State of Western Australia v Australian Securities and Investment Commission

Federal Court of Australia|2020-06-09|Before: Re JJ, Ms J, McKerracher J

Pursuant to section 601AH(2) of the Corporations Act 2001 (Cth), by no later than 12 June 2020 the Defendant reinstate the registration of Inspire Acacia Pty Ltd (deregistered) (ACN 167 063 738).
A copy of the Court's authenticated final orders be: (a) sent by ordinary pre-paid post by the Plaintiff to each of Ms Sharry Maree Eavis and Mr Christopher Mark Eavis; and (b) lodged by the Plaintiff with the Defendant.
There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MCKERRACHER J: 1 The Plaintiff (the State) applies for an order pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) that the Defendant (ASIC) reinstate the registration of Inspire Acacia Pty Ltd (deregistered) (ACN 167 063 738) (the Application). 2 The Application is supported by two affidavits of Mr Edward Fearis. 3 For the reasons outlined below, I made orders for re-instatement as: (a) the State is a person aggrieved by the deregistration of Inspire Acacia; (b) it is just that Inspire Acacia be reinstated; and (c) an order should therefore be made under s 601AH(2).

RELEVANT CONSIDERATIONS 9 Section 601AH(2) of the Corporations Act 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.

Is the Plaintiff a 'person aggrieved'? 10 I canvassed many of the considerations in an application such as this in The Bell Group Limited v Australian Securities and Investments Commission [2018] FCA 884 (at [47]) from which it is clear, as the authorities have determined, that the expression 'person aggrieved' in s 601AH(2)(a)(i) should not be construed narrowly. Importantly, s 2C of the Acts Interpretation Act 1901 (Cth) (AIA) provides that 'references to persons' includes 'a body politic' unless the section in question is subject to a contrary intention (s 2(2) of the AIA). That is not the case here and it is clear that the reference to a 'person' in the section includes the State. For a person to be aggrieved for the purposes of s 601AH(2)(i), the 'person' must be able to show that deregistration of the company deprived them of something or injured or damaged them in a legal sense, or that they became entitled, in a legal sense, to regard the deregistration as a cause of dissatisfaction. Where deregistration of a company has extinguished a legal right of some value or potential value to a person, they may be considered 'aggrieved': Bell (at [50]-[51]). 11 The State is aggrieved by the deregistration of Inspire Acacia because the deregistration has caused its deemed right of subrogation in relation to the relevant legal rights and remedies of Inspire Acacia against KDD and Ms Dillon to be rendered obsolete: MH Smith (Plant Hire) Ltd v DL Mainwaring [1986] 2 Lloyd's Rep 244 and see generally C Mitchell & S Watterson, Subrogation - Law and Practice (Oxford University Press, 2007) at [10.63]. 12 If Inspire Acacia were reinstated, the State would potentially be able to obtain a judgment in Inspire Acacia's name against KDD and Ms Dillon in the order of over $400,000. In saying that I form no view of the merits of that potential claim other than to identify the plausible nature in which, and the basis on which, it is claimed that the State is aggrieved.

