Elston Private Wealth Pty Ltd v Australian Securities and Investments Commission, in the matter of Fortis Private Pty Ltd (deregistered)
[2025] FCA 441
•24 April 2025
FEDERAL COURT OF AUSTRALIA
Elston Private Wealth Pty Ltd v Australian Securities and Investments Commission, in the matter of Fortis Private Pty Ltd (deregistered) [2025] FCA 441
File number: SAD 62 of 2025 Judgment of: FEUTRILL J Date of judgment: 24 April 2025 Date of publication of reasons: 5 May 2025 Catchwords: CORPORATIONS – application for reinstatement of deregistered company under s 601AH(2) of the Corporations Act 2001 (Cth) – company deregistered after voluntary liquidation – former liquidator unfunded to investigate and prosecute s 588FF claims – reinstatement for purpose of pursuing such claims and for company to pursue claims under s 37A of Conveyancing Act 1919 (NSW) – creditors as ‘persons aggrieved’ – no reasonable notice of application to ASIC or interested persons – conditions of reinstatement Legislation: Bankruptcy Act 1966 (Cth) s 81
Corporations Act 2001 (Cth) ss 114, 198G, 201A, 201F, 461, 509, 588FB, 588FDA, 588FDB, 588FE, 588FF, 596A, 597, 601AD, 601AH, 1322
Conveyancing Act 1919 (NSW) s 37A
Federal Court (Corporations) Rules 2000 (Cth) r 2.8
Cases cited: Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; 174 ALR 688
Donmastry Pty Ltd v Albarran [2004] NSWSC 632; 49 ACSR 745
Elston Private Wealth Pty Ltd v Wilson Advisory and Stockbroking Ltd [2022] ACTSC 237
Ligon 158 Pty Limited (in liq) v Shield Holdings Australia Pty Limited (de-registered) [2024] FCA 144
Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38; 71 NSWLR 262
Re ERB International Pty Ltd (deregistered) [2014] NSWSC 200
Division: General Division Registry: South Australia National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 44 Date of hearing: 24 April 2025 Counsel for the Plaintiffs: Mr B Roberts SC with Ms E Keynes Solicitor for the Plaintiffs: DW Fox Tucker Lawyers Counsel for the Defendant: The Defendant did not appear ORDERS
SAD 62 of 2025 IN THE MATTER OF FORTIS PRIVATE PTY LTD (ACN 647 000 379) (DEREGISTERED)
BETWEEN: ELSTON PRIVATE WEALTH PTY LTD (ACN 150 865 277)
First Plaintiff
EP FINANCIAL SERVICES PTY LTD (ACN 130 772 495)
Second Plaintiff
AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Defendant
ORDER MADE BY:
FEUTRILL J
DATE OF ORDER:
24 APRIL 2025
THE COURT ORDERS THAT:
1.The originating process filed in the proceeding be taken to have been filed under Div 2 of the Federal Court (Corporations) Rules 2000 (Cth), the applicants be the plaintiffs and the respondent be the defendant in the proceeding, for the purposes of Form 1 of the Corporations Rules, the proceeding be taken to be ‘In the matter of Fortis Private Pty Ltd (ACN 647 000 379) (deregistered)’ and all documents filed in the proceeding be taken to have been filed, with all necessary amendments, in accordance with the Corporations Rules.
2.The defendant (Australian Securities and Investments Commission or ASIC) reinstate the registration of the company, Fortis Private Pty Ltd (ACN 647 000 379), pursuant to section 601AH(2) of the Corporations Act 2001 (Cth) with effect from the date of these orders.
3.To the extent the effect of paragraph 2 of these orders is not that the company be taken to have continued in existence as a company in liquidation as if it had not been deregistered, the company be wound up with effect from the date of these orders and all and any notices and advertisements in connection with such winding up be dispensed with.
4.To the extent that the effect of paragraph 2 of these orders is not that he be taken to have remained liquidator of the company in liquidation as if it had not been deregistered, Mr Andre Lakomy be appointed liquidator of the company with effect from the date of these orders.
5.The plaintiffs pay the liquidator remuneration for necessary work properly performed and reimburse the liquidator for expenses necessarily and properly incurred in relation to the external administration of the company as a result of the reinstatement of that company under these orders.
