Australian Securities Commission v SIB Resources NL [2005] NSWSC 620 | Case summary

ASIC Charge Number: 566067 Status: Registered Date Created: 8 November 1996 Type: Both Fixed & Floating Date Registered: 12 November 1996 Chargee/Trustee: Braithwaite Richard Limited CN494060 ACN: 076359629 3 Annexed to the plaintiff's affidavit is a copy of the form of Notification of Details of a Charge (Form 309) lodgment of which, it may safely be inferred, caused these particulars to be entered in the register. The information in the form is consistent with the particulars in the register but for one matter: whereas the register refers to the chargee as "Braithwaite Richard Limited CN494060", the description of the chargee in the Form 309 is "Braithwaite Richmond Limited C.N.494060". Leaving to one side as immaterial the matter of the full stops after "C" and "N", there is a discrepancy to the extent that the name of the chargee as notified by means of Form 309 included the word "Richmond" but the particulars entered in the register included instead the word "Richard". 4 This, however, is not the matter in respect of which rectification of the register is sought. Rather, the plaintiff seeks rectification by way of insertion of the words "Charge securing no indebtedness enforceable against the company" after the words "Both Fixed & Floating" where they appear in the section of the register entry headed "Type". It is the contention of the plaintiff that there is no longer any indebtedness secured by the charge and that this should be recognised on the face of the register by an appropriate additional entry. 5 The obvious course of obtaining action of the chargee (voluntary or otherwise) to bring about this result is not available. This is because the chargee no longer exists. 6 There is in evidence a copy of a certificate issued by the Registrar of Companies, New Zealand, on 20 June 2000 stating that Braithwaite Richmond Limited was incorporated under the Companies Act 1955 (NZ) on 28 November 1990 and was reregistered to become a company under the Companies Act 1993 (NZ) on 27 June 1997. The certificate also states that Braithwaite Richmond Limited was "removed from the register" on 20 June 2000, the date of the certificate. Braithwaite Richmond Limited is identified by the number 494060 in the certificate. 7 Section 318 of the Companies Act 1993 (NZ) refers to circumstances in which the Registrar of Companies "must remove a company from the New Zealand register", that is, the register of companies incorporated in New Zealand kept pursuant to s.360(1)(a) of the Act. Section 15 of the Act says that a "company", as defined (being, by force of s.14(b), a company "incorporated under this Act" and, by force of s.15 itself, "a legal entity in its own right separate from its shareholders"), "continues in existence until it is removed from the New Zealand register". It must follow that removal of a company from that register puts an end to the company's existence as a legal entity and a body corporate separate from its shareholders. 8 If a company is removed from the New Zealand register, property of the company that, immediately before the removal, had not been distributed or disclaimed "vests in the Crown with effect from the removal of the company from the register": s.324(1). There is provision in s.324(4) for application to be made to the High Court of New Zealand by "a person who would have been entitled to receive all or part of the property, or payment from the proceeds of its realisation, if it had been in the hands of the company immediately before the removal of the company from the New Zealand register, or any other person claiming through that person". There are also provisions relating to the winding up of companies removed from the register, as well as provisions relating to their restoration to the register. 9 The plaintiff wishes to complete his administration. He is of the view that no indebtedness is secured by the charge and that this position should be reflected in the register, at the direction of the court, so that he may proceed to completion accordingly. 10 The financial records received by the plaintiff upon his appointment as liquidator by this court on 8 April 2003 were current to 31 March 1999. As at that date, there was recorded indebtedness of Silverline of either $1,222,310.83 or $1,240,663.40 in respect of a term loan from Braithwaite Richmond Limited. The plaintiff has received some information and assistance from Mr Bray, one of the three directors of the Silverline. An affidavit of Mr Bray confirms creation of the charge (he signed the charge documents) "as an internal mechanism to secure company assets and the repayment of inter-company loans". The chargor and chargee were related companies. Mr Bray confirms his awareness of the books and records reflecting a liability of $1,222,310.83 at 31 March 1999 but adds: "Since 31 March 1999, all company liabilities secured by the charge have been satisfied." 