Gregg v Australian Securities and Investments Commission
[2024] WASC 314
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: GREGG -v- AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION [2024] WASC 314
CORAM: HOWARD J
HEARD: 22 AUGUST 2024
DELIVERED : 22 AUGUST 2024
PUBLISHED : 30 AUGUST 2024
FILE NO/S: COR 134 of 2024
BETWEEN: BRADLEY STUART GREGG
Plaintiff
AND
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Defendant
Catchwords:
Corporations law - Application by former director to reinstate deregistered Company so a liquidator may be appointed - Where director received two director penalty notices under the Taxation Administration Act 1953 (Cth) – Where granting the application will affect one notice - Where ASIC and ATO did not wish to be heard – Orders for Company to be reinstated, placed into liquidation and other consequential orders
Legislation:
Corporations Act 2001 (Cth)
Taxation Administration Act 1953 (Cth)
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr N F Malone |
| Defendant | : | No Appearance |
Solicitors:
| Plaintiff | : | Pragma Lawyers |
| Defendant | : | No Appearance |
Cases referred to in decision(s):
Jit Sun Investments Pte Ltd [2021] WASC 235
Perrin v Australian Securities and Investments Commission [2024] WASC 38
Re Dreampoint Pty Ltd [2024] WASC 125
HOWARD J:
(These reasons were delivered extemporaneously and have been lightly edited from the transcript.)
By an originating process filed 21 August 2024, the applicant plaintiff seeks seven orders on an urgent basis.
The plaintiff is a former director of the company JR Serra Proprietary Limited (Company), which appears to have been deregistered on 26 February 2020.
In support of his application, the plaintiff has filed:
1.an affidavit made by him on 21 August 2024;
2.a further affidavit made by him on 22 August 2024; and
3.two affidavits of his solicitor, Mr Malone, both made on 22 August 2024.
The impetus for the application and its urgency is that Mr Gregg received two director penalty notices from the ATO dated 1 August 2024 which he deposes to having received in the mail on 5 August 2024.
The first of those director penalty notices is in respect of superannuation and guarantee charge amounts for the company. And while materials dealing with that have been put before the Court, the present application will not have an impact on that notice.
The second director penalty notice is in respect of PAYG withholding amounts (PAYG Notice). If the application is granted, it will have an effect under Division 269 of the Taxation Administration Act 1953 (Cth) (TA Act) and will have the effect of stopping Mr Gregg from being under the relevant obligation imposed by the PAYG Notice. That appears from 269-30 of the TA Act.
Without reciting them, I gratefully adopt the principles which have been applied in this court in analogous cases in Re Dreampoint Pty Ltd [2024] WASC 125 (Master Russell), and Perrin v Australian Securities and Investments Commission [2024] WASC 38 (Strk J). Both of those cases draw on the decision of Hill J in Jit Sun Investments Pte Ltd v Australian Securities and Investments Commission [2021] WASC 235.
Circumstances the Company was deregistered
It appears that from 9 February 2018, the applicant was the sole director and shareholder of the Company.
By early 2019, it appears he had come to the view that the Company was not a viable business in the medium to long term.
The applicant deposes to having sought advice from an accounting firm in Bunbury to assist the Company with winding down its affairs and providing advice upon how the Company could permissibly cease trading.
The applicant deposes that at the time of seeking that advice in early 2019, he was aware that the Company had no liabilities owed to trade creditors and believed or understood that the Company was up to date with its superannuation obligations. That latter belief, he says, came from what he was told by the Company's accountants.
The ATO, obviously, takes a different view in relation to the Company's superannuation obligations as shown by the issuing the director penalty notice in respect of the superannuation guarantee charges.
The applicant deposes that he understood at the time (early 2019), that the Company owed an amount to the ATO, however was unsure of the exact amount. He deposes to having left that matter, effectively, to the accountants to resolve with the ATO. He deposed that he expected to be informed and advised on the best path forward.
The applicant then deposes that he did not hear substantively from the accountants again. This was during a time when he 'got on with his life', without thinking about the Company. During this time his marriage broke down and he was finding alternative work.
As stated above, the Company was deregistered on 26 February 2020. From the applicant's affidavits, it appears that the applicant was aware that an application was being made to deregister the Company. The applicant signed an application to that effect.
I accept that the most likely inference from the material before the Court is that the deregistration occurred as a result of advice the applicant received from the accountants. The applicant deposed to a lack of understanding as to the process of deregistering a company and I accept that he was likely unaware of the process.
I should note that I am making the finding above in the context of this (ex parte) application, and that I have not received any material from the accountants.
The financial status of the Company at the time of deregistration is unclear. What is plain is that Mr Gregg was aware that the Company owed at least PAYG tax to the ATO.
Financial statements for the 2017 financial year have been put before the Court. It appears the 2017 financial year was the last financial year for which financial statements were prepared. From those financial statements, it appears that the Company as at 30 June 2017 had:
1.total current assets of some $62,000;
2.total current liabilities of some $234,000;
3.an overall asset position, including non-current assets, of approximately $108,000;
4.total liabilities of $135,579; and
5.non-current liabilities of approximately $98,000.
Therefore, it appears on the balance sheet, there was a deficiency of approximately $27,000 when all assets and liabilities were considered.
There is, then, some evidence before the Court that the Company was insolvent at the end of the 2017 financial year. There is nothing before the Court that suggests its position had improved by early 2019. The applicant provided some evidence about the issues the Company was facing, which suggests, that if anything, the Company's financial position was worse by early 2019.
The form seeking the deregistration of the Company by ASIC was put before the Court. The form erroneously stated that the Company had no outstanding liabilities. At the very least, to the applicant's knowledge, there was still PAYG tax outstanding.
In any event, the Company was deregistered, and it appears that the applicant gave no further thought to the Company and to the ATO until receiving the two director penalty notices.
The applicant seeks to, effectively, reinstate the Company so that it can be placed immediately into liquidation, and the TA Act can then operate so as to relieve the applicant of the force of the PAYG Notice. This is similar to what each of the applicants sought to do in Re Dreampoint and Perrin.
Disposition
I was concerned when the matter initially came before me this morning that the applicant may have taken the steps to deregister the Company with knowledge of the tax liability. I was also concerned that because of the urgency with which the application was brought that neither ASIC nor the ATO had an opportunity to reach a view as to their position.
From the authorities, I accept that the applicant is a person aggrieved and therefore has standing within s 601AH(2) of the Corporations Act 2001 (Cth) to bring the order. The question for the Court is whether it is satisfied that it is just that the Company's registration be reinstated.
In my view, I should approach that question by taking into account not just the reinstatement, which is sought, but the application which is sought immediately after the reinstatement which, as I have outlined, is putting the Company into liquidation.
When the matter was recalled this afternoon after adjourning this morning, it was apparent from Mr Malone's second affidavit that he had taken steps to speak with the relevant officer at the ATO. It is apparent that after sending the relevant Court documents to the ATO, that the Commissioner did not oppose, nor wish to be heard on, the originating process. In those circumstances, the case is quite analogous with the position in Perrin.
It seems that whatever reservations I may have had to, in effect, protect the revenue, the ATO now has had due notice and has decided not to oppose the application. It may be inferred there was nothing in the application which caused it a concern and so it did not wish to be heard.
With all due respect to ASIC, in an application such as this, the position of the ATO seemed to me to be of more significance when I was considering whether I should exercise the discretion to make the orders sought.
I note that Division 269 by s 269-1 of the TA Act, under the somewhat folksy heading of 'What this Division is about', states that directors of a company have a duty to ensure that the company either:
(a)meets those obligations (which I interpolate broadly to be its taxation obligations); or
(b)goes promptly into voluntary administration or restructuring, or into liquidation.
While it may be observed that the effect of director penalty notices cause the director to become liable to the ATO for tax debts, there is also an evident, alternative, purpose in that Division of requiring a company to go promptly into liquidation; that is (I infer) promptly after the service of a relevant notice.
As said, the two notices were served on 1 August 2024, giving rise to the urgency for the application filed yesterday and determined today.
In all the circumstances, and especially given the attitude of the ATO, in my judgement it would be just to reinstate the Company and then make the consequential orders which are sought.
As the Master expressed it in Re Dreampoint, there would seem, in all of the circumstances, little utility in requiring the normal advertising requirements to be met. Making the consequential orders sought in order 4 seems to be appropriate to me.
So, I will make Orders in terms of Orders 1 to 7 of the originating process filed 21 August 2024.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JC
Associate to the Honourable Justice Howard
30 AUGUST 2024
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