6.By 4.30pm (AWST) on 1 May 2025, the plaintiffs serve on the defendant, liquidator, Ascari Investments Pty Ltd (ACN 655 201 504), Agatina Anderson, Timothy Anderson and Canis Lupus Asset Management Pty Ltd (ACN 647 315 455) a sealed copy of these orders.
7.The liquidator lodge with the defendant (ASIC) a copy of an original duplicate of these orders together with a cover page in Form 105 within 5 days of the date of these orders.
8.The plaintiffs, defendant, liquidator and any person who is able to demonstrate sufficient interest have liberty to apply to set aside or vary these orders upon 48 hours’ written notice.
9.There be no order as to the costs of the proceeding up to and including the date of these orders.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
FEUTRILL J:
The plaintiffs are the principal creditors of Fortis Private Pty Ltd (ACN 647 000 379) (deregistered) (Fortis or company). The plaintiffs filed an urgent application seeking orders requiring the defendant (Australian Securities and Investments Commission or ASIC) to reinstate the company under s 601AH(2) of the Corporations Act 2001 (Cth). The plaintiffs also seek ancillary orders that upon reinstatement the company continue in its existence as a company in liquidation and Mr Andre Lakomy, the former liquidator, be appointed as the liquidator of the company. On 24 April 2025 I made orders substantially in the terms the plaintiffs requested. These are my reasons for those orders.
Factual background
Elston Private Wealth Pty Ltd and EP Financial Services Pty Ltd (plaintiffs) are companies in a group of which Elston Group Pty Ltd is the parent company. The group is a privately owned financial services business that provides private wealth management and advice to individuals. Elston Private Wealth is the operating and employing entity for the group’s offices and advisors. EP Financial Services is the holder of an Australian Financial Services Licence. There is an agreement between Elston Private Wealth and EP Financial Services by which EP Financial Services provides financial services to clients through authorised representatives employed by Elston Private Wealth.
Timothy Anderson was an employee of Elston Private Wealth. In January 2021 he resigned from that employment and incorporated Fortis and TNT Anderson Pty Ltd, which was the sole member of Fortis. Richard Taylor, another former employee of Elston Private Wealth, also resigned and incorporated Canis Lupus Asset Management Pty Ltd.
In February 2021 Wilsons Advisory and Stockbroking Limited appointed Mr Anderson and Mr Taylor as authorised representatives to provide financial services on its behalf. Wilsons and Fortis made a corporate authorised representative agreement by which Wilsons engaged Fortis to provide certain services. Fortis, in turn, employed Mr Anderson as the natural person through which the services were provided.
The plaintiffs assert, through affidavit evidence filed in the proceeding, that before Mr Anderson’s resignation the Elston Private Wealth office in Canberra serviced approximately 275 clients. Shortly after Mr Anderson’s resignation, approximately 32 clients terminated their accounts with EP Financial Services. Mr Anderson or Mr Taylor had been the financial advisors to each of the clients who terminated their accounts.
In April 2021 the plaintiffs commenced proceedings in the Supreme Court of the Australian Capital Territory against Mr Anderson, Fortis and Wilsons. Elston Private Wealth claimed common law damages and equitable compensation against Mr Anderson for breach of his contract of employment and fiduciary and statutory duties associated with misuse of confidential information and soliciting clients. Elston Private Wealth claimed equitable compensation and an account of profits against Fortis for involvement in Mr Anderson’s breaches of contract and duties. EP Financial Services claimed damages and equitable compensation against Mr Anderson for breach of confidence. The plaintiffs claimed equitable compensation and an account of profits from Wilsons for involvement in the breaches of Mr Anderson’s duties.
The plaintiffs assert that until about November 2021 Fortis generated its revenue from fees charged to Wilsons under the corporate authorised representative agreement. Then, in November 2021, Mr Anderson and Mr Taylor ceased involvement with Wilsons and commenced a relationship with Shaw and Partners Limited, another financial services and advisory firm. In November 2021 Ascari Investments Pty Ltd was incorporated. Agatina Anderson was that company’s initial director and secretary. Mr Anderson then held those roles from 10 March until 13 April 2022. Ms Anderson was then reappointed and has held the sole director and secretary offices since 13 April 2022. The sole member of Ascari is TTBCR Investment Pty Ltd. Ms Anderson is the sole director, secretary and member of that company. Ms Anderson is Mr Anderson’s spouse.
The plaintiffs assert that in November 2021 Ascari and Shaw and Partners made a services agreement by which Mr Anderson was authorised to provide financial advisory services under the Australian Financial Services Licence of Shaw and Partners. The plaintiffs assert that in November 2021 Canis Lupus and Shaw and Partners also made a services agreement. Canis Lupus employs Mr Taylor.
In November 2021 the former clients of EP Financial Services who had terminated their accounts in early 2021 after Mr Anderson’s resignation (former Elston clients) ‘transferred’ their portfolios from Wilsons to another broker and, from November 2021 to March 2024 Ascari generated fees from the former Elston clients. There was also a ‘transfer’ of the former Elston clients from Fortis to Ascari in or around November 2021. The plaintiffs assert that the transfer of the clients was for no consideration. However, up to April 2022, Fortis generated revenue from fees it charged Ascari. The amounts charged corresponded to the fees Ascari generated from the former Elston clients.
In December 2023 ASIC cancelled Mr Anderson’s provider registration and, as a result, he was prohibited from providing personal advice to retail clients. Thereafter, former Elston clients who were retail clients were ‘transferred’ to Canis Lupus. The plaintiffs assert that the transfer of the retail clients was for no consideration.
In the meantime, on 15 March 2022 the ACT Supreme Court entered a consent judgment against Fortis and Mr Anderson, its sole director, in favour of the plaintiffs in the sum of $3,250,000 plus costs in the fixed sum of $1,400,000. Otherwise, a trial in the proceeding was held on 15, 16, 18, 23 and 24 March 2022 to prosecute the claims against Wilsons as the remaining defendant. The claims against Wilsons were dismissed in September 2022: Elston Private Wealth Pty Ltd v Wilson Advisory and Stockbroking Ltd [2022] ACTSC 237.
On 28 April 2022 Fortis was placed into voluntary liquidation and Mr Lakomy was appointed liquidator. The plaintiffs lodged a proof of debt for the amount of the ACT Supreme Court judgment debt.
On 9 May 2022 the plaintiffs issued a bankruptcy notice against Mr Anderson in respect of the judgment debt. On 16 May 2022 Mr Anderson became a bankrupt.
On 28 July 2022 Mr Lakomy provided a first report to creditors of Fortis. The report noted that the plaintiffs’ solicitors had raised concerns about Fortis transferring its client base before the appointment of the liquidator and whether that could comprise a voidable transaction and (or) breaches of directors’ duties. Mr Lakomy expressed the view that his investigations had not identified such a transaction but that his investigations were ongoing. The report also noted that the plaintiffs had expressed interest in public examinations of Mr Anderson to obtain information about the company’s affairs and transfer of the client base.
In November 2022 the plaintiffs requested the liquidator to examine Mr Anderson, Ms Anderson and Shaw and Partners under s 596A and request documents under s 597(9) of the Act in relation to the transfer of their former clients. The plaintiffs indicated that they would fund the examinations. Mr Lakomy indicated that he had no objection to that request. Notwithstanding that correspondence, that examination does not appear to have taken place. Rather, an application to examine Mr Anderson under s 81(1A) of the Bankruptcy Act 1966 (Cth) was pursued and undertaken during May 2024. In aid of that examination, in September 2023, the plaintiffs requested Mr Lakomy to produce certain documents. Ultimately, production of the documents was made by order of the Court served on Mr Lakomy in April 2024.
On 8 May 2024 Mr Lakomy provided a second report to creditors. In the report Mr Lakomy notes that concerns had been expressed about the company transferring its client base prior to his appointment and he added ‘I understand that other parties are pursuing the Director with respect to this matter’. Otherwise, Mr Lakomy indicated that he was unfunded to undertake further investigations and (or) undertake public examinations of the director and all other matters had been finalised. He added: ‘In the absence of funding, this will be my final report to creditors, and I intend to finalise the liquidation within 7 days after receiving [certain] proposals by lodging an End of Administration return and an application for deregistration of the Company with ASIC’.
On 11 November 2024 Mr Lakomy lodged an end of administration return with ASIC. On 12 February 2025 Fortis was deregistered under s 509 of the Act.
Although the plaintiffs and their solicitors received a copy of Mr Lakomy’s report to creditors indicating his intention to lodge the end of administration return, no representative of the plaintiffs evidently read the report or, if read, identified or understood Mr Lakomy’s intention. At the relevant time the report was received, the plaintiffs’ solicitors were in the midst of examinations of Mr Anderson under the Bankruptcy Act which could have resulted (as it apparently did) in the plaintiffs obtaining information that could aid the liquidator of Fortis recovering funds for the benefit of the creditors of that company. Self-evidently, claims of Fortis or its liquidator could not be pursued if Fortis were deregistered. In those circumstances, it evidently did not occur to the plaintiffs’ solicitors that Mr Lakomy might consider lodging an end of administration return with ASIC.
On 9 April 2025 the plaintiffs’ solicitors wrote to Mr Lakomy informing him of the plaintiffs’ intention to apply to the Court for leave to commence proceedings in the name of Fortis to recover certain alleged voidable transactions. Mr Lakomy responded the same day indicating that the company had been deregistered.
On 17 April 2025 the plaintiffs filed the present application in this Court for orders to reinstate Fortis. That application is supported by Mr Lakomy, as the former liquidator. Mr Lakomy has also indicated that he consents to his re-appointment as liquidator of the company if it is reinstated.
Purpose of reinstatement
The plaintiffs have prepared a draft statement of claim in a form in which it may be filed in the Supreme Court of New South Wales. Elston Private Wealth, EP Financial Services and Mr Lakomy, as liquidator of Fortis, are the proposed plaintiffs. However, counsel for the plaintiffs informed the Court that Fortis would be added as a party to the proceeding upon reinstatement as it is the party to which any payment would be made in accordance with the relief sought in the proposed proceeding. The proposed defendants are Ascari, Ms Anderson and Canis Lupus.
The proposed statement of claim alleges, in substance, that the list of the former Elston clients was the principal asset of Fortis. That list was transferred to Ascari for no consideration and the retail clients on that list were transferred to Canis Lupus for no consideration. The proposed plaintiffs claim that the transfer to Ascari was a voidable transaction under ss 588FE(3), 588FE(4) and 588FE(6A) as an unreasonable director-related transaction within the meaning of s 588FDA(1) and (or) an uncommercial transaction within the meaning of s 588FB(1) of the Act. The proposed plaintiffs also claim that the transfer to Ascari was a voidable transaction within the meaning of s 588FE(6B) as a creditor-defeating disposition within the meaning of s 588FDB of the Act. The proposed plaintiffs claim that the transfer of the clients to Ascari and transfer of the retail clients to Canis Lupus were to defraud creditors of Fortis and were void and (or) voidable alienations of property for the purposes of s 37A of the Conveyancing Act 1919 (NSW). The proposed statement of claim also alleges that certain payments Fortis made into a joint bank account of Mr Anderson and Ms Anderson are voidable transactions under ss 588FE(3), 588FE(4) and 588FE(6A) as unreasonable director-related transactions within the meaning of s 588FDA(1) and (or) uncommercial transactions within the meaning of s 588FB(1) of the Act.
Section 588FF(1) provides that where, on the application of a company’s liquidator, a court is satisfied that a transaction of the company is voidable because of s 588FE, the court may make, relevantly, orders for payment or transfer of property to the company which transferred the relevant property under the voidable transaction. Section 588FF(3) provides that an application may only be made under s 588FF(1) during the period beginning on the relation-back day and ending, relevantly, three years after that day.
Here, the relation-back day is 28 April 2022. Therefore, any application under s 588FF(1) must be made on or before 28 April 2025. That is the reason for the urgency of the application because Fortis, as a deregistered company, has ceased to exist and the former liquidator is no longer the liquidator of the company: s 601AD(1) of the Act. Therefore, in order to pursue the claims under the Act in the proposed proceeding it is necessary for Fortis to be reinstated, be in liquidation, have a liquidator, and make an application under s 588FF(1) of the Act within one business day.
Applicable principles
Section 601AH provides, relevantly:
…
Reinstatement by Court
(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; 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.
