JENNIFER ELIZABETH LOW AS LIQUIDATOR OF SAFA AUTO PARTS PTY LTD & SAFA AUTO PARTS PTY LTD (IN LIQUIDATION) -v- AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION [2024] WASC 116 (10 April 2024)

1. In support of the application and orders sought, the plaintiffs rely upon a written outline of submissions filed on 26 February 2024, an affidavit affirmed by the first plaintiff, Jennifer Elizabeth Low, on 17 January 2023 and three affidavits sworn by William Bowie Macdonald on 19, 23 and 26 February 2024.
2. ASIC has been served with the originating process, as required by r 2.8 of the Supreme Court (Corporations) (WA) Rules 2004 (WA) (Rules). ASIC's Property Law Group has informed the plaintiffs' lawyers that on the understanding that no order for costs will be sought against ASIC, it does not oppose the application and will not attend the hearing of the application.
3. Notice has also been given to Mr Suliman Rawi, the former director of Safa Auto Parts and of Wardak, and also to Mr Mohammed Taher Sahibi as persons whose interests may be affected or may be prejudiced by the orders sought (as outlined in further detail later in these reasons). No one has given notice to the plaintiffs' solicitors or to the court that they wish to be heard on the application.

1. The following factual background is derived from the affidavits filed in support of the application.
2. Safa Auto Parts was incorporated on 17 July 2013. Its sole director is Mr Suliman Rawi. On 17 October 2023, Mr Rawi passed a director's resolution to voluntarily appoint the first plaintiff, Ms Low, as administrator of Safa Auto Parts. On 21 November 2023, at the second meeting of Safa Autos Parts' creditors, it was resolved that Safa Auto Parts be wound up under s 439C of the Act.
3. Safa Auto Parts previously carried on business trading in auto parts. From 2015, it traded from premises at 26 Furniss Road, Landsdale in Western Australia (Premises).
4. Mr Rawi was also the sole director of Wardak. Wardak was incorporated on 1 August 2017.
5. Ms Low deposes that from her investigation of Safa Auto Parts' affairs and information and documents provided by Mr Rawi, Wardak:

(a) traded only as trustee of the Trust;

(b) purchased the Premises on or about 3 August 2017, with finance from the Commonwealth Bank, which took a registered mortgage over the land;

(c) leased the Premises to Safa Auto Parts; and

(d) had no significant assets apart from the Premises.

1. Wardak was voluntarily deregistered by Mr Rawi, on 1 October 2023. In the application for deregistration, Mr Rawi declared that Wardak had no outstanding liabilities. The circumstances in which he submitted the application and made that declaration are unclear. However, from Ms Low's investigations and review of the available books and records, at the time of Wardak's deregistration, it appears Wardak did have a liability in the form of a book debt (a loan) payable to Safa Auto Parts of $501,440.
2. Ms Low deposes that, at the time of deregistration, Wardak was insolvent with its only asset being $900 cash against a liability of $501,440 and no means of earning income.
3. On or about 23 June 2023, before it was deregistered, Wardak sold the Premises to Mohammed Taher Sahibi. The transfer document registered at Landgate states the Premises were sold to Mr Sahibi for $1.7 million.
4. Ms Low believes from her review of accounting records, as referred to in her affidavit, that the Premises were transferred to Mr Sahibi for $1,132,841 (being the recorded cost price of $1,633,653 less recorded capital loss of $500,812). She believes that Wardak sold the Premises to Mr Sahibi at a significant undervalue and that the transfer is likely to have constituted an uncommercial transaction, insolvent transaction, a creditor-defeating disposition and/or a voidable transaction.[1]
5. The plaintiffs seek reinstatement of Wardak, with orders that it be wound up in insolvency and that Ms Low be appointed as receiver and manager of the Trust so that she may seek relief under s 588FF of the Act against Mr Sahibi, with any recovery being applied against the loan owed by Wardak to Safa Auto Parts.
6. Ms Low deposes that based on her conduct of Safa Auto Parts' liquidation to date, she does not believe there is any real prospect of further asset realisations for its creditors other than the loan owed by Wardak. She does not believe Wardak had any creditors apart from Safa Auto Parts, and Wardak appeared to have operated only as trustee of the Trust.

