Re Brockweir Pty Ltd
[2012] VSC 103
•23 March 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
S CI 2011 3812
IN THE MATTER of Brockweir Pty Ltd
| MICKLYN PTY LTD (ACN 051 614 192) AND ORS (according to attached schedule) | Plaintiffs |
| v | |
| AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION | Defendant |
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JUDGE: | EFTHIM AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 March 2012 | |
DATE OF JUDGMENT: | 23 March 2012 | |
CASE MAY BE CITED AS: | Re Brockweir Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 103 | Revised 31 May 2012 |
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SECTION 601AH Corporations Act 2001 (Cth) – Registration of deregistered company regarding breach of trust/fiduciary duties – Intervenors in seeking leave to intervene argued that it was futile to reinstate trustee company and plaintiff was not aggrieved – Whether just to reinstate when purposes of litigating not clearly signalled at time of deregistration.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr CG Juebner | Schetzer Brock Appel |
| For the Defendant | Mr P Bick QC | F C Law |
HIS HONOUR:
The plaintiffs make application under s 601AH(2) of the Corporations Act for the reinstatement of registration of Brockweir Pty Ltd (deregistered) (“the Company”).
The plaintiffs rely upon a joint affidavit affirmed on 6 March 2012 in support of that application. Two former directors, Mr Michael Abeles and Boris Leiberman (“the intervenors”), have sought leave to oppose the application for reinstatement. They rely on the affidavit of Michael Abeles sworn 20 January 2012.
In Chalker v Clarke and ASIC and ors,[1] the court (Maxwell P, Dodds-Streeton JA and Osborn AJA) referred and cited with approval the observation of Whelan J at first instance who stated:
It is often not appropriate for prospective defendants to a proceeding proposed to be pursued after reinstatement of a deregistered company to be permitted to make submissions as to the merits of the proposed action on the reinstatement application. In some circumstances, it is appropriate to entertain such submissions. For example, where it can be demonstrated that reinstatement is futile as the proposed course of action is clearly statute barred.
[1][2008] VSCA 92.
The plaintiffs submit that an intervenor should only be given leave to be heard if the Court is first satisfied that the cause of action is hopeless such that the reinstatement is clearly futile or pointless.
Mr Bick QC, for the intervenors, informed the Court that he wished to satisfy the Court that the cause of action of the plaintiffs was futile and that he application should therefore be dismissed. If the intervenors are successful in demonstrating the application is hopeless then leave will automatically be given, and the Company will not be reinstated.
Background
The company was incorporated on 20 May 1988. All of the share capital in the company was held by a company known as JGL Investments Pty Ltd. The Company was deregistered on 16 May 2010 and the directors of the company at the time of its deregistration were Michael Abeles and Boris Leiberman. They are also the directors of JGL Investments Pty Ltd.
The plaintiffs are either natural persons or directors of body corporates who assert that they are aggrieved by the deregistration of the company.
Up until 10 April 2000, the Company was the sole registered proprietor of The Wales Corner Building, 227 Collins Street, Melbourne. Prior to 10 April 2000, the plaintiffs or their predecessors in title had entered into contracts of sale to purchase from the Company lots on an unregistered plan of subdivision relating to 227 Collins Street.
On 10 April 2000, a plan of subdivision was registered in respect of the land and Owners Corporation No. PS425082B (“the Owners Corporation”) was created pursuant to the provisions of the Subdivision Act 1988 (Vic).
On the date that the Owners Corporation was created, the Company was its sole member and the Owners Corporation held its first meeting. In that meeting the Company procured the Owners Corporation (as licensor) to enter into two licence agreements with the company (as licensee) in respect of part of the common property of the owners corporation. Each licence was for a fee of $1 per year for an indefinite term by which the Owners Corporation licensed to the Company parts of common property, the roof and the walls of the property.
On 20 March 2000 (three weeks before the licence agreement), the Company, as licensor, entered into a licence with Hutchinson Telecommunications in respect of roof common property for a fee of $25,000. On 10 April 2000 the company, as licensor, entered into a signage licence with Westpac as licensee for the use of the wall common property.
On registration of the Registered Plan, the Company gave notice to each of the plaintiffs or their predecessors, that the settlement was to occur in 14 days. Subsequently, the plaintiffs completed the obligations imposed upon them by the respective contracts of sale. They became registered proprietors of certain lots. They then became members of the Owners Corporation on the date of settlement of their respective contracts and owners as tenants in common and shares proportional to their lot entitlement in the common property of the Owners Corporation.
