Supreme Court New South Wales Medium Neutral Citation: In the matter of F&A Henry (Gowrie) Pty Limited (deregistered) [2012] NSWSC 1061 Hearing dates: 27 August 2012 Decision date: 06 September 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: F&A Henry (Gowrie) Pty Ltd (drgd) ACN 000 254 179 be reinstated. The members' voluntary winding up be terminated immediately following re-registration. Catchwords: CORPORATIONS - Deregistration - Reinstatement - Corporations Act (2001) Cth) s 601AH(2) - Reinstatement by court - Satisfaction of the court as to whether it is just that company be reinstated - Circumstances in which company deregistered, purpose of reinstatement and public interest generally relevant to whether company should be reinstated. CORPORATIONS - Winding up - Termination - Power of court to terminate winding up - Attitude and interests of creditors, liquidator and contributories - Whether termination is in the public interest and the company is solvent - Whether any non-compliance with statutory duties and circumstances leading to wind up explained. Legislation Cited: - Corporations Act 2001 (Cth) ss 95A, 482, 509, 509(5), 511(1)(b), 568, 601AH, 601AH(2), 601AH(3), 601AH(5) Cases Cited: - Anderson v Palmer [2002] NSWSC 192 - Apostolou v VA Corporation of Australia Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84 - Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; (2000) 34 ACSR 232 - Box Valley Pty Ltd v Kidd [2006] NSWCA 26 - Callegher v Australian Securities and Investments Commission [2007] FCA 482; (2007) 239 ALR 749 - McKern v Pacific Edge Corporation Pty Ltd (in liq) [2004] NSWSC 1150; (2004) 51 ACSR 602 - Mercy & Sons Pty Ltd v Wanari Pty Ltd [2000] NSWSC 756; (2000) 35 ACSR 70 - New Cap Reinsurance Corporation Ltd (in liq) v A E Grant [2008] NSWSC 1015; (2008) 68 ACSR 176 - Prendergast v Rolcross Pty Ltd (in liq) [2008] NSWSC 146 - Re Centro Properties Ltd [2011] NSWSC 1171; (2011) 87 ACSR 131 - Re Graf Holdings Pty Ltd [1999] NSWSC 217 - Re Kitchen Dimensions Pty Ltd (in liq) [2012] VSC 280 - Re SNL Group Pty Ltd (in liq) [2010] NSWSC 797 - Re St George Bank Ltd [2007] NSWSC 134 - Re Warbler Pty Ltd (1982) 6 ACLR 526 - Re Yelin Group Pty Ltd [2012] NSWSC 74 - Rothwells Ltd (in liq) v Spedley Securities Ltd (in liq) (1990) 20 NSWLR 417 - Simms (as liquidator of Enron Australia Finance Pty Ltd (in liq)) v TXU Electricity Ltd [2003] NSWSC 1169; (2003) 204 ALR 658 - Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd [2006] NSWSC 292; (2006) 57 ACSR 103 - White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 71; (2004) 49 ACSR 220 Category: Principal judgment Parties: Bruce Henry (Plaintiff) Australian Securities and Investments Commission (Defendant) Representation: Counsel: A.G. Martin (Plaintiff) File Number(s): 12/248514 Judgment 1By application filed on 9 August 2012, the Plaintiff, Mr Bruce Henry, seeks an order under s 601AH(2) of the Corporations Act 2001 (Cth) that the Australian Securities and Investments Commission ("ASIC") reinstate the registration of F&A Henry (Gowrie) Pty Limited ("Company"), which was deregistered by ASIC three months after the conclusion of a members' voluntary winding up of the Company. Mr Henry also seeks an order under s 601AH(3) of the Corporations Act that, upon re-registration of the Company, Mr Bernard Croft, who was previously the voluntary liquidator appointed to the Company, act as its voluntary liquidator. Mr Croft has consented to that appointment. 2Mr Henry also seeks and order that, following the reinstatement of the Company, the members' voluntary winding up in respect of the Company be terminated under ss 482 and 511(1)(b) of the Corporations Act. Factual background 3The Company previously owned 110 acres of land in Gowrie in the Hunter Valley. It sold that land to a developer, Overdean Group Pty Limited (in liquidation) ("Overdean") in September 2004. 4Special Condition 38 of the Sale Contract provided that, notwithstanding any other provision of the Contract, the Company could retain possession of a house on the property and its curtilage; and could agist cattle on all land sold and use the access roads for purposes associated therewith, with a licence fee of $5,000 per annum being payable quarterly in advance from 1 October 2006 until 30 September 2008 and thereafter "the market rate as agreed by the parties" being payable. An issue has subsequently arisen, in the circumstances to which I will refer below, as to whether that licence fee is payable only in relation to the agistment of cattle (which, I was informed had not occurred in the relevant period) or also for the possession of the house and curtilage. A question may also arise, which it is not necessary to determine in the present application, as to whether the agreement for a licence fee at "the market rate as agreed by the parties" is capable of giving rise to an enforceable obligation. Special Condition 40 of the Sale Contract in turn provided that the Company reserved to itself an existing cemetery area and adjacent block of land and the existing house and house block. 5In June 2006, Mr Henry resolved, as the Company's sole shareholder, to voluntarily wind up the Company as it was no longer trading and its principal assets had been realised. Mr Henry's evidence is that he then overlooked the fact that the Company had the benefit of the reservations under the Sale Contract. 6The final meeting contemplated by s 509 of the Corporations Act occurred, the final accounts of the winding up were presented and the liquidator resigned by 19 May 2008 and ASIC deregistered the Company under s 509(5) of the Corporations Act on 19 August 2008. 7In February 2012, over three years later, Overdean was placed in creditors' voluntary liquidation. Its liquidator asserted, in February 2012, that licence fees were payable under the Sale Contract from 1 October 2006 in the amount of $5,000 per annum and, from 1 October 2008, the market rate as agreed between the parties. On 24 May 2012, Mr Henry's solicitors were advised of the proposed sale of the property by Overdean. It appears that, by letter dated 13 June 2012 (which was not in evidence) the liquidator purported to disclaim any entitlement of Mr Henry to occupy the property. That purported disclaimer had the difficulties, first, that it seems to have been a disclaimer of one term of the Sale Contract rather than the whole of the contract, where Overdean retained and indeed has onsold the property; and, second, that it is by no means clear that the Sale Contract was an unprofitable contract in the sense contemplated by s 568 of the Corporations Act: Rothwells Ltd (in liq) v Spedley Securities Ltd (in liq) (1990) 20 NSWLR 417; Simms (as liquidator of Enron Australia Finance Pty Ltd (in liq)) v TXU Electricity Ltd [2003] NSWSC 1169; (2003) 204 ALR 658. It is not necessary to determine its validity for the purposes of this application. 8On 19 June 2012, Mr Henry gave notice to the liquidator of his intent to seek to have the Company's registration reinstated and to assert the Company's rights under the Sale Contract. 9A proposed contract for the sale of the property which was provided by the liquidator of Overdean to prospective purchasers in turn contains a special condition by which Overdean purports to novate to the prospective purchaser and the prospective purchaser undertakes to comply with Overdean's rights and obligations under the relevant clauses of the Sale Contract. 10A further affidavit of Mr Henry sworn 29 August 2012 indicates that a contract for sale of the property has now been exchanged and the liquidator of Overdean has advised that he does not intend to pursue the claim in relation to the ongoing occupation of the property by Mr Henry. It may be that this advice reflects the fact that Overdean's rights under the Sale Contract were purportedly to be novated to the purchaser of the property. 11Mr Henry's evidence is that he wishes to reinstate the Company: "... so that it can assert, protect and recover value for the rights reserved to it in the contract for sale with Overdean. In the event that Overdean sells the property, I wish to ensure that the Company is able to assert, protect and recover those rights against any subsequent purchaser as is also provided for in the special conditions to the contract." Reinstatement of the Company 12Section 601AH(2) of the Corporations Act provides that the Court may make an order that ASIC reinstate the registration of a company if an application for reinstatement is made to the Court by a person aggrieved by the deregistration and the Court is satisfied that it is just that the Company's registration be reinstated. Matters which are relevant to whether it is just that the Company's registration be reinstated include the circumstances in which the Company was deregistered; the purpose of the reinstatement; the Company's solvency; whether any person is likely to be prejudiced by the reinstatement; and the public interest generally: Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; (2000) 34 ACSR 232; Callegher v Australian Securities and Investments Commission [2007] FCA 482; (2007) 239 ALR 749. If the Court makes such an order, it may also make any other order it considers appropriate under s 601AH(3) of the Corporations Act. 13I am satisfied that Mr Henry has standing to pursue an application for reinstatement of the Company as a person interested in property of the Company and a person who would benefit from the Company's assertion of its rights under the Sale Contract: Re Graf Holdings Pty Ltd [1999] NSWSC 217. In the present case, there was nothing inappropriate as to the deregistration of the Company, in circumstances that (but for Mr Henry overlooking the Company's rights under the Sale Contract) it had ceased trading and a members' voluntary winding up had been completed. The purpose of the reinstatement, namely for the Company to assert its rights under the Sale Contract, is a proper one. There is no suggestion that any person is likely to be prejudiced by the reinstatement and, subject to the question of the Company's solvency (which is of greater relevance to the question of termination of the winding up, and which I will address in that context below) there is no public interest reason why the Company should not be reinstated. I am satisfied that an order for reinstatement of the Company can properly be made. 14The effect of reinstatement is that the Company is taken to have continued in existence as if it had not been deregistered and those persons who were its directors immediately before registration become a director as from its reinstatement: s 601AH(5). Mr Henry and Mr Anderson, who was the other director of the Company prior to its deregistration, have indicated their consent to act as directors on its reinstatement. Where the Company was in members' voluntary winding up at the time of its deregistration, it remains in liquidation after it is reinstated: ACCC v ASIC above. As I noted above, the former liquidator of the Company, Mr Croft, has also consented to the resumption of his office. Termination of voluntary winding up 15Mr Henry also seeks an order under ss 482 and 511(1)(b) of the Corporations Act terminating the members' voluntary winding up arising on reinstatement of the Company. 16Section 482 of the Corporations Act permits the Court to terminate a winding up by the Court. The Court's power to make an order terminating a winding up under that section is discretionary and a person who seeks such an order must establish that the order is appropriate. Relevant factors include the attitude and interests of creditors including future creditors whose interests might be prejudiced if the company were released from winding up; the interests of the liquidator, particularly with regard to costs; the interests of contributories, so that a stay or termination will not generally be granted unless each member of the company either consents to it or is bound not to object to it or his or her rights are properly secured; and the public interest, including matters of commercial morality, whether all the company's debts have been discharged; the company's current trading position and general solvency; and any explanation for any non-compliance with statutory duties and of the circumstances leading to the winding up: Re Warbler Pty Limited (1982) 6 ACLR 526; Mercy & Sons Pty Ltd v Wanari Pty Ltd [2000] NSWSC 756; (2000) 35 ACSR 70 at [47]ff; Anderson v Palmer [2002] NSWSC 192 at [6]; Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd [2006] NSWSC 292; (2006) 57 ACSR 103 at [17]; Re Yelin Group Pty Ltd [2012] NSWSC 74 at [8]-[11]. The question of the interests of the company's future creditors, and of its solvency, is of particular importance in this context: Prendergast v Rolcross Pty Ltd (in liq) [2008] NSWSC 146; Re SNL Group Pty Ltd (in liq) [2010] NSWSC 797 at [24]; Apostolou v VA Corporation of Australia Pty Ltd [2010] FCA 64; (2010) 77 ACSR 84 at [58]; Re Kitchen Dimensions Pty Ltd (in liq) [2012] VSC 280. 17Section 511(1)(b) of the Corporations Act in turn authorises the Court to exercise the power to terminate a winding up in a voluntary winding up: McKern v Pacific Edge Corporation Pty Ltd (in liq) [2004] NSWSC 1150; (2004) 51 ACSR 602; Re St George Bank Ltd [2007] NSWSC 134 at [4]. Mr Henry is a contributory of the Company and therefore a proper applicant for such an order under ss 482 and 511(1)(b) of the Corporations Act. Subject to the question of the Company's solvency, the Court may otherwise make an order terminating a winding up where a sole shareholder, for reasons of administrative convenience, took steps directed towards ultimate dissolution of the Company at the conclusion of a members' voluntary winding up and, for reasons of the same kind, now wishes to put a stop to the process which it had previously thought would be beneficial: Re St George Bank Ltd above at [11]. I agree with the view expressed by Barrett J in Re St George Bank that, absent any demonstrated reason why the sole member's wish should not be implemented, the Court, having considered the interests of creditors and any public interest, should be willing to order the termination of a member's voluntary winding up if that is the sole member's wish. 18The question of the liquidator's interest raises no difficulty here, where he has consented to reappointment and will be in office for only a short period between the Company's reinstatement and the termination of the winding up; Mr Henry, as the contributory, has sought the termination of the winding up; and there is no issue as to matters of commercial morality where the Company was solvent when wound up. A question arises, however, as to whether the winding up should properly be terminated where the Company's assets were previously distributed to Mr Henry at the conclusion of the voluntary winding up and a potential claim was (as noted above) previously identified in respect of a licence fee under the Sale Contract. Although Mr Henry's evidence, as noted above, is that the liquidator of Overdean has advised that he does not intend to pursue that claim, there is no evidence as to the intent of the purchaser of the property in that regard. 19On balance, I do not consider that that potential claim creates an obstacle to the termination of the winding up. First, it is by no means clear that, on the proper construction of the Sale Contract, the licence fee in fact attaches to the occupancy of the house on the property as distinct from agistment of cattle; even if it does, there will be an issue as to what is payable if the house is occupied but agistment does not take place; and there will be, as I noted above, a further question as to whether the provision for a licence fee at a market rate as agreed by the parties is enforceable. Second, it seems to me that any claim for the licence fee would need to be pursued as a claim for unliquidated damages and would not constitute a "debt" within the meaning of s 95A of the Corporations Act so as to deprive the Company of solvency: White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 71; (2004) 49 ACSR 220 at [317]; Box Valley Pty Ltd v Kidd [2006] NSWCA 26; Re Centro Properties Ltd [2011] NSWSC 1171; (2011) 87 ACSR 131 at [45]-[46]. For the purposes of the present application, I should follow Box Valley notwithstanding the reservations expressed by White J in New Cap Reinsurance Corporation Ltd (in liq) v A E Grant [2008] NSWSC 1015; (2008) 68 ACSR 176. 20I am conscious that Mr Henry seeks to have the Company reinstated and its winding up terminated in circumstances where it now has no assets, other than its contractual rights, and no debts, but the possibility of the claim noted above. I would have greater hesitation as to such an order, where there is no evidence of the Company's future working capital, if there was any suggestion, as a matter of fact, that the Company was likely to engage in trading activities or dealings with third parties. There is nothing in the present facts to suggest that that course is likely. I do not consider that there is an immediate issue as to the solvency of the Company so as to prevent the termination of the winding up. However, the directors of the Company will need to give continuing attention to the question of the Company's continuing solvency, particularly if the claim previously foreshadowed by Overdean's liquidators eventuates. 21I am satisfied that an order under ss 482 and 511(1)(b) of the Corporations Act terminating the members' voluntary winding up arising on reinstatement of the Company can properly be made. For completeness, I should note that, by letter dated 15 August 2012, ASIC advised Mr Henry that it would not oppose the reinstatement of the Company subject to specified conditions. Those conditions included that the Company (if ordered to be reinstated) was wound up and its former liquidator continued as liquidator; the Court order was lodged with ASIC so the Company could be wound up; and the liquidator notified ASIC upon conclusion of the winding up. It appears that, in a subsequent telephone conversation between Mr Henry and a representative of ASIC, Mr Henry specifically drew ASIC's attention to his application that, following reinstatement, the members' voluntary liquidation would be terminated and was advised by ASIC that it would comply with any direction made by the Court in that regard. ASIC did not appear to oppose the reinstatement of the Company. 22I should also note that Mr Martin, who appears for Mr Henry, draws attention to a complexity which arises because the reinstatement of the Company will not take effect until ASIC reinstates the Company, in accordance with the Court's order that it do so made under s 601AH of the Corporations Act. Mr Martin points out that the process for re-registration contemplated by ASIC Regulatory Guide 83 will not take immediate effect, and that there will be no winding up to be terminated until such time as the Company has been reinstated. Mr Martin points out, and I accept, that this complexity can readily be addressed by making orders under ss 482 and 511(1)(b) of the Corporations Act for the voluntary winding up of the Company to be terminated immediately following its re-registration by ASIC. 23Accordingly, I make the following orders: 1. An order that the Australian Securities and Investments Commission reinstate the registration of F&A Henry (Gowrie) Pty Ltd (drgd) ACN 000 254 179 ("Company"). 2. An order that, upon re-registration of the Company, Bernard Croft of Crofts Chartered Accountants, Level 10, 50 Berry Street, North Sydney continue to act as voluntary liquidator of the Company. 3. Pursuant to ss 482 and 511(1)(b) of the Corporations Act, immediately following the re-registration of the Company, the members' voluntary winding up of that Company be terminated. ********** 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. Decision last updated: 07 September 2012