CATINARI v Ashford Apartments P/L - [2013] SASC 187

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
CATINARI v ASHFORD APARTMENTS P/L & ANOR
[2013] SASC 187
Judgment of The Honourable Justice David
29 November 2013
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH DISCRETION OF COURT BELOW - IN GENERAL
CORPORATIONS - FORMATION - REGISTRATION OR INCORPORATION - DEREGISTRATION
The first respondent applied pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) for an order that ASIC reinstate the registration of a company. The appellant, the former director of the company the subject of the application, was joined as second defendant and actively opposed the application. A Master granted the order that ASIC reinstate the registration of the company and ordered the appellant to pay the costs of the first respondent’s application.
Held: appeal dismissed - the Master was correct in regarding the first respondent as a ‘person aggrieved’ by the deregistration of the company – Master’s reasons do not indicate any error in approach to the exercise of the discretion or award of costs.
Corporations Act 2001 (Cth) s 601AH(2), s 601AA, referred to.
Newfront Pty Limited (Deregistered) (ACN 053 228 489) [2008] SASC 127; Australian Competition & Consumer Commission v Australian Securities & Investments Commission (2000) 174 ALR 688; Ashford Apartments Pty Ltd v Australian Securities & Investments Commission & Anor (Judge Withers, 17 July 2013, unreported); Ashford Apartments Pty Ltd v Australian Securities & Investments Commission & Anor (No 2) (Judge Withers, 16 August 2013, unreported); Re G A and R J Elliot Pty Limited; Ex parte Mitcham (1978) 3 ACLR 523; Piccoli Tesori Pty Limited (2006) 151 FCR 109; GIS Electrical Pty Limited v Melsom (2002) 172 FLR 218; Jason Newham v Australian Securities and Investment Commission (2000) 35 ACSR 147, considered.

CATINARI v ASHFORD APARTMENTS P/L & ANOR
[2013] SASC 187
Appeal from a Master

DAVID J: This is an appeal against the decision of a Master granting an application for the reinstatement of the registration of a company pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) (“the Act”).
Introduction
The appellant is the former director of Commercial & General Projects Pty Limited (ACN 085 133 197) (“the company”), being the company whose registration the first respondent has sought to reinstate. The first respondent in this matter engaged the company in January 2006 to undertake certain construction works, which are now the subject of Magistrates Court proceedings. The second respondent, the Australian Securities and Investments Commission (“ASIC”), did not wish to be appear or be heard before the Master or on the appeal and will abide my decision.
In January 2006 the first respondent entered into a contract with the company for the construction of an apartment complex in Ashford. Practical completion of the apartment complex was achieved, though it is a matter of contention as to precisely when. Regardless, in around December 2011 (subsequent to practical completion being achieved), the first respondent raised with the company a number of alleged defects in the construction works performed by the company. The alleged defects were the subject of correspondence between the first respondent and the company from December 2011 until around September 2012.
On 13 September 2012, the first respondent wrote to the company to advise that it would be pursuing it for loss and damage arising out of the company’s alleged breaches of contract and breaches of statutory obligations. The first respondent commenced proceedings against the company in the Magistrates Court on 17 September 2012, which proceedings were served on the company on 21 September 2013.
On 18 September 2012 and in the shadow of legal proceedings (after the letter dated 13 September 2012 and after the Magistrates Court proceedings had been commenced but prior to them having been served) the appellant lodged an application with ASIC for voluntary deregistration of the company. The company was deregistered on 21 November 2012.
The first respondent’s solicitors became aware of the company’s deregistration on 17 January 2013. The first respondent applied to ASIC to reinstate the registration of the company. That application was refused in circumstances where the appellant (as the former sole director of the company) declined to support it.
Accordingly, on 28 March 2013 the first respondent applied to the Supreme Court pursuant to s 601AH(2) of the Act for an order that ASIC reinstate the registration of the company. The appellant actively opposed the making of such an order and ASIC remained neutral.
After hearing argument on the matter, the Master ordered ASIC to reinstate the registration of the company. The Master further ordered the appellant to pay the first respondent’s costs of that application, which he certified fit for counsel.
The first respondent also applied for costs on an indemnity basis, which application was heard by the Master on the papers. After receiving further written submissions from the appellant and first respondent, the Master ordered the appellant to pay the first respondent’s costs of the principal application and the subsequent costs application on a party/party basis.
The appellant now appeals against both the order that ASIC reinstate the registration of the company and the order that the appellant pay the first respondent’s costs on a party/party basis.
The decision of the Master
The Master delivered judgment in respect of the application for reinstatement of the company on 17 July 2013.
The Master referred to the power in section 601AH of the Act. Section 601AH provides:
(2)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;
(ii)a former liquidator of the company; and
(b)the Court is satisfied that it is just that the company’s registration be reinstated.
The Master then proceeded on the basis that he first had to determine whether the first respondent had standing as “a person aggrieved by the deregistration” to make the application and, second, whether in the circumstances it was “just that the company’s registration be reinstated.”
The Master dealt with those two issues in turn.
In respect of the first issue as to the first respondent’s standing to make the application, the Master set out and adopted the analysis of Gray J in Newfront Pty Limited (Deregistered) (ACN 053 228 489)[1] and concluded:[2]
On that analysis the plaintiff is entitled to be treated as a person aggrieved.
[1] [2008] SASC 127.
[2] Ashford Apartments Pty Ltd v Australian Securities & Investments Commission & Anor (Judge Withers, 17 July 2013, unreported) at [13].
In respect of the second issue, the Master referred to and considered each of the four criteria identified by Austin J in Australian Competition & Consumer Commission v Australian Securities & Investments Commission.[3]
[3] (2000) 174 ALR 688.
The Master used the four criteria as the framework for the exercise of his discretion and, in his reasons for determining that it was “just that the company’s registration be reinstated”, the Master stated:[4]
[16] Criteria one is the circumstances in which the company came to be dissolved. These are circumstances which cast no merit on the second defendant or on the company. The application for the company’s deregistration was lodged with ASIC at a time when the second defendant knew that the company was involved in a dispute and where there was an alleged outstanding liability yet no mention was made of this in the application to ASIC ... In my view, the second defendant’s conduct in obtaining deregistration of the company in the circumstances in which he did, in not notifying the plaintiff of the application made notwithstanding the extensive correspondence entered into, and notwithstanding his awareness that the plaintiff had issued proceedings against the company, entirely lacks merit.
[17]It was argued by the second defendant that there was no utility in reinstating the company – criteria two. The company had no insurance from which the applicant’s claim could be met and had no assets. However, it is accepted that there is an indemnity agreement with the company’s parent company such that if the company (Projects) has any liability as asserted by the plaintiff, then the parent company is obliged to indemnify in respect of that liability and to meet the plaintiff’s claim.
[18]In my view, it is appropriate and necessary that the company (Projects) be reinstated to be continued as a defendant in the action instituted by the plaintiff. This will ensure that the pre-trial processes normally available to the litigant are available to the plaintiff to require disclosure by the contracting company and if appropriate to seek admissions from the contracting company. It will allow the Court or make findings in respect of the liability or otherwise of the company.
[19]It is suggested by the second defendant that prejudice will be suffered by him if the company is reinstated – criteria three – because it would be necessary for a liquidator to be appointed as he is not prepared to continue in the role as director. On a court order for reinstatement, the second defendant will again become the director of the company. How the company chooses to conduct itself from that time is a matter for the company. That does not, in my view, impact upon the appropriateness of ordering its reinstatement.
[20]It was suggested that the plaintiff will be able to obtain the relief it seeks by pursuing the parent company on the performance guarantee it provided. It is at least arguable that guarantee only sounds in remedy to the plaintiff if liability is found on the part of the deregistered company ... In all the circumstances it is in the public interest that the company be reregistered to enable the plaintiff’s claim to proceed in an orderly fashion.
[4] Ashford Apartments Pty Ltd v Australian Securities & Investments Commission & Anor (Judge Withers, 17 July 2013, unreported) at [16] – [20].
In respect of the first respondent’s application for indemnity costs the Master delivered judgment on 16 August 2013 and stated:[5]
The order on costs will be that the second defendant pay the plaintiff’s costs of the action on a party/party basis. That order also applies to the determination of the costs issue. I certify fit for counsel.
[5] Ashford Apartments Pty Ltd v Australian Securities & Investments Commission & Anor (No 2) (Judge Withers, 16 August 2013, unreported) at [13]
The Master’s decision to refuse the first respondent’s application for an indemnity costs order was not the subject of any appeal. Rather, the issue on appeal was whether the Master erred in making a costs order against the appellant at all.
Appeal
The appellant seeks appellate interference with a discretionary decision. Accordingly, it is incumbent upon him to show that the Master has acted upon a wrong principle, allowed extraneous or irrelevant matters to guide or affect his decision, mistaken the facts or failed to have regard to a material consideration.
On appeal, Mr Robertson SC advanced a number of submissions on behalf of the appellant. In essence, Mr Robertson contended that the Master incorrectly determined that the first respondent was a person aggrieved by the deregistration of the company, had improper regard to what Mr Robertson described as the “inferred subjective intent” of the appellant, incorrectly found that the appellant had a positive obligation to inform ASIC of an error contained in the application for deregistration, and failed to consider the appellant’s undertaking to provide disclosure in the Magistrates Court proceedings.
Mr Robertson argued that these purported errors in the approach of the Master are evident on the face of his reasons, and are such that it is available to me to re-exercise the discretion.
In that regard, Mr Robertson made a number of submissions as to the relevant considerations that I should consider in the event that I decide to re-exercise the discretion. Mr Robertson’s principal submission was that there is no utility in reinstating the company because it is insolvent, because the first respondent purportedly has the benefit of a performance guarantee provided by the parent company of the company and because the appellant and parent company have provided an undertaking not to impede the pre-trial procedures in the Magistrates Court proceedings. It was also put that the appellant stands to suffer significant prejudice in the event that the company is reinstated.
Conversely, Mr Burnett, counsel for the first respondent, submitted that the Master correctly determined that the first respondent was a person aggrieved because it is a contingent creditor of the company and its legal rights have been damaged or injured by the deregistration of the company. Mr Burnett submitted that having correctly determined that the first respondent was a person aggrieved, the Master correctly identified and considered the matters relevant to the exercise of his discretion. Mr Burnett put that in those circumstances, the Master has not erred either at law or in the exercise of his discretion, such that it is not open to me to re-exercise the discretion.
Mr Burnett further submitted that if I identified an error in the Master’s reasoning, then I should nevertheless exercise the discretion in the same way.
Person Aggrieved
In determining that the first respondent was a person aggrieved, the Master adopted the analysis of Gray J in Newfront Pty Limited (Deregistered) (ACN 053 228 489).[6]The Master was clearly satisfied that the first respondent was entitled to be treated as a person aggrieved, though he did not expressly state the basis upon which he had come to that conclusion.
[6] [2008] SASC 127.
The appellant contends that because the first respondent has the benefit of an indemnity pursuant to a performance guarantee entered into with the parent company of the company, its legal rights are unaffected by the deregistration of the company. Accordingly, the appellant contends that the first respondent has no genuine grievance and therefore no standing to make an application pursuant to s 601AH(2) of the Act.
However, regardless of whether another avenue is available to the first respondent to recover any loss that it may have suffered as a result of the company’s purportedly defective works, it is clear that as a result of the deregistration one such avenue is no longer available. In these circumstances, it is not for the Court to examine the merits of the remaining choses in action available to the first respondent to determine whether it still has a viable avenue to recover its loss.
The fact of the matter is that as a result of the deregistration of the company the first respondent has been deprived of a chose in action. The first respondent has suffered a legal grievance as its legal rights have clearly been affected. There is a wealth of authority,[7] much of which was referred to by the Master, to suggest that a person in those circumstances is entitled to be treated as a person aggrieved.
[7] See in particular Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688 at [24] – [26]; Re G A and R J Elliot Pty Limited; Ex parte Mitcham (1978) 3 ACLR 523 at 525.
On that basis alone, and keeping in mind that the expression “person aggrieved” is an expression of wide import and is to be construed liberally[8], I agree with the Master that the first respondent is a person aggrieved by the deregistration of the company.
[8] Newfront Pty Limited (Deregistered) (ACN 053 228 489) [2008] SASC 127 per Gray J at [10] citing Piccoli Tesori Pty Limited (2006) 151 FCR 109; GIS Electrical Pty Limited v Melsom (2002) 172 FLR 218 at 230-231.
Accordingly, this submission of the appellant fails.
The “inferred subjective intent” of the appellant
The appellant contends that the Master inferred that the appellant had an improper motive (avoiding the Magistrates Court proceedings) in applying to deregister the company. The appellant contends that this inference is evident from paragraph 16 (erroneously referred to in the appellant’s written submissions as paragraph 18) of the Master’s reasons, which I have set out above at paragraph [17].
The appellant submits that the Master ought not to have had any regard to the intention of the appellant at the time he applied for the company to be deregistered, and that he has erred in law by doing so.
I have reviewed the Master’s reasons carefully. In my view, the Master does not make the inference contended for by the appellant. The Master refers to the circumstances surrounding the deregistration of the company and, indeed, to the knowledge of the appellant both at the time he applied for deregistration and shortly thereafter. However, at no point does he make any finding as to the motive or intent of the appellant in applying for deregistration or at all. The appellant, in inviting me to make a finding to the contrary, is in effect asking me to infer an inference.
Accordingly, this submission of the appellant fails.
The obligation to notify ASIC of the service of the Magistrates Court proceedings
The appellant contends that the Master erred in law by finding that, having applied for deregistration of the company, the appellant had a positive obligation to inform ASIC of any change in circumstance that would affect its decision to make the order for deregistration.
