Reported Decision : 68 ACSR 242 New South Wales Supreme Court CITATION : Stone v ACN 000 337 940 Pty Ltd [2008] NSWSC 1058 HEARING DATE(S) : 07/10/08 JUDGMENT DATE : 9 October 2008 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Proceedings adjourned. CATCHWORDS : CORPORATIONS - deregistered company - application for order that ASIC reinstate registration - applicant wishes to pursue proceedings against company in Dust Diseases Tribunal - whether plaintiff may proceed direct against insured without reinstatement of company's registration - not shown that he can - various factors relevant to whether reinstatement "just" - company in liquidation immediately before deregistration - need to re-install liquidator - former liquidator should be appointed unless unable or unwilling to act LEGISLATION CITED : Corporations Act 2001 (Cth), ss 601AG, 601AH(2), 601AH(3). 601AH(5) CATEGORY : Principal judgment Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd [2005] NSWCA 19; (2005) 62 NSWLR 148 Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; (2000) 34 ACSR 232 Del Borrello v Australian Securities and Investments Commission [2008] WASC 48 Gorman v Australian Securities and Investments Commission [2008] FCA 962 CASES CITED : Hutchinson v Australian Securities and Investments Commission [2001] VSC 465; (2001) 40 ACSR 198 J P Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu [2008] FCA 433; (2008) 65 ACSR 636 Orica Ltd v CGU Insurance Ltd [2003] NSWCA 331; (2003) 59 NSWLR 15 Pagnon v WorkCover Queensland [2000] QCA 421; [2001] 2 QdR 492 Ramantanis v G & M Excavations Pty Ltd [2003] NSWSC 250; (2004) 22 ACLC 22 Suncorp Metway Insurance Ltd v Clonmel Pty Ltd [2000] QSC 135; [2001] 2 QdR 94 PARTIES : John Albert Stone - Plaintiff ACN 000 337 940 Pty Ltd - Defendant FILE NUMBER(S) : SC 5076/08 COUNSEL : Mr A P Cheshire - Plaintiff Mr S Ingate - Former Director of Defendant SOLICITORS : Turner Freeman - Plaintiff Ingate & Associates - Former Director of Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J THURSDAY 9 OCTOBER 2008 5076/08 JOHN ALBERT STONE v ACN 000 337 940 PTY LTD JUDGMENT 1 The plaintiff seeks an order under s 601AH(2) of the Corporations Act 2001 (Cth) directing Australian Securities and Investments Commission to reinstate the registration of the company formerly named Rigby Jones Pty Ltd which, in 2002, changed its name to correspond with its Australian Company Number (with the addition of "Pty Ltd"). It will be convenient to refer to it as "Rigby Jones". 2 The application is opposed by Mr Ingate who was the sole director of Rigby Jones at the time of its deregistration. 3 Rigby Jones was deregistered on 20 May 2006 pursuant to s 509 of the Corporations Act upon completion of a members voluntary winding up. 4 The plaintiff is a former employee of Rigby Jones. By statement of claim filed on 13 June 2008, he commenced (or purported to commence) proceedings in the Dust Diseases Tribunal of New South Wales seeking damages for bodily injury allegedly sustained by him through exposure to asbestos in the workplace. Four defendants are named in the statement of claim. One of them is Rigby Jones which, of course, is non-existent and was non-existent when the proceedings in the Tribunal were commenced. 5 It is alleged in the statement of claim that the plaintiff was employed by Rigby Jones between about 1972 and 1990, that he was required to attend particular premises in the course of his employment between about 1960 and 1990 and that he was there exposed to asbestos (before 1972, he was employed by another company also named as a defendant in the statement of claim). The basic allegation against Rigby Jones is that it failed to provide a safe system of work and was thereby guilty of negligence and breach of statutory duty which occasioned injury to the plaintiff. 6 Quite separately, the plaintiff's solicitors say in a recent letter to the solicitors for Mr Ingate that the plaintiff "was exposed to asbestos up until about 1975". 7 The plaintiff's solicitors have made inquiries as to insurances that may have been held by Rigby Jones in respect of liability for injury to employees. A company called Corporate Management Services (Australia) Pty Ltd, ostensibly writing as agent for a number of companies in liquidation, informed the plaintiff's solicitors, by letter dated 23 September 2008 headed "Company Restoration of Rigby Jones Pty Limited": "While there are no actual underwriting documents, claims records confirm that AGCI was on risk in 1975." 8 The reference to "AGCI" may be taken to be a reference to Associated General Contractors Insurance Company Limited, one of the companies in liquidation apparently represented by Corporate Management Services (Australia) Pty Ltd. 9 I mention these matters as a prelude to a consideration of the submission made on behalf of Mr Ingate that an order under s 601AH(2) should not be made because the plaintiff has sufficient protection under s 601AG: "A person may recover from the insurer of a company that is deregistered an amount that was payable to the company under the insurance contract if: (a) the company had a liability to the insurance contract covered that liability immediately before deregistration." 10 Mr Cheshire of counsel, who appeared for the plaintiff, submitted that s 601AG is not applicable. He referred to one case, being the decision of Muir J (as he then was) in Suncorp Metway Insurance Ltd v Clonmel Pty Ltd [2000] QSC 135; [2001] 2 QdR 94. That case is of no direct assistance. But other cases are. 11 The purpose and effect of s 601AG were recent explained by Beech J in Del Borrello v Australian Securities and Investments Commission [2008] WASC 48 at [11] and [12]: "[11] To my mind, reference to the explanatory memorandum of the Company Law Review Bill 1997 (Cth), which ultimately resulted in the inclusion of s 601AH and s 601AG in the Corporations Act , and to the authorities which I have had the opportunity to review does not support the view that there is any reasonable room for doubt in this regard [that is, to the purpose and effect of the section]. [12] The explanatory memorandum which accompanied the Company Law Review Bill included paragraphs in these terms [15.22] - [15.23]: At present, a person wishing to make a claim against a deregistered company may need to apply to a court for the reinstatement of the company in order to bring an action against it. The Bill enables a person to proceed directly against the insurer of a company that is deregistered, without seeking the company's reinstatement (Bill, s 601AG). Comparable rights have previously been provided in other legislation, for example, section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). The Bill enables a third party to recover directly from the insurer of the deregistered company an amount payable under their contract of insurance if 2 preconditions are met: (a) the deregistered company had a liability to the third party; (b) the insurance contract covered that liability (Bill s 601AG)." 12 His Honour then quoted with approval a passage in the judgment of McPherson JA in Pagnon v WorkCover Queensland [2000] QCA 421; [2001] 2 QdR 492 at [17]: "The legislative policy underlying s 601AG is, however, not open to doubt. It is to 'shortcut' the need to reinstate the company, and to do so by enabling the ultimate recipient of the insurance proceeds to sue the insurer direct where the company has been dissolved without imposing the additional trouble and expense of first applying to have it reinstated." 13 The operation of s 601AG was considered by the Court of Appeal in Almario v Allianz Australia Workers Compensation (NSW) Insurance Ltd [2005] NSWCA 19; (2005) 62 NSWLR 148. Ipp J said (at [19]-[20]), with the concurrence of Hodgson JA and Hunt AJA: "[19] Section 601AG creates a new cause of action. The action is not a claim for damages. It is for an amount that was payable to the deregistered company under the relevant insurance contract. A claim in terms of s 601AG is subject to two conditions, namely, proof that the deregistered company "had a liability" to the person claiming and that the insurance contract covered that liability immediately before deregistration. [20] The two conditions are expressed in the past tense. The inference is that the time for determining whether the deregistered company had a liability to the person claiming, and whether the insurance contract covered that liability, is "immediately before deregistration" (being the phrase qualifying condition (b)). This was not disputed. 14 Whether the two conditions specified in s 601AG are satisfied at the time of deregistration in a particular case will depend, in the case of an action for damages, on both the time at which the relevant cause of action for damages became complete and the terms of the relevant insurance policy. It may be that, as in Orica Ltd v CGU Insurance Ltd [2003] NSWCA 331; (2003) 59 NSWLR 15, insurance will respond only when a cause of action completed by damage arises. 15 In the present case, there is no evidence of the terms of the relevant insurance. Indeed, it cannot be by any means certain that an insurance contract subsisted to cover the whole or any relevant part of the period of employment, whatever it may have been. The most that appears is a statement by a purported agent of an insurance company in liquidation that no underwriting documents exist but "claims records confirm that [that insurance company] was on risk in 1975". Nor is it possible to say when the cause of action the plaintiff asserts became complete. 16 The court is unable to conclude that circumstances are such as to allow the present plaintiff to by-pass Rigby Jones and sue Associated General Contractors Insurance Company Limited (in liquidation), relying on the statutory cause of action created by s 601AG. Nor, I might say, is it at all clear what that statutory cause of action, if existing, might be worth, in view of the winding up of the apparent insurer. 17 It is clear, in my view, that the availability and worth of a cause of action under s 601AG are matters relevant to be considered upon an application for an order for reinstatement under s 601AH: see, for example, Hutchinson v Australian Securities and Investments Commission [2001] VSC 465; (2001) 40 ACSR 198 at [36] – [37] and Arnold v Poltane Pty Ltd [2005] FCA 1418. In the latter case, Merkel J said at [8]: "Section 601AG appears to permit the plaintiff to bring proceedings directly against Poltane's insurer. If GIO conceded that s 601AG applied because the conditions in (a) and (b) had been satisfied, there would be no need to reinstate Poltane." 18 If s 601AG clearly applied and the re-creation of the deregistered company would put the prospective claimant for damages in a position from which no outcome better than that made available by s 601AG might be expected, that prospective claimant would not be a "person aggrieved by" the deregistration. 19 That, however, has not been shown to be the position here. The existence of an insurance policy and the terms of any policy have not been established. In addition, it is not at all clear that a cause of action completed by damage had arisen before the deregistration of Rigby Jones. 20 That being so, it should be accepted that any prospect that the plaintiff has of obtaining satisfaction from an insurer of Rigby Jones depends on his bringing an action against Rigby Jones so as to establish liability of Rigby Jones. That, of itself, is sufficient to make the plaintiff a "person aggrieved" by the deregistration: see Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; (2000) 34 ACSR 232. The plaintiff's standing to bring the application for reinstatement is thus established: s 601AH(2)(a)(i). 21 The court must therefore decide whether it is "just" that the registration of Rigby Jones be reinstated: s 601AH(2)(b). It is necessary to consider the impact that restoration to the register would have on persons interested and affected. 22 From the plaintiff's perspective, restoration will be beneficial because it will enable him to pursue the damages action he wishes to pursue in the way already described. 23 One aspect of the inquiry into what is "just" concerns the future stewardship of the company, if and when it comes back into existence. As I have said, Mr Ingate was the sole director at the time of deregistration in May 2006. For more than three years before that, the company had been in liquidation as a result of a decision of its members that it should be wound up. Mr Ingate thus ceased to exercise the functions of director in January 2003, almost six years ago. He is now aged 83 and does not wish to have the responsibilities of directorship again. 24 Immediately before deregistration, however, Rigby Jones was subject to members voluntary winding up. A liquidator was in office. If and when reinstated, the company will again be a company in liquidation. However, the person who was the liquidator at the time of deregistration will not resume office as liquidator upon reinstatement: see J P Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu [2008] FCA 433; (2008) 65 ACSR 636 and cases there discussed. It will be necessary, therefore, that a liquidator be appointed. This is another aspect of stewardship. 25 Generally speaking, it is desirable that the previous liquidator be put back into office: J P Morgan Portfolio Services Ltd v Deloitte Touche Tohmatsu (above), Ramantanis v G & M Excavations Pty Ltd [2003] NSWSC 250; (2004) 22 ACLC 22; Gorman v Australian Securities and Investments Commission [2008] FCA 962. As Stone J said in the J P Morgan case at [10]: "[A]ll other things being equal, it is preferable that the same liquidator be appointed." 26 And as was said in the Ramantanis case at [8], s 601AH(3)(b) provides a basis for appointing a liquidator upon reinstatement where a liquidator was in office at the time of deregistration. 27 I shall return to this matter. 28 The inquiry whether reinstatement will be "just" requires that attention be given to another matter. The fact that the winding up was a members voluntary winding up implies the possibility of a surplus after the payment of the company's debts, which surplus was distributed among members according to their respective entitlements. That raises a question about the effect that s 601AH(5) will have if reinstatement is effected. If there were any prospect that the distribution might be recovered by the liquidator of the reinstated company, that would be a significant factor in the determination of what is "just" for the purposes of s 601AH(2)(b). 29 Section 601AH(5) lays down the general rule that, upon reinstatement, "the company is taken to have continued in existence as if it had been deregistered". The deemed continuity must, however, be continuity of existence in the form prevailing at the time of deregistration – in the present case, in the form of a company which had been duly subjected to members voluntary winding up and the surplus assets of which had been distributed pursuant to such a winding up. So far as the corporate entity is concerned, the section deems no more than continuity of existence. It does not purport to change anything done before or existing at deregistration. 30 It follows that members to whom distributions may have been made in the course of the members voluntary winding up will not be prejudiced by reinstatement of the registration. 31 My conclusion is that, provided proper provision is made for the appointment of a liquidator, it will be "just" that the registration of Rigby Jones be reinstated. 32 As I have said, it is generally desirable that the person who was the liquidator immediately before deregistration be put back into office. In the present case, there is no evidence that the former liquidator has been approached. He is still in practice and there is nothing before me to suggest that he is unable or unwilling to act. The plaintiff has produced the consent of another qualified person without advancing any reason why that person should be preferred. 33 If the true position is that the former liquidator is unwilling to be appointed, there is no reason why the person proposed by the plaintiff should not be appointed. The position the former liquidator does, however, need to be clarified. 34 I note, in conclusion, that ASIC has been notified of the present application and that it has, by letter dated 29 September 2008 addressed to the plaintiff's solicitors, indicated that it does not oppose the application, provided that certain conditions are satisfied. The conditions do not involve any matter that should cause the court to hesitate. 35 At this stage, I indicate that orders as follows will be made when the matter just mentioned concerning the previous liquidator has been attended to: 1 Order pursuant to s 601AH of the Corporations Act 2001 (Cth) that Australian Securities and Investments Commission reinstate the registration of ACN 000 337 940 Pty Ltd (formerly Rigby Jones Pty Ltd) ACN 000 337 940. 2. Order that, immediately upon reinstatement of the registration, [name] of [address] be appointed liquidator of ACN 000 337 940 Pty Ltd [if applicable: in substitution for [name]. 36 The originating process seeks, in addition to this relief, an order allowing the proceedings in the Dust Diseases Tribunal to continue. The following additional orders will be made when the orders already mentioned are made: 3. Order that, immediately upon reinstatement of the registration, the plaintiff have leave nunc pro tunc to commence and leave to proceed with proceedings 8172 of 2008 in the Dust Diseases Tribunal of New South Wales against ACN 000 337 940 Pty Ltd. 4. Order that no step to enforce any judgment or verdict obtained in those proceedings 8172 of 2008 shall be taken by the plaintiff otherwise than by resort to proceeds of insurance, without the further leave of the court. 37 The proceedings will be stood over to a time to be fixed so that the matter to which I have referred may be attended to. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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