In Re JCEE Pty Ltd, Trustee of the Bankrupt Estate of Justin Thomas McQuinn v Australian Securities and Investments Commission - [2019] SASC 169

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
IN RE JCEE PTY LTD, TRUSTEE OF THE BANKRUPT ESTATE OF JUSTIN THOMAS MCQUINN v ASIC
[2019] SASC 169
Judgment of Judge Bochner a Master of the Supreme Court
27 September 2019
CORPORATIONS
Reinstatement of company - s 601AH - person aggrieved.
Held - application for the reinstatement of JCEE Pty Ltd is dismissed.
Corporations Act 2001 (Cth) s 601AH; Trade Practices Act 1974 (Cth), referred to.
Pilmer v The Duke Group Ltd (In Liquidation) [2001] HCA 31; Casali v Crisp [2001] NSWSC 860; Re Trim Perfect Australia Pty Ltd [2005] NSWSC 972; Australian Competition and Consumer Commission v Australian Securities and Investments Commission, in the matter of SensaSlim Australia Pty Ltd (In Liquidation) [2015] FCA 258; Bell Group Ltd v Australian Securities and Investments Commission [2018] FCA 884; In the Matter of Auzhair Supplies Pty Ltd (In Liq) [2013] NSWSC 1, considered.

IN RE JCEE PTY LTD, TRUSTEE OF THE BANKRUPT ESTATE OF JUSTIN THOMAS MCQUINN v ASIC
[2019] SASC 169
Reinstatement of JCEE Pty Ltd

The trustee (“the trustee”) of the bankrupt estate of Justin Thomas McQuinn (“McQuinn”) seeks to have the company JCEE Pty Ltd (“JC”) reinstated pursuant to s 601AH of the Corporations Act 2001 (Cth) (“the Act”). On 4 June 2019, I granted leave to Merit Partners and Simon Coulter (“the interveners”) to intervene in the application, on the basis that their interests are likely to be affected by the outcome of the application. On 29 July 2019, I heard argument as to reinstatement. Craig John Beadman (“Beadman”), a former director of JC, was also represented at the hearing. The interveners and Beadman objected to the reinstatement of JC.
Reinstatement pursuant to s 601AH of the Act
Section 601AH of the Act relevantly 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; 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.
Before I make any order reinstating the registration of JC, I must be satisfied that the trustee is a person aggrieved (clearly not being a former liquidator of JC), and that it is just that the registration be reinstated. I will come back to these requirements.
The trustee’s position
McQuinn became bankrupt on 25 September 2017, following his inability to meet a judgment debt in relation to a valuation of the shares of a company, NTRDS Pty Ltd (“NTRDS”). The current trustee was appointed on 2 August 2018.
On 13 July 2018, the trustee issued proceedings in the Federal Circuit Court in Adelaide (“the Circuit Court claim”), against the interveners, seeking damages for negligence, breach of fiduciary duty, breach of contract, and breaches of the Australian Consumer Law. The background to the Circuit Court Claim is as follows.
In 2007, JC was incorporated, with two shares issued, one to McQuinn and one to Beadman. McQuinn and Beadman were both directors of JC. Through JC, they ran the business of installing roller doors in the Northern Territory. In 2012, McQuinn and Beadman decided to part company; the decision to separate out their business interests was an amicable one.
McQuinn wanted to continue to use JC as the vehicle through which he ran his business. As a result, he and Beadman agreed that McQuinn would pay Beadman the sum of $25,000, in consideration for the registered business name, “Roller Door Services NT”, and the telephone and facsimile numbers and email address of the business.[1] In addition, they agreed to divide the plant and equipment of JC between them, and reached various other arrangements in relation to the completion and retention of current contracts. They agreed to instruct JC’s accountant, the interveners, to effect the transfer of Beadman’s share to McQuinn, and to prepare company accounts to facilitate the division of assets. They signed a “Shareholders Agreement” to this effect on 30 September 2012.
[1] FDN 13 at CJB 1.
2 FDN 18 at [9].
The trustee says that McQuinn instructed the interveners “to implement the procedural components of the Agreement”,[2] including the transfer of Beadman’s share, and his resignation as a director. Instead of doing these things, the interveners, on the instructions of a third party, Paul Blackadder (“Blackadder”), incorporated a new company, NTRDS. They caused 50% of NTRDS’s shares to be issued to Blackadder, and 50% to McQuinn, made them both directors of NTRDS, and caused 900 new shares to be issued in JC. 450 of those shares were allocated to NTRDS, and the remaining 450 were issued to another company, 101(NT) Pty Ltd, which was controlled by Beadman. They then issued a dividend in JC, to distribute its assets, and arranged to have JC deregistered. The effect of the share issue was that McQuinn and Beadman were each allocated 1/902 of JC’s assets, and NTRDS and 101(NT) Pty Ltd were each allocated 450/902.
McQuinn concedes that he agreed with Blackadder that a new company was to be set up to carry on the business of JC, however, Blackadder was to hold only 24.4% of its shares. McQuinn was to transfer all of the assets he had brought from JC to the new company. There was no agreement that new shares in JC would be issued, or that JC would be deregistered, or that JC’s assets to which McQuinn was entitled should be transferred to NTRDS.
The trustee says that from about 1 September 2012, NTRDS carried out the business previously operated by JC. He says that McQuinn did not discover that Blackadder held a 50% interest in NTRDS until May 2015.
In September 2015, Blackadder resigned as a director of NTRDS, and demanded that McQuinn purchase his shares. Following legal action brought by Blackadder against McQuinn in the Supreme Court of the Northern Territory, McQuinn was ordered to purchase Blackadder’s shares for $630,844 and to pay his legal costs in the sum of $125,000. His inability to pay this judgment debt led to McQuinn’s bankruptcy. NTRDS went into liquidation on 23 March 2018.