11 The plaintiff has also made inquiries in New Zealand with a view to obtaining information from persons associated with Braithwaite Richmond Limited. It has not been possible, however, to pursue those inquiries beyond professional advisers. A request for information directed to a firm of accountants which provided the registered office elicited the name of a solicitor who was involved in the preparation of the charge. An inquiry was made of that solicitor who said that he had no recollection of the creation of the charge and had spoken to "one of the former owners of Braithwaite Richmond Limited" who could "shed no light on the status of the debenture". The plaintiff's solicitors also sent letters to the four persons recorded as directors of Braithwaite Richmond Limited immediately before the deregistration. The letters were sent to them at their addresses in New Zealand obtained on search. One letter was returned marked "return to sender". Another was returned because the person concerned no longer resided at the address. The address to which the third letter was sent was found to be non-existent. There was no reply to the fourth letter. These letters went sent in November 2004. The main message conveyed by each letter was "We would be grateful for any assistance you might be able to offer in ascertaining whether Braithwaite Richmond Limited was owed any sums under the charge at the time of its removal from the register." 12 The plaintiff's solicitors also contacted the New Zealand Treasury which administers property of defunct companies vested in the Crown. The Treasury stated that its practice is not to seek to establish what property may have become vested in the Crown unless and until someone seeks to recover the property. In the absence of any such initiative, the Crown understandably takes the position that it is merely an unknowing and unconcerned receptacle. The Treasury also stated that it neither consented to nor opposed the present application and would not wish to be heard. Contact was made with the Registrar of Companies in New Zealand and a like expression of attitude was stated. 13 As to the relevant law, the principal submission made by Mr Lo Surdo of counsel, who appeared for the plaintiff, is that the removal of Braithwaite Richard Limited from the New Zealand register caused it to go out of existence, with the consequence that all claims by and against it were thereby extinguished. 14 Mr Lo Surdo relies upon a statement by McLelland J in Re Austral Family Homes Pty Ltd (1992) 28 NSWLR 247 and a statement by Mann CJ (speaking for a Full Court consisting of himself and Lowe and Gavan Duffy JJ) in Taylor v Sanders [1937] VLR 62. In the former case, McLelland J said (at p.249): "After the dissolution of a company no action can be brought to which the company would have been a necessary party ( Coxon v Gorst [1891] 2 Ch 73), and the dissolution extinguishes all claims by or against the company: Russian and English Bank v Baring Bros & Co [1936] AC 405 at 427; Taylor v Sanders [1937] VLR 62 at 65." 15 In the Victorian case, the Full Court said( at p.65): "In Russian and English Bank v Baring Bros & Co [[1936] AC 405 at p.427], Lord Atkin reaffirms absolutely the statement of Blackstone that 'the debts of a corporation either to or from it are totally extinguished by its dissolution'. In the present case, therefore, the debt of the company to the mortgagee was totally extinguished some years before the present action." 16 On the basis of these observations, it was submitted by Mr Lo Surdo that removal of Braithwaite Richmond Limited from the New Zealand register, resulting in its no longer existing, brought about the extinguishment of not only debts owed by it but also debts owed to it - including, of course, any remaining debt secured by the charge granted by Silverline. 17 In Russian and English Bank and Florance Montefiore Guedalla v Baring Brothers and Company Limited [1936] AC 405, Lord Atkin quoted a passage from Blackstone's Commentaries (Book I, Chapter 18) cited by Wright J in Re Higginson and Dean; Ex parte Attorney-General [1899] 1 QB 325 (at pp.330-1): "The debts of a corporation either to it or from it, are totally extinguished by its dissolution, so that the members thereof cannot recover or be charged with them, in their natural capacities, agreeable to the maxim of the civil law si quid universitati debetur, singulis non debetur; nec, quod debet universitas, singuli debent." 18 The civil law maxim "that which is owed to the body is not owed to the individuals; nor do the individuals owe what the body owes" pays attention to the position occupied by the former corporators when the bond of incorporation no longer unites them - that is, when the incorporated body is dissolved. But Lord Atkin's reference to that maxim was accompanied by a reference to and discussion of a common law rule later stated as follows by Fullagar J in Re Usines de Melle & Firmin Boinot's Patent (1954) 91 CLR 42 (at p.49): "According to the common law of England the property of a dissolved corporation vests in the Crown as bona vacantia: Re Higginson & Dean; Ex parte Attorney-General [1899] 1 QB 325 and Re Wells; Swinburne-Hanham v Howard [1933] Ch 29." 19 There is, on the face of things, some difficulty in reconciling vesting of a dissolved corporation's property in the Crown as bona vacantia with Blackstone's proposition, as repeated by Lord Atkin and drawn upon by Mann CJ and McLelland J, that not only debts owed by a dissolved company but also debts owed to it were extinguished upon and by virtue of the dissolution. A debt owed to a company which was later dissolved, being a chose in action, should have been regarded as part of its property so that the debt, like the remainder of the dissolved company's property, became vested in the Crown. Extension of Blackstone's principle to debts owing to a dissolved company, as well as debts owing by such a company, is therefore difficult to understand - unless by reference to the fact that, in the eyes of the common law, a debt was incapable of assignment, so that, if the creditor who alone was able to maintain an action at law in debt ceased to exist, the right of action also ceased to exist. 20 This dilemma was noted by Lawrence LJ in Re Sir Thomas Spencer Wells; Swinburne-Hanham v Howard [1933] Ch 29. After referring to a part of the judgment of Wright J in Re Higginson and Dean (above) which dealt with the position of a debt owing to a dissolved company and expressed doubt whether the Crown could sue for such a debt unless there was a trust, Lawrence LJ said (at pp.51-2): "In my judgment this doubt is not justified; long before choses in action became transferable at common law they were regarded in equity as assignable and could be dealt with inter vivos and on the death of the owner devolved upon his legal personal representative as part of his personal estate. The statement in Blackstone's Commentaries, vol. I., p.484, that the debts of a corporation either to or from it are totally extinguished by its dissolution and similar statements made by Kyd and Grant must either be read as having reference merely to the rights and liabilities of the individual corporators or else are obsolete. Moreover I find it difficult to reconcile the doubt expressed by the learned judge with his decision that the Crown had the right to recover its distributive share of the assets of the bankrupt's estate from the trustee. There is no difference in principle between a right to enforce payment of a share in a trust fund in the hands of a trustee and the right to enforce payment of a debt - both are choses in action and personal property which admittedly would pass to the Crown as bona vacantia in the case of persons dying intestate without next of kin." 21 This analysis tends against the correctness of the proposition (apparently approved by Mann CJ and McLelland J) that, at common law, a debt owing to a corporation at the time of its dissolution was extinguished by the dissolution. The better view, it seems, is that the debt became vested in the Crown as bona vacantia. In the present case, however, there is no need to pursue this question. As Finkelstein J noted in Holli Managed Investments Pty Ltd v Australian Securities Commission (1998) 30 ACSR 113, statutory provisions dealing with the outstanding assets of dissolved companies under general companies legislation are of long standing in Australia. His Honour referred to a provision of that kind having first been enacted in Victoria in 1897. Such a provision was enacted in the United Kingdom in 1928. The important point, for present purposes, is that there is also a provision of the relevant kind in New Zealand. 22 I mention these matters because they emphasise the need, in the present circumstances involving a company created by registration under the system that has applied in the United Kingdom since the Companies Act 1862 (UK) and was imported into Australia and New Zealand, to consider the statutory consequences of the removal of the New Zealand company from the register of companies, rather than seeking guidance from some generally stated common law principle. Braithwaite Richmond Limited was created by statute. The removal of it from the New Zealand register was a statutory process. The consequences of the removal must be ascertained by reference to the statute, insofar as the statute deals with them. 23 I return, therefore, to the provisions of the Companies Act 1993 (NZ). I have already quoted part of s.324. It is appropriate now to quote more: "324(1) Property that, immediately before the removal of a company from the New Zealand register, had not been distributed or disclaimed, vests in the Crown with effect from the removal of the company from the register. 324(2) For the purposes of this section, property of the former company includes leasehold property and all other rights vested in or held on trust for the former company, but does not include property held by the former company on trust for any other person." 24 Provision is made in ss.328 and 329 for restoration to the New Zealand register of a company that has been removed from that register, in one case by the Registrar and in the other by order of the High Court. The consequences of restoration, as regards the status of the company, are stated in s.330(2): "A company that is restored to the New Zealand register shall be deemed to have continued in existence as if it had not been removed from the register." 25 The general rule with respect to property is stated in s.331(1): "Subject to this section, property of a company that is, at the time the company is restored to the New Zealand register, vested in the Crown pursuant to section 324 of this Act, shall, on the restoration of the company to the New Zealand register, vest in the company as if the company had not been removed from the register." 26 There is no reason to think that debts owing to a company and thus representing choses in action forming part of its property are beyond the reach or contemplation of s.324 or any subsequent operation of s.331(1). They are, clearly enough, within the concept of property referred to in s.324(2). The susceptibility of debts to statutory vesting is illustrated by the decision of Hodgson J in Webb v National Australia Bank Ltd (1990) 5 BPR 11,395. Nor is there any reason to think that the operation of New Zealand law in relation to property of a New Zealand company would not be recognised under our law when the property was a debt owed by an Australian company. 27 In light of the New Zealand statutory scheme, it is not possible, in my opinion, to conclude that the effect of removal of Braithwaite Richmond Limited from the New Zealand register in 2000 was to extinguish or make irrecoverable any debt owed to that company by Silverline at the time of removal. If there was, in truth, any such debt, it vested in the Crown with effect from the removal. This was the effect of s.324(1). And if, in the future, Braithwaite Richmond Limited is restored to the New Zealand register, any such debt will, by force of s.331(1), vest in it as if it had not been removed from the register. 28 Because it cannot be accepted that the debt, if any, has undergone some form of extinguishment, it is necessary to address the question whether it may be said to have been discharged. The only evidence about the state of the indebtedness when the company ceased to exist is that, according to Silverline's records, the sum owing exceeded $1.2 million in March 1999 and, according to one of the directors, the debt was fully satisfied at some later time. The director states no basis for that opinion. He does not refer to any particular payment, release or other discharge. His unexplained and unsupported statement is not a safe basis for a conclusion that there is now no longer any indebtedness. 29 The case may, in this respect, be distinguished from Re New South Wales Tennis Association Ltd [2004] NSWSC 175 in which Campbell J ordered rectification of the Australian Register of Charges to reflect that no debt enforceable against the company was secured (see, as to the appropriate form of order, Re New South Wales Tennis Association Ltd (No 2) [2004] NSWSC 807). His Honour did so in circumstances where the charge had been given in 1908, apparently to secure a loan of 1,254 pounds; the lender died in 1909; balance sheets of the company as at 31 December 1912 and 1915 referred to the secured debt; a record of 1919 showed the debt as having reduced to 222 pounds; the balance sheet as at 31 December 1925 no longer recorded the indebtedness; and no one representing the estate had ever made any claim, whether before or after 1925. As his Honour observed, "there is no reason to believe it is possible, giving the running of limitation periods, that the debt remains enforceable". Despite the results of the present plaintiff's inquiries, the extinction of the creditor and lack of any suggestion of moves to resurrect it, the circumstance that any debt is now vested in the Crown in right of New Zealand and that a quantum of more than $1.2 million was reflected in company records as at 31 March 1999 makes it inappropriate to proceed here on any corresponding basis, particularly since the winding up order was made (and the "relevant date" referred to in s.553 occurred) in 2003. 30 I proceed, therefore, to a consideration of the plaintiff's alternative claim which is a claim for a direction pursuant to s.479(3) of the Corporations Act. The plaintiff, as liquidator, seeks a direction that he would be justified in declaring a dividend and otherwise administering the affairs of Silverline without having regard to the charge and as if the charge secured no debt enforceable against Silverline. 