Supreme Court New South Wales Medium Neutral Citation: In the matter of Kylie Mitchell Holdings Pty Ltd [2019] NSWSC 1638 Hearing dates: 18 November 2019 Decision date: 18 November 2019 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. Order pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) that the Australian Securities and Investments Commission (ASIC), reinstate the registration of the deregistered company (Kylie Mitchell Holdings Pty Limited ACN 133 358 639). 2. Order pursuant to s 601AH(3)(c) of the Corporations Act 2001 (Cth), that the resolutions made by the deregistered company on 30 June 2017, 30 June 2018 and 28 June 2019, in its capacity as trustee of the Kylie Mitchell Family Trust concerning the distribution of trust income to beneficiaries, be validated. 3. Order that the costs for the application for reinstatement of the registration of the deregistered company be borne personally by the plaintiff. 4. Note the plaintiff's undertaking that the company will attend to lodgement of all outstanding documents and all outstanding fees and penalties for reinstatement to ASIC capped at $784. 5. Note that the plaintiff will lodge with ASIC a copy of this Court order. 6. Order that these orders be entered forthwith. Catchwords: CORPORATIONS – deregistration – application to reinstate company under Corporations Act (2001) Cth s 601AH(2) – whether plaintiff is a person aggrieved by deregistration of company – whether just to reinstate the registration of company. Legislation Cited: Corporations Act 2001 (Cth), ss 601AD, 601AE, 601AH Cases Cited: ACCC v ASIC [2000] NSWSC 316; (2000) 174 ALR 688 Arnold World Trading Pty Ltd v ACN 133 427 335 Pty Ltd [2010] NSWSC 1639; (2010) 80 ACSR 670 Callegher v ASIC [2007] FCA 482; (2007) ALR 749 In the matter of European Metal Recyclers Pty Ltd (in liq) (deregistered) [2018] NSWSC 946 Re European Metal Recyclers Pty Ltd (in Liq) (Deregistered) [2018] NSWSC 946 Re Newfront Pty Ltd (deregistered) [2008] SASC 127 Category: Principal judgment Parties: Kylie Jayne Mitchell (Plaintiff) Australian Securities & Investments Commission (Defendant) Representation: Counsel: HW Somerville (Plaintiff) Solicitors: Hall & Wilcox (Plaintiff) File Number(s): 2019/00346193 Publication restriction: Nil Judgment 1. HER HONOUR: This is an application by originating process filed on 4 November 2019, being an application made under s 601AH of the Corporations Act 2001 (Cth) (Corporations Act) for the reinstatement of a deregistered company, Kylie Mitchell Holdings Pty Ltd, and consequential relief. 2. The application is supported by an affidavit sworn 4 November 2019 of Kylie Jayne Mitchell, the plaintiff. Also read on the application are two affidavits, sworn 12 November 2019 and 18 November 2019 respectively, by Ms Mitchell's solicitor, Mark Robert Petrucco. Background 1. By way of background, the now deregistered company was incorporated on 22 September 2008. The company acted as trustee for the Kylie Mitchell Family Trust (the Trust), of which Ms Mitchell is a beneficiary. A copy of the trust deed establishing the Trust on 31 October 2008 is part of Exhibit A in these proceedings. 2. On incorporation of the company, the plaintiff, Ms Mitchell, was the sole director and secretary and became the holder of the only one issued share capital of the company. Ms Mitchell has deposed in her affidavit (at [8]) that the company was incorporated for the sole purpose of acting as trustee of the Trust on its establishment and that the company has only ever acted in that capacity and has not undertaken any activities or held any assets in its own right. 3. On 29 June 2016, in its capacity as trustee of the Trust, the company acquired 20 ordinary shares in Blackbox Nominees Pty Ltd (Blackbox) from a company named Succession Evolution Pty Ltd, for the consideration of $8,077.20. Circumstances in which deregistration occurred 1. Ms Mitchell has deposed to the circumstances in which an application for the voluntary deregistration of the company was made. They were as follows. 2. In about January 2017, Ms Mitchell received a notice from the Australian Securities and Investments Commission (ASIC) that the annual review fees were due for the company. She has deposed that at all material times her accountant and that of the company was Peter Saccasan, a partner of RSM Australia Pty Ltd (RSM). 