Application to reinstate deregistered company - s 601AH of the Act

1. Pursuant to s 601AH(2) of the Act, where a company has been deregistered, the court may make an order that ASIC reinstate the company if the conditions required by the Act are met. Relevantly, s 601AH(2) states:

(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.

1. I refer to and respectfully adopt Hill J's summary of the principles applicable to an application under s 601AH of the Act in Jit Sun Investments Pte Ltd (Singaporean Unique Entity Number: 200308432W) v Australian Securities and Investments Commission,[2] as follows:

(1) An application to this court for a company to be reinstated may be made by a person who is aggrieved by the deregistration or a former liquidator of the company. The court has a residual discretion whether to make an order.[3]

(2) The term 'person aggrieved' is not expressly defined in the Act and should not be construed narrowly.[4] In determining whether the plaintiff is a person aggrieved by the deregistration of the company, the court must consider whether the plaintiff has shown that deregistration has deprived them of something, or injured or damaged them in a legal sense, or that they became entitled in a legal sense to regard the deregistration as the cause of dissatisfaction.[5]

(3) There is no temporal limitation in the term 'person aggrieved' and there need only be a causal link between the grievance and the deregistration of the company.[6] A person can become aggrieved as a result of events which occur after the time of the deregistration.[7]

(4) Before the court can make an order for reinstatement, the court must be 'satisfied that it is just that the company's registration be reinstated'. This confers a broad discretion on the court. In exercising its discretion, relevant factors that the court will take into account include:[8]

(a) the circumstances in which the company came to be deregistered;

(b) the future activities of the company, if an order for reinstatement is made;

(c) whether any particular person is likely to be prejudiced by the reinstatement; and

(d) the public interest generally.

1. In Re Brockweir Pty Ltd,[9] Sifris J said:

In order to assess whether the plaintiffs are aggrieved parties, it is not necessary to embark on a detailed and exhaustive analysis of the facts and law underpinning the claim. The threshold is low. The assessment needs to be dealt with in a summary way. As long as the claim is not plainly hopeless and bound to fail, it should, subject to other relevant matters, proceed.

1. I am satisfied on the evidence adduced that Safa Auto Parts has a claim against Wardak in relation to an unpaid book debt. There is also a prospect of a liquidator appointed to Wardak recovering funds from a third party in respect of a potentially voidable transaction to meet some or all of the debt owed by Wardak to Safa Auto Parts. Such claims cannot presently be pursued because Wardak has been deregistered.
2. Though Wardak is insolvent and it is sought to be wound up if reinstated, that is to facilitate the pursuit of the potential voidable transaction. Wardak's sole creditor is Safa Auto Parts. There does not appear to be any other way for Safa Auto Parts to pursue the debt, nor any other avenues to realise funds for Safa Auto Parts' creditors.
3. Although, the amount that may be recovered and the prospects of successfully recovering funds to meet the unpaid debt owed by Wardak to Safa Auto Parts is uncertain, it cannot be said the claim has no potential value or is plainly hopeless and bound to fail.
4. In the circumstances, I am satisfied that Safa Auto Parts and Ms Low, in her capacity as its liquidator, are persons aggrieved by Wardak's deregistration. I accept they have standing to bring the application. I am also satisfied that it is just to make an order that Wardak's registration be reinstated.
5. The only person who may be prejudiced by Wardak's reinstatement is Mr Sahibi as a potential defendant if Ms Low's views about the voidability of the transfer of the Premises are correct. However, that is not a reason, in my view, that would make it unjust to order reinstatement of Wardak's registration. Mr Sahibi has been given notice of these proceedings and his lawyers have written to the plaintiffs' lawyers stating he will not sell the Premises pending a resolution.
6. I do not consider that the public interest will be undermined by granting the relief sought.

