securities and Investments Commission ("ASIC") reinstate Human Group Pty Limited ("HGPL"). NAB also seeks an order that, upon the reinstatement of HGPL, it be wound up on the grounds set out in s 461(1)(k) of the Act and ancillary orders, including orders for the appointment of joint and several liquidators of HGPL. NAB contends that it has standing to seek that application as a contingent or prospective creditor of HGPL under s 462(2) of the Act.

Affidavit and other evidence as to HGPL

NAB read several affidavits and tendered several documents in support of the application concerning HGPL. By his affidavit dated 18 November 2022, Mr Lovell, a solicitor acting for NAB in respect of this application, addresses the nature of proceedings brought by NAB against, inter alia, HGPL and its director and shareholder, Ms Helen Rosamond, in the Commercial List of this Court. In those proceedings, NAB contends that, over a four year period from 2013 to the end of 2017, HGPL issued and NAB paid invoices for consulting services in the amount of approximately $43.4m, which were issued as part of the dishonest and fraudulent scheme devised by HGPL, Ms Rosamond and a former employee of NAB. Mr Lovell also refers to criminal proceedings brought against Ms Rosamond in which she has been found guilty, although she has yet to be sentenced in respect of her conviction.
Mr Lovell also gives evidence as to asset preservation orders previously made against, inter alia, HGPL and Ms Rosamond in the Commercial List proceedings, which are subject to a term that certain information provided by them as to their assets is not to be made available to NAB until further order of the Court. That order plainly reflected the fact that criminal proceedings were then on foot against Ms Rosamond. He also refers to a judgment delivered by Henry J in National Australia Bank Limited v Human Group Pty Ltd (No 2) [2020] NSWSC 1900, where her Honour dealt with an application to vary the freezing orders, and made several findings as to the strength of the prima facie case available to NAB against HGPL in the Commercial List proceedings.
By a second affidavit dated 2 December 2022, Mr Lovell led evidence of the conviction of Ms Rosamond in the criminal proceedings, and referred to correspondence with ASIC in relation to this application. ASIC does not oppose the orders that are sought by NAB, on the condition that HGPL be wound up at the time it is reinstated. NAB in turn brings a winding up application, consistent with that condition, and I will address aspects of that application below. By a third affidavit dated 25 January 2023, Mr Lovell addressed a particular allegation made by NAB in the Commercial List proceedings, relating to an amount that (NAB contends) HGPL had wrongly invoiced to it in respect of "Project Eagle", where HGPL had no proper claim for the amount invoiced. NAB also tenders evidence led in the Commercial List proceedings which is directed to establishing its claim in respect of the Project Eagle invoice. NAB also tenders consents of the liquidators who it seeks to have appointed to HGPL.

