Middleton Nominees Pty Ltd (ACN 005 219 876) v Westpac Banking Corporation

REASONS FOR JUDGMENT 1 An application has been filed by Middleton Nominees Pty Ltd (ACN 005 219 876) and Sonia Kirszbaum ("the Applicants") seeking an order pursuant to s 601AH(2) of the Corporations Act 2001(Cth) ("Corporations Act") for the reinstatement of the registration of Nepalle Pty Ltd (ACN 007 013 112)("Nepalle"). The application seeks further orders dependent upon an order for reinstatement being made pursuant to s 601AH(2) of the Corporations Act. 2 Section 601AH of the Corporations Act relevantly provides as follows: "(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 the Court makes an order under subsection (2), it may: (a) validate anything done between the deregistration of the company and its reinstatement; and (b) make any other order it considers appropriate. ..." 3 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 the Australian Securities and Investments Commission ("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. 4 Nepalle was deregistered by ASIC pursuant to s 601AA of the Corporations Act following an application by the members of Nepalle. At the time of application, the members and directors of Nepalle considered that the requirements of s 601AA(2) had been satisfied. The applicants now contend that the directors of Nepalle, in resolving to make application to ASIC for the company to be deregistered, may have proceeded on wrong bases: that the company had assets worth less than $1,000 and had no outstanding liabilities. It will be necessary to return to consider some of these requirements in further detail below. 5 The application for reinstatement is unopposed. Notwithstanding the lack of opposition, an application for reinstatement must satisfy two requirements: that the applicants for reinstatement are persons aggrieved (s 601AH(2)(a)) and secondly, that the Court is satisfied that it is just that the company's registration be reinstated (s 601AH(2)(b)). These two conditions are conjunctive, not disjunctive. The requirement that the Court be satisfied that it is just that the company's registration be reinstated is not constrained by any particular criterion. However, the authorities make it clear that there are a number of matters which ought to be taken into account, namely the circumstances in which the company came to be deregistered, the future activities of the company if an order be made and also whether any particular person is likely to be prejudiced by the reinstatement: see for example, Re Kilkenny Engineering Pty Ltd (In Liq) (1976) 13 SASR 258; Drysdale v Australian Securities Commission (1992) 10 ACLC 1427; Re Steelmaster Pty Ltd (In Liq); Kenny v McCann (1992) 10 ACLC 176; Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688; Re Smith (a former liquidator of Dallma Multifab Engineering Company Pty Ltd (2005) 54 ACSR 672. 6 Against that background, it is to the current application that I now turn. The applicants are persons aggrieved by the deregistration: see s 601AH(2)(a) and Casali v Crisp [2001] NSWSC 860 at [27] referring to Olney J in Re Waldcourt Investment Co Pty Ltd (1986) 11 ACLR 7 at 12. The applicants were shareholders in Nepalle. Ms Kirszbaum was also a director of Nepalle and remained so until it was deregistered on 26 November 2006. 7 Moreover, the purpose of seeking the reinstatement of Nepalle is to enable Nepalle to be joined as a party to proceedings commenced in the Federal Court by the applicants in which they seek damages and other relief for allegedly misleading and deceptive conduct arising out of what in the most general terms may be described as the financing by the Westpac Banking Corporation ("the Bank") of the acquisition of the freehold and business of the property known as "Victoria by the Park" at 27 Victoria Street, Elsternwick. The applicants contend Nepalle has a contingent asset, being a claim for money had and received by the Bank on behalf of Nepalle. The contingent asset was said to arise on or about 5 July 2006 when the Bank, purportedly without the agreement or consent of Nepalle and in purported reliance upon its rights under a Guarantee and Indemnity, applied the net proceeds of the sale of a property at 44 Otira Road, Caulfield, Victoria (in the sum of $1.067m) in reduction of an amount alleged by the Bank to be owed to it by another entity. The applicants contend that the Guarantee and Indemnity had expired on 31 December 2005. The Bank disputes this contention. The proposed money had and received claim against the Bank is set out in paragraphs 33O to 33Q of the proposed Amended Statement of Claim which is exhibit "SK2" to the affidavit of Sonia Kirszbaum affirmed on 8 May 2007. 8 The applicants acknowledge that the reinstatement of Nepalle may also expose the company to a contingent liability in respect of its obligations under the Guarantee and Indemnity that it provided to the Bank. Other facts relevant to the exercise of the court's discretion in determining whether to reinstate Nepalle include: (1) Nepalle was deregistered by ASIC pursuant to s 601AA of the Corporations Act following an application by the members of Nepalle; (2) at the time Nepalle was deregistered, it was not insolvent and the members were unaware of the legal basis of the claim Nepalle has against the Bank; (3) all of the shareholders and the directors of Nepalle seek reinstatement; (4) the purpose of reinstatement is to enable the claim against the Bank to be pursued. The Bank does not oppose the reinstatement of Nepalle. 9 In the circumstances, the applicants are persons who are aggrieved and it is just that Nepalle be reinstated. 10 The applicants submitted that they will, if called upon as a condition of reinstatement, give an undertaking to the Court that they will pay any costs awarded against Nepalle in the substantive proceeding if Nepalle is unable to pay. In my view, such an offer confuses two quite separate issues: this application and the issue of security for costs in the substantive proceedings. If the latter issue is to be raised, then it is a matter for the Bank to consider and not a matter which I should consider or determine on the basis of the evidence before me on this application. 11 I propose to make orders in the following terms: