Euphron Pty Ltd v Hunter Valley Piggery [2003] NSWSC 543 | Case summary

1 The present plaintiff (which I shall call "Euphron") is a company in liquidation, its liquidators being Mr Prentice and Mr Smith. Their appointment came as a consequence of administration under Pt 5.3A of the Corporations Act 2001 (Cth) and as a result of a resolution at the second meeting of creditors that the company be wound up and that the administrators be appointed liquidators. This occurred on 20 May 2003. 2 Mr Prentice and Mr Smith had also been appointed as administrators of Elenium Pty Limited and, by a parallel process, they became on 20 May 2003 the liquidators of that company as well. 3 Elenium and Euphron are closely connected companies. Euphron apparently has two shareholders, which I shall refer to as "Esplanade" and "JGL". Esplanade is incorporated in Singapore and JGL in Hong Kong. Ownership of shares in Elenium is somewhat unclear. ASIC records suggest that the shares are held by Esplanade and JGL but there is some evidence of a transaction under which Euphron may have come to own all the shares in Elenium in 2000. For present purposes, it is sufficient to know that the ownership structure is such as to cause the companies to be associated and aligned in a commercial sense. 4 The two other companies to be mentioned are those named as defendants, even though they are technically nonexistent. They are Hunter Valley Piggery Pty Limited ("HVP") and Darling Downs Piggery Pty Limited ("DDP"). On the evidence, all shares in each of HVP and DDP were at all material times held by Euphron. Both HVP and DDP were deregistered by ASIC on 15 December 2002 pursuant to s.601AB of the Corporations Act. That section allows ASIC to deregister a company where the annual return is at least six months late, no other documents have been lodged by the company under the Act within the preceding eighteen months, and ASIC has no reason to believe the company is carrying on business. 5 By the originating process currently before me, Euphron claims orders for the reinstatement by ASIC of the registrations of HVP and DDP pursuant to s.601AH(2). That section empowers the court to make such an order where application is made by "a person aggrieved by the deregistration" and the court is satisfied that it is just and equitable that the registration be reinstated. I proceed therefore to consider the effects the deregistration of each of HVP and DDP has had in the overall commercial context in which Euphron is interested. 6 Each of HVP and DDP appears to be (or, more accurately, to have been at the time it went out of existence) a land owning company. Euphron, Elenium, HVP and DDP account in commercial terms for a combination of assets and resources which together make up two piggery businesses, one operated on a property near Scone and the other on a property near Warwick in Queensland. Euphron is an asset holding company and Elenium is an operating company which actually carries on business on the properties. HVP and DDP are also asset holding companies. HVP is the registered proprietor of the property at Scone, although there is evidence suggesting that Euphron is the beneficial owner. DDP is the registered proprietor of the property at Warwick, but again there is evidence suggesting that the property is beneficially owned by Euphron. 7 It is also relevant to mention a third piggery operation. It is located at Pratton in Queensland. Again a number of companies, including Euphron, Elenium, Esplanade and a Danish owned company, control the elements of the collection of assets and resources that make up that business. Some of the relevant land is registered in the name of DDP. 8 According to information supplied to Mr Prentice and Mr Smith, who are the liquidators of Euphron and Elenium as I have mentioned, neither HVP nor DDP conducts any business apart from being the registered proprietor of the properties to which I have referred and neither has debtors or creditors apart from ASIC for fees and penalties, although that last proposition seems to depend on the effectiveness of some kind of contractual provision under which there was an assumption of the liabilities of those companies by Euphron in 2000. 9 Mr Prentice and Mr Smith are of the opinion that the piggeries at Scone and Warwick are marketable as going concerns and that the piggery at Pratton is marketable as a single unit. In consultation with an agent specialising in marketing rural properties and businesses, they have developed and begun to implement a marketing plan for all the piggery assets. As a consequence of the deregistration of each of HVP and DDP, its estate and interest in the land of which it was a registered proprietor at the time of deregistration has been vested in ASIC under s.601ED(2). Even if HVP and DDP were merely bare trustees of the land for Euphron or someone else, it was no doubt the fee simple as distinct from any essentially valueless bare legal estate which thus became vested in ASIC. 10 Because of this statutory vesting, any plan to carry through to conclusion a sale of the piggery properties and businesses will be incapable of being achieved unless either ASIC becomes an active participant in the sale of the property vested in it or the property is revested in HVP and DDP and they are restored to a position where they can both own and deal with it. The possibility of ASIC's becoming an active participant may at once be rejected. Although ASIC is given by s.601AD(4) all the powers of an owner, there is no statutory warrant for it to deal with the property for commercial purposes or in the exercise of any kind of general discretion. Resuscitation of HVP and DDP and revesting of the property in them, which under s.601AH(5) is a by-product of reinstatement of registration, is therefore viewed as the only practical way forward. 