New South Wales Supreme Court CITATION : Workers Compensation Nominal Insurer v Australian Leader [2008] NSWSC 97 HEARING DATE(S) : 10 December 2007, 14 February 2008 JUDGMENT DATE : 14 February 2008 JURISDICTION : Equity JUDGMENT OF : Austin J DECISION : See at [10] CATCHWORDS : CORPORATIONS - reinstatement of registration - application by workers compensation insurer - standing as person aggrieved by the deregistration - deregistration frustrates plaintiff's statutory right to give notice for recovery of premium adjustment after wage audit - special considerations affecting whether it is just that the registration be reinstated - considerations affecting adjournment of winding up application LEGISLATION CITED : Corporations Act 2001 (Cth), ss 601AA, 601AH Workers Compensation Act 1987 (NSW), ss 170, 172 CASES CITED : CGU Workers Compensation (NSW) as agent for New South Wales WorkCover Scheme [2007] NSWSC 1393 PARTIES : Workers Compensation Nominal Insurer (P) Australian Leader Pty Ltd (D) FILE NUMBER(S) : SC 5163/07 COUNSEL : J O'Connor (P) SOLICITORS : Mason Black Lawyers (P) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J THURSDAY 14 FEBRUARY 2008 5163/07 WORKERS COMPENSATION NOMINAL INSURER V AUSTRALIAN LEADER PTY LTD JUDGMENT (ex tempore; revised 15 February 2008) 1 HIS HONOUR: By an originating process filed on 24 October 2007 the plaintiff seeks an order that the company Australian Leader Pty Limited be reinstated by ASIC, followed by an order that the company be wound up and a liquidator be appointed. To a substantial degree, though not entirely, the facts of the case are governed by a decision of mine in CGU Workers Compensation (NSW) as agent for New South Wales WorkCover Scheme [2007] NSWSC 1393. However, there are some points of distinction in the facts. 2 In the CGU case the insurer conducted an audit of the company's wage records which was carried out before the company was deregistered. In the present case, although the audit related to a period before deregistration, the company was deregistered before the audit was initiated, and therefore the entire process comprising the audit, followed by a demand for increased premium, an application for review to the WorkCover Authority and determination of the review by the WorkCover Authority, was carried out without any reference to the fact that the company was already deregistered under s 601AA. 3 A further difference is that in the CGU case the WorkCover Authority was informed that the company had been deregistered before the purported review was undertaken, and the Authority determined that in those circumstances it had no power to deal with the application. In the present case, as I have said, the issue of deregistration does not appear to have been raised with the WorkCover Authority. It seems that the WorkCover Authority purported to determine the application for review, against the company and in favour of the insurer, on the ground that information sought from the company had not been provided. 4 The reasoning which led me, in the CGU case, to conclude that the plaintiff was a person aggrieved by the deregistration, therefore having standing to seek reinstatement under s 601AH(2), is applicable in this case. The interest of the plaintiff is to initiate and carry through a process which will determine, by audit, whether the company's wage records for earlier years were correct and if not, enable the insurer to recover additional premiums. The amount claimed exceeds $145,000 and is a matter of some substance. There is no evidence to indicate whether, if the company is reinstated and additional premiums fall due and then the company is put into liquidation, the liquidator will be able to recover assets to meet the insurer's claim as creditor. Nor is there any evidence whether, if additional premiums fall due, the insurer will have any claim against the former directors of the company. But, nevertheless, there is a substantial economic interest at stake for the insurer contingent upon there being some assets to meet its claim. Further, there is a public interest involved in reinstating a company which had the benefit of a Workers' Compensation Insurance policy, so as to enable the insurer to seek to recover a premium adjustment arising by way of a wage audit, as I noted in paragraph [24] of the CGU judgment. 5 As to whether, for the purposes of an order for reinstatement under s 601AH, it is just that the company's registration be reinstated, the evidence in this case is stronger in favour of the plaintiff than the evidence in the CGU case. There I held that there was a genuine dispute as to the validity of the insurer's claim, but, nevertheless, that it was just to reinstate the company. Reinstatement would enable that dispute to be determined. That was appropriate even though, if the dispute were determined in favour of the company, there would be no claim and with the wisdom of hindsight, no reason to have reinstated the company. 6 In the present case the WorkCover Authority purported to make a determination of the review application, although the determination related to a company that did not then exist. The determination was that no evidence had been produced to show that the persons regarded by the auditor as "deemed" workers were in fact not workers. That being so, there seems to be a higher probability that if proper procedures are followed, the insurer will reach a point where there is a debt deemed to be owing under the Workers' Compensation Act s 172, and will be able to proceed to winding up. 7 Because the company did not exist at any relevant time during the audit and review process, I doubt whether the plaintiff has standing to obtain a winding up order at this stage. It is not necessary to make a final determination of that question, because I intend to adjourn the winding up application for reasons I shall explain. But on the face of it, since the entire procedure leading to a deemed debt under s 172 was not initiated until after the company was deregistered, it is hard to see how, upon the reinstatement of the company, a debt would spring up immediately, causing the plaintiff to be a creditor forthwith. The issue might depend upon the correct interpretation of s 601AH(5), but that can be left as a matter for another day. 8 Since, in substance, the plaintiff is entitled to have the company reinstated, the question becomes whether a procedure can be devised which will allow the plaintiff to do whatever is necessary to confirm the audit that has occurred (or to conduct an audit effectively) and for an effective demand for additional premiums to be made, triggering the procedure in ss 170 and 172 of the Workers' Compensation Act. The question is also what can be done to ensure that the directors, should they wish to do so, will be able to make an application for review to the WorkCover Authority under those statutory provisions, and to ensure that the WorkCover Authority has jurisdiction to deal with any such application. 9 Aided by helpful submissions from counsel, I have decided that the appropriate procedure is: · to reinstate the company now so that it is returned to its directors; · to make an interim order restraining the directors from allowing the company to trade, so as to protect creditors; · to require the directors to indemnify the company in respect of any costs of the application for review that they may wish to make on behalf of the company to the WorkCover Authority; and · to extend the period within which a winding up order may be made so as to allow those processes to occur. I shall stand the winding up application over to a date likely to be after those processes have been completed. 10 The course that I am taking may cause prejudice to the former directors of the company. With that in mind, when the application first came before me on 10 December, I directed that the plaintiff notify the former directors, at their last known addresses, that the Court had adjourned the proceedings, and to draw their attention to the judgment in the CGU case. That has occurred and the directors have not appeared today, although the matter has been called outside the courtroom. Those matters, coupled with the facts, that: · the directors notified the insurer on 17 November 2006 that they intended to lodge an appeal against the auditor's determination, using the letterhead of the deregistered company and disclosing that company's ABN; and · they then caused an application to be lodged to the WorkCover Authority in the name of another company, Australian Leader Group Pty Limited, with a different ABN number; lead me to the conclusion that this is not a case in which it would be appropriate to require the defendant to give the usual undertaking as to damages as a condition for the making of an interim order restraining the directors from allowing the company to trade. 11 So I make the orders in the document entitled orders which I now initial and date for identification. I direct that these orders be entered forthwith. ********** 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.