Michael John Morris Smith (a former liquidator of Dallma Multifab Engineering Company Pty Ltd) [2005] NSWSC 850

Reported Decision : 54 ACSR 672

New South Wales Supreme Court

CITATION : Michael John Morris Smith (a former liquidator of Dallma Multifab Engineering Company Pty Ltd) [2005] NSWSC 850

HEARING DATE(S) : 09/08/05

JUDGMENT DATE : 26 August 2005

Equity Division JURISDICTION : Corporations List

JUDGMENT OF : Barrett J

DECISION : Order that Australian Securities and Investments Commission reinstate registration and ancillary orders

CATCHWORDS : CORPORATIONS - company deregistered - application for reinstatement by former liquidator - deregistration following lodgment by liquidator of form appearing to be Form 523 but departing from that form in minor respects - no occasion for lodgment of Form 523 - whether deregistration regular - whether ASIC's unilateral power to reinstate exercisable

Corporations Act 2001 (Cth), ss.509, 601AC(2), 601AH(1) and (2) LEGISLATION CITED : Corporations Regulations 2001 (Cth), regs.5.6.11, 5.6.16, 5.6.27

Michael John Morris Smith (a former liquidator of Dallma Multifab Engineering Company Pty Ltd) - Plaintiff PARTIES :

FILE NUMBER(S) : SC 4264/05

COUNSEL : Mr J.T. Johnson - Plaintiff

SOLICITORS : Watson Mangioni - Plaintiff

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

FRIDAY, 26 AUGUST 2005

4264/05 MICHAEL JOHN MORRIS SMITH (A FORMER LIQUIDATOR OF DALLMA MULTIFAB ENGINEERING COMPANY PTY LTD) JUDGMENT 1 This is an application for an order under s.601AH(2) of the Corporations Act 2001 (Cth) that the Australian Securities and Investments Commission reinstate the registration of a company. It arises in unusual circumstances. 2 The application is made by Mr Smith who, on 1 March, 2002, became the liquidator of Dallma Multifab Engineering Pty Ltd ("Dallma"), having previously been the administrator of that company under a Part 5.3A administration. 3 Mr Smith thereafter attended to his duties as liquidator and, in the course of so doing, gave notice of a general meeting of the company and a meeting of creditors required to be convened in accordance with s.508. The date fixed for each meeting was 17 March 2004. The general meeting of the company was not attended by the necessary quorum. Mr Smith then acted on the basis that, because of regulation 5.6.16 of the Corporations Regulations 2001 (Cth), the meeting was adjourned to the same time on 24 March 2004. The view was taken that a "general meeting of the company" referred to in s.508 is, in terms of regulation 5.6.11(2)(a), both "a meeting convened under Part … 5.5 … of the Act" and "a meeting of members … of a company". On the second occasion, there was again no quorum. On the footing that regulation 5.6.16 applied, the result was that the adjourned meeting lapsed. 4 Mr Smith was under the impression that he then came under a duty to make a lodgment with ASIC. If the case had been truly within regulation 5.6.11(2)(a)(i) and a quorum had been achieved so that the meeting was properly constituted, regulation 5.6.27(2)(a) would have required a record of the meeting to be made and regulation 5.6.27(2) would have required lodgment with ASIC of a certified copy of the minutes. The appropriate form of certification would have been Form 911. 5 But, of course, the fact that there was no quorum meant that there was never any properly constituted general meeting. Because there was no form catering for this situation, Mr Smith adopted an unorthodox course in relation to the ASIC lodgment he considered himself bound to make. Aware, no doubt, that, had the same situation of lack of quorum arisen in relation to the final meeting called for by s.509, lodgment of a return in Form 523 would have been required by s.509(4), Mr Smith made some changes to Form 523 with a view to making it fit the circumstances which had arisen in the s.508 context. He then proceeded to lodge that modified Form 523 with ASIC. 6 The content of the document Mr Smith lodged differed from the content of Form 523, as prescribed, in three ways: first, the heading was changed to read "Presentation of Annual meeting convened by liquidator" rather than "Notification of final meeting convened by liquidator"; second, whereas Form 523, under the heading "purpose of meeting", refers to presentation of an account "showing how the winding up of the company had been conducted" [emphasis added], Mr Smith's document referred to an account "showing how the winding up of the company is being conducted" [emphasis added]; and, third, whereas the prescribed form contains provision for notifying either the holding of, or absence of a quorum for, either a "general meeting" or a "meeting of members and creditors", the document lodged referred to either a "general meeting" or a "meeting of members" and included crosses indicating "meeting of members" and lack of quorum. The prominent references to ss.509(3) and (4) at the top of the form were retained, along with the form number (523). Also retained was the reference in the form to annexure of a copy of "the account presented at the meeting, prepared in accordance with subsection 509(1)". In fact annexed, however, was a copy of what purported to be "minutes of annual meeting of members". The changes Mr Smith made were in fine print sections of the form. They are not apparent except upon a very close reading. 7 Lodgment of Form 523 in a case under s.509(4) to which it applies – that is, a case where no quorum is achieved at the final meeting of creditors and members together called for by s.509 – operates, under s.509(5), to require ASIC to deregister the company. Unless the court orders otherwise under s.509(6), ASIC must deregister at the end of the period of three months after lodgment. 8 In the present case, ASIC deregistered Dallma three months after lodgment of the variant of Form 523 lodged by Mr Smith. He became aware of that only at a later time when he attempted to lodge further documents relating to Dallma. Because the administration is incomplete, Mr Smith wishes to have the registration reinstated. 9 When he became aware of the deregistration, Mr Smith applied to ASIC for the exercise by it of its power to reinstate the registration. That power is conferred by s.601AH(1): "ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered." 10 The application to ASIC was made by means of a form apparently preferred by ASIC in such cases, supported by appropriate evidence and the necessary fee. The application was dated 2 May 2005. By letter dated 21 June 2005, ASIC notified Mr Smith's firm that the application had been unsuccessful, saying: "Your application was considered but we are not satisfied that the company should not have been deregistered." 11 ASIC referred to its Policy Statement No 83 which gives, as one example of circumstances in which it will exercise the s.601AH(1) power: "Where … there was a procedural defect or oversight in the procedure leading to the deregistration." 12 The matter before it was seen by ASIC as one in which deregistration had occurred, but not one involving procedural defect or oversight productive of the conclusion that "the company should not have been deregistered". There can, in my mind, be no real doubt as to the correctness of both these propositions. 13 Chapter 5A of the Corporations Act deals with deregistration. By force of s.601AD(1), a company ceases to exist "on deregistration". In the context, "deregistration" has a meaning corresponding with that derived from paragraph (a) of the s.9 definition of "deregistered" which refers to "deregistered under Chapter 5A". That chapter defines certain circumstances in which ASIC may deregister a company and certain circumstances in which it must do so. Among the latter are the circumstances in s.601AC(2): "ASIC must deregister a company if: