Brown v Hightek Scaffolding Pty Ltd

STEWART J: 1 The plaintiff seeks the reinstatement of Hightek Scaffolding Pty Ltd which was recently deregistered by the Australian Securities and Investments Commission (ASIC) for failing to pay annual fees. The plaintiff intends that, on reinstatement, the company be wound-up by creditor's voluntary winding-up and that Erwin Rommell Alfonso be appointed liquidator. 2 The plaintiff is the sole director of the company, and the sole director and sole shareholder of the company's sole shareholder, namely BA Browny Investments Pty Ltd. 3 The immediate reason for seeking reinstatement of the company is that the Deputy Commissioner of Taxation, as delegate of the Commissioner of Taxation, has recently issued two director penalty notices against the plaintiff in respect of tax obligations of the company. In the event that the company is reinstated and placed into voluntary liquidation, the plaintiff will not be liable for the amounts claimed under the penalty notices under the Taxation Administration Act 1953 (Cth) Div 269-15. The penalty notices are dated 16 October 2024 and require payment within 21 days, which is tomorrow (although the plaintiff is concerned that it might be today). 4 The company used to conduct business in the hire, installation and dismantling of scaffolding on building sites in the construction industry. However, with the hiatus in that industry created by the COVID-19 pandemic lockdowns, the once successful business of the company collapsed. The draft statements of account for the 2020 and 2021 financial years reflect the company to have been running at a loss. The plaintiff decided to cease all trading activity for the company from 17 July 2023, however he appears not to have done anything to settle the company's outstanding debts or to wind it up. 5 On the plaintiff's evidence, the company has two creditors. The one is the Commissioner of Taxation in respect of various PAYG and GST withholding amounts and other tax liabilities, and the other is a related entity, namely Hightek Scaffolding Pty Ltd, in respect of a related party loan. 6 After having received the penalty notices on 22 October 2024, on 25 October the plaintiff met with the company's accountant and Mr Alfonso to discuss the appointment of the latter as voluntary liquidator to the company. The plaintiff planned to pass the necessary resolutions. At that time, the plaintiff, the accountant and Mr Alfonso were unaware that the company had been deregistered. 7 On 1 November 2024, the plaintiff received notice from ASIC that the company had been deregistered on 27 October 2024. For reasons that are not explained, it was not until yesterday, 4 November 2024, that the plaintiff consulted with lawyers and was advised of the need to reinstate the company and place it into voluntary liquidation. Hence the application today. 8 Section 601AH(2) of the Corporations Act 2001 (Cth) provides that the Court may make an order that ASIC reinstate the registration of a company. There are two requirements for the exercise of the Court's discretion in that regard. First, the application for reinstatement must be made by "a person aggrieved by the deregistration" or a former liquidator of the company. Secondly, the Court must be satisfied "that it is just that the company's registration be reinstated." 9 The plaintiff brings the application as "a person aggrieved by the deregistration". The plaintiff's interest in the deregistration, namely his interest in placing the company into voluntary liquidation in order that he have no liability to the Commissioner of Taxation under the penalty notices is a sufficient interest to qualify him as "a person aggrieved by the deregistration": Andrews re Pink Foods Pty Ltd [2011] NSWSC 332 at [30] per Barrett J; Perrin v Australian Securities and Investments Commission [2024] WASC 38 at [24] per Strk J (Perrin v ASIC). 10 Insofar as the Court being "satisfied that it is just that the company's registration be reinstated" is concerned, regard should be had to the circumstances in which the company came to be deregistered, the future activities of the company if an order for reinstatement is made, and whether any particular person is likely to be prejudiced by the reinstatement: Western Australia v Australian Securities and Investments Commission [2020] FCA 810 at [13] per McKerracher J. 11 The critical point in the present case is that but for the very recent deregistration of the company, which seems to have arisen from oversight more than anything else, the plaintiff would not be liable to the Commissioner of Taxation under the penalty notices. The plaintiff therefore has not only a powerful interest in the reinstatement of the registration of the company and in placing it into voluntary liquidation, but will also be significantly prejudiced if reinstatement were not to be ordered. As against that, the Commissioner of Taxation faces the corresponding prejudice by being deprived of their claim against the plaintiff in the event that the company is reinstated. 12 Balancing those interests, and in particular taking into account how recently the company was deregistered and the circumstances of its deregistration as already canvassed, I am satisfied that it is just that the company's registration be reinstated. I also consider relevant the fact that but for the deregistration the plaintiff would have been able to avoid liability to the Commissioner of Taxation by winding up the company. I find support for that approach in similar circumstances in, for example, In the matter of Yield Service Pty Ltd (deregistered) [2014] NSWSC 764 at [6]-[8] per Brereton J; Perrin v ASIC at [26]-[35]. 13 A difficulty in the present case is that because of the urgency with which the matter has been brought on, the Commissioner of Taxation has not been given notice of the application. I therefore propose to reserve to the Commissioner of Taxation the liberty to apply within 14 days of service on them to vary the orders that I make today. ASIC is in the same position, so I will reserve to it the same liberty. I am satisfied that the urgency of the matter justifies that course. 14 In case reinstatement of the registration of the company has not been completed by ASIC before the close of business today, I will order that any special resolution or other action of and relating to the company to implement a creditor's voluntary winding up and the appointment of a liquidator be validated. That power is available under s 601AH(3)(c). I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.