Onesteel Reinforcing Pty Ltd v Westpoint Constructions Pty Ltd, in the matter of Westpoint Constructions Pty Ltd

REASONS FOR JUDGMENT 1 This is an unusual application. There is on foot an application by OneSteel Reinforcing Pty Limited to wind up Westpoint Constructions Pty Ltd. However, Onesteel no longer wishes to proceed with that application and has provided Westpoint with a notice of discontinuance to file on its behalf but, for a reason I will explain in a moment, that notice has been given to someone else. The application which is before me is not the winding up application. Westpoint has brought an application under s 1322(4)(b) of the Corporations Act 2001 (Cth) for an order to rectify a register maintained under the Act by Australian Securities and Investments Commission (ASIC). It is that application that I must resolve. 2 These are the facts that have produced both applications. Westpoint is a substantial company. Its business involves the design and construction of major residential and commercial projects, principally for companies in the Westpoint group. The group has net assets exceeding $80 million. Westpoint itself has unencumbered assets of around $700,000. It is trading profitably. It has work in progress worth exceeding $200 million and it is about to begin further projects valued at approximately $500 million. 3 In 2004 there was a dispute between Westpoint and OneSteel about a contract for a development in Melbourne. Westpoint terminated the contract, purportedly for breach. Onesteel made a claim for $166,781.30 as money due to it under the contract. Negotiations to settle the dispute were unsuccessful. Consequently OneSteel sent by prepaid ordinary post a statutory demand claiming payment of the debt. For reasons which cannot be explained, the demand was not received by Westpoint. Of course, the demand was not satisfied. Believing that the demand had been ignored, Onesteel made application to wind up Westpoint. In accordance with s 470 of the Corporations Act, notice of the application was lodged with ASIC. The notice was then placed on an ASIC register which is available for inspection by members of the public. 4 When Westpoint was served with the winding up proceeding it immediately paid OneSteel's claim, reserving the right to take any action on the contract which it might consider appropriate. Having received payment of its debt OneSteel has agreed to discontinue the winding up application. In any event, the application is bound to fail because Westpoint is able to establish its solvency with little difficulty. 5 The reason Westpoint applies to rectify the register is this. Westpoint says that the nature of the construction business is such that it must rely heavily on the support of its creditors and financiers who regularly make inquiries into about Westpoint's credit. These inquiries are made to ASIC and to private information bureaus who have access to ASIC's record. If, as a result of those inquiries, it becomes known that there has been an application to wind up Westpoint, the company's reputation will be damaged, some creditors may be reluctant to extend it credit and it will be far more difficult for Westpoint to conduct its affairs. It therefore seeks an order that the ASIC register be rectified by the removal of any reference to the winding up proceeding. 6 Initially I was a little sceptical about Westpoint's concerns, believing that Westpoint might be exaggerating the problem. But my scepticism was misplaced. One of Westpoint's financiers which has agreed to provide the company with a facility of $1.3 million, will not permit the facility to be drawn until this matter is resolved. Moreover, this financier requested delivery of the notice of discontinuance to its solicitors which (when filed) will get rid of the winding up application. I assume that once the outcome of this application is known, the financier will return the notice of discontinuance so that it may be filed. 7 Mr Faigen, who appears for ASIC, informed me that ASIC neither consents nor opposes the application. He then reminded me that on the withdrawal or dismissal of a winding up application, s 470 requires notice of that fact to be lodged with ASIC. He said that in due course that notice will also appear on the register. If I were to order rectification of the register to remove notice of the winding up application, a similar order should be made in relation to the notice of withdrawal. 8 I am satisfied that had the statutory demand come to the attention of Westpoint the dispute with OneSteel would have been resolved immediately, as in due course it was. It is unfortunate that things went as far as they did. In the unusual circumstances of this case I would make the orders sought provided there is power to do so. 9 On this point I was referred to Re Voxson Sales Pty Ltd [1988] 1 Qd R 711. There an application was made under s 539(4)(b) of the Companies (Queensland) Code (the predecessor to s 1322) to remove and destroy documents which had been lodged with the National Companies and Securities Commission in relation to the defective appointment of a receiver. Ambrose J declined to make the order. He said (at 717): "I am unpersuaded however that a register may be 'rectified' by removing and destroying microfilm of documents which have been lodged with and accepted by the Commission." He later went on to state: "Once an application to wind up, however, has been made, that fact cannot be 'hidden' from public gaze merely because upon the hearing of the application it is shown that the application ought never to have been made." 10 As to the judge's first point, the present application is sufficiently different not to be covered by his reasoning. Westpoint does not seek the destruction of records lodged with ASIC. Those records will be retained. Westpoint seeks only the removal of an entry from the register. Section 1322(4)(b) gives the court power to direct the "rectification of any register kept by ASIC". One meaning of "rectify" is to "reform" and I am asked to order the register be reformed by the removal of an entry. I am in no doubt that I have the power to make that order. 11 As to the second point made by Ambrose J, concerning the question of discretion, that point was made in relation to the particular circumstances of the case. For reasons which I have explained, I am satisfied that the discretion should be exercised in favour of Westpoint on the facts of this case. 12 I notice that s 1322(4) provides that orders may be made unconditionally or subject to such conditions as the court imposes. There is a condition that, I think, ought be imposed in the circumstances. It relates to the commencement of the order. In my view the order should not come into operation until the notice of discontinuance is filed or the winding up application is discontinued. It would be wrong to remove notice of the application if the application is still on foot. 13 So far as costs are concerned, ASIC says that it may incur some expense in carrying out the order. It is appropriate to protect ASIC's position by reserving to it liberty to apply in the event that the rectification exercise is costly and it wishes to seek reimbursement from Westpoint. If an application is made I can then determine whether or not ASIC should bear the costs or in what proportion it should do so. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.