The trustee alleges that, through the advice, or lack of advice, given to McQuinn by the interveners, the interveners breached their common law duty of care to McQuinn, as well as their fiduciary obligations, their contract and the Australian Consumer Law. Put very loosely, he says that, as a result of the actions of the intervener, in failing to transfer Beadman’s share to McQuinn and to register Beadman’s resignation as a director of JC, and their subsequent conduct in relation to NTRDS, they caused McQuinn to lose his interest in JC, and suffer the judgment in the action brought by Blackadder.[3]
[3] The statement of claim in the Circuit Court claim is found in FDN 14 at BMR 10.
The trustee now wants to join JC as a further plaintiff to the Circuit Court claim, on the basis of loss that the trustee says JC suffered as a result of the actions of the interveners. The trustee says that, not only did the interveners breach their retainer with, common law duty of care to, and fiduciary and statutory duties to McQuinn, they also breached their retainer with and their duty of care to JC. The trustee describes the combined effect of the interveners’ actions as follows:
d.     Effect and consequences of what was done (or not done)
i.     JCEE lost all of its assets;
ii.    NTRDS got all of the JCEE assets at no cost;
iii.     McQuinn lost all of his interest in JCEE, with no payment having been received;
iv.     Beadman remained on the ASIC records as a director of JCEE;
v.    Beadman remained on the ASIC records as a shareholder of JCEE;
vi.     Beadman’s company, 101 (NT) Pty Ltd obtained shares in JCEE, after he was to have ceased as both a director and shareholder of JCEE;
vii.    NTRDS obtained shared in JCEE; and
viii.   McQuinn did not get any additional shares in JCEE.[4]
[4]    FDN 3 at paragraph 10 (d)(i) – (viii).
He says that this has resulted in a loss to both McQuinn and JC in the region of $1,000,000.
The trustee says that he is a person aggrieved by the deregistration of JC, because JC has various causes of action against the interveners that it should be in a position to prosecute. As a former shareholder and director of JC, McQuinn is the appropriate person to bring these actions against the interveners, and as his trustee in bankruptcy, the trustee stands in his shoes. The reasoning is thus: the interveners breached their duties to JC and to McQuinn. As McQuinn should have been the sole director and shareholder of JC, and as JC was deregistered without his consent, he is a person aggrieved by its deregistration. The trustee stands in the shoes of McQuinn. The trustee has already commenced the Circuit Court claim in relation to the breaches to McQuinn and the losses suffered by him personally. JC also suffered losses as a result of the interveners’ breaches of their various duties to JC. Any loss suffered by JC led to or contributed to the losses suffered by McQuinn. So any redress achieved by JC in the proposed legal action would necessarily lead to a flow on benefit to McQuinn personally. Through the reinstatement of the registration of JC, the trustee seeks to put McQuinn in the position that he would have been in if the interveners had followed his instructions, that is, if they had transferred Beadman’s share to him, facilitated Beadman’s resignation as a director, not caused JC to issue 900 shares, and not incorporated NTRDS on the instructions of Blackadder with Blackadder as a 50% shareholder.
The trustee says that the reinstatement of JC is clearly in the public interest. McQuinn and JC have been seriously aggrieved by the conduct of the interveners, and so should have the opportunity to bring them to account.
I note that, when this application was first brought, the trustee sought an order that Beadman’s share be transferred to McQuinn. At the commencement of the argument, the trustee’s counsel, Mr Adams indicated that that the trustee no longer pressed for this order.
In addition to the reinstatement of JC, the trustee also sought an order that JC be placed into liquidation pursuant to s 461 (1)(k) of the Act (the just and equitable ground), and that Dominic Cantone be appointed its liquidator.
The interveners’ position
The interveners oppose the application for reinstatement of JC on a number of grounds.
The first of these is that if reinstated, JC does not have reasonable prospects of success in the proposed litigation against the interveners. The contemporaneous records show that there was no breach of retainer or breach of common law duty of care by the interveners in their conduct viz-a-viz JC. Further, they say that the evidence of McQuinn before me is fundamentally different to the evidence given by McQuinn on oath in the proceeding in the Supreme Court of the Northern Territory. They say the evidence of McQuinn is fundamentally different to the evidence of Beadman as to the circumstances in which the 900 new shares were issued in JC, and JC was then deregistered. They say that the evidence is clear that McQuinn agreed to the deregistration of JC.
The interveners’ position is that the trustee is in error to say that McQuinn paid Beadman $25,000 for his share in the company. They say, on the contrary, that the Shareholder Agreement makes it clear that the payment was for other assets held by Beadman, specifically, the business name, and its telephone and facsimile numbers and email address. Additionally, they say that McQuinn’s Northern Territory affidavit sets out the true position. In this affidavit, McQuinn deposes that it was agreed between Beadman and himself that JC would cease trading on 14 September 2012, that he and Beadman continued as JC’s directors and shareholders until deregistration, that he agreed with Blackadder that a new company would be established to carry on the business of JC, and that the new company (NTRDS) would trade using the plant, equipment, stock, goodwill and money brought by McQuinn from JC.[5] There is no suggestion in this affidavit that the deregistration of JC was in any way inappropriate, or otherwise than in accordance with McQuinn’s intention to carry on business through a new entity.
[5] Affidavit of Justin McQuinn sworn 18 November 2016, in Blackadder v McQuinn & Anor Supreme Court of South Australia No 61 of 2016.
