SPECIALIST PATHOLOGY SERVICES PTY LIMITED ACN 126 594 616 v EMERGEN-X PTY LIMITED

REASONS FOR JUDGMENT 1 The plaintiff applies under section 509(6) of the Corporations Act 2001 (Cth) ("the Act") for an order that the Australian Securities and Investments Commission ("ASIC") deregister the defendant, Emergen-X Pty Limited (in liquidation) ("the Company"), on 24 May 2010. 2 If the order is not made, the effect of section 509(5) of the Act is that the Company would be deregistered on 21 July 2010. Section 601AC(2) would also require ASIC to deregister the Company on 21 July 2010, if an order under section 509(6) has not been made during the period from 21 April to 21 July 2010 The effect of section 509(6) is that the Court has power to make the order, provided that the application is made before the end of the three-month period. In this case, the application would have to have been made before 21 July 2010, as it was. 3 I am satisfied that the plaintiff is a person who is an interested party within the provisions of section 509(6), because it is a member of the Company, and for reasons mentioned below, has an obvious interest in the making of this application. 4 The short reason why the application is made is that if the Company is not deregistered by a date which appears on the evidence to be 3 June 2010, the plaintiff may lose the benefit of certain tax concessions amounting to approximately $85,000, which appear to be available to it under the small business capital gains tax ("CGT") regime of the Income Tax Assessment Act 1997 (Cth). In what I am about to say, I express no view as to whether the plaintiff would be entitled to obtain the concessional treatment which is referred to in the affidavit evidence in support of the application. However, what is important is that this is the reason why the plaintiff seeks to bring forward the date of deregistration from the date which would otherwise be fixed by the provisions of the Act. 5 The background facts may be stated shortly. The Company was registered on 2 June 2005. Its business was the conduct of pathology services. On 6 March 2009, the Company, in conjunction with its service entity, entered into a contract for the sale of the Company's business assets. Certain assets were excluded from the sale, namely those which were used in the business of providing histopathology services. 6 A condition of the sale of the business assets was that the purchase price be placed in escrow in the trust account of the plaintiff's solicitors, on condition that they not be transferred until and unless approval was granted to the sale by the Australian Competition and Consumer Commission ("ACCC"). 7 The ACCC approval was granted in June 2009, and the purchase price, which was to that point held in escrow, was then released to the vendors on 16 June 2009. 8 On 3 October 2009, the remaining assets of the Company were transferred to interests associated with Mr Anthony Michael Watt, and his co-director, Mr John Leigh Dooley. On that date, the defendant ceased to carry on business. 9 On 3 March 2010, there was a meeting of members of the Company, at which it was resolved that the Company be wound up, and that Michael Richard Peldan, and Michael John Griffin, of Worrells Chartered Accountants, be appointed liquidators. The winding up was a members' voluntary winding up, and on the day before the resolution, there was a meeting of the directors of the Company, at which they resolved to execute the necessary declaration of solvency. 10 It appears that the liquidation of the Company was conducted in an expeditious and orderly fashion, but Mr Watt explains in his evidence that he did not appreciate the necessary deadlines, which were required to be met in order for the plaintiff to obtain the benefit of the small business CGT regime, to which I have referred. 11 Mr Dooley has also sworn an affidavit explaining that he too was unaware of the requisite timelines. 12 It was not until 19 April 2010 that the final meeting of members of the Company was convened by the liquidators. The meeting was held on that date and on 21 April 2010 notice of the final meeting was lodged with ASIC. It was that date which triggered the application of the three month period referred to in section 509(5) of the Act, so that, as I have said, but for the present application, the Company would be deregistered by ASIC on 21 July 2010. 13 Most of the authorities which have dealt with the exercise of the power contained in section 509(6) seem to be concerned with the exercise of a discretion to extend the date of deregistration of a company. 14 In one of those authorities, Re Rosaub Pty Ltd (in liq) (2005) 54 ACSR 371, Barrett J observed at [10] that the case law provides little guidance as to the considerations that are relevant to the exercise of the discretion. His Honour referred to an earlier unreported South Australian authority, which supported the proposition that the discretion is properly exercised to extend the date where the continued existence of the company is necessary in order to effect a proper purpose. 15 I referred to some of the authorities in my decision in Programmed Maintenance Services Ltd v Ranelagh House Pty Ltd (In Liquidation) [2008] FCA 1974. 16 The reason why there is a period of grace of three months allowed after the filing of the return seems to be explained in a Victorian authority from the nineteenth century. The decision, which is relevant, is John Birch & Co. Limited v The Patent Cork Asphalt Co. Limited (1894) 20 VLR 471 ("John Birch"). In that case Madden CJ said at 472 that the suspension of a dissolution for three months in the then relevant section of the legislation means that a purpose is to be served. His Honour said the only easily understandable purpose is to enable persons who are affected to come in and make a claim. Thus the period of grace is allowed for claims by creditors or other aggrieved parties so as to ensure that they can make a claim against a company without having to go through the process of seeking an order reinstating it. 17 Although the decision of Madden CJ in John Birch was reversed on appeal, the discussion of the Full Court does not affect the primary judge's explanation for the rationale of the three month period, see John Birch & Co. Limited v The Patent Cork Asphalt Co. Limited (1985) 21 VLR 268. 18 There is authority for the proposition that the power of the Court under section 509(6) may be exercised where an application is made to bring forward the date of deregistration. The authority is a decision of Austin J in Re SC Aust (in liq) & SC Equipment (in liq) [1999] NSWSC 176. The facts in that matter seem to be somewhat analogous to those in the present. There was evidence before his Honour indicating that, unless the companies in question were deregistered earlier than the date on which ASIC was required to deregister them, the plaintiffs would suffer significant financial loss, which could be avoided if an order were made by the court under section 509(6). 19 The evidence disclosed that deregistration of the companies was required in order to establish to the National Administration Agency in Japan that certain steps had been taken so as to permit the Japanese banks, who had filed evidence before his Honour, to claim a write-off of unrecoverable amounts in the current financial year, which in that case ended on 31 March 1999. His Honour was persuaded that this was a clear case for the making of the order on the basis that if the order was not made the six Japanese banks in question would suffer a loss to which there was no particular reason to subject them. 20 In the present case, I am satisfied on the evidence before me that there are no creditors of the Company. I am also satisfied that the members of the Company support the application. In addition I have evidence of the liquidator, Mr Peldan, that he consents to the application. I also note in his evidence that he obtained a clearance from the Australian Taxation Office prior to the holding of the final meeting of members on 19 April 2010. 21 I have been provided in evidence with a letter from ASIC dated 10 May 2010. The letter is in the form which is commonly provided in this sort of case. It states that ASIC does not propose to attend today's hearing, nor to oppose or consent to the application. 22 All of these matters satisfy me that it is appropriate to exercise my discretion to bring forward the date of deregistration by the period which is sought. This will result in bringing forward the date of deregistration by approximately seven weeks from the period prescribed by the statute. 23 . If it were the case that there may be creditors in the offing who wish to bring a claim against the Company, that would be a factor against the exercise of my discretion. However, an important consideration is that, as I have said, the evidence shows that the Company has no creditors In any event, should it appear in the future that a creditor has been overlooked, it would always be open to such a creditor to make an application to have the Company reinstated. 24 Mr Dawson, who appears for the plaintiff, points out that there is no opposition to the application. He emphasises that if the Company is not deregistered by ASIC within the period to which I have referred, the plaintiff will lose the benefit of tax concessions, which appear on the evidence, to be legitimate tax concessions. 25 Mr Dawson submits that there is no consideration of "commercial morality" which would weigh against the exercise of the Court's discretion. It seems to me that that submission is correct and is supported by authority, although the authority is one which was decided in a different context. 26 In Re Avram Investments Pty Limited (No 2) (1992) 10 ACLC 1,747 Heerey J made an order approving a scheme of arrangement under section 411 of the then Corporations Law, notwithstanding the opposition of the Deputy Commissioner of Taxation. 27 The scheme of arrangement involved the benefit of certain tax losses. The Deputy Commissioner argued that where a company seeks to make use of the benefit of tax losses in a scheme, then in "ordinary cases" the taxation authorities "could not quibble". However, it was then submitted that where the benefit to creditors was marginal, as it apparently was in that case, the loss of public revenue caused by the utilisation of taxes was a factor weighing against the approval of the scheme. Heerey J did not agree. He said that any question of commercial morality or public policy was not involved; the tax legislation specifically provided criteria which would determine whether or not past tax losses could be utilised if the scheme was approved. There was no suggestion of any fraud on the revenue involved in the scheme. 28 Similarly in the present case, the tax legislation to which I have referred will provide the criteria for the tax concessions claimed by the plaintiff. Whether the plaintiff is entitled to the concessions will depend entirely upon the terms of the Income Tax Assessment Act 1997 (Cth). There is, of course, no suggestion of any untoward conduct involved in the making of the present application. 29 Indeed, the directors of the Company have explained that the delay in deregistering the Company came about only as a result of the fact that they were previously unaware of the necessary timelines for the obtaining of the tax concessions. 30 I should also perhaps add that reference was recently made to the question of whether commercial morality is a consideration in relation to the exercise of the discretion to approve a scheme of arrangement; see CSR Limited, in the matter of CSR Limited [2010] FCAFC 34 at [82] - [86] per Finkelstein J. It is unnecessary for me to express any view as to whether the comments made by his Honour are applicable in the present context. 31 For those reasons I propose to make an order in terms of order one of the originating process. I will also order that this order be entered forthwith. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.