Commonwealth of Australia v Calabretta, in the matter of Condura Pty Ltd

YATES J: 1 The Commonwealth applies under s 601AH(2) of the Corporations Act 2001 (Cth) (the Act) for the reinstatement of the second defendant. On 19 February 2019, the Court made orders that the first defendant, who had been appointed as liquidator of the second defendant, firstly in a members voluntary winding up and then in a creditors voluntary winding up, be removed from office and that Robyn Duggan be appointed in his place. The Court made further orders designed to facilitate the transfer of control, and of books and records, of the second defendant from the first defendant to Ms Duggan. Orders were also made to facilitate the determination of the question of costs of the application, with the determination to be made on the papers without an oral hearing. 2 The reasons for the Commonwealth seeking the first defendant's removal from office were, firstly, its concern that the first defendant had not conducted the members voluntary winding up with due diligence, and with the care and skill required of a liquidator. Secondly, the Commonwealth concluded that there was a need to consider the affairs of the second defendant as at 21 December 2017, and the transactions it had entered into before and after that date, on the footing that the second defendant was likely to have been insolvent on that date or shortly thereafter. Thirdly, given the matters to which I have just referred, it was inappropriate that the first defendant as liquidator investigate these matters, particularly as his conduct may have caused loss or damage to the second defendant. 3 As events transpired, neither the first defendant nor the second defendant contested the Commonwealth's application, and the orders to which I have referred were made by consent. However, following the making of the orders, it came to Ms Duggan's notice that the second defendant had been deregistered since 25 January 2019. The reason for this appears to be that a Form 5603 (End of administration return) had been lodged by the first defendant with ASIC on 25 October 2018. 4 Form 5603 is an administration return under s 70-6 of the Insolvency Practice Schedule to the Act. A return under this section is only to be lodged if an external administration comes to an end. Where the external administration, which includes a creditor's voluntary winding up, is continuing, the appropriate return is a Form 5602 under s 70-5 of the Insolvency Practice Schedule. The consequence of filing a Form 5603 return is that ASIC considers that the affairs of the company are fully wound up, and will deregister the company in accordance with s 509 of the Act. 5 In the present case, it seems that on 25 October 2018 the first defendant lodged the wrong form following the conversion of the members' voluntary winding up into a creditors' voluntary winding up following a creditors' meeting on 24 September 2018. The lodgement of the Form 5603 on 25 October 2018 resulted in the deregistration of the second defendant on 25 January 2019. 6 The Commonwealth submits that the deregistration of the second defendant has frustrated the continuation of the creditors' voluntary winding up, and the appointment of Ms Duggan as liquidator of the second defendant in accordance with the Court's orders of 19 February 2019. 7 The present application is supported by an affidavit by Natalie Margaret Tatasciore, a partner in the firm of solicitors engaged by the Commonwealth. Ms Tatasciore has deposed that on 18 December 2018, prior to the filing of the principal proceeding on 21 December 2018, she caused an ASIC current and historical search to be obtained for the second defendant. That search indicated that the second defendant was still registered. Between 29 January 2019 and 18 February 2019, Ms Tatasciore received no less than nine letters and emails from the solicitors for the first defendant and the second defendant concerning the principal proceeding. Ms Tatasciore has deposed that in none of that correspondence was she informed that the second defendant may have been deregistered. 8 The Commonwealth submits that it is a person aggrieved within the meaning of s 601AH(2)(a)(i) of the Act, as it is a priority creditor of the second defendant and at the time of deregistration the liquidation of the second defendant had not been completed. 9 One object of the replacement of the first defendant as liquidator was to allow for an investigation of his conduct in relation to the winding up of the second defendant, and of certain transactions, for the benefit of the unsecured creditors. These matters are referred to in an affidavit made by Henry Foster Carr on behalf of the Commonwealth. Mr Carr's affidavit is dated 20 December 2018 and was read in support of the orders made on 19 February 2019 and in support of the application today. In oral submissions today, the Commonwealth has pointed to an additional matter that it submits should be investigated. It is not necessary for me to go into that matter for the purposes of these reasons. 10 I am satisfied that the deregistration of the second defendant has affected the Commonwealth's interests, and that it is a person aggrieved within the meaning of the relevant provision. 11 Section 601AH(2) of the Act empowers the Court to order that ASIC reinstate the registration of a company on the application of a person aggrieved by the deregistration if the Court is satisfied that it is just that the company's registration be reinstated. In Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; 174 ALR 688, Austin J observed that the wording of section 601AH(2) is very broad and gives the Court a wide discretion. His Honour noted that the Court takes into account the circumstances in which the company came to be deregistered; whether, if an order for reinstatement were made, good use could be made of that order; and whether any person is likely to be prejudiced by the reinstatement. His Honour observed that "[t]hese matters are only factors to be weighed in the exercise of the court's discretion. They are not limits on the court's power.": [27] - [28]. 12 Applying these factors to the present case, the Commonwealth submits that it is just that the second defendant's registration be reinstated as it was dissolved as the result of administrative error by the former liquidator, the first defendant, in circumstances where there was an extant application to replace him for the reasons I have identified. Secondly, the Commonwealth submits that if an order for reinstatement is made, it will allow the new liquidator, Ms Duggan, to continue with the liquidation of the second defendant including, importantly, investigating the conduct of the liquidation to date and the transactions that have taken place. Thirdly, the Commonwealth submits that no one is likely to be relevantly prejudiced by the reinstatement. Fourthly, the Commonwealth submits that the public interest strongly points in favour of reinstatement to allow for the completion of the liquidation and the distribution of the second defendant's assets, if any, in accordance with Pt 5.6, Div 6 of the Act. 13 ASIC has been informed of the present application. In a letter dated 22 February 2019 addressed to the Commonwealth's solicitors, ASIC has stated that it will not oppose the application for reinstatement provided certain conditions are satisfied. Those conditions are: (a) the order for reinstatement be in terms of s 601AH(2) requiring it to reinstate the registration of the company; (b) ASIC be made a party to the proceeding so that its consent to the application will be a relevant matter for the Court's consideration; (c) the second defendant, if ordered to be reinstated, continue to be in liquidation and Ms Duggan be the liquidator; (d) the Court's order be lodged with ASIC so that the second defendant may be reinstated; and (e) Ms Duggan notify ASIC upon conclusion of the second defendant's winding up. 14 I have been informed and seen evidence of the fact that the first defendant has asked the Commonwealth to mention his appearance. I note that the first defendant has agreed that the costs of the present application will be paid by him, pursuant to a fixed costs order of $4,000 inclusive of GST, and that he will not be entitled to an indemnity from the second defendant's assets for those costs. 15 I am satisfied that the orders now sought by the Commonwealth are appropriate and should in all the circumstances be made for the reasons canvassed in the Commonwealth's submissions. I am satisfied that these orders will also achieve the substance of the conditions on which ASIC's letter of 22 February 2019 proceeds. Therefore, orders will be made accordingly. I will also grant liberty to apply. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.