Casali v Crisp

REASONS FOR JUDGMENT 1 This is an application under s 601AH(2)(a)(i) of the Corporations Act 2001 (Cth) ("the Act") for an order that the Australian Securities and Investments Commission ("ASIC") reinstate the registration of Piccoli Tesori Pty Ltd ("the company"). The company was registered in Western Australia on 25 February 2000 and deregistered by ASIC on 17 July 2005. Pursuant to s 601AD of the Act the company "cease(d) to exist" on deregistration and all of its property vested in ASIC. 2 The two directors appointed on the date of registration of the company were the owners of the two shares that had been issued by the company. They remained the directors of the company until its deregistration. At all times the residential address of the directors, who the Court was told are husband and wife, was in Canberra in the Australian Capital Territory. 3 From the date of registration the registered principal place of business of the company was in Canberra. It has been deposed by one of the former directors of the company, Mr Bertuol, that the company carried on business in the ACT and had an Australian Business Number. The nature of the business conducted by the company appears to have involved the sales of goods and the provision of professional consultancy services. 4 From the 17 March 2000 the registered office of the company was at the office of a firm of accountants carrying on business in Western Australia. That firm had been instructed by the company to prepare accounts and to file returns on behalf of the company with ASIC. 5 Annual returns were filed with ASIC for the years 2000, 2001 and 2002. At the end of 2002 Mr Bertuol instructed a firm of accountants carrying on business in Canberra to take over preparation of the accounts and to conduct secretarial duties for the company formerly performed by the accountants instructed in Western Australia. No change of registered office was filed with ASIC thereafter. The requirement of Chapter 2N of the Act that an annual return be filed was repealed on 1 July 2003 and replaced with more general obligations and the payment of an annual "review fee". (See: Corporations Legislation Amendment Act 2003 (Cth) s 3 Schedule 1). It does not appear that after 1 July 2003 the company, as a "small proprietary company" (s 45A(2)), was obliged to file any further documents such as financial or directors' reports prepared under s 293 or 294 of the Act, or responses to a return of particulars or requisitions delivered to the company by ASIC under s 348A or 348B of the Act. 6 The material placed before the Court shows that a taxation return for the company for the year ending 30 June 2004 was prepared by the accountants instructed in Canberra. The company also presented to the Court accounts for the years ended 30 June 2004 and 30 June 2005 which showed that after provision for income tax the company derived a net profit in each year of $10,566.65 and $27,992.15 respectively. Indicative accounts prepared to the date of deregistration, 17 July 2005, showed that at that date the net worth of the company would have been $53,748.72 of which $47,884.63 was represented by undistributed profits. 7 Mr Bertuol has deposed that the company "continued to operate as an ongoing concern" and that it was not until February 2006 that the directors became aware that the company had been deregistered. Business Activity Statements have been filed with the Australian Taxation Office each quarter. Application for reinstatement of registration was made by the company in order that the foregoing acts could be validated and to allow the company to continue to carry on business as a provider of consultancy services. 8 It seems that deregistration of the company was effected by ASIC pursuant to s 601AB(1A) of the Act. Under that section ASIC may decide to deregister a company if a "review fee" in respect of a "review date" has not been paid in full twelve months after the "due date". 9 Section 345A(1) of the Act provides that the "review date" for the company is the anniversary of its registration. Under the Corporations (Review Fees) Act 2003 (Cth) and Corporations (Review Fees) Regulations 2003a company must pay the "review fee" prescribed in the regulations. Pursuant to s 1351(3) of the Act the "due date" for payment of a "review fee" is two months after the "review date". 10 The payment of a "review fee" is tied by the Act to the resolution the directors must make annually as to the solvency of a company. (See: ss 347A-347C, s 348C). 11 Before ASIC could deregister the company it was required by s 601AB(3) of the Act to give notice of the proposed deregistration. Such notice had to be given to, inter alia, the company and to its directors and had to be published in the Government Gazette. ASIC was empowered by the Act to effect deregistration two months after the date of publication of the notice in the Gazette. 12 Mr Bertuol has deposed that notice of the proposed deregistration did not reach the directors. Mr Bertuol deposed that the directors changed their residential address in Canberra in about January 2003. The post office box in Canberra, however, to which Mr Bertuol had directed the accountants in Western Australia to forward mail, remained in operation at all material times. 13 It is to be noted that the surname of the deponent director as recorded in the ASIC register is a first name and not his surname. Whether that circumstance caused an ASIC notice to go astray is unknown. 14 Under s 601AH(2) of the Act the Court may make an order that ASIC reinstate the registration of a deregistered company if satisfied that it is just to do so. Section 601AH(5) provides that if a company is reinstated it is taken to have continued in existence as if it had not been deregistered. Any director of the company in office immediately before deregistration becomes a director again from the time reinstatement is ordered and any property of the company vested in ASIC revests in the company. 15 Section 601AH(2)(a)(i) provides that "a person aggrieved" may apply for an order that the registration of a company be reinstated. It is necessary to have regard to earlier provisions of company law to understand the context in which that provision of s 601AH(2)(a)(i) is to be construed. 16 At one time the Companies Act 1948 (UK), the Australian Uniform Companies Act 1961-1962 and Companies Act 1955 (NZ) all contained similar provisions that permitted a company that had been struck off the register of companies that felt aggrieved by that fact to apply to the Court, within a specified period of years, for an order that the company be restored to the register. The Court was empowered to make that order if satisfied that at the time of striking off the company was carrying on business, or was in operation, or that it was otherwise just that the company be restored to the register. 