Submissions and determination as to the reinstatement of HGPL

Mr Thomas, with whom Ms Bathurst appears for NAB, made detailed submissions. He addressed the substance of the claims brought by NAB in the Commercial List proceedings, the history of the criminal proceedings against Ms Rosamond and the fact that, NAB contends, Ms Rosamond has now been automatically disqualified from acting as a director of HGPL on her conviction in the criminal proceedings. I will address aspects of those matters below.
Mr Thomas submits, first, that NAB has standing to bring the application to reinstate HGPL, so far as it is a person aggrieved by the deregistration of HGPL. Mr Thomas submits, and I accept, that it is well established that the concept of a person aggrieved for that purpose includes a person who has a genuine grievance because a company's dissolution has extinguished a right of some value or potential value, including a right to bring proceedings against the company: Re Likehart Pty Ltd (dereg'd) [2017] NSWSC 884 at [18]; Re LCW Property Holdings Limited (dereg'd) [2020] NSWSC 71 at [21].
I am satisfied that, in the present circumstances, NAB is a person aggrieved by the deregistration of HGPL. On the face of it, HGPL is a necessary and proper party to the Commercial List proceedings, so far as claims are made and remedies are sought against it. I recognise that, as Mr Thomas fairly also recognises, the quantum of any amount that will be practically recoverable by NAB against HGPL in those proceedings is presently uncertain, where the amount of HGPL's remaining assets is not presently known, at least to NAB. I bear in mind that is the case because, although disclosure orders have been made, NAB has not yet been provided with access to any information provided by Ms Rosamond or HGPL, and it is likely to be allowed access to that information on the conclusion of the criminal proceedings, and possibly now that the liability stage of the criminal proceedings has concluded. It is also apparent, from the evidence led by NAB in the Commercial List proceedings and in this application, that HGPL has received substantial sums from NAB and, if NAB is successful in obtaining a judgment against HGPL in the Commercial List proceedings, it would be entitled to enforce that judgment against any remaining assets of HGPL, and to prove in a liquidation for that judgment and take the benefit of any assets that may be recovered by a liquidator appointed to HGPL. In those circumstances, although the amount that may practically be recovered by NAB against HGPL is uncertain, and may ultimately prove to be minimal if assets no longer remain with HGPL and are not recoverable by a liquidator, it could not be said that a claim against HGPL does not have value or potential value, where the prospect of recoveries is real.
I am also satisfied that it is just to reinstate HGPL, having regard to the circumstances in which it was deregistered, the purpose of NAB in seeking its reinstatement, whether any person is likely to be prejudiced by its reinstatement, and the public interest generally: LCW Property at [16] and [22]ff. In particular, NAB's purpose in seeking HGPL's reinstatement, to prosecute the Commercial List proceedings against it with a view to vindicating NAB's rights and obtaining any recoveries that may be available from HGPL's assets or in a liquidation of HGPL, is a proper purpose, and the continuation of those proceedings against HGPL is consistent with the public interest.
I recognise that a question arises here as to whether, as ASIC appears to contend, the Court could only make, or would only make, a reinstatement order if HGPL was placed in liquidation, where Ms Rosamond either now is, or shortly will be, disqualified from acting as a director of HGPL by reason of her conviction in the criminal proceedings. It seems to me that, as Mr Thomas submits, the better view is that Ms Rosamond is already disqualified from acting as a director of HGPL, because s 206A(2) and s 206B(1)(b) of the Act attach such a disqualification to her conviction for the relevant offences, rather than to her sentencing in respect of that conviction. However, even if Ms Rosamond is not yet disqualified from acting as a director of HGPL, and would inevitably shortly be disqualified from acting as a director when sentenced in respect of those convictions, there would be no less reason to wind up HGPL on the just and equitable ground, if NAB otherwise has standing to bring a winding-up application.
As I noted above, NAB seeks an order to wind up HGPL on the just and equitable ground, at the same time as HGPL is reinstated, and I will address that application below. I should, however, record that I do not consider that the fact that a company's only director is disqualified at the time of the reinstatement application would necessarily prevent that application succeeding, even if NAB did not have standing to bring a winding up application. While that would no doubt be a relevant matter, it is possible that the public interest in a company's reinstatement would be sufficient to warrant an order for reinstatement, even if the applicant did not itself have standing to bring a winding up application. In that case, the company that was reinstated could be wound up on application by a person with standing, including ASIC, on the just and equitable ground, even if the applicant for reinstatement could not seek or obtain that order. Conversely, I am not persuaded that an applicant with a proper claim against a company should necessarily fail in a reinstatement application, because that company does not have a director in office and the applicant lacks standing to seek a winding up order. I make these observations because it should not be assumed that this application would necessarily have failed, even if NAB did not have standing to bring a winding-up application in respect of HGPL. However, it is not necessary to determine that question in this application because, as Mr Thomas contends and as I accept below, NAB has standing to bring a winding-up application against HGPL in any event.

