Taylor (Trustee), in the matter of Kwok v Goldana Investments Pty Limited

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 316 of 2014

IN THE MATTER OF THE BANKRUPT ESTATE OF MICHAEL WILSON KWOK

BETWEEN: BARRY ANTHONY TAYLOR AS TRUSTEE OF THE BANKRUPT ESTATE OF MICHAEL WILSON KWOK

AND: GOLDANA INVESTMENTS PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (ACN 073 235 275) AND ANOR

JUDGE: WIGNEY J DATE: 27 AUGUST 2015 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 Mr Barry Anthony Taylor (the Trustee) is the trustee of the bankrupt estate of Michael Wilson Kwok. As a result of orders made by the Court on 13 April 2015, 100 shares in a company, Goldana Investments Pty Limited (Goldana), were transferred to Mr Kwok. Those shares then vested in the Trustee pursuant to s 58(1)(b) of the Bankruptcy Act 1966 (Cth). The Trustee now seeks orders, the effect of which will be that he will become the registered holder of the shares in Goldana and will therefore have standing to apply, and will apply, to have Goldana wound up. The Trustee's ultimate objective is to realise the assets of Goldana for the benefit of its creditors (if any) and the creditors of Mr Kwok as sole shareholder of Goldana. 2 The route that the Trustee must take through the Corporations Act 2001 (Cth) to achieve his objective is, unfortunately and surprisingly, somewhat tortuous. The complicating fact is that both Mr Kwok and his former wife, Ms Tracy Helen James, who is the sole director and secretary of Goldana, have gone to ground. There does not appear to be any books and records of the company and, most significantly, no register of shareholders has been able to be located. In these circumstances, how is the Trustee to become registered as the holder of the shares with standing to apply to wind up the company? 3 For the reasons that follow, despite the complexities, the Trustee is entitled to the relief that he seeks, including an order that the register of members be corrected and, ultimately, an order that Goldana be wound up.

Background 4 The relevant factual background is detailed in the judgment pursuant to which Ms James was ordered to transfer 100 shares in Goldana to Mr Kwok: Taylor (Trustee), in the matter of Kwok v Goldana Investments Pty Limited (receivers and managers appointed) [2015] FCA 517. It is unnecessary to rehearse those background facts here. It is sufficient to note the following. 5 First, the order that Ms James transfer the shares to Mr Kwok was consequent upon a declaration that an earlier transfer of the shares by Mr Kwok to Ms James was void against the Trustee by reason of s 121 of the Bankruptcy Act. 6 Second, whilst Ms James initially defended the Trustee's application to have the shares transferred to Mr Kwok, ultimately neither she nor Mr Kwok appeared in opposition to the declaration and order sought by the Trustee. Nor have they appeared in respect of the Trustee's current application, despite the considerable efforts that have been made by the Trustee to serve them with the relevant documentation. 7 Third, Goldana has an asset, namely monies that have been paid into the Supreme Court of New South Wales by receivers that had been appointed to Goldana by a secured creditor. The monies represent the balance of monies received by the receivers following the sale of real estate previously owned by Goldana after the payment of the secured debt. Goldana otherwise appears to be dormant. Its sole shareholder, Mr Kwok, is bankrupt and its sole director and secretary, Ms James, appears to reside overseas and to have no ongoing role in the management of the company.

the trUstee's standing to wind up goldana 8 The Trustee applies for an order that Goldana be wound up on just and equitable grounds pursuant to s 461(1)(k) of the Corporations Act. The difficulty is that, without further order, the Trustee does not have standing to apply for Goldana to be wound up on that basis. 9 Section 462(2) of the Corporations Act contains a list of persons who may apply for an order to wind up a company. The list includes a "contributory". A "contributory" in relation to a company is defined in s 9 of the Corporations Act as including, relevantly, a holder of fully paid shares in the company. 10 Upon the transfer of the shares back to Mr Kwok (a transfer that has now been recorded by the Australian Securities and Investments Commission), the shares vested in the Trustee pursuant to s 58(1)(b) of the Bankruptcy Act. That does not mean that the Trustee is the holder of the shares with standing to apply for the winding up of the company. To achieve that position, he must become the registered holder of the shares: Re H L Bolton Engineering Co Ltd [1956] Ch 577. 11 But how does the Trustee become the registered holder of the shares?