17 Although expressed in different terms the effect of dissolution of a company under the foregoing provisions was equivalent to the application of s 601AD of the Act, namely, that the company ceased to exist at the time of deregistration or striking off. 18 The respective legislative provisions acknowledged however, that a deregistered company had capacity to make application for the restoration of registration, notwithstanding the cessation of existence of the company. (See: Re L Carroll Ltd [1975] 1 NZLR 79 per O'Regan J at 80). 19 The provisions of s 601AH(5) suggest that the Act has continued to recognise that a deregistered company has sufficient existence for the purpose of making an application under s 601AH(2) as a "person aggrieved" notwithstanding that under s 601AD(1) the company "cease(d) to exist" upon deregistration. (See: GA & RJ Elliot Pty Ltd (formerly a company) Ex parte Mitcham (1978) 3 ACLR 523 per Young CJ at 526; CTG Pty Ltd v Yamamori (Hong Kong) Pty Ltd (1992) 10 ACSR 534, 536). The terms of s 601AH(5) are consistent with a statutory form of a "nunc pro tunc" order. That is to say the Act contemplates that an order under s 601AH(2) will have a retrospective effect that makes good the deregistered company's standing to make the application. There are no authorities directly on point. It may be accepted that the deregistered company has no standing to commence other proceedings. (See: Sweeney & Vandeleur Pty Ltd v BNY Australia Ltd (1993) 11 ACSR 356). 20 In the absence of any material that suggests that the legislature identified and sought to remedy a mischief that had arisen out of a company being permitted to apply for reinstatement of its registration there seems to be no reason to apply a restrictive interpretation to the term "person aggrieved" as used in s 601AH(2)(a)(i). Apart from the historical context referred to above the term is an expression of wide import that is not to be given a restrictive interpretation. (See: GIS Electrical Pty Ltd v Melsom (2002) 172 FLR 218 per Steytler J at 230-231). If the proper construction of the Act is as I have posited the company would have capacity to make an application as a "person aggrieved". 21 Putting to one side for the moment the question whether the Act contemplates that a deregistered company has capacity to make an application under s 601AH(2), there would seem to be adequate grounds in this case to conclude that by the company being subjected to deregistration when it was successfully carrying on business it became a person "aggrieved" for the purpose of s 601AH(2). Indeed s 601AB(1) does not empower ASIC to deregister a company unless it has no reason to believe that the company is carrying on business. Although the subsequently enacted 601AB(1A), empowers ASIC to deregister a company that has defaulted in paying "review fees" without qualifying that power by requiring ASIC not have reason to believe that the company is carrying on business, that provision does not detract from the foregoing argument. 22 To avoid doubt as to whether the company has the capacity to make application under s 601AH(2)(a)(i) Mr Bertuol now seeks to be substituted for the company as plaintiff in this matter. 23 It may be accepted that the fact that a person is a shareholder, or a director, of a deregistered company does not in itself establish that person to be a "person aggrieved" for the purpose of s 601AH(2) of the Act. However, a shareholder who is a creditor of the company who could have expected payment of the debt in whole or in part, or who had an expectation of a distribution from surplus assets or a dividend from retained profits would be a person prejudicially affected by deregistration of the company and, therefore, a "person aggrieved". (See: Casali v Crisp (2001) 165 FLR 79 per Young CJ in Equity at 82-83). 24 The company has assets that exceed its liabilities, the net worth of the company being represented in substantial measure by undistributed profits. A shareholder in the company, therefore, has an expectation of the distribution of a dividend from the retained profits and is a person aggrieved by deregistration of the company, an event that has removed that expectation and has vested the property of the company in ASIC for ASIC to dispose of, and deal with, as it sees fit pursuant to s 601AE(2)(a) of the Act. 25 I am satisfied that it is appropriate that Mr Bertuol be substituted for the company as plaintiff in the matter. 26 As to what is "just" in the circumstances of this case the relevant points seem to be as follows. 27 First, the company was not deregistered as a consequence of insolvency and although some delay has occurred since deregistration the company has moved reasonably promptly to obtain reinstatement. If reinstatement of registration were ordered the company would have ample funds from which it could meet outstanding fees due to ASIC, a step the directors have undertaken to carry out if returned to office by an order for reinstatement. There appears to be no question that the company would be able to resume the conduct of a profitable business if reinstated. 28 Second, it does not appear on the material before the Court that a third party could be adversely affected by an order for reinstatement. Obviously it would be more convenient for the company, and for the parties with whom it deals, for reinstatement to be effected and the assets recovered rather than another corporation be formed, or acquired, to take over the business previously carried on by the company. 29 As required by rule 2.8 of the Federal Court (Corporations) Rules 2000 a copy of the originating process and supporting affidavit was served on ASIC a reasonable time before the hearing of the application and copies of all further materials filed in Court have also been served on ASIC. 30 In response to that material ASIC has advised the solicitors for the company that it had no objection to the order for reinstatement of registration sought. ASIC did not attend on the hearing of the application. 31 In all the circumstances it appears to be just to order that ASIC reinstate registration of the company and that a further order be made under s 601AH(3) of the Act that anything done between deregistration of the company and reinstatement be validated. 32 Orders will be made accordingly.