31 The plaintiff is in a position where the ostensible secured creditor has taken no action to rely upon and enforce the security, to surrender the security or to prove in the winding up, these being the courses of action open to a secured creditor in a winding up by virtue of Subdivision C of Division 6 of Part 5.6 of the Corporations Act. The plaintiff thus has before him no claim of any kind by the ostensible holder of the security or, for that matter, anyone else in respect of any debt owed by Silverline to Braithwaite Richmond Limited. Furthermore, he is in a position, as a result of his inquiries, where he knows that the ostensible holder of the security is now non-existent and that the secured debt, if any, is vested in the Crown in right of New Zealand which, through the New Zealand Treasury, has made it clear that it has no intention of making any such claim and, in effect, has no interest in pursuing the matter at all. 32 A liquidator is not entitled to shut his or her eyes to known liabilities. Where the liquidator is aware of a debt, he or she must take steps to discover whether a claim will be pressed in the winding up. The matter was put thus by Austin J in Re Graf Holdings Pty Ltd; Larking v Australian Securities and Investments Commission [1999] NSWSC 217: "The liquidator has a duty to act impartially and a duty to discover who are the creditors of the company: Re Autolook Pty Ltd (1983) ACLR 409. A liquidator is obliged to enquire into all claims. There is a duty to ascertain by direct enquiry whether a claim is being pressed and the liquidator has a duty not merely to advertise but to write to creditors of whose existence he is aware: Harry Gourdias Pty Ltd v Port Adelaide Freezers Pty Ltd (1992) 7 ACSR 303. The question is whether the plaintiff has conducted sufficient investigations to discharge his duty in this case, as regards possible claims by the trustee or beneficiaries of the trust." 33 I am satisfied that the plaintiff, as liquidator of Silverline, has fully discharged these responsibilities in relation to the matter at hand. He has been diligent in his inquiries whether anyone relevantly associated with Braithwaite Richmond Limited before its deregistration, or the Crown in right of New Zealand as successor in title to its outstanding property (if any), has knowledge of any claim in respect of indebtedness of Silverline to that company. His approaches cannot but have alerted the persons concerned to the possibility that they might take action towards proving in the winding up of Silverline. But none has shown any inclination in that direction. 34 In these circumstances, the court will make a direction that allows the plaintiff to proceed to completion of the winding up without further attention to the possibility of any claim in respect of indebtedness that may be secured by the charge granted to Braithwaite Richmond Limited in 1996. 35 The appropriate form of direction, it seems to me, is that the plaintiff, as liquidator, is justified in proceeding with and completing the winding up on the footing that any debt secured by the charge has not been and will not be proved in the winding up, that all property subject to the charge is available for application and distribution in the winding up and that the plaintiff need not take further steps to ascertain the identity or intentions of the person entitled to the charge. The context is not one in which there is any dispute about the entitlement of a creditor or claimant. A direction in the terms I have stated will not curtail or modify such rights, if any, as a holder of the charge has; but it will put the liquidator in a position of reassurance as to the sufficiency of the steps he has taken and as to appropriate future action. 36 My decision to make a direction means that there is no need to consider the plaintiff's third claim. It is an alternative claim for rectification of the Australian Register of Company Charges in the way already mentioned. This alternative claim is advanced by reference to s.1322(4)(b) of the Corporations Act, rather than s.274. Because it is unnecessary to deal with this claim, I say nothing about it beyond observing that the existence of the particular power of rectification conferred by s.274 in relation to the Australian Register of Charges may mean that s.1322(4)(b) (referring generally to rectification of "any register kept by ASIC under this Act") cannot be invoked in relation to that particular register. That possibility was mentioned by Ryan J in Australian Securities Commission v SIB Resources NL (1991) 5 ACSR 411 at p.420. 37 In the result, therefore, I make a direction under s.479(3) of the Corporations Act 2001 (Cth) as follows: The plaintiff, as liquidator of Silverline Technologies Pty Limited, is justified in proceeding with and completing the winding up of Silverline Technologies Pty Limited on the footing that any debt secured by the charge numbered 566067 in the Australian Register of Charges has not been and will not be proved in the winding up, that the property subject to that charge is available for application and distribution in the winding up and that no further steps need be taken either to inform any holder of, or person entitled under, the charge of any right to prove in the winding up or to elicit any proof or claim from any such holder or person. 38 I order that the plaintiff's costs be paid out of the assets of Silverline Technologies Pty Limited as an expense of the winding up. **********

Australian Securities Commission v SIB Resources NL

At a glance

Court

Decision date

Before

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Judgment (12 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (5)

Cited By (2)