NAB's standing to bring a winding up application as to HGPL

Turning now to the basis on which NAB contends it has standing to seek a winding up order in respect of HGPL, Mr Thomas rightly accepts that there is at least a rule of practice that a person who claims to be a creditor, but whose debt is disputed on genuine grounds, would ordinarily not be permitted to initiate or pursue a winding-up application: Treadtel International Pty Ltd v Cocco (2016) 316 FLR 318; (2016) 117 ACSR 176; [2016] NSWCA 360 at [57]ff. It seems to me that that rule of practice has no application here. First, NAB's claim for debt against HGPL is not disputed in this application, on genuine grounds or otherwise. No contributory of HGPL has sought to appear, by contrast with the position in Treadtel, to identify any basis on which that debt would not be established.
Second, even if that debt were disputed, it is not immediately apparent, having regard to the evidence led in this application and the observations of Henry J in the judgment to which I referred above, that that dispute would be raised on genuine grounds. As Mr Thomas points out, there seems to be no room for dispute that NAB suffered loss in respect of at least the Project Eagle invoice, by reason of conduct of HGPL that was at least wilful, and potentially also dishonest or fraudulent. On that basis, HGPL was liable to indemnify NAB against that loss pursuant to the contractual arrangements between NAB and HGPL, and NAB is presently a creditor, or at least a contingent or prospective creditor, in respect of the amount that is the subject of that indemnity. While Mr Thomas points to other bases on which NAB's status as a contingent or prospective creditor may be established, it is not necessary to address those other bases for present purposes, and it seems to me preferable not to do so where they may need to be determined in the Commercial List proceedings.
Where NAB has standing to bring the proceedings, as a contingent or prospective creditor of HGPL, I am satisfied that the question of security for costs arising from s 462(4) of the Act does not provide any reason not to hear the winding-up application. No party has sought security for costs against NAB in respect of the application or the appointment of a liquidator, and there is no reason on which such security for costs should be ordered even if it had been sought, given the financial standing of NAB. A prima facie case for winding up HGPL has been established to the Court's satisfaction, for the reasons noted below.

Whether a winding up order should be made as to HGPL

The basis for making a winding-up order as to HGPL is straightforward in the relevant circumstances. For the reasons noted above, the better view is that Ms Rosamond has been disqualified from acting as HGPL's sole director at the point of her conviction and has not sought to appoint another director to HGPL. Even if that is not the case, Ms Rosamond will shortly be disqualified from acting as HGPL's director on her sentencing in the criminal proceedings. Where a company has no director presently able to manage its affairs, the Court has a well-established jurisdiction to wind it up on the just and equitable ground: see, for example, CIC Insurance Ltd (prov liq appt'd) v Hannan & Co Pty Ltd (2001) 38 ACSR 245; [2001] NSWSC 437. In Regional Planners Developments Co Pty Ltd [2015] NSWSC 1996, Brereton J relied on that principle in making a winding up order in a somewhat similar case to this case. His Honour also there appears to have proceeded on the basis that a secured creditor, which was an aggrieved person and able to seek the company's reinstatement, also had standing to seek a winding-up order for the purposes of s 461(1)(k) of the Act.
Here, it seems to me that NAB could also establish the basis for a winding-up having regard to the evidence that is led in this application, and the conviction of Ms Rosamond, on the basis of mismanagement, misconduct or lack of confidence in the conduct and management of HGPL's affairs: see Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504; (1995) 18 ACSR 459; [1995] FCA 1663 and the many cases which have followed that decision. However, it is not necessary to determine this application on that basis, where the fact that HGPL presently has (or will shortly have) no director who is able to manage its affairs, and there is no apparent likelihood of any director being appointed to it in its present circumstances, is sufficient basis to establish the basis for a winding-up order on the just and equitable ground.
So far as the procedural requirements for a winding-up are concerned, I have noted above that it does not seem to me that security is required, for the purposes of s 462(4) of the Act, and ASIC consents to the reinstatement order sought in respect of HGPL, at least on the basis that HGPL is wound up. The advertising and service requirements in respect of a winding up application have been complied with, other than in respect of service upon HGPL. As Brereton J pointed out in Regional Planners, service cannot be affected against a company that has been deregistered, where it no longer exists, and I will dispense with the need for such service to the extent it is necessary to do so.

Orders as to HGPL

For these reasons, I make orders 1-4 as set out in the Amended Originating Process filed by NAB on 25 January 2023. I make a further order that there be no order as to costs of that application, where that is the basis on which ASIC has adopted its position in respect of the application. For completeness, I recognise that HGPL is not party to the proceedings, where it did not have legal existence when they were commenced or until the order for its reinstatement takes effect. I would, if it were necessary to do so, make a further order nunc pro tunc joining it as party to the proceedings at that point.

Nature of the application as to ACN 137 384 662 Pty Ltd

By Originating Process filed on 16 January 2023, NAB also seeks an order for the winding up of ACN 137 384 662 Pty Ltd ("ACN 137") on the grounds set out in s 461(1)(k) of the Corporations Act, again on the basis that it has standing to bring that application under s 462(2) of the Act as a creditor, including a contingent or prospective creditor, of ACN 137. That company has not been deregistered and no question of reinstatement arises.

Affidavit and other evidence as to ACN 137

NAB relies on aspects of the evidence it has led in its application in respect of Human Group, including Mr Lovell's affidavit dated 18 November 2022, which sets out the background of proceedings brought by NAB in the Commercial List against ACN 137 as well as HGPL. It also relies on documents which it tendered in respect of the application concerning HGPL, including affidavit evidence as to the matters in issue in the Commercial List proceedings. NAB also relies on Mr Lovell's affidavit dated 16 January 2023, which establishes that Ms Rosamond is the sole director, company secretary and shareholder of ACN 137. NAB contends that she is already disqualified from acting as a director of ACN 137 by reason of her conviction. If that proposition is incorrect, she would at least be disqualified from acting as a director of ACN 137 at the point of her sentencing in respect of that conviction. By his further affidavit dated 24 January 2023, Mr Lovell annexes correspondence with the solicitors acting for Ms Rosamond in the criminal proceedings, which drew attention to the filing of this application and the listing of this application today, and the fact that NAB would seek to have the application heard today. ASIC has already been given notice of the application, and also has not sought to oppose the application.
There is evidence that this application was served on ACN 137. ACN 137 has not itself appeared to oppose the application, and it would have had difficulty in doing so, in circumstances where Ms Rosamond is, for the reasons noted above, likely already disqualified from acting as a director and could not have given instructions for it to do so, and no other director has been appointed to ACN 137 in her place. Mr Panetta, a solicitor, who acted for Ms Rosamond in the criminal proceedings, appeared when the application was first mentioned today but acknowledged that he may not have instructions to appear for ACN 137 given this difficulty. He has since advised that he sought instructions from Ms Rosamond, who is currently incarcerated, after the matter was first mentioned this morning and before it was returnable this afternoon, but was unable to contact her and did not have instructions to appear. There is no evidence as to what instructions Mr Panetta had taken in the period between the service of the application on ACN 137 and his attempt to contact Ms Rosamond today. It seems to me the appropriate way to address that issue is to reserve liberty to Ms Rosamond to apply, within two business days, and to direct that a copy of any orders that are made be provided to her solicitors, so that she has the opportunity to do so.

Submissions and determination

NAB again contends that it at least has standing to bring this application on the basis that it is a contingent or prospective creditor of ACN 137. I put that proposition in that way because, on one view, Mr Thomas's submissions went further, to submit that NAB could establish that it was a creditor of ACN 137, and not merely a contingent or prospective creditor, so far as the matters alleged in the Commercial List proceedings give rise to an existing debt owed by ACN 137 to NAB. However, Mr Thomas rightly accepts that NAB does not seek a finding to that effect today, where that is an issue that will ultimately be determined in the Commercial List proceedings. Instead, while contending that NAB could establish that matter in the Commercial List proceedings, Mr Thomas today seeks to establish the lesser proposition that NAB is at least a contingent or prospective creditor of ACN 137, on the evidence led before the Court in this application, and recognising that NAB has not led all of the evidence that it will ultimately lead in the Commercial List proceedings, and that ACN 137 and Ms Rosamond have not led any of the evidence which they may ultimately lead in the Commercial List proceedings in order to seek to oppose relief sought by NAB in those proceedings. I am therefore not asked to decide the matter that will ultimately be determined in the Commercial List proceedings, and there is no reason to be concerned that deciding that matter, in an application to which ACN 137 is party but in which it has not appeared, would create either a res judicata or issue estoppel which would bind it in respect of that matter in the Commercial List proceedings.
Consistent with NAB's contentions that I have noted above in respect of Human Group, Mr Thomas submits that NAB can here establish that it is at least a contingent or potential creditor of ACN 137, with a debt which is not disputed on genuine grounds, having regard to the evidence which is led in this application, including the evidence of payments initially made by NAB to HGPL and then transferred by HGPL to ACN 137. Mr Thomas submits that ACN 137 held those amounts on trust for NAB under the principle in Black v S Freedman and Company (1910) 12 CLR 105, [1910] HCA 58, which was subsequently considered by the Court of Appeal in Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462, particularly in that part of Gleeson JA's judgment at [141]ff. In particular, Mr Thomas referred to his Honour's observations that a Black v Freedman constructive trust is institutional in character, whether or not it is properly characterised as a constructive or a resulting trust, and is not simply remedial in character, and that such a trust is imposed by way of remedy on property which is in truth the plaintiff's property rather than on a discretionary basis. The observations of Gleeson JA in that case have in turn been applied in other cases in this Court, including by Parker J in Rheem Australia Pty Ltd v McInnes [2020] NSWSC 1313 and in my recent judgment in Re DCA Enterprises Pty Ltd [2023] NSWSC 11 at [197].
I am satisfied that the evidence led by NAB in this application is sufficient to establish, absent evidence led by ACN 137 or Ms Rosamond in response, that NAB is at least a contingent or prospective creditor of ACN 137 and that there is no basis to find that its debt is disputed on genuine grounds so as to deprive it of standing to bring a winding-up application. I note that that finding does not amount to a conclusion as to the outcome of that question in the Commercial List proceedings, where that question may present differently, in the light of different evidence, or in circumstances where ACN 137 or Ms Rosamond may raise a dispute which was not raised in this application. I am therefore satisfied that NAB, on the evidence as it stands and the evidence and the issues as they have been presented in this application, has standing to bring the winding-up application.
I am also satisfied that the evidence led in this application establishes the basis for a winding up on a just and equitable ground. The better view is that ACN 137 presently has no director in office, because Ms Rosamond has been disqualified from acting as a director. It is not apparent that any other director can or would be appointed to ACN 137, where NAB has invited Ms Rosamond to make such an appointment but she has not done so. As I noted above in respect of HGPL, it seems to me that the evidence to which I have referred would also be sufficient to establish the basis for a winding up on the just and equitable ground, by reason of mismanagement, misconduct or lack of confidence in the conduct and management of ACN 137's affairs. However, it is again not necessary to determine the application on that basis.
For these reasons, I am satisfied I should make the winding up order sought by NAB in respect of ACN 137, although I will reserve the opportunity for Ms Rosamond to bring an application to set that order aside, within two business days, if so advised, where she has not appeared today.

Orders as to ACN 137

Accordingly, in respect of the application concerning ACN 137, I make the following orders:
Order pursuant to ss 461(k) and 462(2) of the Corporations Act 2001 (Cth) that the Defendant A.C.N. 137 384 662 Pty Ltd be wound up.
Order that Messrs Strawbridge and Hansell of FTI Consulting be appointed as the joint and several liquidators of the Defendant.
There be no order as to the costs of the application.
Reserve liberty to Ms Rosamond to set aside these orders by application made within 2 business days of provision of a copy of these orders to Ms Rosamond's solicitor.
These orders be entered forthwith.
The Plaintiff's solicitors provide a copy of these orders upon their entry to the solicitors for Ms Rosamond.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 February 2023

Corporations Act 2001(Cth)ss 461, 462, 601AH

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