Vero Insurance Ltd v Nicejade Pty Ltd

2008/281810 VERO INSURANCE LIMITED v NICEJADE PTY LIMITED JUDGMENT 1 The plaintiff ("Vero") seeks an order under s 601AH(2) of the Corporations Act 2001 (Cth) directing Australian Securities and Investments Commission to reinstate the registration of Nicejade Pty Ltd ("Nicejade"). Sunlord Holding Pty Ltd ("Sunlord") was the holding company of Nicejade at the time of deregistration. 2 The deregistration of Nicejade occurred on 6 August 2006. It was a "voluntary" deregistration under s 601AA made upon an application by Mr Chan, who was at the time a director of both Nicejade and Sunlord. In conjunction with the deregistration, Mr Chan made a statement that Nicejade had no outstanding liabilities, that being one of the conditions that must be satisfied to permit a s 601AA application to be made: see s 601AA(2)(e). Another condition (imposed by s 601AA(2)(c)) is that the company's assets are worth less than $1,000. The deregistration application in respect of Nicejade contained a representation to that effect as well. 3 Nicejade developed a block of home units at Bellevue Hill. The builder was Moonfare Pty Ltd, another subsidiary of Sunlord. Upon completion of the building and registration of a strata title plan in 1997, the common property vested in the owners corporation as successor to Nicejade. 4 Also in 1997, Vero issued home warranty insurance in respect of the home units. A policy of insurance under the Home Building Act 1989 was issued to Nicejade and certificates of insurance were issued to both Nicejade and Moonfare. Under a provision in the insurance, Vero was, in the event of its paying a claim, subrogated to the rights of the insured against any other person in relation to the claim. 5 It appears to be common ground that Vero paid a claim under the relevant insurance in circumstances such that it had or might have had, by subrogation, a right as against Nicejade to recover the amount paid. 6 It seems that the persons in control of Sunlord, Moonfare and Nicejade were aware of the matters that gave rise to the insurance claim before the application for Nicejade's deregistration was made. Furthermore, it appears that Nicejade had sold the home units for more than $27 million, making a profit of some $6 million and that, in the period immediately before the deregistration application there were intra-group transactions involving Nicejade. 7 Whether Nicejade had financial substance (or assets or liabilities) in the period before deregistration is not something on which I am at this point able to make findings. It is sufficient to say that a forensic accountant's report put into evidence by Vero raises the possibility of irregularities in Nicejade's financial reporting and other matters that may merit further investigation with a view to possible recoveries by Nicejade or a liquidator of Nicejade; also that certain actions (including the application for deregistration of Nicejade) may have been taken in the face of the circumstances grounding Vero's claim. 8 The circumstances as I have related them to this point would warrant a conclusion that Vero is, within s 601AH(2)(a)(i), a person aggrieved by the deregistration of Nicejade. I say this because the deregistration and consequent non-existence of Nicejade prevent action by Vero against Nicejade. The circumstance, if it be the case, that Nicejade had no assets might militate against such a conclusion but the possibility that it has rights of recovery, particularly at the suit of a liquidator, would redress the balance. 9 The same considerations would warrant a conclusion that it was, in terms of s 601AH(2)(b), just that Nicejade's registration be reinstated. 10 Sunlord contends, however, that a single powerful factor precludes both the conclusions I have mentioned. Its contention is that any action upon the causes of action to which Vero may be subrogated is time barred. 11 Sunlord points first to s 18E of the Home Building Act which provides that any proceedings for a breach of statutory warranty must be commenced within seven years after completion of the work to which it relates. 12 Reference is then made to s 109ZK of the Environmental Planning and Assessment Act 1979 which, as in force at the relevant time, provides that an action may not be brought in relation to any building work more than ten years after the date on which the "final occupation certificate" is issued. 13 Sunlord maintains that the relevant work was completed by 4 November 1999 (the date of issue of the final occupancy certificate), 15 November 1999 (the date of the final inspection by the certifying authority), 16 November 1999 (the date of issue of the building certificate) or 30 November 1999 (the date of registration of the strata plan). 14 On each view of the relevant date, Sunlord says, the period of seven years referred to in one enactment and the period of ten years referred to in the other have both expired without any relevant action having been commenced. Reinstatement of the registration of Nicejade with a view to the commencement of the proceedings would therefore serve no useful purpose, on the view Sunlord takes - from which it follows that Vero is not aggrieved by the deregistration. 15 Section 18C of the Home Building Act refers to a limitation period of seven years from "the completion of the work". The "completion" concept is not defined or explained. There were competing submissions on the correct approach to the question. 16 The plaintiff relied on McCallum Developments v The Owners Corporation SP53908 [2002] NSWSC 1103 where Studdert J said at [44]: "It does not seem to me that time for notification under cl7 would necessarily run before the builder asserted the building work was completed. Regard has to be had to the beneficial nature of this scheme. For instance, if some defect was detected whilst construction was continuing and when this was pointed out to the builder he indicated he would rectify that defect, then in those circumstances there would be good reason to conclude that time did not start to run until any attempt at rectification was completed unsatisfactorily and/or until the builder communicated he was not going to attend to any persisting defect." 17 The defendant relied on the judgment of Elkaim DCJ in Abrahams v Degan [2009] NSWDC 315, particularly [13]-[17]. At [17] his Honour states that the applicable date (date of completion) is "the date of the final inspection of the work". There was reference to the definition of when work is completed found in the Home Building Regulation cl 61(1)(b). 18 As to the several possible dates referred to by Sunlord and mentioned at paragraph [13] above, Vero points to the fact that the builder had to return many times to undertake rectification work and was there as late as 2004. Vero says that the factual question of when the work was completed is one that can only be decided after full assessment of a quantity of evidence. 19 In relation to the time bar arising under s 109ZK of the Environmental Planning and Assessment Act (which has regard to a particular certificate), Sunlord says that a "classification certificate" dated 16 November 1999 and issued by Woollahra Municipal Council is, for the purposes of the section, the "final occupation certificate". 20 The parties take different views of the status and significance of the "classification certificate" having regard to clauses 49 and 64 of the Environmental Planning & Assessment (Savings & Transitional) Regulation 1998. 21 It appears from an examination of the Local Government Act 1993 and Local Government (Approvals) Regulation 1993 that the "certificate of classification" in respect of occupancy was the predecessor to the "occupation certificate" introduced by the Environmental Planning & Assessment Amendment Act 1997. That Act commenced on 1 July 1998, and as a result the provisions in respect of a certificate of classification had been repealed by the time of the issue of the certificate of 16 November 1999 by Woollahra Council. Part 4A certificates under the Environmental Planning and Assessment Act 1979 governed occupancy approval at that time. 22 There are however transitional provisions. Clauses 49 and 64 are referred to above. Clause 49 states that a certificate of classification granted under the Local Government Act is an occupation certificate under the Environmental Planning and Assessment Act. Clause 64 states that anything begun under the old Act may be continued and completed under that Act, as if the Environmental Planning and Assessment Act had not been enacted. The key difference of opinion goes to the effect of this clause and whether it has a prospective as well as retrospective effect. Confusingly, it seems that Nicejade may have applied for an occupation certification under Part 4A of the Environmental Planning and Assessment Act 1979 but been granted a certification of classification under the Local Government Act 1993. 23 Enough has been said to make it clear that there is no clear and obvious answer to the two limitation questions. The question under the Home Building Act comes down to an assessment of a number of factual issues, viewed in the light of a correct construction of the legislation. The question under the Environmental Planning and Assessment Act involves difficult issues of construction, as well as factual questions. 24 None of these matters can satisfactorily be determined on an application such as this. If there were a clear and precise conclusion that proceedings were barred, that would work against positive answers to the questions posed by s 601AH(2). But issues of the complexity I have described can only be dealt with in properly constituted proceedings between the relevant parties. 25 Because Vero is unable to sue the non-existent Nicejade and has an arguable claim against it, Vero is aggrieved. The same factors make it just that the registration should be reinstated - but on the footing that the absence of assets and liabilities testified to by Mr Chan to obtain the deregistration and the obvious unwillingness of the directors to resume control of the company (they being opposed to the reinstatement) make it just and equitable that Nicejade be wound up. 26 There will accordingly be orders for reinstatement and winding up and the appointment of a liquidator, as follows: 1. Order pursuant to s 601AH of the Corporations Act 2001 (Cth) that Australian Securities and Investments Commission reinstate the registration of Nicejade Pty Ltd ACN 059 658 310. 2. Order pursuant to s 467(3)(d) that all notification and advertising requirements in respect of an application for a winding up order in respect of the said Nicejade Pty Ltd be dispensed with. 3. Order that, immediately upon reinstatement of the registration, the said Nicejade Pty Ltd be wound up. 4. Order that, immediately upon reinstatement of the registration, Brent Kijurina of Hall Chadwick Chartered Accountants of Level 29, St Martins Tower, 31 Market Street, an official liquidator, be appointed liquidator of the said Nicejade Pty Ltd. 27 I should add that the facility under s 601AA to obtain "voluntary" deregistration is one that is properly resorted to only in clear and uncontentious cases where a company has come to the end of its useful life and has been reduced to a mere worthless shell without any continuing legacy. It is not a means of circumventing winding up in case where there is any estate to be administered or any background from which claims for the benefit of creditors may emerge. The court will take these matters into account in deciding what is "just" for s 601AH(2) purposes. That has been done in this case in light of the fact that the controllers of Nicejade were aware of the facts grounding Vero's claim which they chose to subject Nicejade to a s 601AA application. **********

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