Fairway Trading Pty Ltd (in liq) v Ioricorp Pty Ltd; Vina Australasia Pty Ltd

Supreme Court of NSW|2020-12-08|Before: Wright J

Arogen v Leighton [2013] NSWSC 1099 The Bell Group Limited v Australian Securities and Investments Commission [2018] FCA; 358 ALR 624 The Owners of Strata Plan No 91349 v Australian Securities and Investments Commission [2020] NSWSC 685; 147 ACSR 456 Category: Procedural and other rulings Parties: Proceedings 2019/277473 Fairway Trading Pty Ltd (in liq) (Plaintiff) Ioricorp Pty Ltd (Defendant)

Proceedings 2019/277475 Vina Australasia Pty Ltd (in liq) (Plaintiff) Ioricorp Pty Ltd (Defendant) Representation: Counsel:

Proceedings 2019/277475 Turks Legal (Plaintiff) File Number(s): 2019/277473; 2019/277475

Judgment

Insurance Australia Limited, trading as Lumley Insurance and as CGU Insurance, (the insurer) has applied by notice of motion to reinstate two deregistered corporations, Fairway Trading Pty Ltd (Fairway) and Vina Australasia Pty Ltd (Vina), under s 601AH(2) of the Corporations Act 2001 (Cth). Fairway is named as the plaintiff in one of the proceedings presently before the Court and Vina is named as the plaintiff in the other proceedings.
The circumstances giving rise to these applications in each of the proceedings were not in dispute and are set out in the paragraphs which follow.

Circumstances

During the evening of 17 February 2014, a fire occurred in the kitchen of Coo Restaurant, operated by Ioricorp Pty Ltd (Ioricorp) in the Canberra suburb of Civic. It has been contended that the fire was caused by the chef employed by Ioricorp leaving cooking oil unattended on a lighted gas burner.
The fire spread to nearby premises owned by Fairway, including premises which Fairway had let to Vina. Both Fairway and Vina suffered loss and damage as a result of the fire.
At the relevant time, Fairway and Vina were insured against such loss and damage by the insurer. Each of Fairway and Vina made claims under their policies and the insurer made payments pursuant to the policies in respect of those claims (the insured losses). The payments made by the insurer did not cover all of the costs and expenses suffered by Fairway or Vina as a result of the fire (the uninsured losses).
In June 2014, the insurer instructed its solicitors to investigate its prospects of recovery against Ioricorp pursuant to the insurer's right of subrogation to the rights of Fairway.
In January 2017, the insurer instructed its solicitors to investigate its prospects of recovery against Ioricorp pursuant to the insurer's right of subrogation to the rights of Vina.
On 3 August 2017, Mr Frank Lopilato was appointed as liquidator of Vina by way of a creditors' voluntary winding up.
On 26 February 2019, Mr Lopilato was appointed as liquidator of Fairway by way of a members' voluntary winding up following a resolution to wind up the company and the filing of a declaration of solvency.
On 7 May 2019, a "Notice By External Administrator/controller - Appoint/cease Resignation of Removal of Liquidator/provisional Liquidator" was filed in relation to Fairway, together with a "End of Administration Return End Return of Members' Voluntary Winding Up". Accordingly, it appears that Mr Lopilato may have ceased to be the liquidator of Fairway by that time.
On 7 August 2019, Fairway was deregistered by the Australian Securities and Investments Commission (ASIC) under s 509 of the Corporations Act.
On 5 September 2019 the insurer, relying on its rights of subrogation, commenced the present two proceedings in the names of Fairway and of Vina against Ioricorp seeking damages. At this time, the insurer and its solicitors were not aware of the earlier deregistration of Fairway or of the fact that Vina was under external administration.
Later in 2019, both the Fairway and Vina proceedings came before the Registrar on a number of occasions. The defendant, Ioricorp, did not take any point that Fairway was deregistered or that Vina was under external administration.
On 25 October 2019, the Registrar ordered that the Fairway proceedings, the Vina proceedings and other related proceedings against Ioricorp "run concurrently with evidence of one party being evidence of that party in the concurrent proceedings".
On 14 December 2019, a "Notice By External Administrator/controller - Appoint/cease Resignation of Removal of Liquidator/provisional Liquidator" was filed in relation to Vina. Accordingly, it appears that Mr Lopilato had ceased to be the liquidator of Vina by that time.
On 10 December 2019, the Registrar ordered Ioricorp to pay Fairway's and Vina's "costs thrown away in respect of arranging a mediation and today's directions hearing".
On 26 January 2020, Vina was deregistered by ASIC under s 601AB of the Corporations Act.
On 17 November 2020, the insurer, acting in the name of Fairway and Vina, and Ioricorp reached an "in principle" agreement whereby Ioricorp agreed to pay amounts to resolve the Fairway and Vina proceedings.

