Callister v Karadimas, in the matter of A.A.S - Australian Auto Salvage Pty Ltd (Deregistered)
[2014] FCA 971
•5 September 2014
FEDERAL COURT OF AUSTRALIA
Callister v Karadimas, in the matter of A.A.S. – Australian Auto Salvage Pty Ltd (Deregistered) [2014] FCA 971
Citation: Callister v Karadimas, in the matter of A.A.S. – Australian Auto Salvage Pty Ltd (Deregistered) [2014] FCA 971 Parties: DUNCAN KENNETH CALLISTER v GEORGE VALANTI NICHOLAS KARADIMAS, A.A.W. AUSTRALIAN AUTO WRECKERS PTY LTD (ACN 143 090 251) and AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION File number: VID 329 of 2014 Judge: GORDON J Date of judgment: 5 September 2014 Catchwords: CORPORATIONS – Deregistered company – application for reinstatement and winding up of company Legislation: Corporations Act 2001 (Cth), ss 459A, 601AA(2), 601AH(2), 601AH(5) Cases cited: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225
Denis & Ors v McMahon (1989) 7 ACLC 283
Stork ICM Australia Pty Ltd v SFS 007.298.633 Pty Ltd (formerly Stork Food Systems Australasia Pty Ltd) (2010) 77 ACSR 517Date of hearing: 5 September 2014 Date of last submissions: 5 September 2014 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 20 Counsel for the Plaintiff: S Wright Solicitor for the Plaintiff: Wright Gilmour Barristers & Solicitors Solicitor for the Second and Third Defendants: Ms Ziger, Lawyers R Us Solicitor for the Fourth Defendant: Mr Walter, Australian Securities and Investments Commission
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 329 of 2014
IN THE MATTER OF A.A.S. – AUSTRALIAN AUTO SALVAGE PTY LTD (DEREGISTERED) (ACN 091 307 390)
BETWEEN: DUNCAN KENNETH CALLISTER
PlaintiffAND: GEORGE VALANTI NICHOLAS KARADIMAS
Second DefendantA.A.W. AUSTRALIAN AUTO WRECKERS PTY LTD (ACN 143 090 251)
Third DefendantAUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Fourth Defendant
JUDGE:
GORDON J
DATE OF ORDER:
5 SEPTEMBER 2014
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The Fourth Defendant reinstate the registration of A.A.S. – Australian Auto Salvage Pty Ltd (ACN 091 307 390) (the Company) pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) (the Act) .
2.The Company be wound up under s 459A of the Act and Stirling L Horne of PKF Lawler be appointed as liquidator (the Liquidator) of the Company.
3.The Plaintiff lodge a copy of this order with the Fourth Defendant.
4.The Liquidator notify the Fourth Defendant at the conclusion of the winding up of the Company.
5.The Plaintiff serve a copy of this order on Norman Kenneth Jones of Courtney Jones and Associates, Level 1, Suite 5, 433 Little Collins Street, Melbourne, Victoria 3000 in his capacity as the trustee in bankruptcy of Nicholas George Karadimas.
6.The Plaintiff's costs of and incidental to these proceedings up to and including 7 July 2014, as agreed with the Liquidator or otherwise taxed, be costs in the winding up of the Company.
7.The Plaintiff’s costs of and incidental to these proceedings on and from 8 July 2014 be paid by the Second and Third Defendants on an indemnity basis.
8.Otherwise, there be no order as to costs.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 329 of 2014
IN THE MATTER OF A.A.S. – AUSTRALIAN AUTO SALVAGE PTY LTD (DEREGISTERED) (ACN 091 307 390)
BETWEEN: DUNCAN KENNETH CALLISTER
PlaintiffAND: GEORGE VALANTI NICHOLAS KARADIMAS
Second DefendantA.A.W. AUSTRALIAN AUTO WRECKERS PTY LTD (ACN 143 090 251)
Third DefendantAUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Fourth Defendant
JUDGE:
GORDON J
DATE:
5 SEPTEMBER 2014
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
INTRODUCTION
The Plaintiff, Duncan Kenneth Callister (Mr Callister), seeks the reinstatement and winding up of A.A.S. – Australian Auto Salvage Pty Ltd (Deregistered) (ACN 091 307 390) (AAS). The application was supported by an affidavit sworn by Mr Callister on 15 August 2014.
On 27 June 2014, the Fourth Defendant (ASIC) provided a letter indicating that it would not oppose the application for reinstatement of AAS if the following conditions were satisfied:
1.The order sought for reinstatement is in the terms of section 601AH(2) of the [Act], requiring ASIC to reinstate the registration of the company;
2.The Originating Process be amended to include ASIC as a defendant in this proceeding, in which case [ASIC’s] opposition or consent to the application will be a relevant matter to the Courts [sic] consideration;
3.The company (if ordered to be reinstated) is wound up and a Liquidator be appointed. This is because the sole director at the time of the deregistration [Nicholas George Karadimas] is currently an undischarged bankrupt;
4.The applicant notifies the former officeholder/s of the company of this application;
5.The Court order is lodged with ASIC … so that the company may be reinstated;
6.The Liquidator notifies ASIC upon conclusion of the winding up.
(Original emphasis.)
ASIC was joined as the Fourth Defendant on 7 July 2014. On the same day, the Second and Third Defendants consented to be joined as parties to the proceeding. The Second Defendant, Mr George Valanti Nicholas Karadimas, is a director of the Third Defendant, A.A.W. Australian Auto Wreckers Pty Ltd (ACN 143 090 251) (AAW). Prior to the hearing, the Second and Third Defendants opposed the applications. At the commencement of the hearing, they informed the Court that they did not consent or oppose the applications but then proceeded to raise two grounds of opposition – that AAS should not be wound up under s 459A of the Act because insolvency had not been established and Mr Callister had not agreed to fund any liquidator.
FACTS
In or about October of 2009, Mr Callister had a contractual dispute with Mr Nicholas George Karadimas and AAS trading as “A.B.W. – Australian Body Works”. As a result of that dispute, on 26 November 2012 an order was made in the Magistrates’ Court of Victoria, in favour of Mr Callister against Mr Nick Karadimas and “AAS-Austrailian Auto Salvage Pty Ltd ACN 091 307 309” (sic) trading as “ABW Australian Body Works”. The order was for “Claim $55940.00 and Interest $18981.29 and Costs $32899.82” (the Order).
Subsequent to the Order, Mr Callister instructed his solicitor to serve a Statutory Demand on AAS. On 14 December 2012, the Statutory Demand was sent to AAS at its registered address requiring payment of $108,246.45. The correspondence was not returned to Mr Callister or his solicitor.
On 14 December 2012, Mr Callister also instructed his solicitor to send correspondence directly to Mr Nick Karadimas. At that time, Mr Karadimas was the sole director of AAS. The letter sent advised the following:
… Following a hearing conducted on the 26th of November 2012 the Court ordered that you pay jointly and/or severally the amount of the claim, interests and costs. I enclose a copy of that order for your records. The total owing is $108,246.45 plus interest at $23.63 per day. If that sum is not received at this office within 14 days from the date of this correspondence we will proceed to enforcement. For your information, a Statutory Demand has been made on AAS Australian Auto Salvage Pty Ltd. We will seek to wind that company up also.
…
(Original emphasis.)The correspondence was not returned to Mr Callister or his solicitor.
On 8 June 2013, a Warrant to Seize Property was issued against Mr Nick Karadimas and AAS trading as A.B.W – Australian Body Works. A Field Report from the Sheriff’s Office Victoria indicates that an attempt to execute the warrant was made on 4 September 2013.
Next, Mr Nicholas George Karadimas as director of AAS, then made application under s 601AA(2) of the Act to deregister AAS. Section 601AA(2) provides:
(2) A person may apply only if:
(a) all the members of the company agree to the deregistration; and
(b) the company is not carrying on business; and
(c) the company’s assets are worth less than $1,000; and
(d)the company has paid all fees and penalties payable under this Act; and
(e) the company has no outstanding liabilities; and
(f) the company is not a party to any legal proceedings.
(Emphasis added.)
The requirements are cumulative.
Mr Nicholas George Karadimas signed the application for deregistration on 16 October 2013. The application for deregistration was received by ASIC on 28 November 2013. In the application, Mr Nicholas George Karadimas declared that:
(a) All members of the company agree to the deregistration; and
(b) The company is not carrying on business; and
(c) The company's assets are worth less than $1,000.00; and
(d) The company has paid all fees and penalties payable under the [Act]; and
(e) The company has no outstanding liabilities; and
(f) The company is not party to any legal proceedings.
(Emphasis added.)
AAS was subsequently deregistered by ASIC on 3 February 2014.
AAS had not and has not complied with the Order or satisfied that judgment debt. The declaration made by Mr Nicholas George Karadimas was at the very least inaccurate.
Mr Nicholas George Karadimas, the sole director of AAS at the time of deregistration, is currently an undischarged bankrupt.
ANALYSIS
Section 601AH(2) of the Act, entitled “Reinstatement by Court”, provides:
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.
First Limb - Standing
The expression “aggrieved by the deregistration” in s 601AH(2)(a)(i) of the Act is to be given a wide meaning: Stork ICM Australia Pty Ltd v SFS 007.298.633 Pty Ltd (formerly Stork Food Systems Australasia Pty Ltd) (2010) 77 ACSR 517 at [19]. Mr Callister is a creditor of AAS who was owed a substantial amount of money at the time that AAS was deregistered. Mr Callister therefore has a real and direct interest in the reregistration of AAS, and standing to bring the application: Denis & Ors v McMahon (1989) 7 ACLC 283.
Second Limb - would it be just to order reinstatement?
As Lindgren J held in Stork ICM at [20], “[w]hether it is just that registration be reinstated depends, inter alia, on the effect of reinstatement”. The effect of reinstatement is described in s 601AH(5), which provides as follows:
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.
In my view, it is just that AAS be reinstated and that the position described in s 601AH(5) be achieved in relation to Mr Callister’s judgment debt. The declaration made by Mr Nicholas George Karadimas in support of the application to deregister AAS was inaccurate. The timing of the deregistration application itself raises serious questions: see [4]-[9] above. There was some material before the Court to suggest that AAS was a trustee for the AAS Auto Salvage Family Trust (the Trust). Whether that is an accurate statement is far from clear. What is also not clear is what happened to the assets of the trading entity (whether held by AAS in its own right or as trustee) and, if AAS was acting as trustee, its right of indemnification against those assets. These are all issues to be addressed on reinstatement.
The final issue concerns the basis on which AAS is reinstated. As ASIC pointed out in its letter of 27 June 2014, the sole director at the time of the deregistration (Mr Nicholas George Karadimas) is currently an undischarged bankrupt. Given the circumstances surrounding the deregistration of AAS, that it is not trading and the director is no longer able to act in that capacity, it is appropriate that AAS be wound up in insolvency by the Court. On any view, AAS’ liabilities are greater than its known assets. It is not trading and has no capacity to meet Mr Callister’s debt.
Mr Stirling Horne of PKF Lawlor, Chartered Accountants, has consented to be appointed by the Court as liquidator of AAS. Counsel for Mr Callister has informed the Court that the liquidator has entered into a funding arrangement with Mr Callister to cover the initial investigations upon his appointment. Mr Horne has estimated that the costs of “cover[ing] the normal processes of a liquidation including an investigation into the company’s affairs to determine whether there are any realisable assets” would be $6,000 plus GST. Mr Callister has agreed to meet those estimated fees. Mr Horne further indicated that if the investigation revealed realisable assets, he and his legal team “may be prepared to work on a success fee basis”. In those circumstances, it is appropriate that orders be made as follows:
1.ASIC reinstate the registration of AAS pursuant to s 601AH(2) of the Act.
2.AAS be wound up under s 459A of the Act and Stirling L Horne of PKF Lawler be appointed as liquidator (the Liquidator) of AAS.
3.Mr Callister lodge a copy of this order with ASIC.
4.The Liquidator notify ASIC at the conclusion of the winding up of AAS.
5.Mr Callister serve a copy of this order on Norman Kenneth Jones of Courtney Jones and Associates, Level 1, Suite 5, 433 Little Collins Street, Melbourne, Victoria 3000 in his capacity as the trustee in bankruptcy of Nicholas George Karadimas.
After the orders were announced, Counsel for Mr Callister sought an order that his client’s costs of and incidental to the proceeding be paid by the Second and Third Defendants on an indemnity basis, as:
1.The Second and Third Defendants sought leave to be joined to this proceeding and consented to their joinder for the sole purpose of opposing Mr Callister’s application, and they must have done so as they believed they would be prejudiced if the application were successful;
2.At no time had the Second and Third Defendants filed any material which identified or suggested that they would be prejudiced by the making of the orders sought;
3.Despite procedural orders being put in place by Registrar Pringle on 7 July 2014 for the conduct of the hearing, the Second and Third Defendants failed to comply with those orders, including the filing of any further material and / or an outline of submissions;
4.Despite endeavours to try to resolve the matter by mediation and otherwise, those attempts were not successful due to the opposition mounted by the Second and Third Defendants;
5.Although the Second and Third Defendants had sent correspondence indicating that they essentially agreed with Mr Callister and would withdraw their opposition to avoid cost consequences, the solicitors for the Second and Third Defendants had refused as even as late as the day prior to the hearing to consent to the orders sought and then maintained their objection at the hearing this morning on the grounds set out at [3] above.
The application was opposed by the Second and Third Defendants. They asserted that they could not agree to the proposed minute of order as the minute contained a reference to s 459A of the Act, and insolvency had not been established. The solicitor for the Second and Third Defendants said that they relied on an outline of submissions that had been filed prior to a hearing before Registrar Pringle (before either party had been joined). Further, they said an indemnity costs order should not be made because the delay in responding was brought about by their accountant. The other matters referred to by Counsel for Mr Callister were not addressed by the Second and Third Defendants.
Making an order for costs on an indemnity basis is a serious matter and requires conduct which the court regards as unsatisfactory: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225. There are, in my view, matters of serious concern about the conduct of the Second and Third Defendants and the steps they have taken (and failed to take) in relation to this proceeding: see [18] above. Moreover, the conduct which resulted in the orders being made (see [15] above) explains why the Second and Third Defendants had no substantial defence to the proceeding. For those reasons, the following costs orders should be made:
1.Mr Callister’s costs of and incidental to these proceedings up to and including 7 July 2014, as agreed with the Liquidator or otherwise taxed, be costs in the winding up of AAS.
2.Mr Callister’s costs of and incidental to these proceedings on and from 8 July 2014 be paid by the Second and Third Defendants, on an indemnity basis.
3.Otherwise, there will be no order as to costs.
The date 7 July 2014 was chosen because it is the date the Second and Third Defendants were joined as parties to the proceeding.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. Associate:
Dated: 5 September 2014
0
3
1