Unlike the “inferred subjective intent” of the appellant, the Master clearly made this finding. The Master states in his reasons:[9]
When the second defendant became aware of the issued proceedings several days after he had lodged the application to deregister, he failed to correct the misinformation given to ASIC that the company was not a party to legal proceedings before the actual deregistration occurred. In my view, the second defendant was under a positive obligation to do so. A director of a company when it applies to the regulatory authority for an order to be made is obliged to ensure that the regulatory body is in receipt of accurate information before it makes the order.
(Emphasis added)
[9] Ashford Apartments Pty Ltd v Australian Securities & Investments Commission & Anor (Judge Withers, 17 July 2013, unreported) at [16].
In response, the first respondent referred to Jason Newham v Australian Securities and Investment Commission[10] and, in particular, to the statement of Higgins J at [59]:
I also reject the view, put on behalf of the second respondents that they were entitled to conceal from ASIC the applicant’s pending claim. They were well aware that the claim was being actively pursued.[11]
[10] (2000) 35 ACSR 147; [2000] ATSC 77.
[11] [2000] ATSC 77 at [59]
I note that although Newham was an appeal from the decision of a Deputy Registrar, Higgins J heard the matter as if the original application was before him, as the original decision of the Deputy Registrar was made in absence of jurisdiction. Accordingly, Higgins J was not limited in the manner that I am, given that this is an appeal from a discretionary decision of a Master.
In the circumstances of this case and for the reasons that follow, I find no error in the Master’s finding.

At the time of applying for deregistration, although the appellant was aware of a dispute with the first respondent, he was not aware that proceedings had been commenced against the company in the Magistrates Court. However, the test is not whether the applicant for deregistration knows whether or not the company is a party to legal proceedings. The test is simply whether or not the company is in fact a party to legal proceedings. Section 601AA of the Act provides:
(2)A person may apply [for deregistration] only if:
...
(e) the company has no outstanding liabilities; and
(f) the company is not a party to any legal proceedings.
The appellant’s application for deregistration was made at a time when the company was a party to legal proceedings. Accordingly, the application was defective.
That said, I agree with the submission put to me by Mr Robertson that there can be no criticism of a director who applies for deregistration honestly believing that the information he or she provides to ASIC is true and correct. However, the fact that the application for deregistration was defective must have become immediately apparent to the appellant once the company was served with the Magistrates Court proceedings only three days later.
In those circumstances, I reject the appellant’s argument that the Master erred in finding that the appellant had a positive obligation to inform ASIC when he became aware that, at the time he applied for deregistration of the company, the company was a party to legal proceedings. It was incumbent upon the appellant to rectify the incorrect information that he, albeit unknowingly, provided to ASIC.
Accordingly, this submission of the appellant fails.
Purported failure to take into account the appellant’s undertaking to provide disclosure in the Magistrates Court proceedings
During the hearing of the application before the Master, the appellant gave an undertaking to the Court on behalf of the parent company of the company not to impede the pre-trial procedures in the Magistrates Court. On appeal, the appellant advanced the submission that the Master failed to have regard to that undertaking, and that as a result this Court is entitled to re-exercise the discretion.
Though the Master was addressed on this point during the hearing of the original application, it is not immediately apparent on the face of his reasons whether he has had regard to it and, if so, what weight he has attributed to it. Relevantly, the Master states:[12]
‘[Reinstatement] will ensure that the pre-trial processes normally available to a litigant are available to the plaintiff to require disclosure by the contracting company and if appropriate to seek admissions from the contracting company. It will allow the Court to make findings in respect of the liability or otherwise of the company.’
[12] Ashford Apartments Pty Ltd v Australian Securities & Investments Commission & Anor (Judge Withers, 17 July 2013, unreported) at [18].
The appellant’s undertaking is relevant to the first matter identified by the Master in the above extract. However, the undertaking does not impact upon the Court’s ability to making findings in respect of the liability of the company.
The undertaking provided by the appellant was one of many considerations the Master was invited to have regard to. It is apparent from his reasons that the Master determined that there was a utility in making the order to reinstate the registration of the company upon which the undertaking would have no bearing.
Accordingly, even if as the appellant contends the Master had no regard to the undertaking, I do not consider that his failure to do so would amount to an error so serious as to result in the miscarriage of his discretion.
Conclusion
I do not consider that the Master has erred either in determining that the first respondent is a person aggrieved or in relation to any of the matters to which he had regard in determining whether it was “just that the company’s registration be reinstated.” Accordingly, there is no basis, in my view, to suggest that the discretion has been miscarried and that the Court should exercise it afresh.
In regards to the question of costs, I consider that in circumstances where the appellant did not raise any objection to being a party to the application for reinstatement but rather actively defended it, it was appropriate for the Master to award costs against him on a party/party basis.
Summary
For the reasons given above, I dismiss the appeal.