Orders sought

In these circumstances, the insurer has sought, among other things, orders to the following effect: 1. Fairway and Vina be reinstated pursuant to s 601AH(2) of the Corporations Act, with Vina continuing in liquidation upon reinstatement; 2. Frank Lopilato of RSM Australia Partners be appointed as liquidator of both Fairway and Vina upon reinstatement; 3. under s 440D of the Corporations Act, a retrospective grant of leave to continue the Fairway and Vina proceedings commenced on 5 September 2019; 4. an order under s 601AH(3) of the Corporations Act validating anything done or purported to be done by or on behalf of Fairway and Vina, in relation to the Fairway and Vina proceedings respectively, during the periods in which each of Fairway and Vina were deregistered; and 5. the costs of the motions be costs in the cause.

Positions of the liquidator, Ioricorp, ASIC and the former directors

Mr Lopilato, the previous liquidator of both Fairway and Vina, swore an affidavit in each of the two proceedings in which he confirmed that he had not been informed of the circumstances relating to the fire in 2014 or of the insured losses and uninsured losses by the directors or shareholders of those companies but had been so informed by the insurer.
He further stated that had he been made aware of the circumstances, he would have provided written consent to the insurer commencing or maintaining recovery proceedings in the name of Fairway and Vina against Ioricorp, provided he was given appropriate indemnities from the insurer, which he had no reason to believe he would not have been, and will not be, provided. Moreover, Mr Lopilato stated that he believed he ought to be reappointed as liquidator to deal with any uninsured losses recovered by the insurer on behalf of Fairway or Vina once the Fairway and Vina proceedings are finalised. I take this to be, in effect, consent to his reappointment as liquidator of both companies.
Mr Lopilato's position is, in substance, that he supports the orders sought being made.
The solicitors for the defendant in both proceedings, Ioricorp, indicated by email dated 2 December 2020 that they consented to the orders "premised on the assumption that settlements will not be prejudiced and with defendant's not being liable for any costs".
By letter dated 26 November 2020 to the insurer's solicitors, ASIC's representative stated its position as follows: "I confirm ASIC's requirements pursuant to the Regulatory Guide 83 have been satisfied by the applicant. Accordingly, subject to the strict understanding that no order for costs will be sought against the Australian Securities and Investments Commission (ASIC), ASIC does not oppose the Applications and will not attend the hearing of the matter."
Finally, it can be noted that copies of the notices of motion and supporting affidavits were also sent to the former directors of Fairway and Vina and they were given notice of the hearing on 8 December 2020. None of the former directors appeared on that occasion or indicated that they opposed any of the orders sought.

Consideration

Section 601AH of the Corporations Act relevantly provides: "… (2) The Court may make an order that ASIC reinstate the registration of a company if: (a) an application for reinstatement is made to the Court by: (i) a person aggrieved by the deregistration; or (ii) a former liquidator of the company; and (b) the Court is satisfied that it is just that the company's registration be reinstated. (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. … (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. …"
For an applicant for reinstatement to be a "person aggrieved" for the purposes of s 601AH(2)(a)(i), the applicant must be able to show that the deregistration deprived the applicant of something, or injured or damaged the applicant in a legal sense, or the applicant has become entitled, in a legal sense, to regard the deregistration as a cause of dissatisfaction: The Owners of Strata Plan No 91349 v Australian Securities and Investments Commission [2020] NSWSC 685 at [62]; 147 ACSR 456 citing The Bell Group Limited v Australian Securities and Investments Commission [2018] FCA 884 (The Bell Group) at [47]; 358 ALR 624.
There is no temporal restriction in the description "person aggrieved" as long as there is a causal link between the grievance and the deregistration, and a person can become aggrieved after the time of deregistration: The Bell Group at [49].
I accept that the insurer is relevantly a "person aggrieved" since it has indemnified Fairway and Vina and has rights of subrogation which would entitle it to bring proceedings in the names of those companies, if they were not deregistered, to recover damages from Ioricorp. It is not in dispute that the claims made in the present proceedings are arguable and, in addition, "in principle" agreements have been reached to settle both of the proceedings, which agreements could be given effect to but for the deregistration of the two companies. In this sense, the applicant's legal rights and interests can be said to have been impaired or damaged by the deregistration.
The question that must then be addressed under s 601AH(2)(b) is whether the Court is satisfied that it is just that the companies' registrations be reinstated. Given the circumstance of Ioricorp and the insurer having reached an agreement to resolve the proceedings, the lack of opposition from any interested party, the availability of the liquidator to deal with any uninsured losses recovered and the fact that the insurer's rights of subrogation would be rendered nugatory unless the companies are reinstated, it appears to me that it is just to order the reinstatement of Fairway and Vina. There are no discretionary considerations raised in the present matters which would tell against making such orders. The circumstances in which each of the companies was deregistered are not such as to make reinstatement inappropriate or unjust. No person who would be prejudiced by the reinstatement has been identified and none of the persons to whom notice of the present applicants has been given oppose the orders being made.
I accept the submission that there is no public interest engaged in the present proceedings that would weigh against reinstatement.
For all of these reasons, I propose to make orders under s 601AH(2) for the reinstatement of Fairway and Vina.
In the circumstances and in order to facilitate the resolution of the Fairway and Vina proceedings, it also appears to me to be appropriate to make validating orders under s 601AH(3) so that there is no question as to the validity or effectiveness of what has occurred to date in relation to those proceedings. Such validating orders will also serve to ensure that the proceedings, although irregularly commenced, are taken to have been validly commenced on 5 September 2019 for the purposes of any argument that might otherwise be available under the Limitation Act 1969 (NSW).
As has been noted above, an order has also been sought, under s 440D of the Corporations Act, retrospectively granting leave to continue the Fairway and Vina proceedings commenced on 5 September 2019. Section 440D relevantly provides: "(1) During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except: (a) with the administrator's written consent; or (b) with the leave of the Court and in accordance with such terms (if any) as the Court imposes."
The Fairway and Vina proceedings were not a "proceeding … against the company". It is arguable, however, that those proceedings were "in relation to any of [their] property" being claims based upon damage to, or in relation to, Fairway and Vina's property as a result of the fire. Authorities such as Arogen v Leighton [2013] NSWSC 1099 at [57] to [62]; 31 ACLC 13-036 do not, in my view, require a contrary conclusion concerning whether the proceedings were "in relation to any of [their] property" in the particular circumstances of the present cases. Since there has not been full argument on that issue, however, I do not propose to decide whether or not that is so. It is sufficient in the circumstances, in order to avoid any risk of invalidity or irregularity, and as there was no opposition to these orders, to make orders under s 440D to the extent that they may be necessary.
Finally, by virtue of s 601HA(5), when a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. The filing of the "Notice By External Administrator/controller - Appoint/cease Resignation of Removal of Liquidator/provisional Liquidator" on 7 May 2019 and 14 December 2019 in respect of Fairway and Vina may indicate that Mr Lopilato had ceased to be the liquidator of each of the companies by that time. If so, s 601AH(5) would not have the effect of his appointment as liquidator continuing in existence as if the companies had not been deregistered. In these circumstances, and taking into account his effective consent to being reappointed as liquidator, it appears to me to be appropriate to order that Mr Lopilato be reappointed as liquidator of both companies upon their reinstatement, once again to the extent that they may be necessary in the circumstances. In addition, to the extent that any formal requirements of the Supreme Court (Corporations) Rules 1999 (NSW) or the Corporations Regulations 2001 (Cth) are applicable in the circumstances and have not been complied with and compliance may be dispensed with, I propose to dispense with compliance.

Costs

The insurer and Ioricorp as the active parties and the parties to the "in principle" settlement have effectively sought that costs of these motions be costs in the cause so that the costs can be addressed as part of the settlement. ASIC and Ioricorp have also consented to, or not opposed, the orders sought on the basis that no costs order in relation to this application would be made against them. In these circumstances, I consider it appropriate that the only costs order that should be made is that the costs of the present application should be costs in the cause.

Orders

For these reasons, the orders of the Court in proceedings 2019/00277473, Fairway Trading Pty Ltd v Ioricorp Pty Ltd (the Fairway Proceedings), are: 1. Pursuant to section 601AH(2) of the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission is to reinstate the registration of Fairway Trading Pty Ltd. 2. On and from the reinstatement of Fairway Trading Pty Ltd Mr Frank Lopilato of RSM Australia Partners is reappointed as liquidator of the company. 3. Pursuant to section 440D of the Corporations Act 2001 (Cth), leave is retrospectively granted to commence the Fairway Proceedings on 5 September 2019 and to continue those proceedings. 4. Pursuant to section 601AH(3) of the Corporations Act 2001 (Cth), anything done or purported to be done by or on behalf of Fairway Trading Pty Ltd in respect of the Fairway Proceedings during the period when Fairway Trading Pty Ltd was deregistered is hereby validated. 5. To the extent that any formal requirements of the Supreme Court (Corporations) Rules 1999 or the Corporations Regulations 2001 (Cth) are applicable in relation to the making of these orders in the circumstances and have not been complied with, compliance with those requirements is dispensed with. 6. The costs of the motion are costs in the cause.
For these reasons, the orders of the Court in proceedings 2019/00277475, Vina Australasia Pty Ltd v Ioricorp Pty Ltd (the Vina Proceedings), are: 1. Pursuant to section 601AH(2) of the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission is to reinstate the registration of Vina Australasia Pty Ltd. 2. On and from the reinstatement of Vina Australasia Pty Ltd Mr Frank Lopilato of RSM Australia Partners is reappointed as liquidator of the company. 3. Pursuant to section 440D of the Corporations Act 2001 (Cth), leave is retrospectively granted to commence the Vina Proceedings on 5 September 2019 and to continue those proceedings. 4. Pursuant to section 601AH(3) of the Corporations Act 2001 (Cth), anything done or purported to be done by or on behalf of Vina Australasia Pty Ltd in respect of the Vina Proceedings during the period when Vina Australasia Pty Ltd was deregistered is hereby validated. 5. To the extent that any formal requirements of the Supreme Court (Corporations) Rules 1999 or the Corporations Regulations 2001 (Cth) are applicable in relation to the making of these orders in the circumstances and have not been complied with, compliance with those requirements is dispensed with. 6. The costs of the motion are costs in the cause.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 December 2020

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