This affidavit also makes it clear, so say the interveners, that contrary to McQuinn’s position in this matter, the assets of JC were not “lost”, nor were they transferred to NTRDS at no cost. The assets of JC were transferred to NTRDS, and the other shareholder in NTRDS, Blackadder, paid money for the investment in NTRDS. The interveners also rely on Beadman’s second affidavit,[6] wherein he exhibits various contemporaneous business records which refute the position put by McQuinn in this application. I will come back to the material exhibited to Beadman’s second affidavit. The effect of this evidence, say the interveners, is that McQuinn’s claim and the proposed claim by JC against the interveners, is without merit.
[6] FDN 20.
Secondly, they say that there is no evidence of any capacity for JC to fund the proposed litigation, noting that the trustee indicated that he would fund the litigation on behalf of JC.
Thirdly, the interveners say that any action to be brought against the interveners by JC is statute barred. There is no evidence before the Court as to the reason for the delay in seeking to bring this proceeding, and no basis has been shown for an extension of time if one is sought by the trustee.
The fourth point made by the interveners is that the just and equitable ground cannot be used appropriately in the situation currently before me.
Finally, the interveners say that the reinstatement of JC will bring little benefit to McQuinn’s creditors even if the litigation against the interveners is successful. This is because McQuinn held only one share in JC. NTRDS, in which he held a 50% interest, and which held 450 shares in JC, is in external administration. The remaining 451 shares in JC are held by Beadman and 101(NT). Thus, should any benefit come from the litigation between the interveners and JC, McQuinn (and his trustee) would receive 1/902 of that benefit. Such a negligible return would not justify the reinstatement of JC and the subsequent litigation brought by it.
Beadman’s position
Beadman also opposes the application to reinstate the registration of JC. His opposition was also on a number of grounds.
Firstly, his counsel, Ms MacKenzie noted that the trustee no longer pressed the order for the transfer of Beadman’s share to McQuinn. She made the point, nonetheless, that even if this order was pressed and made, Beadman’s company, 101(NT) would continue to retain its 450 shares in JC. As a result, Beadman, through 101(NT) would continue to have an involvement in JC and its activities if reinstated, whether he wished to do so or not, and would clearly have a significant interest in any litigation being pursued by JC.
Secondly, Ms MacKenzie noted the substantial factual differences between Beadman and McQuinn as to the events leading up to the deregistration of JC. Beadman says that the assets of JC were transferred to its shareholders pursuant to an agreement between Beadman and McQuinn to wind up the company. Some of the assets were plant and equipment and some were cash. The assets were divided up and transferred to the trading companies of Beadman (101(NT)) and McQuinn (NTRDS). To facilitate the transfer of the assets to the companies, JC issued 450 shares to each of them; this allowed the assets to be transferred by way of a final dividend.
Further, far from the interveners’ failing to remove Beadman as a shareholder and director of JC, Beadman says that he and McQuinn agreed between them that there was no need to do this, once McQuinn had decided to operate his new business through NTRDS rather than JC. They agreed that, instead, JC would simply be deregistered once its debts had been paid and a final dividend issued.
Thus, Beadman’s position is that, while the Shareholders Agreement contemplated the removal of Beadman as a director and the transfer of his share, McQuinn subsequently changed his mind as to how he wished to operate his new business. He decided to set up a new company, transfer his interest in JC to that new company, and wind up JC.
Ms MacKenzie then put in contention the trustee’s submission that the trustee was a person aggrieved in accordance with s 601AH of the Act. However, more significant was Beadman’s position that the reinstatement of JC would not be in the interests of justice. Ms MacKenzie pointed to the fact that the deregistration of JC was not undertaken in error or by oversight, but was an intentional act by McQuinn and Beadman, JC has no creditors, and no one is seeking to bring an action against JC or to access a policy of insurance of which JC is the beneficiary. Rather, this is a situation where the trustee, who effectively holds one of 902 shares in JC, is seeking to reinstate the company so as to commence litigation against a third party.
Beadman also submits that he will be directly prejudiced by the reinstatement of JC. He is concerned that the reputation of his current business will be affected by the fact that he has been the director of company that was placed in liquidation. He notes that when he tenders for government work and other work with large companies, he is required to make a declaration as to credit-worthiness, which includes a declaration as to whether he has been involved in a company that has gone into liquidation. Thus, the resurrection and subsequent liquidation of JC may have an adverse effect on his current business.
Finally, Beadman submitted that, even if the registration of JC was reinstated, it would not be appropriate to wind it up on the just and equitable ground. While recognizing the breadth of the discretion in this ground, Ms MacKenzie submitted that it was not appropriate to use this ground, when there was no argument or difference of opinion between Beadman and McQuinn as to the management and winding up of the company. To the contrary, they were in complete agreement as to how the company should be dealt with, despite the agreed position changing between the time that the Shareholders Agreement was signed, and when the company was finally deregistered. Thus, even if the company was reinstated, there is no work for a liquidator to do; there are no irreconcilable differences, and no deadlock between them. In fact, a remedy as to the fate of JC was reached and achieved at the time of deregistration.
Finally, Ms MacKenzie noted that the proposed litigation against the interveners was unfunded, and submitted that the possibility of a successful claim being brought, where there was no basis for the funding of a costs order in the event of the claim’s being unsuccessful, was insufficient reason to reinstate and order winding up of JC.
Issues arising in the course of the trustee’s reply
In the course of his reply, Mr Adams for the trustee sought to raise a number of issues, which I disallowed on the basis that they were not properly raised in reply. The first issue related to the interveners’ submission that any action against them was statute barred. I ruled that this was a matter that the trustee should have ventilated in his primary submissions.
The other issue raised was the transfer of Beadman’s share to McQuinn. The trustee in the course of his reply sought to substitute an order that all of the shares in JC should be transferred to McQuinn, that is, the 450 owned by 101(NT), the 450 owned by NTRDS and the one owned by Beadman. I refused this oral application on two grounds. The first was that the order seeking the transfer of Beadman’s sharing had specifically not been pressed, as a result of which Ms MacKenzie did not make submissions on this point. The second was that neither NTRDS nor 101(NT) was before the Court, and I was not prepared to make orders affecting their interests in their absence and with no notice to them.

One further issue was raised in reply that warrants mention. Mr Adams put to me that McQuinn had been aggrieved by the issue of the shares in JC; thus JC needed to be reinstated so as to address this issue. I asked Mr Adams if the issue of shares in JC was an injury to JC, or to its shareholders; if the latter, then reinstatement of JC was not required for the trustee to seek a remedy on this basis. Mr Hoffmann referred me to the case of Pilmer v The Duke Group Ltd (In Liquidation)[7] on this point.
[7] [2001] HCA 31.
The facts
It is important to note that there is a real difference between the version of events given by McQuinn in this matter as to the deregistration of JC, as compared to that of Beadman. Perhaps of more concern, however, are the differences between the version given by McQuinn in this matter, and in the Northern Territory affidavit.
In this matter, McQuinn says:
·He and Beadman agreed to end their business relationship, on the basis that McQuinn would continue to carry on business on his own account through JC. To facilitate this, McQuinn would purchase Beadman’s share in JC for $25,000. They signed an agreement to this effect on 30 September 2012.
·The interveners “were engaged to act pursuant to a retainer with JCEE.”[8] McQuinn instructed them to arrange the transfer of Beadman’s share and his resignation as a director, once the sum of $25,000 had been paid.
·On 21 May 2013, McQuinn paid Beadman $25,000. However, the interveners did not effect the transfer of Beadman’s share or his resignation as a director.
·In July 2012, the interveners, on the instructions of Blackadder arranged the registration of NTRDS, with Blackadder as a 50% shareholder and director. Thus was absent McQuinn’s consent.
·In 2013, the interveners issued 900 shares in JC to NTRDS and 101(NT), and then paid dividends to NTRDS and 101(NT) in accordance with their share holdings. This was without McQuinn’s consent.
·McQuinn was not consulted or advised on the deregistration of JC, and Beadman had no authority to sign documents on behalf of JC because he had resigned as its director, despite still appearing on the ASIC register.
·McQuinn says he did not change his mind about using JC to run his new business; NTRDS was registered on the instructions of Blackadder alone.
·McQuinn did not sign any agreement to wind up JC. He made no agreement with Beadman after the agreement signed on 30 September 2012.
[8] FDN 18 at [9].
In the Northern Territory affidavit, McQuinn says:
·It was agreed between himself and Beadman that JC would cease trading on 14 September 2012.[9]
·He approached Blackadder as he needed money to fund his new business. Blackadder told McQuinn that “he would not provide financial support unless the business was carried on by a company other than JCEE and he was a shareholder”.[10]
·It was agreed between McQuinn and Blackadder that the new company, NTRDS, would trade using the plant, equipment, stock, goodwill and cash that McQuinn would bring from JC.[11]
“NTRDS Pty Ltd was incorporated on 13 July 2012 with an issued share capital of 100 $1 shares and the plaintiff being issued with 50% of the shares ad myself being issued with the other 50% of the shares…
I cannot remember when NTRDS started trading but it was about 1 September 2012 NTRDS commenced trading as Roller Door Services NT. NTRDS carried on the same business as JCEE of providing roller door services in and round Darwin using the same premises, the same plant and equipment and the same stock and the same employees as JCEE had been using the day before.
The plant and equipment I contributed to the company is listed in a shareholders agreement which Mr Beadman and I signed on 30 September 2012…
The value of the plant and equipment I contributed is noted by Mr Coulter in his note of 13 June 2013 as being $76,410…
The value of the goodwill I contributed to the company is noted by Mr Coulter in his note of 13 June 2013 as being $25,000. The company paid Mr Beadman $25,000 for his share of the goodwill in JCEE on 21 May 2013.
The cash money I brought from JCEE to NTRDS is the $109,699 which is noted as a dividend paid by JCEE to NTRDS in the NTRDS Profit and Loss statement for the year ended June 2013…”[12]
[9] Northern Territory affidavit at [7].
[10] Northern Territory affidavit at [10].
[11] Northern Territory affidavit at [12].
[12] Northern Territory affidavit at [15] – [20].
McQuinn annexes to the Northern Territory affidavit a copy of the Shareholders Agreement, to which he has attached an email dated 9 December 2012, from [email protected], to [email protected]. McQuinn says that this email sets out the division of JC’s property between himself and Beadman. The email consists of a list of assets. Beside the list of assets are four columns, the first headed “Estimated Dollar Figure”, the second headed Criag (sic) 101NT”, and the third headed “Justin NTRDS”. The fourth column has not printed in full as it is cut off by the edge of the page. This email is also exhibited to Beadman’s second affidavit, FDN 20, at CJB -3. Beadman says that the email address, [email protected] was operated by McQuinn at that time, and that the email was to him ie Beadman. Beadman says that this email sets out the division of plant and equipment as agreed between himself and McQuinn. It appears that they are in agreement on this point.
The difference between the two affidavits of McQuinn could not be more marked. The key points of his affidavit in this matter, that is, that he always intended to continue to use JC as the vehicle for his business, he had no intention to deregister JC, he was not involved in the registration of NTRDS, and he did not consent to the payment of the dividend from JC to NTRDS, are clearly refuted by his sworn evidence in the Northern Territory affidavit. It is also telling, in my view, that in the Northern Territory affidavit, which was filed in an action commenced by Blackadder against McQuinn and NTRDS, McQuinn does not raise any of his allegations that the registration of NTRDS, the issue of 50% of its shares to Blackadder, and the transfer of the assets of JC to NTRDS, all happened without his consent on the instructions of Blackadder.
There is limited contemporaneous evidence on which I may base any factual findings in this matter. The email of 9 December 2012, from [email protected], to [email protected] is one such piece of evidence. Both Beadman and McQuinn agree that it sets out the division of JC’s assets between them. I am prepared to infer that the references to 101NT and NTRDS, beside the names of Beadman and McQuinn indicate that the assets were to be transferred to their corporate vehicles.
A number of further pieces of contemporaneous evidence are exhibited to FDN 20. The first of these is an email from the interveners to Beadman and McQuinn dated 23 January 2013.[13] In this email, the interveners provide information about the financial position of JC and the dividends to be paid to each of them. While the email does not specifically refer to the deregistration of the company, it talks about final dividend. The attached financial statements also provide the projected final dividend to be paid. It is arguable that the reference to “final dividend” infers that the company was to be deregistered.
[13] FDN 20 at CJB-4.
Also exhibited to FDN 20 are the minutes of a meeting of directors of JC, dated 13 June 2013. The resolution made at that meeting reads:
It was resolved that the company be wound up voluntarily by all members on [date omitted][14]
[14] FDN 20 at CJB-11.
These minutes appear to have been signed by both McQuinn and Beadman.
Beadman has also exhibited a copy of notes which he says were made by the intervener, Coulter, at a meeting with him on 1 May 2013, at which McQuinn was also present. He says that these notes record the discussions held at this meeting, including the issue of shares in JC to 101(NT) and NTRDS to facilitate the distribution of JC’s assets. He says that he took a photo of these notes when inspecting the files of the interveners in late May 2019. I do not place any great weight on these notes. While they refer to the companies, a dividend, and the number “450” next to each of the company names, in the absence of evidence from Coulter as to their interpretation, I am not prepared to make any inference or draw any conclusion about their meaning.
It is not the purpose of this hearing to make any factual findings as to the events that occurred between September 2012, when the Shareholders Agreement was signed, and the date of deregistration of JC. These findings of fact are to be made by the Federal Circuit Court. I am prepared to say, however, that I am concerned that McQuinn has given two markedly different accounts of those events, and that the account that he gave in the Northern Territory affidavit accords to a very large extent with that provided by Beadman in this matter. The little contemporaneous evidence that I have before me also supports this version of events. I am also concerned that, in the Northern Territory affidavit, McQuinn has not alluded to the fact that he says that Blackadder gave the instructions to the interveners leading to the incorporation of NTRDS, and that those instructions were given without his consent.
I am prepared to find that McQuinn has given two conflicting version of the events which are the basis of his claim against the interveners, and that both of those versions are on oath. I am also prepared to find that the version that McQuinn gave in the Northern Territory affidavit accords to a large extent with Beadman’s version of events. I am prepared to accept Beadman’s evidence that McQuinn has not previously advised Beadman that he considered that the issue of shares in JC to NTRDS and 101(NT), the payment of dividends to those companies and the deregistration of JC should not have happened.
The authorities
There was agreement between the parties as to the principles to be applied. Each agreed that it was incumbent on the trustee to establish that he was a person aggrieved, and that it was just to reinstate the registration of JC.
In Casali v Crisp,[15] Yates CJ, in the New South Wales Supreme Court considered the notion of aggrievement. He said:
[27] The mere fact that a person is a shareholder or a director of a deregistered company is insufficient to establish that that person is a person aggrieved within s601AH; see eg Re Waterbury Nominees Pty Ltd (1986) 11 ACLR 348. As Olney J said in Re Waldcourt Investment Co Pty Ltd (1986) 11 ACLR 7, 12:
"I do not think that either a shareholder or a director as such must necessarily be aggrieved by the cancellation of the registration of a company. An applicant must, in my opinion, show that his interests have been or are likely to be prejudicially affected by the cancellation of registration."
That prejudice might be shown by the shareholder showing that he or she was also a creditor of the company or that there might well be a surplus of assets if the company were reinstated and certain events occurred.[16]
[15] [2001] NSWSC 860.
[16] [2001] NSWSC 860 at [27].
In finding that the plaintiff in that case was not a person aggrieved, Yates CJ relied on his findings that the plaintiff did not protest at the time of the deregistration, and that “there is only a speculative chance of him obtaining any money if [the company] is reinstated.”[17]
[17] [2001] NSW 860 at [44].
In Re Trim Perfect Australia Pty Ltd,[18] the New South Wales Supreme Court found that a bank was “a person aggrieved” because it was a creditor of the company at the time that it was deregistered.[19]
[18] [2005] NSWSC 972.
[19] [2005] NSWSC 972 at [20].
In Australian Competition and Consumer Commission v Australian Securities and Investments Commission, in the matter of SensaSlim Australia Pty Ltd (In Liquidation),[20] the company in question had been deregistered in error. The Court had previously found that the company had contravened provisions of the Trade Practices Act 1974 (Cth) and the Australian Consumer Law. When the applicant applied for pecuniary penalties against the company, it was found to be deregistered. In those circumstances, Yates J found that the applicant was a person aggrieved.
[20] [2015] FCA 258.
In Bell Group Ltd v Australian Securities and Investments Commission,[21] McKerracher J in the Federal Court examined at some length the question aggrievement. He said:
[21] [2018] FCA 884.
[47] The expression ‘person aggrieved’ in s 601AH should not be construed narrowly: Yeo v Australian Securities and Investments Commission [2017] FCA 1480 at [14]–[16] per Gleeson J and the authorities therein cited). For a person to be aggrieved for the purposes of s 601AH(2)(a)(i), an applicant for reinstatement must be able to show that the deregistration deprived the applicant of something, or injured or damaged the applicant in a legal sense, or if the applicant became entitled, in a legal sense, to regard the deregistration as a cause of dissatisfaction: Danich at [32] per Barrett J.
[48] In Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688; 34 ACSR 232; [2000] NSWSC 316, Austin J at [24]–[26] said:
Is the ACCC “a person aggrieved …”?
[24] The ACCC contends that it fits this description because its legal rights have been affected and because it has a genuine grievance that the dissolution has affected its interests: Re Proserpine Pty Ltd and the Companies Act [1980] 1 NSWLR 745; (1980) 5 ACLR 603. It submits that it has a public duty to improve competition and efficiency in markets, and to foster a fair and competitive operating environment for businesses.
[25] Amongst the strategies which it uses to achieve this objective is undertaking litigation in cases where there are serious breaches of the Act and significant public detriment, as well as the potential for litigation to have a worthwhile educative or deterrent effect. The Commission considers that the conduct which it alleges in this case is a most serious example of price-fixing and market sharing, contrary to the law; and that it has a duty in the public interest to reinstate and sue the perpetrator of some of that conduct.
[26] The officers have informed the court that they accept that the ACCC has standing to apply. I find that for the reasons which it has advanced, the ACCC is a person aggrieved for the purposes of s 601AH(2).
[49] There is no temporal restriction in the description ‘person aggrieved’ as long as there is a causal link between the grievance and the deregistration. A person can become aggrieved after the time of deregistration: see the discussion by Gillard J in Pilarinos v Australian Securities and Investments Commission [2006] VSC 301 (Pilarinos) at [49]. In Pilarinos, where his Honour said:
The question arises whether a person can be aggrieved as a result of events which occur after the deregistration. In my opinion, there is nothing in the legislation which requires that the applicant must have been aggrieved at the time of the deregistration. Indeed, the history of the legislation, and in particular, the widening of the category of persons who could be aggrieved and, further, the removal of any time limit, supports that view. The actual words of the sub-section themselves do not restrict the application to the grievance being in existence at the date of deregistration. The sub-section requires a causal link between the grievance and the deregistration, but no temporal restriction.
[50] There needs, however, to be some connection other than simply being a shareholder or a director of a company that is deregistered in order to be a person aggrieved. An applicant must demonstrate that his or her interests have been, or are likely to be, prejudicially affected by the deregistration of the company. A mere dissatisfaction with an event will not render someone a ‘person aggrieved’; they must be a person who has been damaged or injured in a legal sense: Callegher v Australian Securities and Investments Commission (2007) 218 FCR 81; 239 ALR 749; 98 ALD 1; [2007] FCA 482 (Callegher) at [50] per Lander J and the authorities therein cited). For example, a shareholder demonstrating that he or she is a creditor of the company, or that there will be a surplus of assets and rights to dividends if the company were to be reinstated: Vukasin v Australian Securities and Investments Commission [2007] NSWSC 1341.
[51] Where deregistration extinguishes a legal right of some value, or potential value, or the applicant otherwise has an interest of a ‘proprietary or pecuniary nature’, the applicant may be aggrieved. In Arnold World Trading Pty Ltd v ACN 133 427 335 Pty Ltd (2010) 80 ACSR 670; [2010] NSWSC 1369 (Arnold World), Barrett J said at [43]:
The question whether an applicant under s 601AH(2) is “a person aggrieved by the deregistration” is considered by reference to legal rights and legal interests. It must be seen that the applicant has a genuine grievance that the dissolution of the company affected his or her interests because, for example, a right of some value or potential value has gone out of existence: Australian Competition and Consumer Commission v Australian Securities and Investments Commission (2000) 174 ALR 688; 34 ACSR 232; [2000] NSWSC 316 (at [24]–[26]) […]. Under analogous English legislation, the applicant was expected to have “an interest of a proprietary or pecuniary nature in resuscitating the company”: Re Wood & Martin (Bricklaying Contractors) Ltd [1971] 1 All ER 732; [1971] 1 WLR 293; and see Re G A & R J Elliott Pty Ltd (formerly a company); Ex parte Mitcham (1978) 3 ACLR 523.[22]
[22] [2018] FCA 884 at [47] – [51].
In this matter, the deregistered companies were part of the Bell Group. Following the settlement of proceedings involving those and other companies in the group, those companies were entitled to receive large sums of money. At the time of their deregistration, the deregistered companies had little or no assets. Yates J found that the applicants were persons aggrieved because, as shareholders of the deregistered companies, they were able to demonstrate that there was a real prospect that they would receive a distribution from the companies to be reinstated. Thus, they had a “interest of a ‘proprietary or pecuniary nature’ in resuscitating the companies”.[23]
[23] [2018] FCA 884 at [60].
These authorities establish that, to be a person aggrieved, the applicant must show that his or her legal rights have been affected, to his or her detriment, by the deregistration. There must be a causal link between the loss or injury suffered by the applicant and the deregistration of the company. Simply being a shareholder or director of the company is not sufficient to establish an applicant’s status as a person aggrieved. However, a shareholder with a prospect of receiving a pecuniary or proprietary interest on the reinstatement of the company may amount to a person aggrieved.
On the question of the interests of justice, in Casali v Crisp[24] the Court found that it would not be just to allow the reinstatement of the company in question. Young CJ said:
[31] The authorities show that, normally, it is not just to reinstate an insolvent company so that issues can be litigated which were not clearly signalled at the time of deregistration a fortiori when such reinstatement would increase its debt; see eg Payne v Wizard Industries Pty Ltd (1997) 24 ACSR 277, 284-285; cf Denis v McMahon (1989) 7 ACLC 283.[25]
[24] [2001] NSWSC 860.
