Bailey v Australian Securities and Investments Commission

[2018] NSWSC 1580

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Bailey v Australian Securities and Investments Commission [2018] NSWSC 1580

Hearing dates:

17 October 2018

Date of orders:

17 October 2018

Decision date:

17 October 2018

Jurisdiction:

Equity - Corporations List

Before:

Parker J

Decision:

The Court orders, pursuant to Corporations Act 2001 (Cth), s 601AH(2), that ASIC to reinstate the registration of Evolution Software Services Pty Ltd ACN 102 355 153.

Catchwords:

CORPORATIONS – deregistration – application to reinstate company – where a former director of a deregistered company received Director Penalty Notice (“DFN”) from the Australian Taxation Office (“ATO”) for the company’s failure to pay a superannuation guarantee charge – where reinstatement necessary to lodge form with ATO to off-set the amount owing under the DFN against payments made by former company – where neither ASIC nor ATO is opposed to the application

Legislation Cited:

Corporations Act 2001 (Cth), s 509, 601AH
Superannuation Guarantee (Administration) Act 1992 (Cth)
Superannuation Guarantee Charge Act 1992 (Cth)

Cases Cited:

Re Stojic (2006) 63 ATR 11; [2006] NSWSC 608
Re Yield Service Pty Ltd [2014] NSWSC 764

Category:

Principal judgment

Parties:

Yarogniew Karol Bailey (Plaintiff)
Australian Securities and Investments Commission (Defendant)

Representation:

Counsel:
AW Smith (Plaintiff)

 

Solicitors:
Kennedys Law Firm (Plaintiff)

  No appearance:
Australian Securities and Investments Commission (Defendant)

File Number(s):

2018/311920

Publication restriction:

Nil

Judgment – EX TEMPORE

Revised and reissued on 19 October 2018

1. This is an application to reinstate the registration of Evolution Software Services Pty Limited (to which I will refer as "the Company").

2. The Company was incorporated in September 2002. In September 2015 the shareholders of the Company resolved that the Company be wound up and Christopher Darren and Nicolas Malanos of Worrells Solvency and Forensic Accountants were appointed as liquidators. According to the accounts filed by the liquidators, the company had priority creditors of $173,000 and ordinary unsecured creditors totalling $760,000. The total recoveries were approximately $12,000, all of which was applied to the remuneration expenses of the liquidators.

3. In December 2016, the liquidators lodged with Australian Securities and Investment Commission a Form 505 recording the completion of the liquidation and, in March 2017, the Company was deregistered pursuant to Corporations Act 2001 (Cth), s 509.

4. The application before the Court today is by Yarogniew Karol Bailey. It is made under the Corporations Act, s 601AH. Mr Bailey was director of the Company from its incorporation in September 2002 through until the appointment of liquidators and remained formally a director until the Company was dissolved in March 2017.

5. After the resolution for the winding up of the Company was passed, in December 2015 the Australian Taxation Office (“ATO”) issued notices of assessment to the Company for amounts claimed to be owing by way of superannuation guarantee charge in 2013 and 2014. Further notices of assessment were issued to the Company in February 2017 covering periods of time in 2012. The superannuation guarantee charge is payable where an employer fails to make prescribed superannuation contributions for its employees: see generally Superannuation Guarantee Charge Act 1992 (Cth) and Superannuation Guarantee (Administration) Act 1992 (Cth).

6. In September 2017 the ATO issued Director Penalty Notices (“DPN”) to Mr Bailey. The effect of those notices was to charge Mr Bailey with the superannuation guarantee charge liabilities of the Company for the relevant periods.

7. Subsequently, proceedings were commenced in the District Court against Mr Bailey seeking to recover the amounts the subject of the DPNs. The amount claimed is approximately $237,000. Mr Bailey claims that most of this money has been paid. According to him, the Company made remittances of approximately $190,000 covering the relevant periods of time to the superannuation fund or funds which covered its employees. These remittances were made late (that is, after the time they should have been made pursuant to the legislation which imposes the superannuation guarantee surcharge). Nonetheless, it appears to be accepted that if the payments have been made they will go to reduce the assessments issued to the Company and Mr Bailey's liability under the DPNs.

8. In January 2018, Mr Bailey arranged for the former accountant of the Company to submit to what is described as "superannuation guarantee late payment off-set election forms" in the name of the Company. These forms state that payments for the relevant period were made and seek to have those payments off-set against the superannuation guarantee charge liability.

9. In response, in March this year, the ATO stated that the forms were ineffective to give rise to an off-set against superannuation guarantee charge for the period. The reason given was that the forms were received in January 2018, after the Company had been deregistered. It appears that the ATO is taking the point that as the Company had, by that date, legally ceased to exist, it was not possible for off-sets to be claimed.

10. The purpose of this application is to reinstate the Company's legal existence so that this point cannot be taken. There have been a number of cases in the Court in which the Court has been asked to reinstate a company in circumstances where DPNs have been issued against a director. The first of those was Re Stojic (2006) 63 ATR 11; [2006] NSWSC 608, a decision of White J (as his Honour then was). The most recent appears to be Re Yield Service Pty Ltd [2014] NSWSC 764, a decision of Brereton J (as his Honour then was).

11. The context for those applications was somewhat different. Under the legislation applicable at the relevant time, a director could avoid liability under a DPN by ensuring that the company was placed in administration or liquidation within 14 days of the notice being issued. In each case, the company had previously been deregistered and the application was made to have it reinstated so that it could immediately be put into administration or liquidation.

12. In both cases the application succeeded. The director was recognised as being a "person aggrieved" for the purposes of s 601AH and it was decided that it was a legitimate exercise of the Court's discretion under that section to allow it to be used by the director to take advantage of the exemption from liability afforded by putting the company into administration or liquidation.

13. Both White J and Brereton J remarked on the fact that the administration or liquidation was unlikely to result in monies flowing to the ATO, or at least was likely to result in less money flowing to the ATO than if the payments have been made at the proper time. Nonetheless, each of them considered that as there was no prejudice to any other party and the ATO did not oppose the orders it was appropriate to reinstate the Company.

14. The present situation is different and more favourable to Mr Bailey in that if the moneys have in fact been paid, there has been no relevant loss to the public revenue and there has been no relevant default (I put aside for present purposes the fact that the payments were made late).

15. ASIC has been given notice of this application and has not opposed it. So too the ATO has been given notice of the application and has indicated it neither consents to nor opposes the application.

16. In these circumstances, I consider that the Company should be reinstated and I will make orders accordingly.

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Amendments

19 October 2018 - Amendment to cover sheet.

Decision last updated: 19 October 2018