Donmastry Pty Ltd v Albarran [2004] NSWSC 632 | Case summary

1 The principal relief sought by the plaintiff is an order that ASIC reinstate the registration of Project Management, Architecture, Construction Interior (P.A.C.I.) Pty Ltd, which I shall call "PACI". Deregistration of PACI occurred pursuant to s.509(5) of the Corporations Act 2001 (Cth) following lodgment of form 523 by its liquidator, Mr Albarran. According to that form, this followed the holding of a meeting pursuant to s.509(1) on 18 March 2004. Having regard to s.509(5), deregistration occurred three months after lodgment, that is to say, on 23 June 2004, the lodgment having been made on 23 March 2004. 2 It will be gathered from this that Mr Albarran was the liquidator of PACI under a voluntary winding up. In fact, the particular winding up was a creditors voluntary winding up that followed on from Part 5.3A administration. 3 The plaintiff's application for reinstatement of the registration is made under s.601AH. The first matter to address, therefore, is the plaintiff's status as a "person aggrieved by the deregistration": s.601AH(2)(a)(i). 4 PACI was a building contractor which contracted to construct a hotel for the plaintiff. There are currently on foot, in the Federal Court, proceedings in which the plaintiff makes claims against various parties in relation to the construction project, principally claims under s.52 of the Trade Practices Act. One such party is PACI. The remedy sought against PACI is, I am told, damages. The fact that PACI now no longer exists obviously affects the plaintiff in an adverse way, so far as pursuit of that claim is concerned, since pursuit of the claim is now impossible. That, of itself, is sufficient, having regard to the principles discussed by Austin J in Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 34 ACSR 232, to make the plaintiff the person aggrieved by the deregistration: see also Krstevska v ACN 010 505 102 Pty Ltd (2001) 20 ACLC 292. 5 The next matter to which s.601AH(2) directs attention is the question whether the court is satisfied that it is "just" that the registration be reinstated: s.601AH(2)(b). This is not a case where deregistration occurred as an administrative measure in the nature of a cleansing of the register to remove apparently superfluous entries. Deregistration was the culmination of the process of winding up and, in the normal course, the court would be more reluctant to disturb that kind of deregistration than it would be to resuscitate a company removed as a purely administrative measure. The plaintiff, however, points to certain aspects of the winding up which require comment and indicate a need for certain aspects of PACI's activities to be examined. 6 The meeting of creditors under s.509(1), according to the minutes in evidence, was a meeting at which no quorum was present. There was therefore no return of the kind contemplated by s.509(3) and the process of registration was triggered by the alternative form envisaged by s.509(4). There are before me, however, three affidavits of officers of companies which a schedule of creditors prepared by the liquidator in February 2003 acknowledged to be creditors. Each affidavit states that the particular creditor company received no notice of the s.509 meeting and was unaware that the meeting had been held until sometime afterwards when the lodgment under s.509(4) had occurred and the period of three months referred to in s.509(5) had commenced. The evidence does not enable me to say whether there is good reason why these apparent creditors were not notified, but the facts deposed to do raise some questions. One of the creditors to which I have just referred is the present plaintiff. 7 There is also affidavit evidence of matters relevant to the possibility that uncommercial or other voidable transactions may have occurred before PACI became subject to creditors voluntary winding up. Mr Albarran's report to creditors dated 19 February 2003 referred to an alleged fraud involving persons associated with the company and the possibility that transactions, susceptible to challenge as uncommercial transactions under the Act, may have occurred. The liquidator said in his report that once he had concluded his investigations he would provide creditors with an update. The plaintiff is not aware of any further report on that matter. 8 The plaintiff is also concerned that there may be assets which were purchased with PACI funds that are in the hands of third parties and associates. In a letter dated 16 June 2004 the plaintiff's solicitors raised with the liquidator evidence pointing to the possibility that company funds, to the extent of $117,000, had been applied in purchasing a motor vehicle that was delivered to the father of one of the principals of the company. There was also reference to records showing cash cheques on the company's bank account which may have involved diversion of cash to persons associated with the company. Another person associated with the company (and bankrupt) was noted in the letter as having been identified as driving a Porsche car. The plaintiff expressed concern to the liquidator that the company may have paid for the Porsche. 9 These matters are, to my mind, sufficient to show that that the plaintiff has a genuine interest in pursuing the Federal Court proceedings in a context where full investigation is made into possibilities of financial recoveries being achieved either at the suit of PACI or through steps taken by a liquidator against persons who may have been party to misapplication of its assets. 10 The plaintiff understands that, at the time of conclusion of the winding up, PACI had no remaining funds. The plaintiff is, however, prepared to pay the costs of the reinstatement and to contribute $16,000 to fund a further investigation by a new liquidator. 11 I am satisfied that a case for reinstatement under s.601AH(2) has been made out. 12 There has been tendered a letter from ASIC in which it states that it will not oppose the application for reinstatement if certain conditions are satisfied. The first is a condition as to the form of the order, that is, that it be an order requiring ASIC to reinstate the registration of the company "for the purpose of winding it up". I had occasion in Anglo Coal (Drayton Management) Pty Ltd [2004] NSWSC 604 (5 July 2004) to say that reinstatement cannot be effected under s.601AH(2) for a particular purpose. Reinstatement and the existence of the company it recreates are an all or nothing affair and the court should not make an order that there be reinstatement for a particular purpose. 13 In the present context, however, I take ASIC's indication to be that its lack of opposition is on the footing that, if reinstatement is ordered, it will be in the context of either a continuation of the pre-existing winding up or the imposition of a new winding up regime. 14 The plaintiff's application has been made on the implied assumption that if reinstatement of the registration is effected, the person who was the liquidator under the creditors voluntary winding up that came to an end upon the s.509(5) deregistration will, by force of the reinstatement, again be the liquidator under a members voluntary winding up. The question whether reinstatement of the registration of a company that was in liquidation at the time of deregistration causes the liquidator to go back into office is one that has been considered in the past. I noted in Ramantanis v G&M Excavations Pty Ltd (2003) 22 ACLC 22 that the passage in McPherson's The Law of Company Liquidation (4th ed, 1999, by Keay) at page 678 on this subject (approved by Hamilton J in Brownlie v TTPM Pty Ltd (2003) 21 ACLC 1204), appeared to be made by reference to cases under earlier legislation having somewhat different features to the present provisions. The present s.601AH, after referring to the deemed continuity of existence of the company that arises upon reinstatement of registration, says that 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 reinstatements the company. I observed in the Ramantanis case that this suggests that in the case of a director the deemed continuity of existence of the company is not, of itself, sufficient to cause a director to resume his former position upon reinstatement and that it seems to be recognised that if the company's existence comes to an end, so too does the tenure of each person who is then a director: hence the need to have the statute cause each such person to become a director again. It went on to say that, by like reasoning, it may well be that a reinstatement order, combined with the statutory deeming of continuity of existence of a company, is not sufficient to cause a liquidator in office, at the time of deregistration, to go back into office automatically on reinstatement of the registration. 15 As a matter of policy it is clear that in circumstances such as the present, where the company was in liquidation at the time of deregistration, it will continue in liquidation if resurrected and its resurrection should be on the footing that the pre-existing liquidator should resume office. In the present case, however, Mr Albarran does not wish to continue in office. Indeed, he has expressly consented to the appointment of another liquidator in his place and wishes to be replaced. 16 In the circumstances to which I have referred concerning the later stages of the winding up and the concerns that are entertained by the plaintiff, the two other creditors and the plaintiff in particular indicate that it is preferable that another liquidator take office so that fresh thinking may be brought to matters. I do not suggest that the evidence indicates any shortcoming on Mr Albarran's part; merely, that the situation is one which would benefit from review. 17 If the effect of a reinstatement order will be to cause Mr Albarran to be again the liquidator under a creditors voluntary winding up (which, as I have said, I think probably will not be the case), the appropriate course will be for him to be replaced in the context of the making by the court of an order for winding up. The plaintiff is an acknowledged creditor and therefore has standing to pursue a winding up application on the grounds of insolvency. Mr Albarran's report to creditors dated 19 February 2003 indicated a deficiency of $770,000 and zero return to creditors. This, plus the evidence that PACI had no remaining funds at the conclusion of the voluntary winding up, is sufficient to justify a finding of insolvency grounding an order for winding up in insolvency under s.459B. The existence of the prior voluntary winding up is no barrier to the making of such an order: s.467B. Furthermore, the making of an order so that the liquidator under a subsisting voluntary winding up may be replaced by a liquidator appointed by the court represents a regular and proper exercise of the s.467B jurisdiction: Citrix Systems Inc v Telesystems Learning Pty Ltd (1998) 28 ACSR 529. 18 Mr Albarran has signed, but not yet dated, a notice of resignation as liquidator which has been produced to the court. This is sufficient evidence of his desire to be relieved and, to the extent that there is any need for "cause" of the kind envisaged by s.503, that desire, coupled with the need for further consideration to be given to aspects of the prior winding up, provides the "cause". 19 Because PACI had been in liquidation for more than a year before deregistration, there is no need for the usual advertising and notification processes in connection with winding up by the court. These should be dispensed with pursuant to s.467(3)(b): see Scott v Janiki Pty Ltd (1994) 14 ACSR 334, Partners in Enterprise Pty Ltd v Sampson [2002] NSWSC 383, Shaw v Goodsmith Industries Pty Ltd (2002) 41 ACSR 556, Euphron Pty Ltd v Hunter Valley Piggery Pty Ltd [2003] NSWSC 543. 20 I note the undertaking of the plaintiff, by its counsel, to provide funding to any liquidator of the company appointed by the court, in the sum of $16,000 in order to fund preliminary investigations by the liquidator. 21 I also note the consent of Mr Struthers to act as liquidator. 22 I make the following orders:

Donmastry Pty Ltd v Albarran

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