Bester v Australian Securities and Investments Commission, in the matter of Marcel Holdings Pty Ltd

GRIFFITHS J: 1 The plaintiff applies under s 601AH(2) of the Corporations Act 2001 (Cth) (the Act) for an order that the defendant, the Australian Securities and Investments Commission (ASIC), reinstate Marcel Holdings Pty Limited (ACN 097 931 881) (In Liquidation) (Deregistered). The application is supported by affidavits sworn by the plaintiff and Andrew Behman respectively. 2 The defendant does not oppose the application.

Summary of background facts 3 Marcel Holdings Pty Limited (In Liquidation) (Deregistered) (Company) was incorporated on 23 August 2001. The plaintiff and her husband were the directors and shareholders at that time. On 27 March 2009, the plaintiff's husband became a bankrupt. He ceased to be a director of the Company and his shares vested in the trustee in bankruptcy. On 7 September 2009, Mr Sule Arnautovic and Mr Trajan John Kukulovski (the former liquidators) were appointed as Voluntary Administrators of the Company. They were appointed liquidators on 10 December 2009. 4 When the company was wound up it held an 85/120th share in a property known as 61 Brush Road, Wamberal, NSW 2260 (folio identifier 15/A/5728) (Property). The remaining share of the Property was held by the plaintiff and her husband as joint tenants. The plaintiff states that the former liquidators did not realise the Company's interest in the Property because the Property 'had negative equity available in [it] and for other reasons.' Although it is not entirely clear what is meant by this statement, I infer this to mean that it was uncommercial as there was insufficient equity in Property to realise any value for the Company after other parties such as the registered mortgagee (see below at [10]) received their share of the proceeds of the sale. 5 On 14 September 2009, the plaintiff became a bankrupt, with similar consequences to that which are described above in respect of her husband. 6 Her bankruptcy was subsequently annulled as a result of acceptance by her creditors of a proposal under s 73 of the Bankruptcy Act 1966 (Cth). Accordingly, property which had previously vested in her trustee revested as her property, including her interests in the Property. 7 The Company was deregistered on 22 January 2012, with the consequence that any property still owned by the Company vested in ASIC. 8 On 13 January 2016, pursuant to an agreement between the plaintiff and her husband's trustee in bankruptcy, the plaintiff purchased her husband's interest in both the Property and the Company thereby becoming the sole shareholder of the Company. 9 Consequently, as matters stand at present, the plaintiff is the sole shareholder of the Company which owns 85/120th of the Property as well as owning the balance in her own right. Nevertheless, in the events described above, the Company's share of the Property remains vested in ASIC and therefore the Property cannot be dealt with. 10 The Property has a current estimated value of between $1.375m and $1.724.999m. It is currently subject to two mortgages, the first a registered mortgage in favour of Permanent Custodians Limited in respect of the entirety of the Property and the other being an unregistered mortgage to Bankwest in respect only of the Company's interest in the Property. 11 As matters stand, neither the plaintiff nor the Company is able to sell the Property so as to repay the secured debt and realise any remaining equity or, in the plaintiff's case, refinance the existing debt and take ultimate control and ownership of the Property. 12 A final matter is that the Company is trustee of a trust called the Marcel No. 1 (Trust). The trust was established by a Deed of Trust dated 24 August 2001 and the Company became the trustee of the Trust on that date. The plaintiff and her husband are beneficiaries of the Trust.

