Krstevska v ACN 010 505 012 Pty Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CAMPBELL J 21 NOVEMBER 2001 5567/01 APPLICATION OF MILENA KRSTEVSKA Judgment 1 HIS HONOR: This is an application by Milena Krstevska to bring a deregistered company out of deregistration and, if that is done, to grant leave to sue the company. 2 On 10 July 2001, Ms Krstevska issued proceedings in the District Court at Wollongong against Menzies Business Services Pty Limited. She claimed damages for injuries she says she suffered while working as a cleaner at Waterloo Public School between January 1994 and August 1999. 3 The statement of claim as originally filed asserted that Menzies Business Services Pty Limited was her employer for the whole of that period. Her solicitor then received information which suggested that two other companies probably employed her for part of that period. One of those companies was City Services Pty Limited, the other was Berkley Challenge Australia Pty Limited. That last mentioned company, it was discovered, had changed its name to ACN 010 505 012 Pty Limited. 4 Thereupon her solicitor took out a notice of motion in the District Court proceedings, initially returnable on 24 September 2001 naming those two companies as respondent, seeking leave to join those companies as defendants to the suit and seeking an extension of time under section 151D of the Workers' Compensation Act 1987 in which to sue those two companies. Section 151D provides, broadly that if a person is entitled to receive compensation from his or her employer, that person cannot bring a common law claim for damages against the employer more than three years after the date on which the injury was received except with the leave of the Court in which the proceedings are taken. It will be seen that the period in which Ms Krstevska says she received her injuries is partly inside that three year period and partly outside. 5 It has now been discovered that the company now named with its ACN was placed in a members voluntary winding up on 13 June 2000. The ASIC search shows that its winding up ceased on 29 September 2001 and that the company was deregistered under the provisions of section 509 of the Corporations Act 2001 (Cth) on 29 September 2001. (Section 509 provides for a company to be deregistered at the conclusion of a voluntary winding up when its affairs are fully wound up.) 6 Ms Krstevska's solicitor also made enquiries to WorkCover, trying to find out who the workers' compensation insurer of Berkley Challenge Australia Pty Limited had been during the period 19 January 1994 to 16 January 1997. (It appears that after 16 January 1997 Menzies Business Services Pty Limited was her employer.) WorkCover replied on 8 November 2001, identifying two insurers who between them covered the whole of the period enquired about and giving the numbers of the two relevant policies. 7 On 16 November 2001, Ms Krstevska's solicitor wrote to the former liquidator of the company known by its ACN, informing of his intention to seek to have the company restored to the register, stating that he intended to resort to the workers' compensation insurance policy, and enclosing a copy of WorkCover's letter of 9 November which identified the relevant policies. 8 It appears that City Services Pty Limited had been deregistered also. On 18 October 2001 this Court made orders in relation to City Services Pty Limited reinstating its registration, and granting leave to Ms Krstevska to commence and continue District Court proceedings against that company. 9 On 19 November 2001 the present application was started and I gave leave to serve short notice of it. At that time there was evidence that the Notice of Motion in the District Court proceedings had been transferred from Wollongong to Sydney, and that it was to be heard on 22 or 23 November. There is also some evidence from the plaintiff's solicitor that legislative changes are imminent in relation to workers' compensation claims which would have an effect on the rights of employees in Ms Krstevska's position in respect of her personal injuries claim. Her solicitor was anxious to have her claim dealt with as soon as possible. 10 The application to reinstate the company is made under section 601AH of the Corporations Act 2001. That section provides so far as relevant: "…(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… (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 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." 11 Thus, the application needs to be made by a person who is aggrieved by the deregistration. This test is satisfied if an applicant's legal rights have been affected by the deregistration and if it has a genuine grievance that the dissolution has affected its interests. (Re Proserpine Pty Limited and the Companies Act [1980] 1 NSWLR 745; Australian Competition and Consumer Commission v ASIC [2000] NSWSC 316 at [24] - [26]; (2001) ACLC 341.) In so far as the entity Ms Krstevska wants to sue has gone out of existence, that test is satisfied. 12 It is also necessary that the Court be "satisfied that it is just that the company's registration be reinstated." That expression confers a very broad discretion on the Court. Usually the exercise of that discretion would require the Court to consider what will happen if the company stays deregistered, and what had will happen if it comes out of deregistration. 13 Here the company was in liquidation immediately before the deregistration. Reviving the company will result in it being in liquidation once again. While its directors will retake their offices under section 601AAH(5), they will have no powers in relation to the company because of the liquidation. The identity of the liquidator is known and there is no difficulty with his taking up that office again if he is in fact called upon to carry out any functions. There is a real prospect, given the purpose of the present application, that he will not need to carry out any functions. 14 In the present case there is no suggestion that reversing the deregistration would allow an insolvent company to trade. (cf Re Great Eastern Cleaning Services Pty Limited and the Companies Act (No.2) (1978) 3 ACLC 886). There is some possibility that the liquidator might need to go through the formal steps of concluding once again the affairs of the company - though whether there is so may depend on the basis on which any litigation which Ms Krstevska brings against the company is resolved (including whether any money flows through the company as a result of that litigation, rather than being paid directly to Ms Krystevska by an insurer), and on whether ASIC deregisters the company by administrative action once the litigation is over. The liquidator, having been notified of the present application, does not appear in these proceedings to suggest that there will be any practical problems resulting from the reversal of the deregistration. 15 Not reviving the company would prevent Ms Krstevska from bringing her litigation against it, in circumstances where any liability of the company is covered by a policy of insurance. This would be a detriment to her. If there are any considerations which make it unfair for the insurers to have to litigate an old claim those considerations are more properly ones to be taken into account in the District Court in the application under section 151D of the Workers' Compensation Act, not in this application. 16 There is room for doubt, in some cases where an application is made to the Court to reverse the deregistration of a company so that an insurance policy can be accessed, whether that is the most convenient course to adopt. Section 601AG Corporations Act says: "A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if: (a) the company had a liability to the person, and; (b) the insurance covered that liability immediately before deregistration." 17 Counsel for Ms Krystevska submits that there may be some room for argument that section 601AG does not apply in a situation where the amount of the liability of a company has not been ascertained at the time it is deregistered, and the doubt raised by the existence of that argument is a reason for someone in Ms Krystevska's position seeking to bring the company out of deregistration, rather than relying on section 601AG to obtain access to the insurance policy. As presently advised I have significant doubts about the strength of that argument, but it is not necessary for present purposes to decide it. 18 If the proper construction of section 601AG is that it applies to a situation where a company has done something which results in it having a legal liability at the time of its deregistration, that legal liability has not been established either by litigation or acknowledgement at the time of deregistration, but there is an insurance policy in place which would sufficiently cover the liability once it was established, then in some cases it would be easier to simply rely on section 601AG to sue the insurer rather than to go through the complex procedure of taking a company out of deregistration. This is particularly so when taking the company out of deregistration revives it for all purposes, not just for the purpose of bringing the litigation which is the immediate occasion for bringing it out of liquidation, and when taking the company out of deregistration involves the cost and trouble of notifying ASIC, notifying any liquidator, and taking court proceedings. 19 The present case, however, is one which has some unusual complexities. The possibility of Ms Krstevska suing the insurers directly was raised by Ms Krstevska's solicitor with the solicitor for one of the insurance companies. The solicitor for that insurer took the view that it was appropriate for all relevant employers to be named as defendants because of the complexity of the matter, because there were successive periods of employment with different employers, and because there were successive insurance policies. 20 I can understand that, for the purpose of establishing the obligations which might exist under each insurance policy, it is necessary to clearly identify which employer has which liability to Ms Krstevska, arising from events during which period of time, and which insurance policy is to respond - assuming for the purpose of argument that one of the employers actually has a liability and that one of the insurance policies does indeed respond. There is no reason of principle why a plaintiff who seeks to use section 601AG could not assert and prove those matters. Using section 601AG imposes on a plaintiff the burden of assessing and proving not only that the company has a liability, but also that the company's insurance contract is one which responds to that liability. There will be cases where it should not be difficult for a plaintiff to assert and prove that the company's insurance policy will respond to the liability. However, on the evidence before me I could not be confident that Ms Krstevska could, in fact, readily assert and prove that, or that it would be appropriate for the Court to expect her to have been able to assert and prove it. 21 In these circumstances it seems to me that it is appropriate to make an order bringing the company out of deregistration rather than to require Ms Krstevska to rely on 601AG. There may well be cases, however, when a Court is not prepared to make an order under section 601AH but rather will require the applicant to take the apparently easier course under section 601AG. 22 In the present case also, given the apparent imminence of changes in the Workers Compensation legislation, I do not think it is appropriate to adopt a course which requires the plaintiff to reconsider the course she has already embarked on in the District Court, namely, seeking to sue the employer companies themselves. In a situation where the law on this topic seems likely to be about to undergo significant change, making the applicant in effect start again in that respect, could significantly affect her rights. 23 I am therefore prepared to make the order. It will be made on the basis that the applicant's solicitor undertakes to the Court to advise ASIC when the litigation which Ms Krstevska brings against the company has finished. 24 In so far as application is made for leave to proceed, this is a case which falls within a category where the Court regularly grants such leave and I propose to grant it. 25 The orders of the Court are:

1. that the Australian Security and Investment Commission reinstate the registration of the company ACN 010 505 012 Pty Limited,

2. that leave be granted to the plaintiff to commence and continue nunc pro tunc proceedings in the District Court of New South Wales against ACN 010 505 012 for damages in relation of injury alleged to have occurred in the course of the plaintiffs employment with ACN 010 505 012 Pty Limited.

I note the undertaking of the plaintiff's solicitor to advise ASIC when the litigation which she brings against the company has finished.

I order that if the plaintiff recovers any judgment against the company, it not be enforced without the leave of the Court. **********

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