Minos v S.J. Timilty Building Pty Limited

Federal Court of Australia|2024-05-13|Before: Mr P, Halley J

Pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) (Act), S.J. Timilty Building Pty Ltd (ACN 002 346 125) (Deregistered) (Company) be reinstated.
Pursuant to s 461(1)(k) of the Act, the Company be wound up on just and equitable grounds.
Andrew Scott be appointed as liquidator for the purposes of the winding up of the Company.
The costs of this application be costs in the liquidation of the Company. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A. Introduction 1 Before me today in my capacity as the Commercial and Corporations Duty Judge is an application by the plaintiffs, Jorden John Vincent Minos and Tallie-Bree Minos, for orders that the first defendant, S.J. Timilty Building Pty Limited (ACN 002 346 125) (Deregistered) (Company), be reinstated pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) (Corporations Act), that the Company be wound up on just and equitable grounds, and an order that Andrew Scott be appointed as liquidator for the purposes of the winding up of the Company (Application). 2 The Application is supported by an affidavit of Mr Minos, affirmed on 3 May 2024, together with affidavits of service from Rajan Matthew Raj Mal, John Stewart, David Neil Halling, Johannes Bernadinus Hunt and Tobias Colin Campbell. 3 In addition, the plaintiffs have tendered a consent of liquidator including from Mr Scott of PricewaterhouseCoopers to act as liquidator of the Company. 4 The Australian Securities and Investments Commission (ASIC) has advised that it does not oppose the relief sought and does not wish to be heard, nor does it intend to appear at the hearing of the Application.

B. Background 5 The Company was deregistered by way of a voluntary deregistration on 30 June 2021. 6 In or about October 2017, the Company entered into a residential building contract with the predecessor in title to the plaintiffs, with respect to the construction of a new dwelling to be carried out at 73A Dolans Road, Burraneer, New South Wales (Contract). 7 The Contract included warranties that are required to be implied into every residential building contract with respect to the standard of work and its lawfulness pursuant to s 18B of the Home Building Act 1989 (NSW) (HBA). As successors in title, the plaintiffs hold the benefit of those warranties: s 18C of the HBA. 8 The warranties provided under the HBA, however, are limited in both time and scope. The maximum warranty period for major defects is six years. That period runs from the date of completion of the work: s 18E and s 3B of the HBA. 9 Major defects are defined in s 18E(4) of the HBA to include a defect in a "major element of a building …". A "major element" of a building includes, relevantly, internal or external load-bearing components of a building that is essential to its stability, and waterproofing: s 18E(4) of the HBA. 10 Mr Minos gives evidence that the property that he and Mrs Minos, the second plaintiff, acquired from the predecessor in title, the brother-in-law of the plaintiffs, suffers from the following defects: (a) structural issues that have caused water damage to a common structural wall between the property and the neighbouring property; (b) defective roofing and guttering resulting in leaks from the roof and/or gutters and consequential damage to wooden flooring, ceilings, walls, carpets and lights; (c) defective waterproofing of the rear alfresco area and consequential damage to the ceiling, paint and gyprock and mould damage to outdoor kitchen cabinetry; (d) the small side courtyard lacks provision for adequate drainage; (e) windows are not properly sealed in second and third bedrooms; and (f) defective waterproofing has resulted in water leaks through the front balcony ceiling. 11 On 25 April 2024, the plaintiffs' solicitors notified the Home Building Compensation Fund of New South Wales of those defects. 12 The plaintiffs have engaged a hydraulic expert to inspect the property and have engaged a structural and waterproofing expert to also inspect the property. 13 On the information currently available to the plaintiffs, it appears that the date by which they must commence proceedings under the HBA in order to satisfy the limitation periods under s 18E of the HBA is likely to fall at a date between 15 May 2024 (based on an invoice issued on 15 May 2018 for tiling and painting) and 12 June 2024 (based on an invoice issued on 12 June 2018 relating to the pouring of the driveway and paths as well as landscaping). 14 Significantly, the Company held home warranty insurance for the work throughout the relevant period. It is only possible to make a claim under the home warranty insurance policy in circumstances where a builder is deceased, disappeared or insolvent. It is not presently clear whether a deregistered company constitutes a builder who has "disappeared". 15 In order to avoid any potential issue with respect to eligibility to make a claim under the home warranty insurance policy, the plaintiffs today seek orders for reinstatement of the Company and the appointment of a liquidator.

C. Relevant principles 16 Section 601AH(2) and s 601AH(3) of the Corporations Act relevantly provide: Reinstatement by Court (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. Note: For example, the Court may direct ASIC to transfer to another person property vested in ASIC under subsection 601AD(2). 17 If a company is reinstated, s 601AH(5) of the Corporations Act provides that the company is taken to have continued in existence as if it had not been deregistered. Any person who was a director immediately before deregistration is reinstated as a director, any company property vested in the Commonwealth or ASIC revests in the company, and any security, interest or claim attached to company property remains in force: Ligon 158 Pty Limited (in liq) v Shield Holdings Australia Pty Limited (de-registered) [2024] FCA 144 at [24] (Cheeseman J). 18 The principles applicable to the reinstatement of a deregistered company are well established. In Ligon, Cheeseman J observed at [27] that the relevant principles were comprehensively reviewed by Gleeson J in Yeo v Australian Securities Investments Commission, in the matter of Ji Woo International Education Centre Pty Ltd (deregistered) [2017] FCA 1480 at [11]-[25], and also, by Bell P (as his Honour then was) in Owners of Strata Plan No 91349 v Australian Securities and Investments Commission (2020) 147 ACSR 456; [2020] NSWSC 685 at [59]-[79]. 19 Those authorities relevantly establish, as Cheeseman J noted in Ligon at [28]-[31], the following four principles: (a) the expression "a person aggrieved by the deregistration" under s 601AH(2) is not defined in the Corporations Act, but should not be narrowly construed; (b) the provisions that provide the Court "may" order reinstatement, if satisfied that it is "just" to do so, confers a broad discretionary judgment on the Court; (c) if the Court is satisfied that the conditions in s 601AH(2)(a) and (b) have been satisfied, then in the ordinary course, an order for reinstatement will be made; and (d) the Court is required to consider, in the exercise of its discretion, the future stewardship of the company, if and when it comes back into existence. 20 It is generally not appropriate for the Court to entertain in any detailed way, argument as to the merits or otherwise of a claim for a right of value or potential value that may have gone out of existence by reason of the deregistration of a company: Owners of Strata Plan No 91349 at [65].

D. Consideration 21 I am satisfied in the present case that the plaintiffs are "person[s] aggrieved" by reason of the fact that they have a claim against the Company for breach of statutory warranties under the HBA. The plaintiffs have a genuine grievance that the dissolution of the Company has affected their interests, because, in this case, they may well have lost the right of some value, or potential value, which has gone out of existence: see Owners of Strata Plan No 91349 at [63]. 22 Further, I am satisfied that it is just that the discretion to reinstate the Company be exercised, for the following reasons. 23 First, the Company was deregistered after the work was completed, but only halfway through the warranty period. If the Company is not reinstated, there is a real risk that the plaintiffs will suffer prejudice in being unable to pursue a claim under the HBA. 24 Second, the Company's director has not indicated any prejudice to the Company, notwithstanding that the director was served late last week with the originating process and supporting documents. 25 Third, more broadly, there is significant public interest in builders who are subject to statutory warranties not being permitted to deregister companies with a consequence that the intent of the legislature would be defeated. The application by the first defendant for deregistration necessarily proceeded on the basis that the first defendant's assets were worth less than $1,000 by reason of s 601AA(2)(c) of the Corporations Act. On the evidence of Mr Minos, it would appear that the liability to the plaintiffs in respect of the defects substantially exceeds $1,000. 26 For these reasons, I am also satisfied that an order should be made that the Company be wound up on the just and equitable ground pursuant to s 461(1)(k) of the Corporations Act. 27 Finally, I note that as a liquidator had not been appointed to the Company prior to its deregistration, it is necessary for a liquidator to be appointed. I am satisfied that Mr Scott has filed a consent to act as liquidator and that it is appropriate to appoint him as the liquidator of the Company.

E. Disposition 28 For these reasons, I am satisfied that orders substantially in the form of the orders sought by the plaintiffs in the originating process should be made. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.

Corporations Act 2001(Cth)ss 461, 601AA, 601AH

Home Building Act 1989(NSW)ss 3B, 18B, 18C, 18E

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