Supreme Court New South Wales Medium Neutral Citation: In the matter of Regional Planners Developments Co Pty Limited [2015] NSWSC 1996 Hearing dates: 13 April 2015 Date of orders: 13 April 2015 Decision date: 13 April 2015 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Company reinstated and wound up; limitation period on actions of plaintiff against first defendant suspended. Catchwords: CORPORATIONS – deregistration – reinstatement of registration for purpose of winding up – winding up on just and equitable ground – where no directors acting and no likelihood of directors being appointed. PROCEDURE – service – failure to comply with (CTH) Service and Execution of Process Act 1992 – where service required upon deregistered company – held, failure of effective service not a bar to matter proceeding. CORPORATIONS – reinstatement of registration – suspension of limitation period on actions against company – whether (CTH) Corporations Act 2001, s 601AH(3)(d), confers jurisdiction to suspend limitation period – discretion to make order – whether deregistration practically precluded plaintiff from instituting proceedings. Legislation Cited: (CTH) Corporations Act 2001, s 446, s 461(1)(k), s 601AB, s 601AH(2), s 601AH(3) (CTH) Service and Execution of Process Act 1992 (UK) Companies Act 1948, s 353(6) Cases Cited: Australian Securities Commission v AS Nominees Limited (1995) 62 FCR 504; Australian Securities and Investments Commission v ABC Fund Managers Limited (2001) 39 ACSR 443 Australian Securities and Investments Commission v Green Pacific Energy Limited (2006) 59 ACSR 142 Australian Securities and Investments Commission v West (2008) 66 ACSR 143 Australian Securities and Investments Commission, in the matter of Storm Financial Limited (Receivers and Managers Appointed) (Administrators Appointed) v Storm Financial Limited (Receivers and Managers Appointed) (Administrators Appointed) (2009) 71 ACSR 81 Storm Financial Limited (receivers and managers appointed) (in liq) v Victorian Families Retirement & Investment Group Pty Limited (No 2) (2009) 71 ACSR 295 CIC Insurance Limited (prov liq apptd) v Hannan & Co Pty Limited (2001) 38 ACSR 245 Official Trustee in Bankruptcy v Buffier (2005) 54 ACSR 767 Phelan v Ambridge Corp Pty Limited (2005) 55 ACSR 136 Re Donald Kenyon Limited [1956] 3 All ER 596 Re Rugby Auto Electric Services Limited (unreported, 14 December 1959, Roxburgh J) Re Huntingdon Poultry Limited [1969] 1 All ER 328 John Hammonds & Co Limited v Registrar of Companies [1999] 3 NZLR 690 Thornton Estates Limited v Registrar of Companies (2006) 3 NZCCLR 590 Re West (unreported, High Court (Napier), 15 May 2002, Ronald Young J) Skeates v Bruce [2008] NZCCLR 27 Solla v Scott [1982] 2 NSWLR 832 Harule Pty Ltd; Ex parte Olita Super Readymixed Concrete Pty Ltd (in liq) (1994) 13 ACSR 500 Deputy Commissioner of Taxation v Action Workwear Pty Ltd (deregistered) (1996) 20 ACSR 712 Lillecrapp v State of South Australia; Golden Eggs v State of SA (1996)14 ACLC 1540 Pagnon v Workcover Queensland [2001] 2 Qd R 492 Deputy Commissioner of Taxation v Action Workwear Pty Ltd (deregistered) (1996) 20 ACSR 712 Hutchinson v Australian Securities and Investments Commission [2001] VSC 465 Del Borello v Australian Securities and Investments Commission [2008] WASC 48 Category: Procedural and other rulings Parties: IPG Finance Australia Pty Ltd ACN 124 131 102 (plaintiff) Regional Planners Development Co Pty Ltd (deregistered) ACN 000 345 086 (first defendant) Australian Securities and Investments Commission (second defendant) Representation: Counsel: Mr Montsallem (plaintiff) Solicitors: Avondale Lawyers (plaintiff) File Number(s): 2015/60710 Judgment (ex tempore) 1. HIS HONOUR: The company Regional Planners Developments Co Pty Limited was deregistered pursuant to (CTH) Corporations Act 2001, s 601AB, on 2 April 2010. Pursuant to an originating process filed on 26 February 2015 and amended on 6 March 2015, the plaintiff IPG Finance Australia Pty Limited seeks orders that the second defendant ASIC reinstate the registration of the company, that the company be wound up, and a liquidator be appointed, and an that any limitation period for a cause of action by the plaintiff against the company be suspended during the period of the deregistration pursuant to Corporations Act, s 601AH(3). 2. The plaintiff claims to be a creditor of the company for a sum now amounting to some $72,271, said to be principal of $15,000 advanced by way of loan by the plaintiff to the defendant on 12 June 2008 together with interest accrued thereon. The terms of the loan are said to be that the loan was for a term of 2 months repayable on 12 August 2008 with interest at 2 per cent per calendar month and secured on title deeds of two parcels of real estate. It appears that, notwithstanding the subsequent deregistration of the company, those parcels remain registered in the name of the company, and the certificates of title for them in the possession of the plaintiff. 3. Following apparent defalcations by a firm of solicitors, of which the director of the company was a member and which had acted for the plaintiff, the plaintiff commenced proceedings against that firm. The director of the company was convicted of fraud and imprisoned in about February 2011. Civil proceedings against the firm continued in the Supreme Court of Queensland, the Court of Appeal of that State and the High Court, where the company prevailed, with special leave ultimately being refused on 14 February 2014. Subsequently, in February through to April 2014, there were proceedings for the bankruptcy of one of the partners in the firm – not Mr Wood, who was the director of the company. 4. As I have said, the company was deregistered on 2 April 2010. According to an affidavit of the plaintiff's director Mr Salameh, in about April 2014 he contacted lawyers to seek "a preliminary investigation regarding the steps required to reinstate the first defendant company". There is no other evidence as to when he became aware that the company had been deregistered, nor of any earlier step taken to enforce any remedy that the plaintiff might have had against the company. Mr Salameh describes that, between April 2014 and early July 2014, he made further enquiries directly with ASIC. It is not clear what those enquiries were, but in any event, on 7 May 2014, it seems that he obtained a search which plainly disclosed that the company was deregistered. In July 2014, he sought fee estimates from a number of law firms for seeking the reinstatement of the company and enforcement of the unregistered mortgage. He says that he was under the belief that, as the company had been deregistered, he had more time to select a firm within his budget, and had sufficient time to commence the proceedings. It was not until 9 December 2014 that he retained lawyers to file an originating process. 5. Given the terms of the loan, to which I have referred, it seems likely that the limitation period for recovery of the loan expired on 12 August 2014, being 6 years from the date for repayment of 12 August 2008. In submissions it was suggested that it was 22 August, and I do not think it makes any difference for present purposes which of those dates is the correct one. 6. As I have said, the originating process seeking reinstatement was not filed until 22 February 2015. When it was filed, the original process named only the company as defendant, and sought only reinstatement and a validating order, including suspension of the limitation period. When ASIC was notified of the application for reinstatement, it advised (in its usual letter, of 3 March 2015) that it would not oppose the application if certain conditions were satisfied, including amendment of the process to include ASIC as a defendant and to seek orders requiring ASIC to reinstate the registration of the company, and that the reinstated company be wound up and a liquidator appointed. The amended originating process thus seeks the winding up order and appointment of a liquidator. 7. The evidence indicates that the original originating process was purportedly served on Mr Wood by placing it in an envelope addressed to him and placed in his letter box at an address in Queensland. There is no evidence that there was any compliance with the (CTH) Service and Execution of Process Act 1992 in that respect. It was also purportedly served on the company at its former registered office at the firm of Crouch & Lyndon in Brisbane, again without any apparent compliance with the Service and Execution of Process Act. The amended originating process was once again served on Crouch & Lyndon, on this occasion apparently by email on 6 March 2015; and on ASIC, also on 6 March 2015. 8. The company is deregistered, and I do not perceive that there is any intelligent notion of service on a deregistered company. By definition, it no longer exists. Normally, one expects an application of this kind to be served on any person whose interest might be affected, or who might be restored to office as a result of the order. Although initially it may be that Mr Wood would have resumed functions as a director, in circumstances where it is intended to appoint a liquidator, that will no longer be the case. Accordingly, while I do not think there has been effective service on anyone other than ASIC, it seems to me that in the particular circumstances of this case that is not fatal to the matter proceeding. 9. A number of other issues, however, will require consideration. The first is whether the grounds for reinstatement have been established. 10. Corporations Act, s 601AH, relevantly provides as follows: Reinstatement Reinstatement by ASIC (1) ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered. Reinstatement by Court (2) The Court may make an order that ASIC reinstate the registration of a company if: (a) an application for reinstatement is made to the Court by: (i) a person aggrieved by the deregistration; or (ii) a former liquidator of the company; and (b) the Court is satisfied that it is just that the company's registration be reinstated. (3) If: (a) ASIC reinstates the registration of a company under subsection (1); or (b) the Court makes an order under subsection (2); the Court may: (c) validate anything done during the period: (i) beginning when the company was deregistered; and (ii) ending when the company's registration was reinstated; and (d) make any other order it considers appropriate. Note: For example, the Court may direct ASIC to transfer to another person property vested in ASIC under subsection 601AD(2). ASIC to give notice of reinstatement (4) ASIC must give notice of a reinstatement in the Gazette . If ASIC exercises its power under subsection (1) in response to an application by a person, ASIC must also give notice of the reinstatement to the applicant. Effect of reinstatement (5) If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim. 1. I am satisfied that the plaintiff is a person aggrieved by the deregistration, by reason that it is precluded from suing the company and inhibited in enforcing its security over the real property by the deregistration of the company. I am satisfied that it is just that the company's registration be reinstated, for the purpose of enabling the plaintiff to pursue those remedies. Accordingly, I will make an order under s 601AH(2) that ASIC reinstate the registration of the company. 2. The next question is whether the company should be wound up upon reinstatement, as ASIC purports to have stipulated. Ordinarily, when a company is reinstated, it is reinstated in the form in which it existed prior to its deregistration. However, the Court can make orders for the winding up of a company upon reinstatement, at least if a ground for winding up the company exists. 3. Ultimately, the plaintiff relied on Corporations Act, s 461(1)(k), that "the Court is of an opinion that it is just and equitable that the company be wound up". It is well-established that the Court can make a winding up order on the just and equitable ground by reason of mismanagement, misconduct or lack of confidence in the conduct and management of the company's affairs [see, for example, Australian Securities Commission v AS Nominees Limited (1995) 62 FCR 504; Australian Securities and Investments Commission v ABC Fund Managers Limited (2001) 39 ACSR 443; Australian Securities and Investments Commission v Green Pacific Energy Limited (2006) 59 ACSR 142, [137]-[139]; Australian Securities and Investments Commission v West (2008) 66 ACSR 143; Australian Securities and Investments Commission, in the matter of Storm Financial Limited (Receivers and Managers Appointed) (Administrators Appointed) v Storm Financial Limited (Receivers and Managers Appointed) (Administrators Appointed) (2009) 71 ACSR 81; Storm Financial Limited (receivers and managers appointed) (in liq) v Victorian Families Retirement & Investment Group Pty Limited (No 2) (2009) 71 ACSR 295]. More pertinently, perhaps, a company may also be wound up on this ground if it has no directors and there is no likelihood of any being appointed [see CIC Insurance Limited (prov liq apptd) v Hannan & Co Pty Limited (2001) 38 ACSR 245; Official Trustee in Bankruptcy v Buffier (2005) 54 ACSR 767; Phelan v Ambridge Corp Pty Limited (2005) 55 ACSR 136, [18]]. 4. Given the background to which I have but briefly referred, it is clear that there are no directors acting in this case, and there seems no likelihood of any being appointed. In those circumstances, and given the purpose for which the company is to be reinstated, I am satisfied that it is just and equitable that the company be wound up. Accordingly, I will make a winding up order, and appoint the liquidators who have consented to act. 5. The further and more difficult question is the application for an order that has the effect of suspending the limitation period in respect of any action that the plaintiff might have against the company. This application is founded on s 601AH(3)(d), which provides, in effect, that if the Court makes an order for reinstatement of a company, it may "make any other order it considers appropriate". I have expressed some reservations as to the power – and, if there is power, discretion – to make an order under that section, particularly where, as in this case, it would have the effect of suspending or extending a limitation period running against the company, after the limitation period has expired. 6. Uninformed by authority, I would seriously have doubted whether s 601AH(3)(d) extended to authorise such an order. However, authority suggests that it does. Such an order was first made by Roxburgh J in Re Donald Kenyon Limited [1956] 3 All ER 596. His Honour was of the view that, in circumstances where the contributories sought restoration of the company to the register for their purposes, and it was conceivable that creditors might not have brought or prosecuted their claims against the company while it was deregistered because they were unable to do so, it was appropriate to impose a condition that had the effect of suspending the limitation period in respect of any pending claim that was not statute-barred when the company was deregistered, for the period of the deregistration. 7. The same judge made a similar order in Re Rugby Auto Electric Services Limited (unreported, 14 December 1959, Roxburgh J, but referred to in Re Huntingdon Poultry Limited [1969] 1 All ER 328, in which Megarry J (as his Lordship then was), distinguishing Donald Kenyon and Re Rugby Auto Electric Services, held that, since the relevant liabilities of the company were not statute-barred when the company was dissolved and would not be so if it were reinstated, it was unnecessary to make any such order). It is pertinent to observe that the English cases to which I have so far referred, like the New Zealand cases to which I shall come, concerned a statutory provision – relevantly, (UK) Companies Act 1948, s 353(6) – the last part of which provided, somewhat analogously to Corporations Act, s 601AH(3)(d), that the Court may by the order of reinstatement "give such directions and make such provisions as seem just for placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off". 8. Such orders have been made in a number of cases in New Zealand. The first appears to have been John Hammonds & Co Limited v Registrar of Companies [1999] 3 NZLR 690, where Hammond J declined to make a reinstatement order, but said that if the company were to be restored to the register, then an order of the type made in Re Donald Kenyon would have been appropriate. In Thornton Estates Limited v Registrar of Companies (2006) 3 NZCCLR 590, Andrews J referred to John Hammonds and to Re Donald Kenyon, as well as to an earlier New Zealand judgment of Re West (unreported, High Court (Napier), 15 May 2002, Ronald Young J). Re West is important, because in that case, Ronald Young J had observed that the intent of the New Zealand s 329(4), which was in similar terms to the UK section to which I have referred, was to ensure in appropriate cases that neither the restored company nor any other person was unfairly or adversely affected by the removal from the register. Because from May 1997 until February 2002 the plaintiff had had no intention of suing the company, due to his belief that his employer was not the company but an individual, it was held that time should run for limitation purposes during that period, and should be suspended only from when the plaintiff formed an intention to sue the company until the company was restored to the register. That judgment indicates that one should focus on the impact of the deregistration on the decision not to bring proceedings, and suggests that it may be appropriate to suspend the effect of the limitation statutes in so far as they have the practical effect of precluding a plaintiff who would otherwise have sued the company from doing so. Consistently with that view, in Thornton Estates, Andrews J distinguished Re West and considered the case to be closer to John Hammonds, finding that in fact there was an intention to sue the company from a time prior to its deregistration. 9. In Skeates v Bruce [2008] NZCCLR 27, Allan J considered Re West and Thornton Estates, but in the context of a case in which, unlike the earlier cases, the company was the intended plaintiff rather than the intended defendant, and reinstatement was sought to enable the company (rather than claimants against the company) to bring proceedings. The limitation period had expired on 1 December 2006, after the company was struck off the register on 17 October 2006. In the absence of evidence that as at 1 December 2006 the company had undertaken any preparatory work of the kind that must have been essential to the commencement of the type of proceedings envisaged, or of any communication of any kind between the parties, the plaintiff was unable to demonstrate that, but for the removal of the company from the register on 17 October 2006, it would have commenced proceedings before expiration of the limitation period and, accordingly, refused to make the order sought. Like Re West, this case reinforces that one should focus on the practical effect of the deregistration on any decision to commence proceedings before the limitation period expires. 10. The reservations I have expressed, and the doubts that I would have had in the absence of authority, as to whether s 601AH(3)(d) confers any such jurisdiction at all are not unique. Such reservations were expressed by McLelland J (as the later Chief Judge in Equity then was) in Solla v Scott [1982] 2 NSWLR 832, where his Honour said (at 834-5): It has been held that in the exercise of its powers under the equivalent of s 308(5) [the predecessor of the provision now under consideration] a court may direct that in case of creditors who were not statute barred at the date of dissolution, the period between the date of dissolution and the date of restoration to the register is not to be counted for the purpose of any statute of limitation: see Re Donald Kenyon Ltd [1956] 1 WLR 1397; [1956] 3 All ER 596, and cf Re Huntingdon Poultry Ltd [1969] 1 WLR 204; [1969] 1 All ER 328 and Re Lindsay Bowman Ltd [1969] 1 WLR 1443, at p 1446; [1969] 3 All ER 601, at p 603. I have some doubt as to whether such an order could properly be made under s 308(5) notwithstanding Re Donald Kenyon Ltd, in which the order made purported to override the provisions of the statute of limitation. For the reasons I have already given no such order is required in the present case, even if it could otherwise properly be made. 1. However, in Harule Pty Ltd; Ex parte Olita Super Readymixed Concrete Pty Ltd (in liq) (1994) 13 ACSR 500, Santow J (as he then was) relied on Re Donald Kenyon and referring to McLelland J's reservations, observed that no reasons were given for them, although accepting that they invited caution on the part of the Court as to making such an order in circumstances where, as in Harule, it was sought for the benefit of the company as a plaintiff, rather than against the company as a prospective defendant. His Honour nonetheless made an order in that case. 2. The jurisdiction to make such an order has also been accepted by Senior Master Mahony in Deputy Commissioner of Taxation v Action Workwear Pty Ltd (deregistered) (1996) 20 ACSR 712, and by Master Burley in Lillecrapp v State of South Australia; Golden Eggs v State of SA (1996)14 ACLC 1540, 1542. 3. It seems to me that for present purposes the reservations entertained by McLelland J and by me can be set to one side, for two reasons. The first is the re-enactment of former s 308(5), in much wider terms, in current Corporations Act, s 601AH(3)(d); the second is and the acceptance of the jurisdiction by the Queensland Court of Appeal in Pagnon v Workcover Queensland [2001] 2 Qd R 492, which I should follow unless convinced it is plainly wrong. 4. The re-enacted section no longer contains the limitation that appeared in its predecessors to the effect that the order be made for the purpose of placing the company and all other persons in the same position as nearly as may be as if the name of the company had not been struck off. That indicates an intention to remove what was seen in some of the cases as a constraint on the types of orders that could be made [see in that respect, in particular, Re Huntington Poultry Ltd (at 330-331); Deputy Commissioner of Taxation v Action Workwear Pty Ltd (deregistered) (1996) 20 ACSR 712, 722-723]. Parliament, by re-enacting the section, should be taken to have intended to confirm the way in which it had been interpreted to that point, and to reduce the constraints which had been applied to its application. Nonetheless, I do not think the earlier cases, in directing attention to remediating any disadvantage that had been occasioned by the deregistration are irrelevant; they continue to give useful guidance as to the application of the provision, though they must be interpreted having regard to the wider power that now is available. 5. As to the judgment of the Queensland Court of Appeal, the leading judgment was that of McPherson JA, a judge with unparalleled experience and standing in the field of company law and, in particular, the law of company liquidation. After referring to some of the cases that I have mentioned, his Honour said (at [13]): In Australia, the jurisdiction to follow this practice was questioned in Solla v. Scott [1982] 2 NSWLR. 832, 835; but, as Santow J pointed out in Re Harule Pty Ltd (1994) 13 ACSR. 500, 501, the observation on that matter in Solla v. Scott was obiter and no reason was given for it…. [14] The same policy is now manifest in the provisions of Part 5A of the Corporations Law, which took effect on or from 1 July 1998. 1. His Honour then set out s 601AH, and continued: [15] It will be seen that the Court's power to order reinstatement under s. 601AH(2) is predicated only on the need to be satisfied that it would be "just" to do so. That is the criterion which the courts have applied in the past in cases of this kind. Furthermore, the power conferred by s. 601AH(3)(b) is now very wide, and extends to making "any other order" that the Court "considers appropriate". I would have no doubt that under this provision the court could, and in a case like the present would if asked to do so, exercise the power under s. 601AH(3)(b) to order that the time between dissolution of the company on 11 December 1998 and the expiration of the limitation period under s. 11 of the Limitation of Actions Act 1974 should not be counted against the plaintiff here. There is every reason why it would be "just" to adopt that course. 1. In Hutchinson v Australian Securities and Investments Commission [2001] VSC 465, Senior Master Mahony (at [28]) cited with approval paragraph [15] of McPherson JA's judgment [see also Del Borello v Australian Securities and Investments Commission [2008] WASC 48, where Beech J observed that the authorities made it clear that the power under s 601AH(3) extended to making orders to the effect that the period of deregistration will not count for the purpose of any limitations period]. 2. Accordingly, I am satisfied that there is jurisdiction under s 601AH(3)(d) to make the order sought. The question remains whether, as a matter of discretion, that order should be made. 3. As it seems to me, there is nothing in the evidence to indicate any intention or attempt to sue the company prior to about April 2014. It matters not for the purposes of whether a limitation period runs that the potential plaintiff is involved in other proceedings or distracted by other business or has difficulty in obtaining solicitors or is absent from the country. None of those matters are reasons for suspending the running of a limitation period. The question is whether the deregistration of the company practically precluded the plaintiff from instituting proceedings, and there is nothing to suggest that, but for the deregistration, proceedings would have been instituted before May 2014. 4. By May 2014, however, that the position had changed. The plaintiff was by then investigating the possibility of bringing proceedings against the company. At least by 7 May 2014, the plaintiff was aware that the company was deregistered and had begun to make inquiries of the solicitors. At that stage, it had approximately three months remaining to it before the limitation period would expire in which it could have brought those proceedings, but for the fact that the company was deregistered. 5. It can therefore be said, I think, that for a period of about three months before the limitation period expired in August 2014, the deregistration of the company practically prevented the plaintiff from bringing proceedings against it which otherwise the plaintiff could and would have brought. That disability has continued to the present day while the company remains deregistered. 6. It therefore seems to me that a just application of the principles to which I have referred would be to provide that the limitation period did not run or was suspended for a period from 7 May 2014 to the present date. The practical effect of that will be that the plaintiff will have roughly three months from the present date (when I will make the reinstatement order) in which to commence proceedings if minded to do so. 7. For those reasons the Court orders that: 1. Pursuant to Corporations Act, s 601AH(2), the second defendant, Australian Securities and Investments Commission, reinstate the registration of Regional Planners Development Company Pty Ltd ACN 000 345 086. 2. The company Regional Planners Development Company Pty Ltd be wound up and Ozem Kassem and Jason Tang of Cor Cordis Chartered Accountants, Level 6, 55 Clarence Street, Sydney, be appointed liquidators of the company. 3. Pursuant to Corporations Act, s 601AH(3)(d), the running of any limitation period applicable to any cause of action that the plaintiff may have against the first defendant company be suspended for the period from 7 May 2014 to the date of this order; that is to say, 13 April 2015. 4. The plaintiff's costs fixed in the sum of $15,500 be paid pursuant to Corporations Act, s 446, from the property of the first defendant. ********** 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: 22 January 2016