3. Ms Mitchell has deposed (at [13] of her affidavit) that in about February 2017 she requested advice from RSM as to whether the company could be deregistered as she believed it did not hold any assets, following the recent sale of its interests in a commercial property. The advice that she says she was given was that the company could be deregistered if it no longer held any assets. Ms Mitchell instructed RSM to lodge an application for voluntary deregistration on or about 2 February 2017. I would infer that was because Ms Mitchell was of the opinion that the company had no assets (and in light of the advice that she had been given). A copy of the application for voluntary deregistration of the company is part of Exhibit A. 4. On 7 April 2017, the company was deregistered by ASIC in accordance with the application for voluntary deregistration that had been lodged on 2 February 2017. 5. Pursuant to s 601AD(1) of the Corporations Act, a company ceases to exist on deregistration. Relevantly, pursuant to s 601AD(1A), on deregistration all property that the company held on trust immediately before deregistration vests in the Commonwealth. 6. Ms Mitchell has deposed (at [17] of her affidavit) that at the time the application for voluntary deregistration of the company was made on 2 February 2017 she did not recall that the Blackbox shares were held by the company in its capacity as trustee of the Trust. Her evidence is that she was under a misapprehension that the Blackbox shares were held by the Trust and she did not realise that the company or another legal entity was required to hold them. (I interpose to note that it appears she was under a common misapprehension that a trust is a separate legal entity.) Application for reinstatement 1. Ms Mitchell has deposed (at [18] of her affidavit) that in about September 2019 she received a telephone call from Mr Saccasan who advised her that he was unaware that the company had been deregistered and that it should not have been deregistered as it still held the Blackbox shares in its capacity as trustee of the Trust. She has further deposed that that is when she first realised the company held the shares as trustee of the Trust and its ownership of its shares in that capacity. As already noted, Ms Mitchell is a beneficiary of the Trust. 2. Pursuant to s 601AH(2) of the Corporations Act, the Court may make an order that ASIC reinstate the registration of a company if, relevantly, 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. 3. Ms Mitchell refers to In the matter of European Metal Recyclers Pty Ltd (in liq) (deregistered) [2018] NSWSC 946 (at [17]) in relation to the definition of "person aggrieved". There, it was said that: The expression "aggrieved person" is of wide impart and should be construed liberally and includes a person who has been damaged in a legal sense. 1. That concept (of a person aggrieved as a person who has been damaged or injured in a legal sense) includes where the person has a genuine grievance as a result of a decision which prejudices that person's interests or where the company's dissolution has extinguished a right of some value or potential value (see ACCC v ASIC [2000] NSWSC 316; (2000) 174 ALR 688; Callegher v ASIC [2007] FCA 482; (2007) ALR 749; Re Newfront Pty Ltd (deregistered) [2008] SASC 127; and Arnold World Trading Pty Ltd v ACN 133 427 335 Pty Ltd [2010] NSWSC 1639; (2010) 80 ACSR 670). 2. Ms Mitchell has identified that she has prejudice flowing to her from the company's deregistered status in that: first, she was the sole director, secretary and shareholder of the company which acted in the capacity as trustee of a discretionary trust (thus, it is said that absent the inadvertent deregistration, the company under her stewardship would have otherwise retained discretion, subject to the trust deed, as to the distribution of funds under cll 2 and 3.2 of the trust deed); second, that the Commonwealth has power to appoint a new trustee under s 601AE(1) (noting the discretionary nature of the Trust in the present case); and, third, the deregistration was unintentional and is not in accordance with others with an interest in the Trust (and, in particular, in that regard, it is noted that there are other classes of beneficiary named under the trust deed). 3. Albeit that it is ironic that the reason that the plaintiff is aggrieved is a decision that the plaintiff herself has made, I am satisfied, having regard to the liberal reading of the definition of "person aggrieved" within the meaning of s 601AH(2)(i) that the plaintiff falls within that definition. 4. As to whether it is just that the company's registration be reinstated, the relevant matters to take into consideration in the exercise of the discretion in that regards includes: circumstances in which the company was deregistered (to which I have referred above in the present case); the reasons for the reinstatement; the solvency of the company; whether any persons are likely to be prejudiced by the restatement; and the public interest generally. 5. As to the solvency of the company, Ms Mitchell has annexed to her affidavit copies of the financial statements prepared for the Trust for the financial years ended 2017 and 2018. The 2018 financial statements, which are the most recent financial statements, disclose a very small positive equity in the balance sheet. The non-current financial assets are $8,089 with current assets of cash and cash equivalent. The liabilities, current and non-current, are $8,079 leaving a positive balance of $10. Although that is a small amount, it is true, as submitted, that the company is not on the balance sheet insolvent. Ms Mitchell has deposed that financial statements have not been prepared for the Trust for the financial year ended 2019 but that the Blackbox shares generated dividends in that financial year of $6,424.32 and a copy of the shareholder dividend statement dated 1 July 2018 is exhibited to her affidavit. The company purported to make resolutions on 30 June 2017, 30 June 2018 and 28 June 2018 for the distribution of trust income to Ms Mitchell as beneficiary. Ms Mitchell has deposed that the relevant income was generated solely from dividends received in respect of the Blackbox shares, and a copy of the resolutions in that regard are exhibited to the affidavit. 6. As to the prejudice to any person or entity, Ms Mitchell has deposed that she is not aware of any person or entity to which prejudice would be subject if the company was reinstated, and she is not aware of any matter that would negatively impact the public interest if the registration of the company were reinstated. 7. ASIC has been advised of the application for an order to reinstate the company to the register. The position that ASIC has taken is that it will not oppose application for reinstatement of the company if certain conditions are satisfied, being that: the order for reinstatement is in terms of s 601AH of the Corporations Act, requiring ASIC to reinstate the registration of the company; the company intends to lodge all outstanding documents and payments and all outstanding fees (that sum being $784); and the Court order is lodged with ASIC so that the company can be reinstated. 8. Ms Mitchell has accepted that the deregistration of the company was due to a mistake on her part and, in those circumstances, as I understand it, Ms Mitchell has given instructions that she will be liable for the costs of the application for reinstatement personally. 9. It is submitted that it is appropriate that Ms Mitchell and the beneficiaries of the Trust are not disadvantaged by what was an honest mistake on Ms Mitchell's part. It is further submitted that the grant of the relief that has been sought will see reversion to the status quo prior to the erroneous or mistaken lodgement for application of deregistration of the company, and that this would be in keeping with the trust deed and the underlying purpose of the Trust, that being to administer the family trust through the company and as corporate trustee. 10. It is submitted that if the company is reinstated it would be appropriate that consequential relief be granted under s 601AH(3) in order to regularise resolutions presently invalid in relation to the distribution of the income of the Trust for the financial years 2017, 2018 and 2019 owing to the unintended deregistration of the company. It is submitted that the effect of such an order would be to regularise the Trust and the beneficiaries under the Trust. Determination 1. I am satisfied that the plaintiff is, relevantly, a person "aggrieved" by the deregistration and that it is just in all of the circumstances that the company's registration be reinstated. Accordingly, I make the following orders: 1. Order pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) that the Australian Securities and Investments Commission (ASIC), reinstate the registration of the deregistered company (Kylie Mitchell Holdings Pty Limited ACN 133 358 639). 2. Order pursuant to s 601AH(3)(c) of the Corporations Act 2001 (Cth), that the resolutions made by the deregistered company on 30 June 2017, 30 June 2018 and 28 June 2019, in its capacity as trustee of the Kylie Mitchell Family Trust concerning the distribution of trust income to beneficiaries, be validated. 3. Order that the costs for the application for reinstatement of the registration of the deregistered company be borne personally by the plaintiff. 4. Note the plaintiff's undertaking that the company will attend to lodgement of all outstanding documents and all outstanding fees and penalties for reinstatement to ASIC capped at $784. 5. Note that the plaintiff will lodge with ASIC a copy of this Court order. 6. Order 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. Decision last updated: 26 November 2019