Pavlakis v Equmen Pty Limited

REASONS FOR JUDGMENT 1 The second plaintiff, Gavin Jones Communications Pty Ltd (subject to deed of company arrangement) (Gavin Jones Communications) applies for an order under s 175 of the Corporations Act 2001 (Cth) (the Act) that the defendant's register of members be corrected. The application is made in the following circumstances. 2 On 20 August 2014, I made an order appointing David Levi, an official liquidator, as provisional liquidator of the defendant. The only active director of the defendant before that time was Gavin Stuart Jones. However, Mr Jones died on 12 July 2014. At the time that Mr Levi was appointed, the defendant was without an effective board of directors. Further, the evidence before me at that time indicated that the defendant was unable to pay its debts as and when they fell due. The full circumstances in which Mr Levi's appointment as provisional liquidator was made are set out in Pavlakis v Equmen Pty Limited [2014] FCA 929. 3 At the time of Mr Levi's appointment as provisional liquidator, an historical search of the defendant showed that it had, on record, two directors and two shareholders. The directors were the late Mr Jones and Corie Kim Chung. The shareholders were shown as Gavin Jones Communications, as to 75 shares, and Ms Chung, as to 25 shares. However, Ms Chung had resigned as a director, or at least ceased to act as a director and, on 20 May 2012, had executed a transfer of her 25 shares in the defendant to Gavin Jones Communications. For reasons that are not known, the share transfer was not registered and Ms Chung's resignation (or cessation) as a director of the defendant was not recorded in the defendant's register of directors or notified to the Australian Securities and Investments Commission. Ms Chung has played no role in the defendant's affairs since at least May 2012 and has resided overseas for some time. 4 I should note that, at the time of his death, Mr Jones was also the sole director and sole shareholder of Gavin Jones Communications. On 7 August 2014, Gavin Jones Communications was placed in voluntary administration. Mr Levi was appointed as administrator. 5 On 29 August 2014, I granted leave to Mr Levi, pursuant to s 436B(2)(g) of the Act, to appoint himself as administrator of the defendant: Pavlakis v Equmen Pty Ltd (No 2) [2014] FCA 951. Mr Levi duly appointed himself as administrator with the consequence that, under s 437C of the Act, his power to act as provisional liquidator of the defendant was suspended while it was under administration. 6 The defendant and Gavin Jones Communications have each entered into deeds of company arrangement. Mr Levi is the deed administrator of each deed. His powers as provisional liquidator of the defendant have now been restored, the defendant no longer being in administration. 7 Mr Levi wishes to be released from his office as provisional liquidator of the defendant. The difficulty is that the defendant has no board of directors and, but for Mr Levi acting as provisional liquidator, has no officer to manage and control its affairs. 8 The first plaintiff, Mr Pavlakis, who is the Chief Executive Officer of the defendant, had originally informed the Court that he was not prepared to act as a director of the defendant. He has now changed his mind and is prepared to undertake that office. However, as matters presently stand, a quorum of members, as required by the defendant's constitution, cannot be achieved in order to hold a meeting at which Mr Pavlakis can be appointed to that office. 9 This is the reason for the present application. If the defendant's register of members can be corrected by removing Ms Chung as a member, and recording Gavin Jones Communications as the sole member, of the defendant, as was intended at the time that Ms Chung executed the share transfer in favour of Gavin Jones Communications, then it will be possible for the defendant to hold a meeting of members (Gavin Jones Communications then being the sole member) at which Mr Pavlakis can be appointed as director. 10 At this point, I should record that Ms Chung has been given notice of the present application and supports it. I should also record that, on 4 August 2014, the Supreme Court of New South Wales ordered that there be a grant to Mr Pavlakis of special letters of administration, permitting him to appoint a director to Gavin Jones Communications pursuant to s 201F of the Act. On the same day, Mr Pavlakis appointed himself as a director of Gavin Jones Communications. 11 The position is, therefore, that in May 2012, Gavin Jones Communications obtained from Ms Chung a transfer of her shares in the defendant but, for whatever reason, the late Mr Jones, who was in effective control of the defendant, did not register the transfer and record Gavin Jones Communications as the sole shareholder in the defendant's register of members. Gavin Jones Communications is plainly a person aggrieved by that failure. There is currently no officer of the defendant who has power to register the transfer of shares. In my view, Gavin Jones Communications is entitled to an order that the defendant's register of members be corrected to record its ownership of all the issued shares in the defendant. An order for correction will, therefore, be made. I will also order that Mr Levi have the power, as provisional liquidator, to effect that correction.