The Court's jurisdiction under s 601AH 13 Section 601AH(2) provides: Reinstatement by Court (2) The Court may make an order that ASIC reinstate the registration of a company if: (a) an application for reinstatement is made to the Court by: (i) a person aggrieved by the deregistration; or (ii) a former liquidator of the company; and (b) the Court is satisfied that it is just that the company's registration be reinstated. 14 Whether or not it is "just" to make the orders is not limited by any particular statutory criteria. In Wedgewood Hallam Pty Ltd v Australian Securities and Investment Commission, in the matter of Combined Buildings Consultants Pty Limited [2011] FCA 439 Gordon J at [5] identified the following matters as being relevant: (a) the circumstances in which the company came to be deregistered; (b) the future activities of the company, if an order for reinstatement is made; (c) whether any particular person is likely to be prejudiced by the reinstatement. 15 In the Bell Group Limited v Australian Securities and Investments Commission [2018] FCA 884; 358 ALR 624 McKerracher J stated at [73] that a further consideration is that of public policy. As his Honour noted at [74] these matters are not exhaustive and they may well overlap. 16 I accept that the plaintiff is a "person aggrieved" within the meaning of authorities such as Re European Metal Recyclers Pty Ltd (in liquidation) (deregistered) [2018] NSWSC 946 at [17] where the expression "person aggrieved" is described as one of wide import which needs to be construed liberally and includes a person who has been damaged in the legal sense. The plaintiff has identified "particular prejudice" flowing from the Company's deregistered status (Melluish v Underwood Development Pty Ltd [2004] NSWSC 429 at [6]). 17 As matters stand at present, notwithstanding that the plaintiff is the beneficial owner of the Company which owns the valuable Property only ASIC can deal with the Property. Significantly, the plaintiff is a creditor of the Company and is entitled to recover from it her proportionate share of the loan repayments made to the first mortgagee and other expenses she has incurred in relation to the Property since at least 7 September 2009, which are estimated at approximately $1m (Friend v Booker [2009] HCA 21; 239 CLR 129 at [38]-[45]). She is unable to refinance or borrow against the Property, but remains partly liable for the debt owed to the first mortgagee. She also wishes to acquire the interest previously held in the Property by the Company but cannot do this until the Company is reinstated and the re-appointed liquidator is able to deal with title. 18 I am also satisfied that it would be just in all the circumstances for the Company to be reinstated because: (a) this would allow the plaintiff and Company to deal with the Property, including by taking steps to discharge the existing securities and repay any residual debt; and (b) there is no other person likely to be prejudiced by the reinstatement.

ASIC's position 19 I am satisfied that ASIC is aware of the proceeding. By letter dated 11 December 2018, ASIC advised that it would not oppose the reinstatement of the Company and would not appear in the proceedings if the following conditions are met: (a) the order for reinstatement be in the terms of s 601AH(2) and require ASIC to reinstate the Company's registration; (b) if the Company is ordered to be reinstated, it should continue to be in liquidation and the previous liquidators should resume their roles or the Court should appoint a new liquidator; (c) the orders of the Court must be lodged with ASIC; and (d) the liquidators should notify ASIC upon conclusion of the winding up. 20 One of the former liquidators (Mr Sule Arnautovic of Jirsch Sutherland) has consented to his re-appointment as liquidator. The plaintiff states that the other former liquidator (Mr Kukulovski) has not been approached because he resigned from Jirsch Sutherland in 2005 and currently works with another firm. This would create practical difficulties and additional costs if the liquidation was spread across two different firms. 21 The plaintiff also seeks that Mr Sule Arnautovic be appointed as receiver of any interest of the Company, relying upon the Court's power under s 57(1) of the Federal Court of Australia Act 1976 (Cth). The nature and scope of this power was considered by White J in Bendigo and Adelaide Bank Limited, in the matter of Reborn Enterprises Pty Ltd (Trustee) v Reborn Enterprises Pty Ltd (Trustee) [2016] FCA 1197 at [6]. 22 I accept that it is appropriate to make such an appointment in circumstances where a liquidator is appointed to a company which was, prior to the winding up, in the office of trustee because such an appointment should: (a) protect and preserve property for the benefit of any persons who have an interest in it; (b) secure the trustee's right of indemnity at minimum cost; (c) resolve any uncertainty concerning the liquidator's power to deal with and distribute property recovered in the course of the winding-up; and (d) overcome the consequences of a vacancy in the office of trustee. 23 The fourth of these matters is relevant here having regard to the operation of cl 31 of the Trust Deed (see above at [12]). By cl 31 of the Trust Deed, the office of trustee was immediately determined and vacated on 10 December 2009 upon the appointment of the former liquidators. Thus the effect is that the Company has ceased to be trustee of Trust and no replacement trustee has been appointed. 24 There is an ambiguity, however, as to whether the Company received its interest in the property in its own right or as trustee of the Trust. The appointment of the liquidator as court receiver would remove any doubt as to the power of the liquidator to deal with the Company's interest in the Property. This should ensure that the trust property is protected (if the Company's interest is in fact held on behalf of the Trust) and facilitate distribution of the trust assets on behalf of the Trust. 25 Mr Arnautovic has consented to being appointed as receiver of any interest of the Company, in his capacity as trustee of the Trust.

Conclusion 26 For all these reasons, I am satisfied that the orders sought by the plaintiff should be made. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths .