Solicitors:
Craddock Murray Neumann (First and Second Plaintiffs)
Kekatos Lawyers (Eleventh, Thirty-Fourth and Thirty-Fifth Defendants)
File Number(s): 2016/256135 (013)
[2]
Nature of application
By Amended Interlocutory Process filed today by leave, Mr Mitchell Ball, in his capacity as liquidator of Bluemine Pty Limited (in liq) ("Bluemine"), seeks orders under s 1322 of the Corporations Act 2001 (Cth) and s 511 of the Corporations Act, as applicable in this matter by reason of transitional provisions, being a declaration that members' resolutions to wind up Bluemine purportedly passed on 26 August 2013 and to appoint Mr Ball as liquidator are not invalid by reason of several alleged contraventions of the Act or Bluemine's constitution.
The relevant contraventions arise from allegations that Mr Gino Cassaniti was not properly appointed as a director and was not a shareholder of Bluemine; that there was a failure to properly call and hold an extraordinary general meeting with members of Bluemine on 26 August 2013; that a special resolution to wind up Bluemine has not been passed at that meeting; and that the minutes recording the resolution at that meeting were not properly executed and dated.
This application is brought in circumstances that proceedings have been under way for a considerable time, brought by Mr Ball in his capacity as liquidator of Bluemine against Mr Cassaniti and others. Mr Cassaniti presently seeks to amend his Defence in a way that raises issues as to whether, at least, Bluemine was properly placed into liquidation. There is an open question, which has yet to be determined, as to whether Mr Cassaniti should be granted leave to amend his Defence in that manner, where that appears to require the withdrawal of admissions previously made in that Defence. That question is to be deferred by agreement of Counsel until after the determination of this application. Similar issues arise in respect of a number of other companies, where similar factual circumstances exist in respect of Bluemine.
On 8 April 2019, the parties to the relevant proceedings agreed that this issue would be determined in respect of Bluemine, and that each of them would be bound by the outcome of the application in each of the several proceedings that are to be heard together in February 2020. I note, however, that the Court must determine the matter on its merits in respect of Bluemine, so far as the issue that first arises in that matter; and it is also likely to be necessary for the liquidator to seek corresponding determinations in the other matters, so far as third parties would not be bound by the concession made by the parties in the proceedings. Plainly, a determination in the Bluemine matter is likely to be of considerable significance in the other matters, so far as the facts are identical.
[3]
Affidavit evidence
Mr Ball and Bluemine rely, first, on Mr Ball's affidavit dated 17 April 2019 which sets out the circumstances of his appointment in respect of Bluemine and the other relevant companies. He refers there to the matters which have given rise to this application, namely an allegation by Mr Gino Cassaniti that, inter alia, he did not sign a consent to be a director of Bluemine or other companies; he did not act as a director of those companies; he did not agree to become a shareholder in those companies; and did not sign any transfers of shares for them; he did not authorise anyone to lodge forms with the Australian Securities and Investments Commission ("ASIC") notifying his appointment as an office holder or shareholder of Bluemine or other companies; and the steps taken to appoint the liquidator to Bluemine were not validly taken. In short it appears that Mr Cassaniti challenges the accuracy of the entirety of the corporate history of Bluemine, so far as that history emerges from the documents lodged by it with ASIC.
Mr Ball in turn refers to the process of his appointment as liquidator of Bluemine on a referral from another insolvency firm. He refers to the general practice of his firm of preparing pro forma documents in respect of a voluntary liquidation, and to the steps that could be taken by his firm after the return of such documents recording his appointment as liquidator in a voluntary liquidation. He refers to the steps which were involved in that appointment, so far as Bluemine was concerned. Mr Ball was overseas on holiday in part of the relevant period, but he refers to steps taken by a senior manager with his firm in that respect and that senior manager also leads evidence in the application. In particular, Mr Ball refers to the documents which were sent out and subsequently returned in respect of the steps involved in his appointment as liquidator to Bluemine in a voluntary liquidation. I note that those documents were incorrectly dated but there seems to be little doubt that they were executed some time shortly before 26 August 2019 when they were returned to Mr Ball's firm.
Mr Ball and Bluemine also rely on the affidavit dated 10 April 2019 of Mr Craig Seymour, who was the then senior manager involved in the relevant matters in Mr Ball's absence. He refers to the steps which he took in that regard. An affidavit of Mr Lachlan Reardan also deals with his involvement in the relevant matters as a graduate accountant employed at the firm at that time. Mr Reardan was involved in the process by which documents were sent to Bluemine and other relevant companies, albeit by being sent to the insolvency practitioner who had referred the matter to Mr Ball's firm. He also refers to the steps which he took to lodge relevant documents with ASIC in respect of Mr Ball's appointment as liquidator and notes that he would not have taken those steps unless he had received completed documents for each of the relevant companies.
There is, in evidence, copies of the documents which were sent out and copies of the documents which were returned, and the documents which were returned each purport to bear the signature of Mr Cassaniti in his various capacities as director, secretary and shareholder of Bluemine, and would be sufficient if properly signed to bring about the appointment of the liquidator.
Mr Cassaniti does not, in terms, oppose this application. However, by his affidavit dated 11 April 2019, he raises the allegations which have prompted the application, including denying that he signed consents to act as a director of Bluemine; denying that he acted as director of Bluemine; denying that he acted or agreed to act as a secretary of Bluemine; denying that he agreed to become a shareholder of Bluemine or signed any transfers of shares; and denying authorising lodgement of forms with ASIC notifying his role as an office holder or shareholder for Bluemine or other relevant companies.
[4]
Determination
I initially had a degree of difficulty in understanding the basis on which Mr Ball and Bluemine put the relevant application. On one view, it might have been thought that, in the relevant circumstances, a question arose as to whether Mr Ball had been validly appointed as voluntary liquidator of Bluemine or not, which could be determined by reaching a determination as to whether Mr Cassaniti's challenge to the various capacities he apparently held with Bluemine should be accepted or not. Mr Faulkner, who appears with Mr Shepherd for Mr Ball and Bluemine, has ultimately persuaded me that that approach is not practicable in the circumstances. In particular, Mr Cassaniti's evidence is in issue in substantial proceedings listed for hearing in this court in February 2020, when issues are likely to be raised as to Mr Cassaniti's credit and as to whether his evidence as to these matters should be accepted. The practical difficulty to which Mr Faulkner points is that, in effect, to determine that question now the Court would need to determine significant parts of the matters that are in issue in those proceedings. The range of evidence which may be involved in that matter is potentially significant. Mr Marshall, who appears with Mr Lee for Mr Cassaniti, does not contend to the contrary.
Mr Faulkner instead adopts a somewhat different approach, which I am persuaded is consistent with the approach which has been accepted in other decisions in this Court. First, Mr Faulkner relies on ss 128 and 129 of the Corporations Act in order to preserve the validity of Mr Ball's appointment as voluntary liquidator of Bluemine. He refers, in particular, to the approach which I adopted to those sections in Correa v Whittingham (No 3) [2012] NSWSC 526; (2012) 267 FLR 120 at [42] in respect of a challenge to the appointment of an administrator of a company. I there noted that section 128(1) of the Corporations Act relevantly provides that a person is entitled to make the assumptions specified in s 129 of the Act in relation to dealings with a company and the company is not entitled to assert in proceedings in relation to those dealings that any of those assumptions is incorrect. Section 129(1), in turn, provides that a person may assume the company's constitution (if any) and any provision of the Corporations Act that applies to the company as replaceable rules as being complied with. In Correa v Whittingham above, I treated the steps involved in a person's appointment as an administrator as a dealing with the company for the purposes of those sections. That approach was not questioned on the appeal in the Court of Appeal in Correa v Whittingham [2013] NSWCA 263 at [118]ff. There is no suggestion that Mr Ball, in this case, had reason to question the assumption that would have been available to him under s 129(1) of the Act.
In Sliteris v Ljubic [2014] NSWSC 1632 at [27]ff, to which Mr Faulkner also refers, I adopted the same approach in respect of the challenge of the validity of a liquidator's appointment. In Re Black Bear Trading Pty Ltd (in liq) (Unreported, Supreme Court of New South Wales, Rees J, 16 April 2019), Rees J also adopted a similar approach in respect of the question of the appointment of a liquidator as voluntary liquidator. Her Honour there recognised that the appointment in that case turned, not only on compliance with the company's constitution, but also on compliance with the relevant requirements of the Corporations Act, including passage of the relevant resolutions by members. Section 129(1) of the Act does not fully substitute for compliance with those requirements, so far as it allows an assumption as to compliance with the constitution or provisions of the Corporations Act that operate as replaceable rules, but not with compliance with the Act generally. The further provision in s 129(2) allowing an assumption that Mr Cassaniti had been duly appointed as a director, and with authority to perform the duties customarily exercised or performed by a director, where he appeared in ASIC's records as a director, goes some way to preserve the relevant decision to appoint a liquidator, but not all the way, where that decision will depend upon the passage of a member's resolution in that respect. For the same reasons as Rees J in Re Black Bear Trading Pty Ltd above, it seems to me that ss 128-129 provide assistance to the liquidator's position, but are not sufficient to preserve the relevant appointment.
However, the second limb of Mr Ball's application relies on s 1322(4)(a) and 1322(6) of the Corporations Act. Relevantly, s 1322(4)(a) of the Act provides that the Court may, on application by an interested person, make specified orders, including an order declaring an act of a corporation is not invalid by reason of any contravention of a provision of the Act or a provision of the constitution of the corporation, in an appropriate case. Section 1322(6) provides several circumstances in which the Court may make such an order, including, relevantly, where it is just and equitable for that order to be made. The case law has emphasised that s 1322(4)(a), read with s 1322(6) of the Act, are remedial provisions and are to be given a liberal construction. In particular, the section is not limited to validating actions that could have been validly undertaken under the Act or a company's constitution and can be used to validate an action which could otherwise not be undertaken in an appropriate case: Weinstock v Beck [2013] HCA 14; (2013) 297 ALR 1. In Re ACN 605 810 928 Pty Limited (in liq) (formerly Sydney Outboard Centre Pty Limited) [2018] NSWSC 2026, I dealt with a somewhat similar situation where there was a dispute as to the validity of the appointment of a liquidator to a company in a voluntary liquidation. In that case, without determining the underlying merit of that dispute, I found that the appointment of the liquidator could be validated by s 1322(4) of the Act.
I am satisfied that Mr Ball is an interested person, who has standing to bring the relevant application. Here, an act took place, purporting to be the voluntary winding up of the company by special resolution of its members, then understood to be Mr Cassaniti. There is plainly a question whether that act was valid or not, which will depend upon the disputed questions as to whether Mr Cassaniti was in fact, as he appeared to be, then a member of Bluemine. In order to make an order under s 1322(4)(a) of the Act, the Court must be satisfied that any one of the three factors specified in s 1322(6) is satisfied. Here, there would be a real question whether Mr Ball's appointment was of a procedural nature. It is impossible to determine whether that appointment was made honestly since, if Mr Cassaniti's allegations are made good, that proposition may not be established.
However, it seems to me that the position here is analogous to that which I considered in Re ACN 005 810 928 Pty Limited above where, as Mr Faulkner points out, the company has now been in voluntary liquidation for a considerable time, and the appointment of Mr Ball as liquidator underpins the substantial proceedings which have been brought in order to seek to advance the interests of its creditors. It appears that Bluemine's assets would be insufficient to support a distribution to its creditors, absent recovery in these proceedings, and there is no suggestion that Bluemine is solvent or should be returned to ordinary trading. As was the case in Re ACN 005 810 928 Pty Limited above, if Mr Ball's appointment as liquidator had been invalid in the first place, then it is likely that the Court would then, or now, have appointed a provisional liquidator or liquidator had it been asked to do so. There is, as the evidence to which I have referred above makes clear, no suggestion that Mr Ball was on notice of the invalidity of his appointment, and it is in the interests of creditors and the community that the proceedings he has brought are determined on the merits. There is no suggestion that validating Mr Ball's appointment would cause substantial injustice to any person, for the purposes of s 1322(6)(c), where creditors' interests will be advanced by doing so and contributories no longer have any apparent economic interest in Bluemine. The Australian Taxation Office, which is plainly a substantial creditor of Bluemine, has indicated its support for the application.
In Re Black Bear Trading Pty Ltd above, Rees J adopted a similar approach in validating the appointment of a voluntary liquidator, there in circumstances where there was a dispute, which her Honour did not seek to determine, as to the then membership of the company, which would in turn have affected the validity of any members' resolution to appoint the relevant liquidator. The decision in that case is also analogous to one aspect of the position here.
For all these reasons, I am satisfied that an order should be made under s 1322(4) of the Act validating Mr Ball's appointment, without determining the question, at present, whether that appointment was otherwise made by Mr Cassaniti as the then shareholder of the company, or the relevant steps taken by Mr Cassaniti, as apparently the then director of the company, were validly taken. That order should be made nunc pro tunc, and will thereby preserve all steps which have been taken in the conduct of the liquidation, including the steps taken in respect of the conduct of these proceedings.
Accordingly, I make the following orders:
Order, pursuant to s 1322(4) of the Corporations Act 2001 (Cth) validating the First Plaintiff's appointment as liquidator of Bluemine Pty Limited (in liq), nunc pro tunc.
The First Plaintiff's costs of this application be paid out of the assets of Bluemine Pty Limited (in liq).
[5]
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Decision last updated: 16 December 2019