FEDERAL COURT OF AUSTRALIA Basto, In the Matter of Torsif Pty Ltd [2003] FCA 675 CORPORATIONS – application for reinstatement of a company pursuant to s 601AH – whether the plaintiff is a "person aggrieved" – plaintiff a shareholder – no evidence that shareholders would benefit from reinstatement of the company Corporations Act 2001 (Cth), ss 601AB, 601AH Deputy Commissioner of Taxation v Lanstel Pty Ltd (1997) 15 ACLC 25 cited Re Lindsay Bowman Ltd [1969] 1 WLR 1443 cited Re Peter Conyers Holders Pty Ltd (in liq) (1996) 14 ACLC 1835 cited A Keay, McPherson: The Law of Company Liquidation (4th ed, 1999) RICHARD JOHN BASTO, IN THE MATTER OF TORSIF PTY LTD N3020 OF 2003 SACKVILLE J SYDNEY 4 JULY 2003 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N3020 OF 2003 IN THE MATTER OF TORSIF PTY LTD RICHARD J BASTO PLAINTIFF JUDGE: SACKVILLE J DATE OF ORDER: 4 JULY 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application be dismissed. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N2030 OF 2003 IN THE MATTER OF TORSIF PTY LTD & ANOR RICHARD J BASTO PLAINTIFF JUDGE: SACKVILLE J DATE: 4 JULY 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 An application has been filed by Mr Richard John Basto ("the Plaintiff") seeking an order pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) ("Corporations Act") for the reinstatement of the registration of Torsif Pty Ltd ("Torsif"). The application seeks a variety of orders other than the reinstatement of Torsif but, as Mr Basto acknowledges, these are dependent upon an order for reinstatement being made pursuant to s 601AH(2) of the Corporations Act. 2 It appears that Torsif carried on business as trustee of the Northern Mortgage Fund ("NMF"). It further appears that NMF operated as an unlisted mortgage trust without approval ever having been obtained for the trust deed. Indeed, it seems that no trust deed was ever executed. 3 The Plaintiff was a director of Torsif and remained so until it was deregistered on 18 February 2002. ASIC's records indicate that the Plaintiff was appointed as a director on 21 January 1997, but he says that he acted as a director from about 1985. 4 Torsif was deregistered by ASIC pursuant to s 601AB of the Corporations Act. That section gives ASIC power to deregister a company if, among other things, the company fails to lodge annual returns or other documents required by the legislation or if the company is being wound up and ASIC has reason to believe that the liquidator is no longer acting. It appears that the company was deregistered by reason of its failure to lodge annual returns. 5 Section 601AH of the Corporations Act relevantly provides as follows: "(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. (3) If the Court makes an order under subsection (2), it may: (a) validate anything done between the deregistration of the company and its reinstatement; and (b) make any other order it considers appropriate. … (5) If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim." 6 The Plaintiff has appeared without legal representation. ASIC has also appeared as amicus curiae in order to assist the Court in addressing the application for reinstatement. ASIC does not consent to an order being made for reinstatement of the registration of Torsif. 7 The relevant circumstances can be stated briefly. On 27 February 1997, Torsif filed a motion in this Court seeking an order that the company be placed in provisional liquidation and a further order that a receiver and manager be appointed to NMF in order to assume management and control of the affairs of NMF and to protect and safeguard its assets. The supporting affidavit, sworn by the Plaintiff, indicated that NMF was in an "insolvent position" and was unable to comply with redemption requests. The Plaintiff expressed the opinion that NMF was unable to pay its debts as and when they fell due. 8 On the same date, 27 February 1997, Lehane J made an order appointing Mr Martin Green ("Mr Green") the provisional liquidator of Torsif. Mr Green was also appointed receiver and manager of NMF. 9 On 15 July 1997, ASIC's predecessor, the Australian Securities Commission ("ASC") issued the Plaintiff with a banning order pursuant to s 829 of the Corporations Law. The effect of the order was to ban the Plaintiff permanently from acting as a representative of a securities dealer. The banning order followed an extensive investigation into the Plaintiff's activities in raising and managing moneys in connection with a number of trusts and funds, including NMF. The ASC alleged that the Plaintiff had contravened legislative requirements in 38 respects and had failed to act honestly, fairly and efficiently in carrying out the duties of a representative of a dealer. The Plaintiff did not admit any of the allegations. However, he consented to the banning order being made. The Plaintiff has also been involved in the management of a number of companies other than Torsif that have been wound up or deregistered. 10 Mr Green did not realise any assets either in Torsif or NMF. On 19 January 2000, having formed the view that the continued appointment of a provisional liquidator to Torsif served no useful purpose, Mr Green resigned as provisional liquidator. On 23 February 2000, Mr Green also ceased to act as receiver and manager of NMF. 11 Mr Green has advised the Plaintiff that he does not consent to renew his appointment as provisional liquidator of Torsif. The Plaintiff acknowledges that Torsif has not filed annual returns for some time, but attributes this default to the provisional liquidator and to the fact that the Plaintiff himself has not had access to the records of the company. The Plaintiff has offered to pay ASIC all outstanding fees and penalties due in respect of the company's defaults in lodging annual returns and in respect of the application for reinstatement. 