BSA Limited v Australian Securities and Investments Commission

Federal Court of Australia|2020-12-18|Before: Bromberg J

Pursuant to s 601AH(2) of the Corporations Act 2001 (Cth), the defendant reinstate the registration of Southern Electrical and Data Pty Ltd (ACN 090 860 549).
To the extent necessary (if at all), pursuant to s 601AH(3) of the Corporations Act 2001 (Cth), the commencement and continuation of proceedings pursuant to the cross-claim filed on 30 October 2020 by BSA Limited (ACN 088 412 748) against Southern Electrical and Data Pty Ltd (ACN 090 860 549) in proceeding VID488/2020 is, by this order, deemed to be valid.
Pursuant to s 601AH(2) of the Corporations Act 2001 (Cth), the defendant reinstate the registration of Escom Communications Pty Ltd (ACN 618 520 433).
To the extent necessary (if at all), pursuant to s 601AH(3) of the Corporations Act 2001 (Cth), the commencement and continuation of proceedings pursuant to the cross-claim filed on 30 October 2020 by BSA Limited (ACN 088 412 748) against Escom Communications Pty Ltd (ACN 618 520 433) in proceeding VID488/2020 is, by this order, deemed to be valid
There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 This proceeding concerns an application for an order pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) that the defendant ("ASIC") reinstate the registration of Southern Electrical and Data Pty Ltd (ACN 090 860 549) ("SED") and Escom Communications Pty Ltd (ACN 618 520 433). 2 The plaintiff ("BSA") is the respondent to proceeding VID 488 of 2020 ("the Bradshaw proceeding"), a representative proceeding brought by Paul Bradshaw and Scott Uren ("the Bradshaw applicants") on behalf of themselves and other group members. On 30 October 2020, BSA filed cross-claims in the Bradshaw proceeding against the Bradshaw applicants and the companies they formerly controlled, namely SED and Escom. The purpose of the reinstatement application is to enable BSA to pursue those cross-claims. 3 It is helpful at the outset that a broad description of the relevant issues raised by the Bradshaw proceeding be given. At all relevant times BSA was a technical services company providing telecommunications services to its various clients. At all relevant times, the Bradshaw applicants were telecommunications technicians. In the Bradshaw proceeding, the Bradshaw applicants claim that they provided their services as telecommunications technicians directly to BSA as employees of BSA. Conversely, in the Bradshaw proceeding, BSA claim that there was no relationship of employment between it and the Bradshaw applicants. In the case of Mr Bradshaw, BSA asserts that the only relevant contractual relationship it had was with SED. In the case of Mr Uren, BSA asserts that the only relevant contractual relationship it had was with Marcomm Communications Pty Ltd, and that, in turn, Marcomm had a contract with Escom. 4 On 7 November 2018, SED was deregistered by ASIC. At all relevant times, Mr Bradshaw had been SED's sole director, secretary and shareholder. 5 On 2 September 2019, Escom was deregistered by ASIC. At all relevant times, Mr Uren had been a director and shareholder of Escom together only with Emma-Jayne Uren. 6 On 10 August 2020, the Bradshaw applicants commenced the Bradshaw proceeding. As earlier outlined, in that proceeding the Bradshaw applicants claim that they were employees of BSA, were not treated as such, and consequently seek relief in the form of declarations, compensation and pecuniary penalties. 7 On 30 October 2020, BSA filed a defence in the Bradshaw proceeding denying liability, and cross-claims against the Bradshaw applicants along with SED and Escom. The cross-claims seek, in the event that the Bradshaw applicants are found to be employees of BSA, the restitution of monies alleged to have been paid by BSA to SED and Escom and compensation for misleading and deceptive conduct on the basis of representations made regarding the status of those companies as independent contractors. In order to pursue those cross-claims, BSA seeks the reinstatement of the registration of SED and Escom. 8 The reinstatement application was not opposed by ASIC. The Bradshaw applicants consented to the orders proposed by BSA. They also gave undertakings that they would remain as sole directors of their respective companies and operate them solely for the purpose of defending against the cross-claims. Ms Uren also gave an undertaking to resign as a director of Escom within 7 days of its reinstatement, and to operate Escom solely for the purpose of defending the cross-claim in the period between the reinstatement and her resignation.

