Millbrook Finance Pty Ltd v Australian Securities and Investments Commission, in the matter of Kekpek Pty Ltd

REASONS FOR JUDGMENT 1 An application has been filed by Millbrook Finance Pty Ltd (ACN 110 264 278) (the Plaintiff) seeking an order pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) (the Act) for the reinstatement of the registration of Kekpek Pty Ltd (ACN 116 470 467) (Kekpek). 2 Section 601AH of the 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 (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. 3 As was explained in Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688 at [27]-[28] in relation to s 601AH(2): [27] The wording of the section is very broad, and the cases confirm that it gives the court a wide discretion. The court takes into account the circumstances in which the company came to be dissolved; whether, if the order were made, good use could be made of it; and whether any person is likely to be prejudiced by the reinstatement: Re Kilkenny Engineering Pty Ltd (in liq) (1976) 1 ACLR 285; Drysdale v Australian Securities Commission (1992) 10 ACLC 1427; Re Steelmaster Pty Ltd (in liq) (1992) 6 ACSR 494. [28] These matters are only factors to be weighed in the exercise of the court's discretion. They are not limits on the court's power. Here, the reinstatement is likely to lead to the company being joined in proceedings in which the [Australian Competition and Consumer Commission] will seek orders for pecuniary penalties against it. The company may therefore be prejudiced. The court may nevertheless conclude that it is just that the company's registration be reinstated, having regard (for example) to the strong public interest which is involved. It is appropriate for the court to take into account questions of public interest in exercising its discretion under s 601AH: Re Immunosearch Pty Ltd (1990) 2 ACSR 455. 4 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. 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. 5 Kekpek was deregistered on 24 February 2014. The deregistration was initiated by ASIC under s 601AB of the Act. ASIC informed the Plaintiff that Kekpek was deregistered as a result of its failure to pay a review fee: s 601AB(1A). 6 ASIC does not oppose the application for reinstatement. Notwithstanding the lack of opposition, an application must satisfy two requirements: first, that the applicant for reinstatement is a person aggrieved (s 601AH(2)(a)) and second, 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. 7 The Plaintiff seeks re-registration of Kekpek to enforce securities that the Plaintiff is in the process of attempting to recover in the Supreme Court of New South Wales in relation to debts that the Plaintiff alleges are owed to it by Kekpek. The securities arise out of the following loan agreements between the Plaintiff and Kekpek: 1. Loan agreement dated 7 March 2012 in the sum of $200,000 (First Loan Agreement); 2. Loan agreement dated 14 May 2012 in the sum of $180,000 (Second Loan Agreement); and 3. Loan agreement dated 29 November 2012 in the sum of $60,000 (Third Loan Agreement), collectively, the Loan Agreements. 8 As security for an advance under the First Loan Agreement, Kekpek provided to the Plaintiff, by way of a General Security Agreement dated 7 March 2013, a security over an asset of Kekpek, being its leasehold interest in a business known as Jouliana's Woodfired Pizza Italian Restaurant, shop 10, 6 Avenue of Europe, Newington, Sydney, New South Wales (the Business) and a mortgage over the land comprised in Certificate of Title Folio Identifier 88/6784, being the land known as 9 Mimosa Street, Granville, New South Wales (the Granville Property). The estimated value of the Granville Property is $600,000. Approximately $400,000 is due to the first registered mortgage holder and the Plaintiff holds a second registered mortgage over the Granville Property. 9 Since approximately February 2013, Kekpek allegedly has been in default of its obligations under the Loan Agreements. On 15 July 2013, the Plaintiff filed proceedings in the Supreme Court of New South Wales (the NSW Supreme Court Proceeding) seeking an order for possession of the Glanville Property. The NSW Supreme Court Proceeding is currently stayed by reason of the deregistration of Kekpek. The Plaintiff submits that it is prejudiced by the deregistration of Kekpek in that the Plaintiff is unable to enforce the securities to recover the amounts owed under the Loan Agreements. 10 Against that background, it is to the current application that I now turn. A person may be aggrieved by the deregistration of a company if that person has a claim against the company: Arnold v Poltane Pty Ltd [2005] FCA 1418 at [4] and Donmastry Pty Ltd v Albarran (2004) 49 ACSR 745 at [4]. In the present case, the Plaintiff is a person aggrieved by the deregistration: see s 601AH(2)(a). 11 Next, the Court is satisfied that it is just that Kekpek's registration be reinstated. Kekpek came to be dissolved by reason of the non-payment of a fee. If the order is made, the Plaintiff will be entitled to pursue the NSW Supreme Court Proceedings and although it is likely that Kekpek will be prejudiced by the reinstatement, it is just that Kekpek's registration be reinstated. Moreover, the Plaintiff has not delayed in making this application. In this context, it is necessary to record that the evidence disclosed that the business appears to be still trading and the former office holder of Kekpek was served with notice of the application but did not appear. For those reasons, ASIC will be ordered to reinstate the registration of Kekpek pursuant to s 601AH(2) of the Act. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.