Mullins v Directline Finance Pty Ltd
[2020] WASC 185
•29 MAY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: MULLINS -v- DIRECTLINE FINANCE PTY LTD [2020] WASC 185
CORAM: VAUGHAN J
HEARD: 21 APRIL 2020
DELIVERED : 21 APRIL 2020
PUBLISHED : 29 MAY 2020
FILE NO/S: COR 262 of 2019
BETWEEN: MARTIN DESMOND MULLINS
Plaintiff
AND
DIRECTLINE FINANCE PTY LTD
First Defendant
J B COLLINS PTY LTD as trustee for the BAREI NUMBER 2 SUPER FUND
Second Defendant
BREJON NOMINEES PTY LTD as trustee for THE BREJON FAMILY TRUST
Third Defendant
G.N.B. INVESTMENTS PTY LTD as trustee for THE HOLYOAK INVESTMENT FUND
Fourth Defendant
GEE BEE HOLDINGS PTY LTD as trustee for THE BLUE WATER TRUST
Fifth Defendant
BRUCE GORDON ROBERTS as trustee for BLUE WATER TRUST
Sixth Defendant
GLORIA DAWN ROBERTS as trustee for BLUE WATER TRUST
Seventh Defendant
BA & VJ MOORE PTY LTD as trustee for THE MOORE FAMILY SUPER FUND
Eighth Defendant
NORMAN JOHN BAKER as trustee for STEEL FABRICATION SUPER FUND
Ninth Defendant
SUSAN BAKER as trustee for STEEL FABRICATION SUPERFUND
Tenth Defendant
Catchwords:
Corporations - Application for coercive order compelling defendants to lodge returns pursuant to s 423(1) and s 434(1) of the Corporations Act 2001 (Cth) - Defendants required to lodge Forms 524 and 5602 in accordance with s 432 and s 422A of the Corporations Act 2001 (Cth) - Whether further adjournment in the interests of justice - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 422A, s 432, s 423(1), s 434(1)
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | In person |
| First Defendant | : | C S Williams |
| Second Defendant | : | C S Williams |
| Third Defendant | : | C S Williams |
| Fourth Defendant | : | C S Williams |
| Fifth Defendant | : | C S Williams |
| Sixth Defendant | : | C S Williams |
| Seventh Defendant | : | C S Williams |
| Eighth Defendant | : | No appearance |
| Ninth Defendant | : | C S Williams |
| Tenth Defendant | : | C S Williams |
Solicitors:
| Plaintiff | : | In person |
| First Defendant | : | Solomon Brothers |
| Second Defendant | : | Solomon Brothers |
| Third Defendant | : | Solomon Brothers |
| Fourth Defendant | : | Solomon Brothers |
| Fifth Defendant | : | Solomon Brothers |
| Sixth Defendant | : | Solomon Brothers |
| Seventh Defendant | : | Solomon Brothers |
| Eighth Defendant | : | No appearance |
| Ninth Defendant | : | Solomon Brothers |
| Tenth Defendant | : | Solomon Brothers |
Case(s) referred to in decision(s):
Nil
VAUGHAN J:
(These reasons were delivered orally at the conclusion of the hearing. They have been edited to correct matters of grammar and infelicity of expression. Authorities have been footnoted rather than appearing in the body of the reasons.)
The plaintiff, Mr Mullins, is the sole director, secretary and shareholder of Settlers House Pty Ltd (in liquidation) (Company). Mr Mullins makes application by originating process dated 23 December 2019 for orders for the defendants to file certain returns in compliance with the Corporations Act 2001 (Cth). The application is supported by Mr Mullins' affidavit sworn 23 December 2019.
The defendants are the holders of a fixed and floating charge dated 11 October 2011 over the whole of the assets and undertaking of the Company. On 12 July 2012 they appointed themselves as controllers and entered into possession of the assets and undertaking of the Company. The defendants remain the controllers of the assets and undertaking of the Company.
Mr Mullins brings these proceedings to compel the defendants as controllers in possession of the assets and undertaking of the Company to file at the Australian Securities and Investments Commission (ASIC) various returns which are required to be filed in an approved form, but which have not yet been filed.
It is apparent from the papers before me that:
1.The defendants entered into possession as controllers on 12 July 2012.
2.A Form 507 'Report as to Affairs From Managing Controller Other Than Receiver/Manager' was lodged on 14 March 2013.
3.No returns have been lodged since 14 March 2013.
4.Mr Mullins has sought back-lodgement from 12 July 2013.
There has been a recent change in the statutory requirements as to the lodgement of returns by controllers. Section 422A of the Corporations Act, as inserted by sch 2 to the Insolvency Law Reform Act 2016 (Cth), applies in relation to the financial year starting on 1 July 2017 and later financial years.[1] However, s 432 - as it was before the amendments - applies in relation to periods starting before 1 July 2017 and ending after that day as if the period ends on 30 June 2017.[2] The former s 432, which applies to the period to 30 June 2017, requires lodgement of accounts for each six month period after the day on which a controller was appointed.[3] This was to be in accordance with ASIC Form 524. However, since 1 July 2017 the relevant provision is s 422A. This requires that an annual return be lodged within three months after each control return year.[4] The control return year is a period which turns on the anniversary of the appointment.[5] The relevant form is an ASIC Form 5602.
[1] Corporations Act s 1623(1).
[2] Corporations Act s 1623(2), (3).