11 I have not so far mentioned the officers of HVP and DDP or, for that matter, of Euphron and Elenium. It is sufficient to say that, as things currently stand, the persons who were the directors and secretary of HVP and DDP at the time of deregistration are now all ordinarily resident outside Australia. 12 I turn now to the question whether Euphron has standing under s.601AH(2)(a)(i) as a person aggrieved by the deregistration of each of HVP and DVP. According to the cases (eg, Re Waldcourt Investment Co Pty Ltd [1988] 1 WAR 1), its position as a shareholder of each of HVP and DDP is not of itself enough to give it the kind of interest contemplated by the words "aggrieved by the deregistration". There must be something more (see, for example, Casali v Crisp (2001) 165 FLR 79). Here there is something more. Euphron, through its liquidators, is, with Elenium, one of the moving parties in the plans to sell the piggery businesses. Furthermore, Euphron was, at the time of the deregistrations, the entity with sole ownership and control of each of HVP and DDP. Its commercial interests require that the property owned by HVP and DDP not be in the hands of ASIC and subject to the strictures that that involves, but rather that HVP and DDP be put into a position where each can, through appropriate decision making processes, determine whether or not to play its part in a sale of the piggeries that Euphron wishes to undertake. These factors, in my opinion, give Euphron an interest quite separate from and additional to its interest merely as shareholder in seeing HVP and DDP brought back to life and an interest sufficient to cause it to have standing under the reinstatement section. 13 I move then to consider whether it is just and equitable that the reinstatement should be ordered. At the time of ceasing to exist, each of HVP and DDP had nothing by way of assets beyond the properties in question and on the liability side had only a liability for ASIC fees and penalties. There is no prejudice to anyone that I can see in bringing both companies back into existence through reinstatement of registration and - indeed, there is benefit in the sense I have already mentioned of putting the companies back into possession of the properties so that they can participate, if so caused by those in charge of their affairs to do so. 14 The application for reinstatement is accompanied by an application for the making of a winding up order in respect of each company. It is recognised in the affidavit material that, with all the persons who were officers at the time of deregistration now not resident in Australia, each company would fall into immediate default under the Corporations Act if it were brought back under the stewardship of those officers: ss.201A(1) and 204A(1). There is the added factor that the holding company by which all shares are held is in liquidation (as is the related company or associated company, Elenium) and that that holding company - which is the plaintiff - could, through its liquidator, provide the ground contemplated by s.461(1)(a) by causing to be passed a special resolution to wind up. In those circumstances it is said that it is just and equitable that the companies should be wound up. I am satisfied that that is so. 15 There will be, upon reinstatement, a hiatus in control at board level, and while that may be remedied by action at shareholder level, that action would be either by way of appointment of further directors, which begs the question whether persons willing to serve could be found, or by way of action to wind up, which is in any event the proposal that is before the court. It is not uncommon for companies brought back to life by way of reinstatement of registration to be placed immediately into liquidation so that they may be in their resurrected form under appropriate administration (see, for example, Payne v Wizard Industries Ltd (1997) 24 ACSR 277). This is such a case. 16 Because each company has been nonexistent for some time, there is no need for the usual advertising and notification processes to be undertaken in connection with the winding up. There is provision in s.467(3)(b) to dispense with those requirements, and as sought in the originating process, it is appropriate that the requirements of s.465A be dispensed with: 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. 17 ASIC has been notified of this application and, by letter dated 4 June 2003, has indicated that it will not oppose an order for reinstatement for the purpose of winding up if certain conditions are satisfied, namely, that the order is couched in terms of s.601AH(2), that the company is wound up and a liquidator appointed, that fees of $434 are paid to ASIC prior to determination of the matter, that the applicant notifies the former office holders of the application, and that the court order is lodged with ASIC in order that the reinstatement may be effected. The third and fourth conditions have already been satisfied. The first condition is satisfied by the terms of the application. The second condition will be satisfied by the making of a winding up order, and the fifth condition will be in the hands of the plaintiff to satisfy once the order is made. The consent of Mr Prentice to act as liquidator of each company has been filed. 18 I make orders for reinstatement, winding up and consequential matters in terms of the short minutes which I initial and date. The orders may be taken out forthwith.

Euphron Pty Ltd v Hunter Valley Piggery

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