(3)If:
(a)ASIC reinstates the registration of a company under subsection (1) or (1A); or
(b)the Court makes an order under subsection (2);
the Court may:
(c)validate anything done during the period:
(i) beginning when the company was deregistered; and
(ii) ending when the company’s registration was reinstated; and
(d)make any other order it considers appropriate.
Note:For example, the Court may direct ASIC to transfer to another person property vested in ASIC under subsection 601AD(2).
…
Effect of reinstatement
(5)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.
…
The principles applicable on an application for reinstatement under s 601AH(2) are well-established. The relevant principles and supporting authorities were recently set out and summarised by Cheeseman J in Ligon 158 Pty Limited (in liq) v Shield Holdings Australia Pty Limited (de-registered) [2024] FCA 144 at [26]-[32]. It is not necessary to repeat what her Honour said or to restate these principles at any length. The following summary is sufficient for the purposes of this application.
(1)The power under s 601AH(2) is discretionary. It is enlivened, relevantly, if the application is made by ‘a person aggrieved by the deregistration’ and the Court is ‘satisfied that it is just that the company’s registration be reinstated’. Once enlivened, the Court has a residual discretion to decide whether to reinstate the company.
(2)The expression ‘a person aggrieved by the deregistration’ is not defined in the Act, but is not to be construed narrowly. An applicant must have a genuine grievance that the dissolution of the company has affected his, her or its interests. Where founded on a claim, it is not necessary that the Court consider in a detailed manner the merits of the claim. The Court only need be satisfied that the claim is not hopeless or bound to fail. A creditor with a real economic interest in reinstatement may be a person aggrieved.
(3)The provision that the Court ‘may’ order reinstatement if satisfied that it is ‘just’ to do so confers a broad discretionary judgment on the Court. The Court may take into account any consideration that is considered relevant to the question of whether it is ‘just’ to reinstate and, if so, whether reinstatement should be ordered. Although these are strictly separate matters, in practice, factors relevant to both questions tend to overlap and be considered together. In general, if the Court is satisfied that the applicant has standing and it is ‘just’ to do so, an order for reinstatement will be made.
(4)The factors that the Court will generally take into account when considering if it is ‘just’ to reinstate include: the circumstances in which the company was deregistered; the purpose in seeking its reinstatement; the extent to which any person is likely to be prejudiced by reinstatement; and the public interest. Additionally, the Court may also take into account the future stewardship of the company if and when it comes back into existence.
(5)The applicant bears the burden of adducing evidence that persuades the Court that reinstatement is ‘just’. But, on the application, the Court is concerned with the justness of reinstating the company, not the justice of any proceeding it is proposed that the reinstated company may institute or resume. Accordingly, the application for reinstatement is not generally the appropriate venue for considering the merits of the proposed proceeding. Nonetheless, it may not be ‘just’ to reinstate a company to pursue a claim that is futile, contingent or speculative. Thus, while a person may be aggrieved by deregistration because the company has lost a claim that it could have pursued, it may not be just to reinstate the company for the purpose of pursuing a claim of insufficient merit.
Where, as here, a company has been deregistered after it has been in liquidation, there has been a degree of conflicting authority regarding the effect of reinstatement. But, the weight of authority supports the proposition that the effect of reinstatement is that the company is taken to have continued in existence as a company in liquidation, but the former liquidator is not taken to have continued in that office. Under s 601AH(3)(b) the Court may order the re-appointment of the former liquidator or appoint a new liquidator. While, all other things being equal, re-appointment of the former liquidator is preferrable, it will not be appropriate where there are considerations militating against that course: see, e.g., Re ERB International Pty Ltd (deregistered) [2014] NSWSC 200 at [22]-[40] (Brereton J) and the authorities there cited.
It has also been suggested that where reinstatement is sought of a company that was deregistered after liquidation, when considering if reinstatement would be just, the Court would be more reluctant to disturb that kind of deregistration than in cases in which a company is deregistered for administrative reasons: Donmastry Pty Ltd v Albarran [2004] NSWSC 632; 49 ACSR 745 at [5] (Barrett J). However, as the facts of Donmastry illustrate, where a liquidation, in effect, ends prematurely and without full investigation of possible voidable transactions, reinstatement for the purpose of completing the liquidator’s investigations and prosecuting potential claims for such voidable transactions may be just.
Are the plaintiffs persons aggrieved?
The circumstances of this application are slightly unusual in that the application has been made by two creditors of Fortis and not Mr Lakomy, the former liquidator, largely for the purpose of pursuing claims that the former liquidator, upon re-appointment, could bring. Nonetheless, as creditors, the plaintiffs manifestly have an interest in reinstatement and completion of the investigation into the affairs of the company and any recovery of funds or property of the company under s 588FF of the Act or s 37A of the Conveyancing Act.
I do not regard the proposed proceeding as futile, hopeless, contingent or speculative. The proposed pleaded facts are supported by statements of fact, albeit of information and belief, and documents exhibited to the affidavits filed in support of the application. These facts provide sufficient support for the material facts and particulars pleaded in the proposed statement of claim to demonstrate an evidential basis for the allegations proposed to be made and that the pleaded facts raise arguable causes of action for the proposed claimed relief.
The plaintiffs are ‘persons aggrieved’ by the deregistration of the company.
Is it just that the company be reinstated?
Circumstances of deregistration, purpose of reinstatement and public interest
The circumstances in which Fortis was deregistered are described earlier in these reasons. The former liquidator’s decision to lodge the end of administration return appears to have been based, at least in part, on a misapprehension that it was unnecessary for the company to remain registered or in liquidation for potential claims associated with the transfer of clients to be pursued. It also appears to have resulted, in part, from oversight on the part of the plaintiffs and their solicitors in failing to appreciate that the former liquidator intended to lodge the end of administration return that would result in deregistration of the company.
This is not a circumstance in which the plaintiffs have decided to pursue the proposed claims as an afterthought. It is evident that the plaintiffs took steps and incurred costs investigating the proposed claims in circumstances in which the former liquidator was unfunded and unable to carry out those investigations. The plaintiffs have completed their investigations and are now in a position to fund and assist in the prosecution of the claims.
The former liquidator has affirmed an affidavit in which he deposes that he has been provided with a draft of the statement of claim. He deposes that subject to consideration and verification of the factual matters asserted and documents referenced in the claim he is of the view that it is appropriate that he be joined as a party to the claim, as liquidator. He has indicated that he will instruct the plaintiffs’ solicitors, at the plaintiffs’ cost, to urgently commence the proposed proceedings in the NSW Supreme Court. He deposes that subject to consideration and verification of the claims, he intends assigning his causes of action, as liquidator, to the plaintiffs on terms including that any relief be returned to Fortis for distribution amongst its creditors.
The former liquidator deposes that he believes it is in the best interests of Fortis’ creditors that the company be reinstated and he supports the application for orders for the company’s reinstatement. He also deposes that he consents to re-appointment as liquidator of the company.
I have set out earlier in these reasons the purpose for which the company is sought to be reinstated. I have also indicated that the evidence filed in support of the application supports the facts pleaded in the proposed statement of claim and it pleads arguable causes of action for the relief claimed. Even in the absence of a claim that is ready for prosecution, there is a strong public interest in the function liquidators perform in investigating the affairs of companies in liquidation and taking appropriate steps, including proceedings under s 588FF(1), to maximise the assets available for distribution amongst creditors and contributories. The ability of liquidators to perform that function can be limited by the availability of funding to carry out investigations. In general, if a creditor is willing to accept the cost burden and pursue claims that may augment the distributions to creditors, it is the interests of the creditors, as a whole, to permit that investigation to take place. In substance, that is what is proposed in this case if the company were reinstated.
The circumstances in which the company was deregistered, the purpose for its reinstatement and the public interest are all considerations that favour a conclusion that it is just to reinstate the company in this case.
Other considerations
Rule 2.8 of the Federal Court (Corporations) Rules 2000 (Cth) requires a person who makes an application under s 601AH(2) of the Act to serve the originating process and supporting affidavit on ASIC a reasonable time before the hearing of the application.
As already mentioned, the application in the proceeding was filed on 17 April 2025. On the same day, the plaintiffs’ solicitors sent the originating application and supporting affidavits and other documents to ASIC by email. On 23 April 2025 ASIC sent an email to the plaintiffs’ solicitors indicating that the short notice given to ASIC was not usual practice and unreasonable. Further, upon its initial review it raised the ineligibility of Mr Anderson (as a bankrupt) to be the director of the company upon reinstatement and that the sole member of the company was deregistered on 12 March 2024. Therefore, if the company were reinstated it would not be able to comply with s 201A (at least one director) or s 114 (at least one member) of the Act. ASIC also requested an adjournment of 14 days if the Court wished to hear further from ASIC. In my view, the notice given to ASIC was not reasonable and, therefore, there was not compliance with r 2.8 of the Corporations Rules. But, that non-compliance is not fateful to the application for the reasons that follow.
As to the matters ASIC raised, in circumstances in which the company was in liquidation and it is proposed that it remain or be returned to liquidation, I do not consider Mr Anderson’s disqualification from appointment as a director nor that the member of the company is deregistered to be substantive impediments to reinstatement. If and to the extent there may be any surplus for distribution to the member as a result of the liquidation upon reinstatement, the right to that surplus would be vested in ASIC and an aggrieved person could apply for reinstatement of the member to obtain that distribution. As to the absence of a director, that is no impediment because the office of directors is redundant during liquidation: s 198G of the Act. In any event, Mr Anderson’s trustee in bankruptcy has the power to appoint a director should that appointment be considered necessary: s 201F(3)(c). Further, the absence of a director or existence of a member would be reasons to order that the company be wound up on just and equitable grounds under s 461(1)(k) of the Act. That is, these are not reasons to prevent reinstatement of a company for the purpose of completing the winding up of that company.
The application and supporting documents were sent to Mr Anderson by express post on 22 April 2025. Notice to Mr Anderson was obviously also inadequate assuming that he received the originating application and other materials. Likewise, no notice of the application was given to the defendants in the proposed proceedings. Although it has been said that it will be a very rare case that merely reinstating a company will be prejudicial to a potential defendant: Re ERB International at [13] (Brereton J), nonetheless, none of the proposed defendants or the former director has had reasonable notice and an opportunity to make submissions to the Court as to any reason why reinstatement would be unjust and prejudicial to one or more of them.
Ordinarily, the lack of reasonable notice to ASIC, the former director and proposed defendants would be a reason for refusing to make the orders sought on the application at this time. However, for the reasons already given, the application was urgent and, taking into account the circumstances in which and time at which the plaintiffs became aware of deregistration of the company, in practical terms, an application could not have been made much earlier than it was made and ASIC and Mr Anderson could not have been given much more notice than was given. I do not consider the lack of notice to ASIC, Mr Anderson or the potential defendants to be a reason for refusing the orders sought in the circumstances of this case. The lack of notice is, however, reason for making additional orders under s 601AH(3)(d) that would permit any person with sufficient interest in the proceeding to apply to the Court to vary or set aside the orders for reinstatement. An order for reinstatement may be set aside if it should not have been made and the register corrected under s 1322(4)(b) of the Act: e.g., Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38; 71 NSWLR 262 at [60] (Spigelman CJ, Tobias and Campbell JJA agreeing).
A further consideration in this case is that the former liquidator indicated that he was unfunded. It is clear that the liquidator upon re-appointment would not have funds to carry out any investigations, consider or verify the facts set out in the proposed statement of claim, or continue with liquidation of the company. The liquidator will also have to negotiate the terms and conditions of the foreshadowed assignment of his causes of action or some other agreement or arrangement for managing, prosecuting and funding the proposed proceeding. The liquidator will be entitled to remuneration and will incur expenses as a consequence of reinstatement irrespective of whether or not the proposed proceedings are commenced and prosecuted. The liquidator should not be out of pocket as a result of those matters. Therefore, it is appropriate that additional orders be made under s 601AH(3)(d) to the effect that a condition of the reinstatement be that the plaintiffs pay the liquidator remuneration for work and reimburse him for expenses incurred as result of the reinstatement: see, e.g., Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; 174 ALR 688 at [60] (Austin J).
The company should be reinstated
For the reasons given, the plaintiffs are persons aggrieved and it is just that the company be reinstated. I am satisfied that, subject to the conditions referred to earlier in these reasons, an order should be made for reinstatement of the company.
I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill. Associate:
Dated: 5 May 2025
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