In the matter of Epitome Holdings Pty Ltd [2017] NSWSC 1533

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Epitome Holdings Pty Ltd [2017] NSWSC 1533 Hearing dates: 1 May; 11, 15, 25 September; 30 October 2017 Date of orders: 13 November 2017 Decision date: 13 November 2017 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: The respondent to reinstate the registration of Epitome Holdings Pty Ltd and that the applicant have leave to continue proceedings against the company Catchwords: CORPORATIONS – deregistration and reinstatement – where applicant seeks reinstatement in order to obtain judgment against company and then enforce against guarantor – whether applicant a person aggrieved – whether just to order reinstatement – held, it is. Legislation Cited: (CTH) Corporations Act 2001, s 471B, s 601AB, s 601AH Cases Cited: ERB International Pty Ltd, In the matter of [2014] NSWSC 200; (2014) 98 ACSR 124 Category: Principal judgment Parties: Lane Cove Council (plaintiff) Australian Securities and Investments Commission (defendant) Representation: Counsel: J.T. Johnson (plaintiff)

Solicitors: O'Neill Partners (plaintiff) File Number(s): 2017/116817

Judgment 1. Before the court is an application by the Lane Cove Council for an order that the Australian Securities and Investments Commission reinstate the company Epitome Holdings Pty Ltd, which was deregistered on 12 October 2014. 2. Epitome was registered in New South Wales on 3 December 2010. At all material times, its sole shareholder and director was David John McLeod. Epitome was wound up by order of the court of 25 March 2014, when Scott Darren Pascoe was appointed liquidator. It was deregistered, pursuant to (CTH) Corporations Act 2001, s 601AB, on 12 October 2014, upon the request of the liquidator. 3. Epitome operated a sidewalk café/restaurant business in the Lane Cove precinct, for which it was liable to the Council for an occupation fee. The Council brought proceedings (2013/084371) against Epitome in the Local Court at Sutherland. Those proceedings were settled by Terms of Settlement dated 27 August 2013, which were to the effect that: 1. Epitome agreed to pay 1. $61,887.98 (arrears) and costs of $9,500 making a total of $70,387.98 for the outstanding moneys claimed in the statement of claim, and 2. separately to pay to the Council $1,368 per month for current rental, the first such payment to be made on 1 September 2013, and in this respect time to be of the essence; 1. if the amount of $61,887.98 was paid in full, the Council would discontinue the proceedings; 2. if the amount of $61,887.98 was not paid, or the monthly instalments of $1,368 were not paid in accordance with the agreement, then upon 14 days' notice given by the Council to Epitome of the default, the Council could enter a consent judgment for $61,887.98 plus costs of $8,500, making a total of $70,387.98, less credit for any payments made on account; 3. if the arrears were paid in full, then the Council would waive its entitlement to costs of $8,500; 4. it was also agreed that: 1. Epitome would pay the arrears in full within 2 years of completion of the upgrade works referred to below, as well as ongoing rental in full; 2. the Council would not charge approval fees during the period of upgrade works at the Lane Cove Plaza precinct adjacent to Epitome's restaurant, and in that respect a certificate of the Council's Executive Manager – Open Space and Urban Services stating that the works were completed would be prima evidence to that effect; and 3. after completion of the upgrade works and the issue of the certificate, Epitome would have a further two years to pay the arrears. 1. Concurrently with those terms of settlement, on 27 August 2013 Mr McLeod executed a deed of guarantee in favour of the Council, by which he unconditionally guaranteed to the Council the due and punctual payment of all moneys now or in the future payable by or recoverable from Epitome arising out of (a) the Sutherland Local Court proceedings and judgment entered therein; (b) future fees payable by Epitome to the Council for occupation of the relevant footpath area; and (c) all fees due now or in the future by Epitome to the Council which Epitome does not pay (clause 1). The Deed provided that if any of the obligations guaranteed were at any time not enforceable against Epitome, it should be construed as an indemnity, and Mr McLeod indemnified the Council in respect of any failure by Epitome to make any payment referred to in clause 1 (clause 4). 2. It appears that the upgrade works were completed on 1 November 2014. On that basis, the "arrears" referred to in the terms of settlement would not become payable before 1 November 2016 at the earliest. However, it seems that no such notice or certificate as referred to in (5)(c) above was then given, and under that provision of the terms of settlement, time ran from the issue of the Certificate. 3. By 1 November 2014, Epitome had gone into liquidation (on 25 March 2014), and had been deregistered (on 12 October 2014). 4. In 2015, the Council brought proceedings (2015/234226) in the Local Court at Hornsby against Mr McLeod, apparently founded on the theory that the deregistration of Epitome somehow dispensed with the preconditions or accelerated the obligations of the guarantor. These proceedings resulted in a judgment in favour of Mr McLeod as defendant. The Magistrate appears to have concluded that (1) there was no judgment in the Sutherland proceedings, because although the terms of settlement contemplated entry of judgment in certain circumstances, that had never been done; (2) there was no money presently owing by Epitome, because the two year period had not expired; and (3) because there was at that stage no money payable by Epitome, the guarantee/indemnity was not engaged. 5. On 12 December 2016, the Council sent to ASIC a certificate of the completion, on 1 November 2014, of the upgrade works, over the signature of its Executive Manager – Open Space and Urban Works. Whether that had any effect may be doubted, because although the property of a deregistered company vests in ASIC, the company ceases to exist upon deregistration and ASIC does not represent the company. On the other hand, under the terms of settlement time runs from the issue of the certificate (by the Council), rather than the giving of notice to Epitome, so it may not matter. In any event, it is unnecessary to resolve that issue in this proceeding. A copy of the certificate was also sent to Mr McLeod, whose barrister responded to the effect that Mr McLeod denied that any moneys were owing by him pursuant to a guarantee, that proceedings against him would be baseless, and that ASIC was a mere repository of any assets. Further correspondence did not advance the position. 6. The Council then instituted the present application, by originating process filed on 19 April 2017, in order to enable the Council to obtain a judgment against Epitome in the Sutherland proceedings, and then enforce that judgment against Mr McLeod as a guarantor. The application should have been made by interlocutory process, in the winding-up proceeding, and I will make an order for consolidation. In addition to reinstatement, the Council also seeks leave under Corporations Act, s 471B, to continue the Sutherland proceedings against Epitome. 7. The application has been adjourned from time to time, because the full background – and in particular the basis of the judgment in the Hornsby proceedings – was not then known, and the possibility that a judgment therein favourable to Mr McLeod rendered inutile, by way of res judicata, any reinstatement of Epitome, required exploration. It took some time to obtain a transcript of the judgment in the Hornsby proceedings. Once it was obtained, it appeared that the effect of the relief sought might be to deprive Mr McLeod of a defence otherwise available to him in any claim on the guarantee, and so on 15 September I directed that notice of the proceedings be served on him. That was done, and on 25 September 2017 counsel appeared for Mr McLeod, although no notice of appearance was filed. The proceedings were at his request adjourned to 30 October, to enable him to consider the evidence and prepare submissions. However, before the adjourned date, Mr McLeod's counsel informed the Council's solicitor that his instructions to appear had been withdrawn, that he would not be appearing, and that he did not expect that Mr McLeod would appear. On 30 October, the application proceeded without opposition. That of course does not dispense with the need for the Court to be satisfied that the conditions for reinstatement are met.