[25] [2001] NSWSC 860 at [31].
He concluded:
[46] Even if I was wrong on the matter of a person aggrieved, on the principles I have discussed, it would not be just to order reinstatement. Reinstatement would permit an insolvent company to mount speculative litigation against the defendants over an event many years old with little prospect of financial reward to the plaintiff at the end of the day.[26]
[26] [2001] NSWSC 860 at [46].

In SensaSlim, the Court considered that it was just to reinstate the company despite its insolvency. It found that there was a public interest involved seeking a pecuniary penalty against a company which had breached the Trade Practices Act and the Australian Consumer Law. It found that the question of penalty should be determined by the court dealing with the application for penalty, taking into account the insolvency of the company at that time.
In the Bell Group case, Yates J said:
[72] The question of whether it is ‘just’ to make these orders is not constrained by any particular legislative parameters but, as noted in Wedgewood Hallam Pty Ltd v Australian Securities and Investments Commission, Re Combined Building Consultants Pty Ltd [2011] FCA 439 per Gordon J (at [5] and the authorities therein followed by her Honour), regard should be had to:
(a) the circumstances in which the companies came to be deregistered;
(b) the future activities of the companies, if an order for reinstatement is made; and
(c) whether any particular person is likely to be prejudiced by the reinstatement.
[73] A further consideration is also raised within the case law being that of public policy: see, for example, Re ERB International Pty Ltd (deregistered) (2014) 98 ACSR 124 per Brereton J (at [5] and the authorities therein cited).
[74] These are by no means the only considerations and they may well overlap one another. They should not be approached as though they are statutory prescriptions.[27]
[27] [2001] FCA 884 at [72] – [74].
He also noted that a court should be readier to reinstate a company that has not been through a winding up process.[28]
Consideration
[28] [2018] FCA 884 at [76].
Is the trustee a person aggrieved?
On balance, I have reached the conclusion that the trustee is a not a person aggrieved. I have not been able to identify the legal rights that McQuinn says have been affected by the deregistration of JC.
The trustee has failed to convince me that any loss suffered as a result of the actions of the interveners is anything other than loss personal to McQuinn. The Northern Territory affidavit makes it clear that McQuinn was aware that the assets of JC were to be transferred from JC to other entities (whether those entities were Beadman and McQuinn personally, or companies operated by them), and that he intended the business of JC was to be carried on through an entity other than JC. Thus, it was McQuinn’s intention that, once his new business was set up, the assets assigned to him when he and Beadman parted company were to be used in or by NTRDS. Thus, the failure to transfer those assets in accordance with his instructions or to leave them in JC, is an injury to him rather than to JC. The intention was always that JC’s assets were to be transferred away from JC; as to where, goes to McQuinn’s loss.
The actions of the interveners in the registration of NTRDS and the issue of its shares is also, in my view, a loss personal to McQuinn.
As to the issue of shares in JC, I am also of the view that that is a loss personal to McQuinn, rather than to JC. In Duke Group, the plurality of the High Court said:
[18] It is of the first importance to keep at the forefront of consideration that the claim which was made is a claim by the company, not a claim by or on behalf of its shareholders. It may be readily accepted that directors and other officers of a company must act in the interests of the company as a whole and that this will usually require those persons to have close regard to how their actions will affect shareholders. It may also be readily accepted that shareholders, as a group, can be said to own the company. But the company is a separate legal entity and the question raised in this matter is what damage (if any) did it suffer by issuing new shares. The question is not whether shareholders in Kia Ora were adversely affected.
[19] Next, it is important to understand the nature of a share in the capital of a company. Once issued, a share comprises "a collection of rights and obligations relating to an interest in a company of an economic and proprietary character, but not constituting a debt". It is, according to the classic description of Farwell J in Borland's Trustee v Steel Brothers & Co Ltd:
"the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with [the relevant corporations legislation]."
The reference to measuring the interest of a shareholder in a company by a sum of money is no longer apt under present corporations law in Australia. The Company Law Review Act 1998 (Cth) abolished the concept of par value and did away with the concept of authorised capital. It seems that this was done in the belief that par value was merely an "arbitrary monetary denomination" which was potentially "misleading to an unsophisticated investor". The consequences of these and related changes to the law will, no doubt, depend upon the particular statutory provisions that have been made. They can be put to one side for the purposes of this case.
[20] Before the shares in question were issued, they did not exist as an item of property whether of the company or anyone else. It was the act of issuing the shares and agreeing to allot them which created the relevant item of property - property which was never owned by the company.[29]
[29] [2001] HCA 31 at [18] – [20].
After examining the history of the law relating to the issue and allotment of shares, and considering in detail the facts of the case, the Court said:
[64] The answer to that inquiry must be that Kia Ora outlaid cash and whatever may have been the administrative costs of issuing the shares. If a claim had been made, it may well be that some allowance would be made for the consequential effect on its capacity to raise other equity or debt finance. Otherwise, however, it gave up, or lost nothing by the issue of its shares.
[65] It follows that in our opinion the Full Court was wrong to allow the sum which it did for the issue and allotment of Kia Ora shares in assessing the damages to be allowed for breach of contract or negligence.[30]
[30] [2001] HCA 31 at [64] – [65].
It is clear, therefore, that any loss caused through the issue of the shares in JC is a loss to McQuinn (and Beadman), but not to JC.
Is it just that JC’s registration be reinstated?
Even if I am wrong on the question of whether the trustee is a person aggrieved, I do not consider that it would be just to reinstate JC.
McQuinn owns only one share of the 902 shares of JC. Even if JC was successful in its litigation against the interveners, any return to the trustee would be minimal. It is hard to imagine that there would be any significant return to McQuinn’s creditors, once the cost of the litigation was taken into account. The cost of the litigation would not justify the return of only 1/902 of any damages recovered by the trustee.
I note that the proposed litigation is not supported by Beadman or through him, NT(101). I have no evidence before me that the liquidator of NTRDS, the holder of 49.89% of the shares in JC, is even aware of this application. I would have been more inclined to find that it was just to reinstate JC, if all of its shareholders supported the proposed litigation against the interveners.
I note, too, the words of Young CJ, in Casali, where he said:
[38] Apart from the problems with the proposed action, there is not the evidence to show that, even if it were successful, the action would produce money for the plaintiff.[31]
[31] [2001] NSWSC 860 at [38].
I have found it difficult to form any view on the prospects of success of the proposed litigation. This is because McQuinn has a given two very different versions of the events leading to the deregistration of JC. Clearly this raises issues of his credibility which the trustee will need to address. On the hearing of an application such as this, these are questions that I cannot deal with.
Nonetheless, I am prepared to infer two facts. The first of these is that McQuinn must have known that his business was being conducted through NTRDS, as he would have been required to sign company accounts, attend board meetings, and approve tax returns and the like. Secondly, he has annexed to his Northern Territory affidavit the certificate of registration of a vehicle used by the business; it is registered in the name of NTRDS. Thirdly, he annexes to that affidavit his personal tax return for the financial year ended 30 June 2014. In this document, his employer is recorded as NTRDS. All of this begs the question, what did he think had happened to JC? In FDN 18, he says:
I have been shown a copy of Beadman’s affidavit affirmed on 28 May 2019. At paragraph 12 of his affidavit he states I changed my mind and started a new company NTRDS Pty Ltd and that I used JCEE logo without having paid him. I disagree with this and say that NTRDS was registered following unilateral instructions from Blackadder to Merit and Coulter. I always intended to retain JCEE and informed Merit and Coulter of my intention on multiple occasions.[32]
[32] FDN 18 at [21].
In light of the facts set out above, this statement is difficult to understand, let alone accept. If NTRDS had been incorporated against his wishes, and had taken over the business of JC without McQuinn’s approval, why did it take him until 2018 after he had been made bankrupt, to do something about it?
The second fact that I am prepared to infer is that McQuinn did not raise any questions about the deregistration of JC prior to the commencement of this application. I accept Beadman’s evidence that no such question has been raised with him in the past. McQuinn has not put to me that he has raised these questions with the interveners or any other accountant or legal advisor prior to the filing of this proceeding. They do not appear to have been raised in the Northern Territory proceedings, where it would have been natural to raise them, given that McQuinn says that the losses he suffered as a result of the issue of shares in JC and its deregistration go hand in hand with the losses that he suffered as a result of the improper and unauthorised instructions of Blackadder to the interveners.
In my view, these facts are hurdles that McQuinn would have to overcome to in any litigation brought by JC.
In relation to the circumstances in which JC was deregistered, I note the resolution signed by McQuinn, resolving to deregister JC. This has not been explained by McQuinn.
I accept that Beadman would suffer prejudice if JC was reinstated and placed into liquidation. I accept that there is a risk that he or his company would suffer reputational loss if associated with a company that had been placed into liquidation.
I take into account that JC ceased trading in September 2012 and was deregistered in 13 February 2014. No action has been taken in relation to its reinstatement until now. I do not consider that it would be just to reinstate a company that has not traded for 7 years and was deregistered more than 5 years ago, in circumstances where the applicant (the trustee) would receive very little return from the litigation. I note again the words of Young CJ:
[46] Even if I was wrong on the matter of a person aggrieved, on the principles I have discussed, it would not be just to order reinstatement. Reinstatement would permit an insolvent company to mount speculative litigation against the defendants over an event many years old with little prospect of financial reward to the plaintiff at the end of the day.[33]
[33] [2001] NSWSC 860 at [46].
Save that JC is not insolvent, this comment applies equally to JC.
I am concerned that the proposed litigation is unfunded. I would be more inclined to find that reinstatement was just, if there was funding for the litigation.
I address only briefly the question of the proposed litigation against the interveners being time barred. It is generally accepted that the Court has power pursuant to s 601AH(3) of the Act, to make orders to the effect that the period of deregistration does not count for the purpose of a limitation period.[34] However, in In the Matter of Auzhair Supplies Pty Ltd (In Liq),[35] Brereton J said:
[21] However, in my view the power to make such an order could arise only — as it did in Del Borrello — in respect of causes of action against the company, as distinct from causes of action by the company against others. I cannot see that there is a sufficient nexus between the deregistration and reinstatement of the company Auzhair Supplies and a cause of action against its directors that an order that time not run in respect of a cause of action against the directors while the company was deregistered could be supported as ancillary to its reinstatement. The alternative view would expose not only former officers, but also complete strangers, to the resurrection of apparently time-barred suits by a company following reinstatement, potentially very many years after those causes of action had prima facie become barred. This far-reaching consequence is not to be attributed to an ancillary provision such as s 601AH(2).[36]
[34] See for example In the Matter of Auzhair Supplies Pty Ltd (In Liq) [2013] NSWSC 1.
[35] [2013] NSWSC 1.
[36] [2013] NSWSC 1 at [21].
This suggests that the question of an extension of time would have to be addressed in the Circuit Court proceedings. This is an added hurdle that would have to overcome by JC should it be reinstated.
The application for the reinstatement of the registration of JC is dismissed.
I will hear the parties on the question of costs.