CORPORATIONS - application for order pursuant to s 601AH(3)(d) of Corporations Act 2001 (Cth) - administrative oversight led to plaintiff's deregistration by ASIC - plaintiff subsequently reinstated pursuant to s 601AH(5) of Corporations Act 2001 (Cth) - divestment and revesting of plaintiff's shareholding - potentially significant capital gains tax liability might be incurred as a result - consideration of The Bell Group Limited v Australian and Securities Investments Commission

THE COURT ORDERS THAT:

1. Pherous Holdings Group Pty Ltd (ACN 106 590 050) is deemed and taken at all times to have remained the legal and beneficial owner of 20,740,000 ordinary shares in Corporate Travel Management Ltd (ACN 131 207 611) during the period from 8 March 2019 to 26 March 2019 (inclusive). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WIGNEY J: 1 The applicant, Pherous Holdings Group Pty Ltd, has applied for an order pursuant to s 601AH(3)(d) of the Corporations Act 2001 (Cth). The effect of the order would be to deem that Pherous Holdings continued to own certain property during a period when it had been deregistered by the Australian Securities and Investments Commission (ASIC) as a result of an administrative oversight by its director, Mr James Pherous. 2 The acknowledged purpose of the order is to avoid the risk that Pherous Holdings might incur a potentially large capital gains tax liability at some point in the future as a result of Mr Pherous's administrative oversight. Both ASIC and the Commissioner of Taxation have been advised of Pherous Holdings's application. Neither of them oppose nor seek to be heard in relation to the application. 3 For the brief reasons that follow, the order sought by Pherous Holdings can and should be made. It is both within power and appropriate in all the circumstances. 4 The following short factual summary derives from three affidavits, including their annexures, filed in support of the application: the affidavit of James Michael Pherous sworn 9 May 2022; the affidavit of Joseph Power sworn 9 May 2022; and a second affidavit of Joseph Power sworn 9 May 2022. 5 Mr Pherous is the sole shareholder in Pherous Holdings, as well as the company's sole director. Pherous Holdings was formerly known as Pherous Holdings Pty Ltd. Pherous Holdings is a substantial shareholder in a publicly listed company, Corporate Travel Management Ltd (CTM). Mr Pherous was the founder of the business now conducted by CTM. 6 On 8 March 2019, Pherous Holdings was involuntarily deregistered by ASIC pursuant to s 601AB of the Corporations Act. As has already been adverted to, that was the result of an administrative oversight by Mr Pherous. The registered office of Pherous Holdings was CTM's head office. In February 2016, CTM relocated to a new head office. Arrangements were made for mail, including mail addressed to Mr Pherous and Pherous Holdings, to be forwarded to CTM's new head office. Mr Pherous's evidence, however, was that he did not receive any correspondence from ASIC between February 2016 and March 2019. As a result, he did not lodge documents which he was required to lodge with ASIC to maintain Pherous Holdings's registration. Mr Pherous did not become aware that Pherous Holdings had been deregistered until 25 March 2019. 7 When Mr Pherous did become aware that Pherous Holdings had been deregistered, he promptly lodged a reinstatement application with ASIC. On 27 March 2019, ASIC reinstated Pherous Holdings's registration pursuant to s 601AH(1) of the Corporations Act. It follows that Pherous Holdings was deregistered for a total of 18 days. 8 One consequence of a company's deregistration is that its property, other than any property held on trust, vests in ASIC upon deregistration: s 601AD(2) of the Corporations Act. At the time of Pherous Holdings's deregistration on 8 March 2019, it held 20,740,000 shares in CTM, which consequently vested in ASIC upon deregistration. 9 When Pherous Holdings was reinstated on 27 March 2019, the CTM shares revested in Pherous Holdings per the operation of s 601AH(5) of the Corporations Act, which provides: Effect of reinstatement (5) If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim. 10 There is, however, a potential issue as to whether the revesting of the CTM shares by operation of s 601AH(5) is retrospective, in the sense that the shares are taken to have revested as at the date of deregistration, or whether the revesting is taken to occur on the day of reinstatement. If the shares are taken to have revested retrospectively, the effect may arguably be that the shares are taken not to have vested in ASIC in the first place. If, however, the CTM shares are only taken to have revested in Pherous Holdings as at the date the company was reinstated, the revesting would not alter the fact that there was a change in ownership of the CTM shares when the shares vested in ASIC upon deregistration. 11 The potential problem for Pherous Holdings is that, if s 601AH(5) does not relevantly operate retrospectively so that there was, in effect, a change in ownership of the CTM shares when the company was deregistered, the result would be that a relevant capital gains tax "event" occurred - specifically, a "CGT event A1" as defined in s 104-10(1) and (2) of the Income Tax Assessment Act 1997 (Cth). That may, in turn, mean that at some point in the future Pherous Holdings might incur a capital gains tax liability. 12 It is, for present purposes, unnecessary to go into any further detail as to how that potential capital gains tax liability might arise. It is sufficient to note that Pherous Holdings, through its legal advisers, has been in contact and communication with the Commissioner, through the Australian Taxation Office, in respect of the issue. Pherous Holdings maintains that the revesting of property pursuant to s 601AH(5) of the Corporations Act is retrospective, with the result that, in its case, the CTM shares are taken never to have vested in ASIC in the first place, and therefore no relevant CGT event A1 arises. The Commissioner, however, takes a different view about the proper construction and operation of s 601AH(5). The Commissioner maintains that s 601AH(5) does not operate to effectively deem the revested property never to have vested in ASIC in the first place. It would follow, in Pherous Holdings's case, that there was a change in ownership of the CTM shares when Pherous Holdings was deregistered, with the result that there was a CGT event A1. 