Correction of the register 12 Section 1072C of the Corporations Act sets out the rights of a trustee of the estate of a bankrupt shareholder. Subsections 1072C(1) and (2) relevantly provide as follows: (1) If: (a) because of the Bankruptcy Act 1966, a share in a company, being part of the property of a bankrupt, vests in the trustee of the bankrupt's estate; and (b) the bankrupt is the registered holder of that share; this section applies whether or not the trustee has been registered as the holder of the share. (2) On producing such information as the company's directors properly require, the trustee is entitled to: (a) the same dividends and other benefits; and (b) the same rights, for example, but without limitation, rights in relation to: (i) meetings of the company; or (ii) documents, including notices of such meetings; or (iii) voting; or (iv) inspection of the company's records; as the bankrupt would be entitled to if he or she were not a bankrupt. 13 It follows that the Trustee is entitled to the same rights as Mr Kwok would be entitled to if he was not a bankrupt. Those rights would include the right to be registered as the holder of the 100 shares transferred to him following the orders of the Court made on 13 April 2015. 14 The Trustee has led evidence that he has sought to be registered as the holder of the 100 shares by writing to Ms James, as Goldana's sole director and company secretary, at each of her known addresses. The Trustee's efforts have been to no avail. Ms James has apparently refused or neglected to take any steps to register the Trustee as the holder of the 100 shares. 15 The Trustee has also endeavoured to locate Goldana's register of members, again to no avail. 16 Section 175(1) of the Corporations Act relevantly provides that "… a person aggrieved may apply to the Court to have a register kept by the company … under this Part [Part 2C.1] corrected." One of the registers to be kept under Part 2C.1 of the Corporations Act is a register of members: Corporations Act, s 169. The Trustee is a "person aggrieved" because he is entitled to be recorded in the register of members of Goldana as the holder of the 100 shares by reason of Mr Kwok's bankruptcy, s 58(1)(b) of the Bankruptcy Act, and s 1072C(2) of the Corporations Act: Francis v Blue Ribbon Enterprises (NSW) Pty Ltd (2009) 76 ACSR 13; [2009] FCA 1364 (Francis v Blue Ribbon) at [17]. That is all the more so given that the director and the company secretary of Goldana is either refusing or neglecting to register the Trustee as the holder of those shares. 17 The difficulty here is that no register has been located. How then can it be corrected? There is some authority that the Court can create a register so as to correct it. In Re Mogul Stud Pty Ltd [2012] NSWSC 1639 at [7], Black J noted that whilst s 175(1) of the Corporations Act does not confer a power to create a register, it assumes that the Court already has such a power at general law. His Honour referred, in that context, to Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1996) 20 ACSR 553; (1996) 14 ACLC 1089 at 1094 and Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1 at 51, and the general law power to rectify a register. 18 Black J's reference to these authorities and the general law power to rectify is a bit puzzling as these authorities do not appear to involve the creation of a register. Nor does it appear to have been necessary for his Honour, in the case he was deciding, to order that a register be created. Nevertheless, the power in s 175 of the Corporations Act, considered against the background of the general law power to rectify a register, would appear to be sufficiently broad to enable a register to be created where the original has been destroyed or cannot be located. Section 175 is plainly a beneficial provision and should be construed broadly. 19 In any event, an order that the register be corrected pursuant to s 175 of the Corporations Act to record the shares presently registered in the name of Mr Kwok be registered in the name of the Trustee would be sufficient to give the Trustee standing to apply to have Goldana wound up. That was the position taken by Emmett J in Francis v Blue Ribbon, where his Honour ordered that the register be corrected nunc pro tunc to record the trustee in bankruptcy as the holder of shares in the relevant company, and also ordered that the company be wound up on the application of the trustee in bankruptcy, who as a result of the correction to the register had standing. In those circumstances, it is unnecessary for the Court to order that a register of members be created for the Trustee to have standing. If necessary, the physical creation (and correction) of the register can in due course be carried out by the liquidator on behalf of the company. That would appear to be the preferable course to take. 20 In the present circumstances, it is appropriate to make an order pursuant to s 175 of the Corporations Act to correct Goldana's register of members to record that the 100 shares presently registered in the name of the bankrupt, Michael Wilson Kwok, be registered in the name of Barry Anthony Taylor as trustee of the bankrupt estate of Michael Wilson Kwok, such order to take effect nunc pro tunc.

Winding up on just AND equitable grounds 21 For the reasons already given, the Court is of the opinion that it is just and equitable that Goldana be wound up. The sole director and secretary appears now to reside overseas, and to have no involvement in the management or control of the company. The company appears to be carrying on no business and appears not to have any books and records. The Trustee is now the sole shareholder of Goldana. The Trustee's application to wind up Goldana has already been advertised. Mr Richard Stone of RSM Bird Cameron has consented to act as liquidator. Accordingly, it is appropriate for the Court to order that Goldana be wound up and Mr Stone be appointed as liquidator.

Disposition and orders 22 The Court makes the following declarations and orders. 23 The Court declares that:

1. Pursuant to s 58(1)(b) of the Bankruptcy Act 1966 (Cth), the 100 ordinary shares in Goldana Investments Pty Limited have vested in Barry Anthony Taylor as trustee of the bankrupt estate of Michael Wilson Kwok.
2. Pursuant to s 1072C of the Corporations Act 2001 (Cth), Barry Anthony Taylor as trustee of the bankrupt estate of Michael Wilson Kwok is entitled to be registered as the holder of 100 ordinary shares in Goldana Investments Pty Limited. 24 The Court orders that:
3. Pursuant to s 175 of the Corporations Act 2001 (Cth), the register of members of Goldana Investments Pty Limited be corrected to record that the shares presently registered in the name of Michael Wilson Kwok be registered in the name of Barry Anthony Taylor as trustee of the bankrupt estate of Michael Wilson Kwok, such order to take effect nunc pro tunc.
4. Goldana Investments Pty Limited ACN 073 235 275 be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth).
5. Richard Stone of RSM Bird Cameron be appointed liquidator of Goldana Investments Pty Limited.
6. The applicant's costs of this application be taxed and paid out of the assets of Goldana Investments Pty Limited. I certify that the preceding twenty four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney.