In the matter of Concreting and Formwork Personnel Pty Ltd ACN 627 355 480 (In Liquidation) [2023] NSWSC 512

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Concreting and Formwork Personnel Pty Ltd ACN 627 355 480 (In Liquidation) [2023] NSWSC 512 Hearing dates: 15 May 2023 Date of orders: 15 May 2023 Decision date: 16 May 2023 Jurisdiction: Equity - Corporations List Before: Williams J Decision: See orders at [29] Catchwords: CORPORATIONS – directors and officers – person recorded in ASIC register as director and company secretary did not consent to be appointed to those roles and did not act in those roles – declarations that purported appointments invalid. Legislation Cited: Corporations Act 2001 (Cth) s 500(2) Taxation Administration Act 1953 (Cth) sch 1 s 269-25 Cases Cited: In the matter of Whitsunday Clean Sands Pty Ltd [2017] NSWSC 1199 Texts Cited: N/A Category: Procedural rulings Parties: Jennifer Dib (Plaintiff) Concreting and Formwork Personnel Pty Ltd ACN 627 355 480 (in liquidation) (First Defendant) Deputy Commissioner of Taxation (Second Defendant) Representation: Counsel: G D McDonald (Plaintiff) S Roewal (Solicitor) (Second Defendant)

Solicitors: Reuben George Lawyers (Plaintiff) ATO Litigation and Legal Services (Second Defendant)

Submitting Appearances: First Defendant File Number(s): 2023/53270 Publication restriction: N/A

Judgment 1. The first defendant, Concreting and Formwork Personnel Pty Ltd ACN 627 355 480 (in liquidation), was incorporated on 6 July 2018 and went into liquidation under a creditors' voluntary winding up on 17 January 2020 (the Company). Schon Gregory Condon, registered liquidator, was appointed as the liquidator of the Company (the Liquidator). According to the register maintained by the Australian Securities & Investments Commission (ASIC), the plaintiff, Jennifer Dib, was the sole director and company secretary of the Company from 6 July 2018 until 20 August 2019. 2. By originating process filed on 16 February 2023 (as amended on 28 April 2023), Ms Dib seeks leave pursuant to s 500(2) of the Corporations Act 2001 (Cth) to commence these proceedings against the Company and declarations to the effect that she did not consent to act as, and was not appointed as, the Company's director and company secretary on 6 July 2018. Ms Dib seeks a further declaration to the effect that those purported appointments are void and of no effect. 3. Ms Dib seeks those declarations in circumstances where the Deputy Commissioner of Taxation issued a Penalty Notice to Ms Dib under s 269-25 of Schedule 1 to the Taxation Administration Act 1953 (Cth) on 14 November 2019 in respect of PAYG withholding amounts totalling $523,351 that the Company failed to pay. The Deputy Commissioner has not commenced recovery action against Ms Dib in respect of that Penalty Notice, but has effectively reserved the right to do so unless Ms Dib succeeds in the present application for declaratory relief. 4. The Deputy Commissioner was joined to the proceedings as the second defendant on 28 April 2023. The solicitor appearing for the Deputy Commissioner at the hearing of these proceedings on 15 May 2023 informed the Court that the Deputy Commissioner neither consents to nor opposes the relief sought by Ms Dib and will withdraw the Penalty Notice if the Court grants that relief. 5. The Liquidator has filed a submitting appearance on behalf of the Company. The Liquidator's solicitors have written to Ms Dib's solicitors confirming that the Liquidator neither consents to nor opposes the relief sought by the plaintiff and seeks to be excused from appearing in the proceedings. The Liquidator's solicitors requested that Ms Dib's solicitors bring their letter to the attention of the Court. 6. At the conclusion of the hearing, I made orders and declarations substantially in the terms sought by Ms Dib on the basis that my reasons for doing so would be published as soon as possible. These are those reasons. 7. I determined that it was appropriate to grant leave to Ms Dib to commence these proceedings pursuant to s 500(2) of the Corporations Act because the relief sought cannot be the subject of a proof of debt in the winding up and the Liquidator did not oppose the grant of leave. 8. The evidence adduced by Ms Dib in support of her claims for declaratory relief may be summarised as follows. 9. In her affidavits sworn on 7 February 2023, 17 March 2023, and 28 April 2023, Ms Dib has deposed that her husband, Francis Joseph Eltakchi, has operated formwork and concreting businesses and companies for more than 30 years. Ms Dib has assisted Mr Eltakchi with administrative tasks for those businesses and companies, including bookkeeping, correspondence, completing bank deposit forms, and writing cheques for signature. However, Ms Dib had no authority or involvement in decisions concerning the management of those businesses and companies. 10. At the time the Company was incorporated on 6 July 2018, Ms Dib was travelling overseas. She departed Australia on 1 July 2018 and returned on 19 July 2018. 11. Upon her return to Australia, Ms Dib became aware from her administrative work described above that the Company had been incorporated. However, she did not know that she had been named as the director and secretary of the Company. Ms Dib performed the administrative tasks described above in respect of the Company, but did not sign documents on behalf of the Company in any capacity. 12. In about August or September 2022, Ms Dib first became aware of the Penalty Notice. Ms Dib attributes this delay to the Penalty Notice having been addressed to an old office address for the Company. 13. Ms Dib has deposed that she was "taken aback and confused" about why the Penalty Notice had been issued to her "as I had never consented to act, or acted as a director of the Company". Ms Dib then had a conversation with Mr Eltakchi in which he told her that he had arranged for his accountant, Sam Kontorgiorgis, to appoint her as a director of the Company while she was overseas in July 2018, and in which Ms Dib protested that Mr Eltakchi had not asked her to be a director. 14. Mr Eltakchi's affidavit sworn on 14 February 2023 corroborates Ms Dib's evidence. Mr Eltakchi deposed that Mr Kontorgiorgis had advised him in June 2018 to incorporate a new company to hire employees for his concreting and formwork business in order to reduce his payroll tax. According to Mr Eltakchi, Mr Kontorgiorgis also advised him that he would need to appoint a person other than himself as the director of the new company in order to achieve the objective of reducing payroll tax. Mr Eltakchi then instructed Mr Kontorgiorgis that he would appoint Ms Dib as the director of the new company. A few days later, Mr Kontorgiorgis sent an email to Mr Eltakchi attaching documents required to be signed for the purpose of incorporating the new company, including a consent to act as public officer, consent to act as director, and consent to act as secretary. Each of these documents named Ms Dib as the appointee and provided for her signature. Mr Eltakchi then told Mr Kontorgiorgis that he would not be able to provide the signed documents that day, but asked him to "proceed to register the company regardless". According to Mr Eltakchi, Mr Kontorgiorgis agreed to do so. 15. Mr Eltakchi has deposed that, at the time of the Company's incorporation on 6 July 2018, Ms Dib was overseas in Lebanon, and that: "… I did not tell her that I had incorporated the Company, nor that I had elected her to be a director. I did not ask for, nor obtain her consent to be a director or secretary and had intended to do so, when she returned. I forgot." 1. Mr Eltakchi has also given evidence that he instructed Mr Kontorgiorgis in about July 2019 to take steps to remove Ms Dib as the director and secretary of the Company and to appoint Mr Eltakchi in her place, so that Mr Eltakchi could be the authorised signatory on a bank account that he intended to open in the name of the Company. 2. Mr Kontorgiorgis lodged a Form 484 with ASIC on 16 September 2019 purporting to give notice of this change of office holders. 3. Even when instructing Mr Kontorgiorgis to remove Ms Dib as director and secretary of the Company, Mr Eltakchi did not tell Ms Dib that ASIC had previously been notified that she had held these offices. Mr Eltakchi has deposed that he did not inform Ms Dib that she had ever been recorded as a director and secretary until she confronted him about the Penalty Notice in about August or September 2022. 4. The evidence of Ms Dib and Mr Eltakchi concerning the circumstances in which Ms Dib came to be recorded as the sole director and secretary of the Company during the period from 6 July 2018 until 20 August 2019 is consistent with an email sent by Mr Kontorgiorgis to Ms Dib's solicitors on 21 November 2022, in which Mr Kontorgiorgis stated that his firm sent the documents for the incorporation of the Company to Mr Eltakchi, who was "tasked to organise the required signatures", but that "we did not receive any such signed documents from the client". The email from Mr Kontorgiorgis does not purport to offer any explanation for his conduct in causing the Company to be registered on the basis that Ms Dib was the sole director and company secretary, without her express consent to those appointments. 5. The evidence of Ms Dib and Mr Eltakchi concerning the circumstances in which Ms Dib came to be recorded as the sole director and secretary of the Company during the period from 6 July 2018 until 20 August 2019 is consistent with the correspondence received by Ms Dib's solicitors from the Liquidator on 16 November 2022. The Liquidator advised that he had reviewed all of the Company's books and records received from Mr Kontorgiorgis' office and had been unable to locate any consent to act as a director in respect of the period between the Company's incorporation on 6 July 2018 and the appointment of the Liquidator. 6. At the hearing on 15 May 2023, The Deputy Commissioner did not adduce any evidence and did not cross-examine either Ms Dib or Mr Eltakchi. The Court was informed that the Deputy Commissioner holds no information about the circumstances in which Ms Dib came to be recorded as the sole director and company secretary of the Company for the period from 6 July 2018 until 20 August 2019, and had issued the Penalty Notice to Ms Dib solely on the basis that she was recorded in ASIC's register as having been a director of the Company for that period. As I have already mentioned, the Deputy Commissioner neither consents to nor opposes the relief sought by Ms Dib and will withdraw the Penalty Notice if the Court grants that relief. 7. It is well established that, where a person has not consented to their appointment as director or secretary of a company, either by written consent or by consent in fact, then their appointment will be invalid. [1] 8. Ms Dib's evidence that she did not consent to her appointment as a director and secretary of the Company is unchallenged, and is also corroborated by the evidence of Mr Eltakchi and by the correspondence from the offices of Mr Kontorgiorgis and the Liquidator that was tendered at the hearing. 9. It is plain from Ms Dib's unchallenged evidence about the nature of the work that she undertook in relation to the Company that she did not, in fact, act as a director or secretary of the Company. 10. I am satisfied on the basis of the evidence referred to above that Ms Dib was not validly appointed as, and did not in fact act as, director and secretary of the Company during the period from 6 July 2018 to 20 August 2019. 11. I am also satisfied that it is appropriate to make the declarations sought by Ms Dib to that effect. Those declarations will resolve a legal controversy between Ms Dib and the Deputy Commissioner. It is plain from the position taken by the Deputy Commissioner in these proceedings that, unless and until the Court makes the declarations sought by Ms Dib, the Deputy Commissioner intends to rely on the ASIC register to establish Ms Dib's directorship for the purpose of future recovery action against Ms Dib in relation to the Penalty Notice. The evidence does not disclose the reasons why no such recovery proceedings have been commenced in the period of some three and half years since the Penalty Notice was issued. That unusual circumstance means that Ms Dib is not presently able to have the question of the validity of her purported appointments determined in such proceedings. The risk for Ms Dib is that, if she waits for recovery proceedings to be commenced rather than making the present application for declaratory relief, the Deputy Commissioner may take other forms of recovery action without further recourse to Ms Dib, including setting off any tax refunds to which Ms Dib may otherwise be entitled against the amount stipulated in the Penalty Notice. In all of those circumstances, it is appropriate to make the declarations, which will result in the withdrawal of the Penalty Notice. 12. ASIC is not a party to these proceedings and Ms Dib does not presently seek an order in terms of prayer 6 of the amended originating process directing ASIC to rectify any register in respect of the Company to reflect the declarations that are to be made. Counsel for Ms Dib proposed the alternative course that Ms Dib will provide a copy of these reasons and the orders made on 15 May 2023 to ASIC and the Liquidator, it being anticipated that ASIC will rectify its register upon receipt of this judgment and the orders of the Court without a formal direction requiring it to do so, and that the Liquidator will voluntarily rectify any register in his possession in accordance with this judgment and the orders of the Court. If that does not occur, Ms Dib may wish to join ASIC to these proceedings and press prayer 6 of her amended originating process. The proceedings will therefore be stood over for a period of 14 days in the expectation that prayer 6 will either be dismissed or pressed on the next occasion. 13. No order for costs was sought by Ms Dib or the Deputy Commissioner. 14. For those reasons, I made the following orders and declarations at the conclusion of the hearing of these proceedings on 15 May 2023: 1. Leave be granted for the Plaintiff to commence these proceedings against the First Defendant pursuant to section 500(2) of the Corporations Act 2001 (Cth). 2. A declaration that Jennifer Dib did not consent to act as, and was not appointed as, director of Concreting and Formwork Personnel Pty Ltd ACN 627 355 480 on 6 July 2018. 3. A declaration that Jennifer Dib did not consent to act as, and was not appointed as, company secretary of Concreting and Formwork Personnel Pty Ltd ACN 627 355 480 on 6 July 2018. 4. A declaration that Jennifer Dib did not resign as Director of Concreting and Formwork Personnel Pty Ltd ACN 627 355 480 on 20 August 2019. 5. A declaration that the purported appointment of Jennifer Dib on 6 July 2018 as director and secretary of Concreting and Formwork Personnel Pty Ltd ACN 627 355 480 on 6 July 2018 is void and of no effect. 6. The proceedings are adjourned to the Corporations Registrar's list on 20 June 2023, for the purpose of the claim for relief in prayer 6 of the originating process being determined or dismissed. 7. No order as to costs.