Application for an order that Wardak be wound up upon reinstatement

1. It is the usual position that when a company is reinstated, it is reinstated in the form in which it existed prior to its deregistration. However, it is open to the court to make orders for the winding up of the company upon reinstatement of its registration, if there is a basis for such an order to be made.
2. I am satisfied there is such a basis and it is appropriate to order that, upon reinstatement, Wardak be wound up in insolvency on the application of the plaintiffs pursuant to s 459P(1)(b) of the Act, Safa Auto Parts being a creditor of Wardak. There is no suggestion the debt claimed by Safa Auto Parts is a contingent or prospective debt, such that leave is required pursuant to s 459P(2)(a). It is recorded in the financial statements as a debt owed to Safa Auto Parts.
3. In any event, I am satisfied that there is a prima facie case Wardak is insolvent, such that if leave were required pursuant to s 459P(3), it ought be granted. On the evidence before me, Wardak was insolvent at the time it was deregistered because its total liabilities exceeded its total assets and it was unable to discharge its debt, being the amount owed to Safa Auto Parts. That will also be the position upon Wardak's reinstatement. As such, in my view it would be appropriate to make an order that Wardak be wound up on the ground of insolvency under s 459P of the Act.
4. Further, I accept the plaintiffs' submission to the effect that, upon reinstatement, Wardak will have no director presently able to manage its affairs based on Mr Rawi's personal circumstances, as outlined in his communications with Ms Low.[10] As Wardak's only creditor is Safa Auto Parts, its remaining affairs would appear to be limited to its debt to Safa Auto Parts, which it appears may only be recovered through the pursuit of the potential voidable transaction by a liquidator appointed upon a winding up of Wardak.
5. In those circumstances, if I had not been satisfied it is appropriate to make an order that Wardak, upon reinstatement, be wound up in insolvency, I am satisfied it would be just and equitable to order the winding up of Wardak pursuant to s 461(1)(k).
6. I accept the plaintiffs' submissions to the effect that it is appropriate in the circumstances of this application to exercise my discretion under s 467(3)(b) of the Act and dispense with the notice and advertising requirements under s 465A of the Act, and related requirements under the Act and Rules, to the extent they have not been complied with. The legislative purpose of the requirements is to ensure that those who are potentially affected by a winding up application have sufficient notice of it.
7. I am satisfied that sufficient notice has been given to those identified as being persons potentially affected by Wardak's winding up and its registration being reinstated, being:

(a) ASIC, which has been served with the application for reinstatement, which includes the winding up application;

(b) Mr Rawi, Wardak's former director and director of Wardak's sole creditor, Safa Auto Parts; and

(c) Mr Sahibi.

1. This is also consistent with the authorities in relation to applications involving a combined reinstatement and winding up, which provide it would be appropriate for the court to order such dispensation when no useful purpose would be served by insisting on those requirements.[11]
2. Ms Low has confirmed her consent to act as liquidator of Wardak in the prescribed form as required under s 532(9) of the Act and r 5.5(2) and (3)(a) of the Rules. The plaintiffs are cognisant, as am I, that if appointed as liquidator of Wardak, Ms Low would control the liquidations of both Safa Auto Parts and Wardak. In the circumstances of this case, I accept the plaintiffs' submission to the effect that there is no real (as opposed to theoretical) conflict of interest and that this should not be an obstacle to the orders sought.[12]
3. For these reasons, I consider it is appropriate to make an order that, upon its reinstatement, Wardak be wound up, and Ms Low be appointed as its liquidator.

Application for orders for appointment of Ms Low as receiver and manager of the Trust and related orders

1. The first plaintiff, Jennifer Elizabeth Low, also seeks orders that she be appointed without security as receiver and manager of all of the assets and undertaking of the Trust, and that:
   1. The Receiver have powers:

1. provided by s 420 of the Act as if the reference therein to 'corporation' were to 'Trust', together with the powers that a liquidator has in respect of property of a company (in its role as legal owner and trustee) pursuant to s 477 of the Act; 2. to do all things necessary or convenient to be done for or in connection with or as incidental to the objective of: 1. enabling the first plaintiff, as receiver, to realise trust assets to enforce Wardak's indemnity, and apply the proceeds to discharge the liabilities of Wardak incurred as trustee; and 2. enabling the first plaintiff to recover the costs of the receivership, and the general costs of the liquidation of Wardak;

1. to discontinue, terminate or wind up any such business, enterprise or venture, in whole or in part; and

1. sell and convert into cash any property or assets of the Trust. 2. In order to enable her to properly discharge her functions and exercise her powers under these orders, the first plaintiff may obtain independent commercial and legal advice as she deems appropriate, including without limitation the advice of counsel. 3. The first plaintiff is entitled to: 1. remuneration for work done pursuant to the receivership orders by her and the staff of the firm acting under her supervision (Remuneration); 2. the reasonable costs and expenses (including without limitation legal expenses) properly incurred by her in the performance of her duties and the exercise of her powers and any matters arising from, relating to, incidental to and in connection with the performance of her duties and the exercise of her powers under the receivership orders (Costs and Expenses); and 3. an indemnity out of the assets of the Trust in respect of the Remuneration and Costs and Expenses. 4. The Receiver may from time to time after the date of appointment draw against the property and assets of the Trust as required for reimbursement of her Costs and Expenses. 5. The Receiver be paid Remuneration from the property and assets of the Trust from time to time, calculated on a time basis at the same rates as apply to the carrying out of the liquidation of Wardak, and such Remuneration be approved pursuant to s 60‑10 of the Schedule to the Act. 6. The first plaintiff would be justified in distributing the available funds realised from the Trust in accordance with the priorities outlined in Part 5.6, Division 6 of the Act. 7. The Receiver or any other party have liberty to apply to the court to vary or discharge these orders or other directions.
2. The principles that apply to an application for the appointment of a receiver where a corporate trustee enters external administration (and related orders concerning a receiver's powers to deal with trust assets) are well established. They were recently summarised by Hill J in Re Jennifer Elizabeth Low as liquidator of Midwest Marine Pty Ltd; ex parte Midwest Marine Pty Ltd (in liq).[13] I refer to and respectfully adopt her Honour's summary without repeating it.
3. It is submitted on behalf of the plaintiffs that the court has power to make the orders sought under s 601AH(3)(d) of the Act, which provides that upon making an order under subsection (2), the court may 'make any other order it considers appropriate.' The plaintiffs suggest that subsection (3)(d) should be given a wide interpretation and the court's discretion under the provision is broad and 'should encompass ancillary orders upon a winding up such as the receiver and manager appointment.' However, the plaintiffs have been unable to identify any authority that directly supports that position, or to support the making of the orders sought contemporaneously with a company's reinstatement of registration.
4. As Hill J observed in Re Jennifer Elizabeth Low as liquidator of Midwest Marine Pty Ltd, s 90-15(1) of the Insolvency Practice Schedule (IPS) provides that the court may make such orders as it thinks fit in relation to the external administration of a company. The power under s 90-15 is broad and permits orders to be made of the nature sought in relation to Ms Low being appointed and receiver and manager of the Trust, and in relation to her powers in that capacity to deal with the assets of the trust.
5. I have jurisdiction to make the orders sought under s 90-15 of the IPS as this matter has been referred to me, as Master, for hearing and determination by the judge in charge of the Corporations List.
6. A copy of the Trust Deed for the Trust is attached to the affidavit of William Bowie Macdonald sworn on 26 February 2024. Clause 85 of the Trust Deed provides that upon the trustee (Wardak) entering into liquidation, its appointment as trustee terminates automatically. As such, upon Wardak being wound up and placed into liquidation, whilst it retains the right to hold trust assets as bare trustee, the liquidator of Wardak will not have power to sell or deal with the assets absent intervention by the court.[14]
7. I am satisfied that Wardak only acted as trustee of the Trust and in no other capacity, and that all assets held by Wardak were held in its capacity as trustee of the Trust.
8. I accept that in the circumstances and on the evidence before me it is expedient for Ms Low to be appointed as receiver and manager of the Trust without security, and to have the power to deal with the assets of the Trust as provided in the orders sought. Ms Low is subject to the regulatory regime applicable to insolvency practitioners, which require her to maintain professional indemnity insurance and she is subject to the continued supervision of the court.
9. The orders sought are consistent with the legal principles referred to and as set out in Re Jennifer Elizabeth Low as liquidator of Midwest Marine Pty Ltd, and with the orders made in that case. I am satisfied they are appropriate in the circumstances of, and on the evidence adduced in, this case.
10. The plaintiffs also seek an order that the costs of these proceedings be costs in the winding up of Safa Auto Parts. In my view, that is the appropriate order as to costs.

1. For these reasons, I have made orders in the terms sought in the plaintiffs' amended minute of proposed orders, with minor modifications.
2. The orders made, a copy of which is annexed to these reasons marked 'Annexure A', are to be served on the interested parties notified of the application as identified in [31] of these reasons, which include liber[15] to apply.15

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Pursuant to ss 588FB, 588FC, 588FDB and 588FE(2), (3), (5) or (6B) of the Act.

[2] Jit Sun Investments Pte Ltd (Singaporean Unique Entity Number: 200308432W) v Australian Securities and Investments Commission [2021] WASC 235 [5] - [8].

[3] Re Deputy Commissioner of Taxation; in the matter of James Hardie Australian Finance Pty Ltd [2008] FCA 1181; (2008) 248 ALR 557 [13].

[4] The Bell Group Ltd v Australian Securities and Investments Commission [2018] FCA 884; (2018) ACSR 247, 262 [47] (McKerracher J).

[5] Hugall v Australian Securities and Investments Commission [2009] WASC 185 [13]; Callegher v Australian Securities and Investments Commission (2007) FCA 482; (2007) 239 ALR 749 [50].

[6] The Bell Group Ltd v Australian Securities and Investments Commission [49].

[7] Pilarinos v Australian Securities and Investments Commission [2006] VSC 301 [49].

[8] The Bell Group Ltd v Australian Securities and Investments Commission [72]; Re ERB International Pty Ltd (deregistered) [2014] NSWSC 200; (2014) 98 ASCR 124 [5].

[9] Re Brockweir Pty Ltd [2012] VSC 225 [22].

[10] See Affidavit of William Bowie Macdonald sworn 23 February 2024, WBM-2, and plaintiffs' written submissions filed 26 February 2024 [19] - [21], and the authorities referred to: Re Human Group Pty Ltd [2023] NSWSC 28 [15]; Legrande Enterprises Pty Ltd v ASIC [2009] FCA 718 [33] - [34] as to court's jurisdiction to wind up a company under s 461(1)(k) where there is no director presently able to manage the company's affairs.

[11] See for example The Bell Group Ltd v Australian Securities and Investments Commission [95], and the authorities referred to.

[12] See Australian Securities and Investments Commission v Westpoint Corporation Pty Ltd (2006) 56 ACSR 646; [2006] FCA 135 [20], [32] - [34].

[13] Re Jennifer Elizabeth Low as liquidator of Midwest Marine Pty Ltd; ex parte Midwest Marine Pty Ltd (in liq) [2023] WASC 481 [11] - [20].

[14] See Jones v Matrix Partners Pty Ltd; Re Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) FCR 310 [44], [85] - [91] (Alsop CJ), [142] Siopis J and [198] (Farrell J); Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 [22] - [28] (Gordon J),