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: (a) 3 months have passed since the company's liquidator lodged a return under section 509; and (b) no order under subsection 509(6) has been made during that period." 14 The reference here to "a return under section 509" must be understood in the light of the content of that section. The section is concerned with the final meeting. The requirement imposed by s.509(3) is that there be lodged "a return of the holding of the meeting and of its date with a copy of the account attached to the return". The "account" is that called for by s.509(1). If no meeting is held because of the absence of a quorum, s.509(4) provides for a return so stating, again with the relevant "account" attached. 15 I am satisfied that the adapted Form 523 lodged by Mr Smith was, in terms of s.601AC(2), "a return under section 509". Despite the fine print textual modifications to which I have referred, the document had the appearance of such a return and dealt with matters of the kind with which such a return would deal. Most significantly, it carried on its face a clear reference to "Corporations Act 509(3) & (4)" as the provisions governing or giving rise to it and said explicitly: "A copy of the account presented at the meeting, prepared in accordance with 509(1) is enclosed in the annexure marked ('A')." 16 The document prepared and lodged by Mr Smith thus purported to be a document conveying information in accordance with s.509. The fact that a close reading of the fine print may have disclosed some minor departures from the content normally to be expected does not, in my view, detract from the document's own statement of its statutory role and purpose related to s.509. It was, in my view, what it purported by that statement to be, that is, a "return under section 509" as referred to in s.601AC(2). 17 The situation was, of course, one in which no occasion for the lodgment of a "return under section 509" had arisen. But ASIC, having received from the liquidator a document of that description was entitled – indeed, bound – to deal with it accordingly and therefore to deregister at the end of the period of three months after lodgment. And that is what it did. 18 In these circumstances, there was deregistration under Chapter 5A. ASIC's power to reinstate the registration under s.601AH(1) would have arisen had there been proper grounds for concluding that the company should not have been deregistered. But because the deregistration was effected consistently with the legislation, no such grounds were available. ASIC was therefore correct in taking the view that the s.601AH(1) power was not exercisable. 19 The power of the court under s.601AH(2) is, however, clearly available. That provision pays no attention to the circumstances of deregistration. It is exercisable in every case of deregistration. 20 Section 601AH(2) poses two questions: first, whether the applicant for reinstatement of the registration is a person within s.601AH(2)(a) ; and, second, whether it is "just" that the registration be reinstated (s.601AH(2)(b)). The first question is answered in the affirmative in this case: a former liquidator of the company is within s.601AH(2)(a) (see s.601AH(2)(a)(ii)). Mr Smith obviously satisfies that description. In addition, the circumstances that Mr Smith had not completed his administration and that deregistration occurred without his knowledge and in the absence of any intention on his part to initiate it show clearly that it is "just" that the effects of the deregistration be reversed. 21 I therefore make the following orders: 1. That Australian Securities and Investments Commission reinstate the registration of Dallma Multifab Engineering Company Pty Ltd. 2. That Michael John Morris Smith, the liquidator of Dallma Multifab Engineering Company Pty Ltd immediately before its deregistration, be restored to office as such liquidator upon reinstatement of the registration. 3. That all things purportedly done by, to and in relation to Michael John Morris Smith as liquidator of Dallma Multifab Engineering Company Pty Ltd after its deregistration and before reinstatement of its registration shall be as valid and effectual as they would have been had the deregistration never occurred. 22 Mr Smith has also applied for an order that the costs of this application "be costs and expenses of the Company as reinstated". In other words, he seeks a basis upon which to recoup out of the assets of Dallma, after its recreation, the expenses incurred by him as "a former liquidator of the company" in procuring that recreation. As I presently see matters, I am not inclined to consider it appropriate to make any such order. In the first place, it is by no means clear to me that there is any provision within Division 6 of Part 5.6 under which assets of the company in liquidation could be applied in meeting such costs, even if ordered by the court to be paid. As a result, the order may well be one which is without utility. Second, the application was made necessary by the course Mr Smith took in lodging what was, in the circumstances, a misleading document, although I readily accept that he had absolutely no intention to mislead and believed he was acting both properly and responsibly. It is not necessarily clear that the estate under administration should bear the costs, even if an order of the court could make them payable or reimbursable out of that estate. 23 Because the question of costs was not expressly addressed in submissions, that question is reserved for further consideration, should Mr Smith wish to advance submissions. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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