13 The order sought by Pherous Holdings is effectively intended to avoid it potentially having to litigate the issue of whether a CGT event A1 occurred when it was deregistered. The order sought would deem Pherous Holdings to have not been divested of its CTM shares when it was deregistered. The order sought is in the following terms: An order pursuant to s 601AH(3)(d) of the Corporations Act 2001 (Cth) that Pherous Holdings Group Pty Ltd (ACN 106 590 050) is deemed and taken at all times to have remained the legal and beneficial owner of 20,740,000 ordinary shares in Corporate Travel Management Ltd (ACN 131 207 611) during the period from 8 March 2019 to 26 March 2019 (inclusive). 14 Section 601AH(3) provides as follows: 601AH Reinstatement … (3) If: (a) ASIC reinstates the registration of a company under subsection (1) or (1A); or (b) the Court makes an order under subsection (2); the Court may: (c) validate anything done during the period; (i) beginning when the company was deregistered; and (ii) ending when the company's registration was reinstated; and (d) make any other order it considers appropriate. Note: For example, the Court may direct ASIC to transfer to another person property vested in ASIC under subsection 601AD(2). 15 Pherous Holdings submitted that the Court has power to make the order pursuant to s 601AH(3)(d). It also submitted that it would, in all the circumstances, be appropriate for the Court to exercise its discretion to make the order. 16 As has already been noted, Pherous Holdings notified both ASIC and the Commissioner of the application. Both ASIC and the Commissioner advised Pherous Holdings's solicitor that they neither consented to, nor opposed, the order and did not seek to be joined to the proceeding or otherwise be heard in respect of the application. 17 As can be seen, s 601AH(3)(d) is cast in extremely broad terms. Once ASIC reinstates a company, the Court has the power to make "any other order it considers appropriate". The Court's discretion to make such an order is effectively unfettered, though of course the statutory context and apparent purpose of the provision indicates that the order must generally be directed to addressing the consequences or potential consequences of a company having been deregistered and then subsequently reinstated. 18 There is authority which supports the proposition that the discretionary power in s 601AH(3)(d) is sufficiently broad to allow the making of an order of the kind sought by Pherous Holdings. 19 In The Bell Group Limited v Australian and Securities Investments Commission (2018) 358 ALR 624; [2018] FCA 884, the liquidator of the Bell Group sought an order pursuant to s 601AH(3)(d), the effect of which was to deem that certain companies held shares in other companies, including during periods when the first-mentioned companies had been deregistered. The purpose of the order was to enable the liquidator to access tax losses accrued by the deregistered companies. The Commissioner opposed the application on the basis that the order was beyond power, inconsistent with what was said to be the limited form of retrospectivity provided by s 601AH(5), and inconsistent with certain other provisions in the Corporations Act. McKerracher J rejected those contentions, and held that the order sought by the liquidator was both within power and appropriate in the circumstances. 20 McKerracher J gave detailed consideration to the legislative history of s 601AH(3)(d) of the Corporations Act, as well as to previous decisions concerning the scope and operation of it and cognate provisions. His Honour accepted the liquidator's contention that the power in s 601AH(3)(d) was "very wide" and held that the power extended "beyond validating things that have 'been done' during the period when the company was deregistered": Bell Group at [109]. Drawing on Lord Evershed MR's characterisation of an analogous provision in Tyman's Ltd v Craven [1952] 2 QB 100 at 111, his Honour stated that the power extended to making orders that were "designed to put the company in an 'as-you-were' situation as nearly as possible, subject to the interests of affected third parties": Bell Group at [113] (emphasis in original). Putting a reinstated company in an "as-you-were" situation meant, in effect, treating the company as though it had continued in existence from the date of deregistration: Bell Group at [136]. 21 As previously explained, there is no contradictor in respect of the application. I have, nevertheless, given careful consideration to the decision in Bell Group and the question of the Court's power to make the order sought by Pherous Holdings. In my view, the reasoning and conclusion of McKerracher J concerning the scope and operation of s 601AH(3)(d) is correct and should be followed. In Bell Group, the power in s 601AH(3)(d) was considered to be sufficiently wide so as to permit the making of an order which had the effect of putting a reinstated company in the same position it would have been in had it not been deregistered, and permitted the Court to make an order deeming a state of affairs to have existed to achieve that objective. The power in s 601AH(3)(d) is, therefore, sufficiently wide to permit the making of the order sought by Pherous Holdings. 22 I am also satisfied that it would be an appropriate exercise of the Court's discretion to make the order sought by Pherous Holdings. Pherous Holdings was deregistered for only a very short period of time - a total of 18 days - as a result of an administrative oversight. The purpose of the order is to effectively put Pherous Holdings in the position it would have been in had it not been deregistered, at least insofar as its ownership of the relevant CTM shares is concerned. That will avoid Pherous Holdings having to potentially engage in litigation with the Commissioner, either now or at some point in the future, about whether a CGT event A1 occurred in respect of the CTM shares when it was deregistered. 23 There is no indication that the making of the order would affect any third party, other than perhaps the Commissioner. Pherous Holdings engaged with the Commissioner from a very early stage and the Commissioner does not oppose the making of the order. It should also be noted in that context that the order does not directly determine or declare Pherous Holdings's prospective or potential tax liability. Rather, it has the effect of retrospectively deeming a certain state of affairs to have existed. What flows from that in terms of Pherous Holdings's tax liability remains a matter for the Commissioner to potentially determine at some point in the future. 24 It is, in all the circumstances, appropriate to make the order sought by Pherous Holdings. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney.