Supreme Court New South Wales Medium Neutral Citation: In the matter of Bele & Company Pty Limited [2017] NSWSC 1824 Hearing dates: 27 November 2017 Decision date: 27 November 2017 Jurisdiction: Equity - Corporations List Before: Black J Decision: The Court orders that the Australian Securities and Investments Commission reinstate the registration of Karaoke World Sydney Pty Ltd (dereg'd) on the basis that it be wound up and a liquidator be appointed on reinstatement and that the Commission pay to the Plaintiff the sum of $193,417.38 from the property of Karaoke World Sydney Pty Ltd (dereg'd) that was vested in the Commission pursuant to s 601AD(2) of the Corporations Act 2001 (Cth). Catchwords: CORPORATIONS — Dissolution — Reinstatement – Application for order that Australian Securities and Investments Commission pay Plaintiff money held in respect of deregistered company – whether s 601AH(3)(d) of the Corporations Act 2001 (Cth) empowers Court to order Commission to pay money to Plaintiff without reinstatement of company – whether order should be made for reinstatement of company and payment of money – terms of reinstatement. Legislation Cited: - Corporations Act 2001 (Cth), ss 601AA, 601AD, 601AH Category: Principal judgment Parties: Bele and Company (Plaintiff) Australian Securities and Investments Commission (Defendant) Representation: Counsel: J Foley (Plaintiff) Solicitors: Rockliffs Lawyers (Plaintiff) File Number(s): 2017/340673 Judgment – ex tempore (revised 28 november 2017) 1. By Originating Process filed on 10 November 2017 the Plaintiff, Bele & Company Pty Ltd ("Bele") applies for an order that the Defendant, the Australian Securities and Investments Commission ("ASIC"), pay to Bele the sum of $193,417.38, implicitly, from funds which ASIC holds in respect of Karaoke World Sydney Pty Ltd (dereg'd) ("Company"). Alternatively, Bele seeks an order, to achieve the same effect, for reinstatement of the Company pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) and that ASIC pay Bele the relevant amount pursuant to s 601AH(3)(d) of the Corporations Act. 2. ASIC has been given notice of the application and has indicated, by a standard form letter, that it does not oppose the application for reinstatement of the Company, subject to specified conditions. It is not clear whether ASIC has focused, in that letter, upon the order which is sought against it for repayment of funds held by it in respect of the Company's deregistration. Bele has also sought to give notice of this application to Ms Lin, who was a shareholder in and former director of the Company until it was deregistered, and it appears she may have been advised of the application, but may now be resident in China and has shown no interest in it. 3. The application is supported by an affidavit of Mr Brandon To sworn 9 November 2017. While that affidavit sets out events in some detail, it is possible to summarise them in short form. The Company was incorporated on 1 February 2010 and Mr To was one of the four shareholders in the Company until February 2011. In that period, the Company's business was managed by Mr Zhang, who was also a shareholder in the Company with his wife Ms Lin. It appears that, in November 2010, it was agreed, because of then difficulties in the Company's operations, that a new company, Bele, would take over the Company's business. That appears to have occurred in a somewhat informal manner, without a sale agreement or assignment of property, but there is no suggestion on the evidence before me that creditors of the Company were left unsatisfied. Bele assumed occupancy of the Company's property under that arrangement, presumably by agreement with the lessor. 4. Bele operated the business from December 2010 until 2013, when another new company was incorporated to trade the business, for reasons not explained by the evidence. It appears that, at that time, it was discovered that Mr To may have omitted to give notification of the fact that Bele had assumed the operation of the business to American Express, which provided card facilities for the Company. It appears that, from at least March 2011, amounts paid by American Express card were deposited by American Express into an account in the name of the Company, in respect of the period in which Bele was trading the business. Those amounts were individually relatively small, perhaps understandably given the nature of the relevant business, although their total, $193,417.38, is substantial. On the evidence as it stands, it appears that the Company has no claim to those amounts which were earned after Bele had assumed operation of that business. I recognise, however, that there has been no opportunity for an independent investigation of that matter, where the only party which appears before me today is Bele. The relevant statutory provisions 1. When the Company was voluntarily deregistered under s 601AA of the Corporations Act on 8 December 2010, it ceased to exist under s 601AD of the Corporations Act, and all of its property (other than property held by the Company on trust) vested in ASIC. However, s 601AD(3) makes clear that ASIC takes only property rights that the company itself had and, if property was subject to some other interest or claim, ASIC takes the property subject to that interest or claim. Section 601AH(2) of the Corporations Act, on which Bele relies, in turn provides that the Court may make an order that ASIC reinstate the registration of a company if it is satisfied that it is just that the company's registration be reinstated. Section 601AH(3) provides that the Court may make any other order it considers appropriate, and a note to that section provides that the Court may direct ASIC to transfer to another person property vested in ASIC under s 601AD(2). The primary relief sought by Bele 1. The primary relief sought by Bele was an order that ASIC pay it the sum of $193,417.38. I do not consider that that relief is supported by s 601AH of the Corporations Act, at least without an order for reinstatement of the Company being made. In particular, I read the power to make any other order that the Court considers appropriate in s 601AH(3)(d) as incidental to the Court's power to reinstate a deregistered company, and not as independent of it. It does not seem to me that the power in s 601AH(3)(d) would allow the Court, in effect, to determine a claim between a plaintiff and a non-existent company, without the attendance of that non-existent company and in a manner that would not bind it, and then make an order for ASIC to make a payment consequential upon its determination of that claim. The alternative relief sought by Bele 1. The alternative form of relief sought by Bele, which seeks the reinstatement of the Company and ASIC's payment to Bele of the amount claimed, consequential upon that reinstatement and Bele's claim against the Company, seems to me to be open in principle. 2. I am satisfied that it is just to reinstate the Company in the relevant circumstances, where that is necessary for Bele to pursue its claim. However, where Ms Lin has not consented to her reappointment as a director of the Company, and as Mr Foley (who appears for Bele) accepts, the Court could not reinstate the Company, other than in liquidation, where reinstatement would otherwise return Ms Lin to her position as director without her having consented to that course. 3. If Bele had a claim against the Company by way of unjust enrichment in respect of the relevant monies, so far as they had been paid to the Company as a result of Mr To's mistake, then, by reason of s 601AD(3) of the Corporations Act, ASIC would hold those monies subject to that claim. Section 601AH(3)(d) of the Corporations Act seems to me to be sufficiently wide to authorise an order for payment by ASIC to a person whom the Court had determined was properly entitled to the relevant funds. As a matter of discretion, however, it seems to me that the Court would not make such an order without allowing the Company or its liquidator the opportunity to be heard, in a manner that will minimise the costs in this application so far as possible. 4. It seems to me that, in these circumstances, the Court can be satisfied that the Company should be reinstated, on the basis that a liquidator is appointed to it. As Mr Foley recognises, that may well require that Bele provide some form of indemnity to the liquidator, at least in respect of his or her remuneration and expenses in a winding up of the Company. Second, it seems to me that the Court can order that ASIC pay to Bele the amount claimed pursuant to s 601AH(3)(d) of the Corporations Act, on the basis that, on the evidence as it stands, the Company has no claim to those funds, which are properly the funds of Bele, and ASIC takes the funds subject to the rights of Bele in those funds. Third, however, such an order should not take effect until a liquidator appointed to the Company, and ASIC, have each had the opportunity to be heard in respect of that order, if they seek to be heard, and to move to set it aside if they consider it appropriate to do so. If a liquidator, once appointed, forms the view that the Company has no claim to the relevant funds, an order of this kind will have the consequence that further costs will not need to be incurred in a further listing of the matter. 5. For these reasons, I make the following orders: 1. Pursuant to s 601AH(2) of the Corporations Act, the Australian Securities and Investments Commission reinstate the registration of Karaoke World Sydney Pty Ltd (dereg'd) ("Company") on the basis that the Company be wound up and a liquidator be appointed on reinstatement. 2. Direct the Plaintiff to serve on the Australian Securities and Investments Commission a copy of these orders together with a consent of liquidator and send a copy of that consent of liquidator to the Associate to Black J by 4pm on 1 December 2017. 3. In the event of non-compliance with Order 2, the matter be relisted before Black J at 9:15am on Tuesday 5 December 2017. 4. Stay Order 1 to 4pm on 5 December 2017. 5. Direct the Australian Securities and Investments Commission to pay to the Plaintiff the sum of $193,417.38, pursuant to s 601AH(3)(d) of the Corporations Act, from the property of the Company that was vested in the Australian Securities and Investments Commission pursuant to s 601AD(2) of the Corporations Act. 6. Stay Order 5 to 4pm on 18 December 2017, and grant liberty to a liquidator appointed to the Company and the Australian Securities and Investments Commission to set aside that order, by application returnable before Black J on two business days' notice prior to that time. ********** 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: 08 January 2018