12 As I follow the Plaintiff, he says that he is a "person aggrieved" for the purposes of s 601AH(2) of the Corporations Act because the provisional liquidator retired without informing the directors of the company and because the provisional liquidator did not collect moneys due from debtors or make any payments to unit holders. The Plaintiff also says that he is a person aggrieved because: · he is a shareholder of Torsif; and · he is a creditor of Torsif. 13 The general principle is that the words "person aggrieved" are of wide import. They include a person who has a genuine grievance because an order has been made which prejudicially affects his or her interests: Deputy Commissioner of Taxation v Lanstel Pty Ltd (1997) 15 ACLC 25, at 26, per Bryson J. It has been held, however, that a shareholder is not a "person aggrieved" for the purposes of an application to reinstate the registration of a company if there are no real prospects of assets becoming available on the reinstatement of the company: Re Lindsay Bowman Ltd [1969] 1 WLR 1443, at 1448, per Megarry J; Re Peter Conyers Holders Pty Ltd (in liq) (1996) 14 ACLC 1835, at 1850, per Mahony SM; A Keay, McPherson: The Law of Company Liquidation (4th ed, 1999), at 673. 14 In this case there is no evidence that Torsif has any significant assets that could be recovered for the benefit of creditors of the company. The Plaintiff has referred in his affidavits to debts, totalling about $65,000, that he says were due to the company in December 1996. One difficulty is that if the debts existed at that date (a matter as to which there may be doubt), it would seem that they would now be statute barred: see Limitation Act 1969 (NSW), s 14(1). In any event, it appears that if any of the debts identified by the Plaintiff are due, they are not assets beneficially held by Torsif. Rather they would be held by it as trustee for the beneficiaries or unit holders of NMF. 15 The Plaintiff submits that his interests would be prejudicially affected if Torsif is not reinstated because Torsif itself held some units in NMF. There is, however, no evidence of the extent of Torsif's holdings or the proportion of units it holds. From the bar table, the Plaintiff said that Torsif had only a small holding – perhaps 2000 units – out of 600,000 on issue. Assuming this to be correct, even if Torsif took action in its capacity as trustee to recover the debts allegedly due to NMF and even if that action was successful, the maximum benefit to Torsif would be a few hundred dollars. When one factors in the obvious difficulties facing any recovery action, the prospects of the shareholders of Torsif, including the Plaintiff, deriving any significant benefit from the reinstatement are remote. 16 In short, there is nothing to indicate that the shareholders of Torsif would benefit from the reinstatement of the company, even if it proved to be possible to recoup the debts allegedly due. There is therefore nothing to indicate that the shareholders of Torsif, including the Plaintiff, will benefit from the reinstatement of Torsif. 17 There is no evidence that the Plaintiff is a creditor of Torsif. Even if he is, in the absence of evidence that there are assets of Torsif that are available to meet the company's debts, the Plaintiff has not shown that his interests have been prejudicially affected by the deregistration of Torsif. 18 There is evidence that Torsif holds shares in Basto Management Ltd (In liq) ("BML"). In his 1997 affidavit, the Plaintiff swore that the shares in BML, which he described as an unlisted public company, had a realisable value of nil. The Plaintiff asserts in one of his affidavits in the present proceedings that the liquidation of BML will be "rapidly terminated" and that Torsif's investment in BML "may have considerable value". This assertion is not, however, supported by any cogent evidence and does not rise above the level of mere speculation. Torsif's shareholding in BML provides no basis for a conclusion that the reinstatement of Torsif would be of benefit to shareholders or creditors of that company. 19 In my opinion, the Plaintiff has failed to establish that he is a "person aggrieved" under s 601AH(2) of the Corporations Act. 20 Even if the Plaintiff could show that he is a person aggrieved, I am not satisfied that it is just that the company's registration be reinstated. I am not satisfied that the reinstatement is likely to result in any significant benefit to unit holders, shareholders or creditors of Torsif. Indeed, I do not think that there is any realistic chance of such a benefit being derived. Moreover, there is no evidence that if Torsif was to be reinstated, it would be solvent. Even if it was reinstated for the sole purpose of pursuing action against the persons said to be its debtors, there is a risk that further debts or liabilities might be incurred by an insolvent company. The Plaintiff expressed the belief that he could fund or arrange funding for Torsif to achieve his objectives. But the evidence is insufficient to provide a foundation for any such belief and no appropriate undertakings have been offered. 21 The Plaintiff's application for reinstatement of the registration of Torsif should be dismissed. It follows that none of the other relief sought by the Plaintiff should be granted. The application must be dismissed. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville. Associate: Dated: 3 July 2003 Counsel for the Plaintiff: The plaintiff appeared in person Solicitor for ASIC (appearing as amicus curiae): Mr Z Pattra Date of Hearing: 3 July 2003 Date of Judgment: 4 July 2003