Relevant legislation and principles 9 Section 601AH(2) of the Corporations Act provides: (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. 10 In factual circumstances largely analogous to those at hand, I dealt with a similar reinstatement application and in so doing set out the relevant principles which, so far are relevant, are here adopted: see Mutch v ISG Management Pty Ltd [2020] FCA 362 at [140]-[146]. 11 For the reinstatement application to succeed, I must be satisfied that BSA is a 'person aggrieved' by the deregistration, and that it is just that the companies' registrations be reinstated. Additionally, the Court has a residual discretion to refuse to make reinstatement orders: Re James Hardie Australia Finance Pty Ltd (deregistered) (2008) 170 FCR 545 at [13] (Lindgren J). 12 It is not difficult for a party to establish that they are a 'person aggrieved' for the purposes of s 601AH(2)(a)(i). As long as the claim is "not plainly hopeless and bound to fail, it should, subject to other relevant matters, proceed": see Re Brockweir Pty Ltd [2012] VSC 225 at [22] (Sifris J). The expression 'person aggrieved' is of wide import: James Hardie at [14]. It should be construed liberally and extends to a person who, because of the deregistration has some right of some or potential value that has been lost, including a right to bring a claim against a company: Boys, in the matter of 38 Akuna Pty Ltd (deregistered) v Australian Securities and Investments Commission [2019] FCA 320 at [26] (Lee J); In the matter of Likehart Pty Ltd (deregistered) [2017] NSWSC 884 at [18] (Black J). The person's interest in the deregistration can validly arise after the fact of the deregistration for the purposes of s 601AH(2)(a)(i): Proserpine [1980] 1 NSWLR 745 at [15] (Needham J). 13 Similarly, s 601AH(2)(b) gives the Court a wide discretion to consider factors such as the circumstances of the company's deregistration, the purpose of reinstatement, whether any person is likely to be prejudiced by reinstatement and the public interest generally: see In the matter of ERB International Pty Ltd (deregistered) [2014] NSWSC 200 at [5] (Brereton J); Boys at [27]-[28]. 14 As for the Court's residual discretion, if the first two requirements are met, "then in the ordinary course an order for reinstatement will be made": Re Newfront Pty Ltd (deregistered) [2008] SASC 127 at [9] (Gray J), unless there are "special considerations" which indicate otherwise: James Hardie at [88] (although on this point see WorkCover Authority of New South Wales v Picton Truck and Trailer Repairs Pty Ltd (De-Registered) and Anor [2004] NSWCA 371 at [21] (Sheller JA, with whom Mason P and Ipp JA agreed).

Consideration 15 I am satisfied that BSA is a 'person aggrieved' by the deregistration of SED and Escom. If those companies are not reinstated, it will be unable to pursue its cross-claims against them. This is enough to establish it is more than just "an officious bystander or busybody": Partners v Sampson [2002] NSWSC 383 at [8] (Barrett J). It is not necessary to delve into the substance of the cross-claims unless it is plainly hopeless and bound to fail: Brockweir at [22]. There is nothing before me to suggest that this is the case. 16 I am also satisfied that it would be just to reinstate SED and Escom, having regard to: (a) the purpose of the reinstatement as identified above, (b) the fact that neither company was deregistered following a winding up process: Boys at [31]; (c) the lack of any identifiable prejudice to the Bradshaw applicants: Mutch at [146]; (d) the insulation of the public interest against the risk of insolvent trading provided by the undertakings described at [8] above: Mutch at [146]; and (e) the absence of any procedural fairness issues given the timely service of the reinstatement application on ASIC and the Bradshaw applicants: Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd (2008) 71 NSWLR 262 at [85] (Spigelman CJ, with whom Tobias and Campbell JJA agreed). 17 There are no factors which warrant consideration of the residual discretion to refuse the application. 18 A further matter raised by BSA concerns the need to ensure that the cross-claims which have already been issued and the related steps already taken are valid, considering the fact that SED and Escom were deregistered at the time those cross-claims were commenced. It is likely that the validity of those steps is already provided for by s 601AH(5), which provides that "[i]f a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered". However, out of an abundance of caution, I will make the orders sought by BSA under s 601AH(3), which empowers the Court to validate anything done between the deregistration of a company and its reinstatement.

Conclusion 19 For the foregoing reasons, I will make orders that ASIC reinstate the registration of SED and Escom, and orders confirming the validity of the institution of the cross-claims and the steps subsequently taken. No party sought costs and no order as to costs will be made. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bromberg.

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