Is it 'just' that Inspire Acacia be reinstated? 13 As noted in Bell (at [72]-[73]), the question of whether it is 'just' to make an order for reinstatement is not constrained by any particular legislative parameters, but regard should be had to the circumstances in which the company came to be deregistered, the future activities of the company if an order for reinstatement is made, and whether any particular person is likely to be prejudiced by the reinstatement. Public policy is also a relevant consideration (see for example, Re ERB International Pty Ltd (deregistered) (2014) 98 ACSR 124 per Brereton J (at [5])). 14 Inspire Acacia came to be deregistered only due to non-payment of fees to ASIC, totalling $919. As set out in further detail at [23], ASIC does not oppose the Application. Further, the State understands that the outstanding fees have now been paid by Ms Eavis. 15 If Inspire Acacia is reinstated, proceedings will be commenced in its name by the State against KDD and Ms Dillon seeking the recovery of over $400,000. If recovered, this money would be paid into the Fidelity Guarantee Account established by the Settlement Agents Act and be available for the public purpose of reimbursing persons who suffer pecuniary or property loss as a result of the defalcation of settlement agents licensed under that Act: see s 88(d) and s 93 of the Settlement Agents Act. 16 Courts have previously ordered the reinstatement of a company for the purposes of the company being able to bring legal proceedings: Re JJ Weeks Constructions Pty Ltd (1982) 31 SASR 96. See also Re Timothys Pty Ltd & the Companies Act [1981] 2 NSWLR 706, where an order was made reinstating a company so that another company, who had been assigned a cause of action by the deregistered company, could exercise those rights. 17 If Inspire Acacia is reinstated, its former directors (and sole shareholders) will become directors again: s 601AH(5) of the Corporations Act. Centrally important is that one of the former directors (Ms Eavis) consents to the reinstatement and the other (Mr Christopher Eavis) has indicated that he does not wish to be heard in relation to the Application. 18 KDD and Ms Dillon may be considered to be prejudiced by the reinstatement of Inspire Acacia. However, exposure to being sued by a deregistered company upon its reinstatement is not a sufficient basis to make the reinstatement unjust for the purposes of s 601AH: Bell (at [78]-[79]). In any event, KDD and Ms Dillon neither consent to nor oppose the Application. 19 Substantial and unexplained delay in making an application for reinstatement can be a reason why it would not be 'just' to order reinstatement: Tyrrell v Tyrrells Building Consultancy Pty Ltd [2008] NSWSC 416 (at [25]); Herbert v Nozala Pty Ltd [2006] NSWSC 1437 (at [51]). However, in this case, the delay in making the Application is neither substantial nor unexplained. 20 The Application was filed approximately 13 months after Inspire Acacia was deregistered: cf Tyrrell (at [25]), where a delay of just under one year was not sufficient to defeat an application for reinstatement. It was filed within four months of the State becoming aware of the deregistration and after it became apparent that Ms Eavis' application for 'administrative reinstatement' of Inspire Acacia may not be determined by ASIC before 16 June 2020, being the last date on which the State may commence legal proceedings in the company's name against KDD and Ms Dillon. There is no evidence to suggest that anyone has been prejudiced by the timing of the Application. 21 In these circumstances, it is just that Inspire Acacia be reinstated.

Notice 22 The Application was served on ASIC. 23 ASIC does not oppose the Application provided certain conditions were met as they have been. Those conditions simply required the State to seek orders in the form sought, to give notice to the former directors of Inspire Acacia and to lodge any order made by the Court with ASIC. It did not intend to appear at the hearing. 24 Procedural fairness should be accorded to any person who may be affected by the reinstatement of Inspire Acacia. It has been. The former directors of Inspire Acacia (Ms Eavis and Mr Eavis), KDD and Ms Dillon have all been notified of the Application and the hearing date. The position of the former directors has been set out at [17] above and the position of KDD and Ms Dillon at [18] above.

CONCLUSION 25 For these reasons and having found that: (a) the State is a person aggrieved by the deregistration of Inspire Acacia and (b) It is just that Inspire Acacia be reinstated, the following orders were made: (1) Pursuant to section 601AH(2) of the Corporations Act 2001 (Cth), by no later than 12 June 2020 the Defendant reinstate the registration of Inspire Acacia Pty Ltd (deregistered) (ACN 167 063 738). (2) A copy of the Court's authenticated final orders be: (a) sent by ordinary pre-paid post by the Plaintiff to each of Ms Sharry Maree Eavis and Mr Christopher Mark Eavis; and (b) lodged by the Plaintiff with the Defendant. (3) There be no order as to costs. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

Corporations Act 2001(Cth)ss 601AH(2), 601AH(2)(a)(i)

Limitation Act 2005(WA)ss 13(1), 27(1)

Settlement Agents Act 1981(WA)ss 87, 88(d), 93, 97, 117

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (4)

Cited By (3)