[3] Corporations Act s 432(1)(a)(ii).
[4] Corporations Act s 422A(4)(b).
[5] Corporations Act s 422A(5).
Based on the foregoing, the requirement in relation to the Company and its circumstances is for lodgement of:
1.ASIC Forms 524 for the six month periods ending 12 July 2013, 12 January 2014, 12 July 2014, 12 January 2015, 12 July 2015, 12 January 2016, 12 July 2016, 12 January 2017 and 12 July 2017.
2.ASIC Forms 5602 for the 12 month periods ending 12 July 2018 and 12 July 2019.
Prior to today's hearing, the substance of the above analysis as to the statutory requirements was provided to the parties for their consideration. The parties were asked whether they agreed with the analysis. Mr Mullins replied in the affirmative. On behalf of the first to seventh, ninth and tenth defendants, their solicitors stated as follows in a 20 April 2020 email:
We agree with [the] assessment of the requirements for the lodgement of annual returns, the requisite forms and the time periods which each form should address. Accordingly, our clients will endeavour to lodge the returns in the correct form as soon as practicable.
By way of further background, I note that the relevant defendants, by their solicitors, appeared on 26 March 2020 when the proceedings were first listed for hearing. They sought, and were granted, an adjournment to today. For the purpose of seeking the adjournment, the relevant defendants filed submissions dated 23 March 2020 in which the following was said on their behalf:
2.The Relevant [defendants] accept that, as mortgagees in possession of lots of [the Company], they fall within the definition of 'controllers' in s 9 of the Act; and are, therefore, controllers for the purposes of s 423 of the Act.
3.The failure to lodge the relevant controllers' annual returns pursuant to s 422A of the Act having been identified, the Relevant [defendants] are currently in the process of causing those returns to be lodged.
4.For this to occur, the Relevant [defendants] are currently working with their accountant to first lodge the requisite Form 505, which (upon processing by ASIC) should then allow their accountant to lodge the controllers' annual returns, by way of Form 5602.
5.The Relevant [defendants] propose that the proceedings be adjourned for a period of four weeks - by which time they anticipate that the returns will have been lodged, and the substance of the proceedings therefore resolved.
Those defendants have caused certain returns to be sent to the ASIC for processing. The returns are copied as attachments to the unsworn affidavit of Angelo Polymeneas as attachment 'AP-1'. (Although the affidavit is unsworn it is before me and there was no objection to it being referred to in argument. I received the affidavit as Exhibit A subject to an undertaking that it will be sworn and filed in due course). It is, however, accepted - as is evidenced by the relevant defendants' solicitor's email that I have already mentioned, that the returns as sought to be processed are not in the correct form. Among other things, they are not for the correct time periods.
The position has now been reached where:
1.The defendants, or at least all of the defendants other than the eighth defendant, accept an obligation as controller to lodge returns in accordance with the Corporations Act.
2.Those defendants accept that they have failed to do so; but intend to do so.
Mr Mullins seeks that I now make a coercive order providing in substance for the defendants to meet their obligations. Mr Williams, counsel for the defendants other than the eighth defendant, says that such an order is unnecessary as a matter of discretion. That is because there is acceptance of the obligation and there is an intention that the lodgements will be done as soon as practicable in any event. Mr Williams accepts, however, that there is power to make the order sought by Mr Mullins. That concession is properly made. There is undoubtedly power under s 423(1) of the Corporations Act, which is the statutory provision relied on by Mr Mullins. There is also power under s 434(1) of the Corporations Act.
I am satisfied that it is appropriate to now make an order providing for the default in lodgement of returns to be rectified. The position is that:
1.The relevant defendants accept, having received competent legal advice, that as controllers they are in default of their obligations to lodge various returns as mandated by the Corporations Act.
2.The default has been ongoing since 2013.
3.On 26 March 2020 the relevant defendants were afforded an opportunity to lodge the returns without the necessity for a coercive order. There was an attempt to do so; however, the attempt was inadequate. Despite the obligations having been brought to their attention, the relevant defendants failed to comply with their obligations.
In my view, it is not in the interests of justice that the matter be further adjourned. The defendants have been given adequate opportunity to rectify their default without the making of a coercive order. It is appropriate now to make orders to ensure compliance in a timely way. I will, however, grant liberty to apply so that if the COVID-19 pandemic causes difficulties in effecting compliance the relevant defendants may approach the court to seek an appropriate extension of time.
Subject to hearing from the parties, I propose orders as follows:
1.By 4.00 pm on Thursday, 21 May 2020, the first to seventh and ninth and tenth defendants in their capacities as controllers of Settlers House Pty Ltd (in liquidation) (Company) lodge the following returns in relation to the Company in compliance with s 432 (as it stood prior to 1 July 2017) and s 422A of the Corporations Act 2001 (Cth), namely:
(a)ASIC Forms 524 for the six month periods ending 12 July 2013, 12 January 2014, 12 July 2014, 12 January 2015, 12 July 2015, 12 January 2016, 12 July 2016, 12 January 2017 and 12 July 2017; and
(b)ASIC Forms 5602 for the 12 month periods ending 12 July 2018 and 12 July 2019.
2.The first to seventh and ninth to tenth defendants have liberty to apply to extend the period in par 1 on 48 hours' notice.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
OE
Research Orderly to the Honourable Justice Vaughan29 MAY 2020
0
0
1