By Deed of Variation dated 22 August 2002 made between the Owners Corporation and Hutchison Telecommunications (Australia) Limited, the Owners Corporation consented to a licence dated 16 May 2002 between the Company and Telecom Hutchison 3G Pty Ltd. From at least 2003, the manager of the Owners Corporation included in body corporate certificates, provided to vendors of units in the subdivision for the provision of selling of those units, notice that the body corporate had granted the licences.
On 18 June 2009, the Owners Corporation convened a special general meeting and resolved that Schetzer Brott and Appel be appointed to brief counsel to provide advice regarding the licence in respect of the common property of the owners corporation.
On 17 February 2010, the Owners Corporation held its annual general meeting. Resolutions were not passed that proposed that the Owners Corporation resolve to institute proceedings against the company in respect of the licences and the Owners Corporation resolve to instruct Schetzer Brott and Appel to institute proceedings. The plaintiffs did not acquire all the lots in the subdivision.
The Company was the bare trustee for the Swanston Street Unit Trust. The Swanston Street Unit Trust was terminated in accordance with the deed constituting the trust in consequence of the restructure of the JGL Group in 2009/2010. The unit holder under the trust is PWC Properties Pty Ltd and it has been under external administration since 2009. The Company prior to its dissolution sold its interest in the licences the subject of proceeding to Collins Street Pty Ltd.
There were 104 lots and the plaintiffs collectively owned 22 lots. The plaintiffs, the owners of these lots, have filed a statement of claim in this Court on 3 September 2010 which has not been served on the company. The statement of claim was filed on 10 September 2010 and is stale. It has not been served.
The statement of claim regarding the cause of action pleads:
14.In the period between the entering into of the respective contracts of sale and settlement of those contracts of sale (Settlement), alternatively in the period between registration of the Plan and Settlement, Brockweir was a constructive trustee of:
(a)the lots on the unregistered plan the subject of the contracts, which lots it held on trust for the respective purchasers of those lots including the First to Seventh Plaintiffs, in relation to those lots identified in paragraph 11 above;
(b)the common property, including the roof and the external walls of the building, the subject of the Roof Licence and the Signage Licence respectively which it held on trust for those persons who had entered into contracts of sale for the lots.
15.As a constructive trustee Brockweir owed to inter alia the First to Seventh Plaintiffs obligations in equity not to place itself in a position of conflict or to profit from contracts entered into relating to the common property.
16.In undertaking the actions referred to in paragraphs 5 and 6 hereof, Brockweir breached the obligation referred to in paragraph 15 hereof.
17.By reason of the matters pleaded above Brockweir holds on trust for the First to Seventh Plaintiffs, such part of the moneys that it has received from Westpac and Hutchison and that received by it upon the sale of its interest in the Westpac and Hutchison licences to Collins Street, as is referable to the First to Seventh Plaintiffs’ proportionate share in the common property as determined by lot entitlements, alternatively is liable to pay such amounts by way of equitable compensation to the Plaintiffs.
The plaintiffs claim a declaration that the defendant holds on trust for the plaintiffs the money received by the defendant from their licences which represents the plaintiffs’ proportionate share in the common property as determined by the lot liability; all necessary accounts of enquiries; and alternatively, equitable compensation.
The Law
For the Company to be reinstated the plaintiffs must demonstrate that they are aggrieved by the deregistration and that it is just that the Company be reinstated.
Section 601AH(2) of the Corporations Act provides:
2.The Court may make an order that ASIC reinstate the registration of a company if:
(a)application for reinstatement is made by the Court by:
(i)the personal aggrieved by the deregistration; or
(ii)… ; and
(b)the Court is satisfied that it is just that the company’s registration be reinstated.
Person aggrieved
In Deputy Commissioner of Taxation, Re James Hardie Australia Finance Pty Ltd (Deregistered)[2] it was held that a court should not narrowly construe the expression “person aggrieved”. Lindgren J stated:
[2](2008) 67 ACSR 497.
It has been said that the expression “a person aggrieved by the deregistration” should not be narrowly construed: see Re Proserpine Pty Ltd and the Companies Act [1980] 1 NSWLR 745; (1980) 5 ACLR 603 at [15] (Proserpine); Pacanowski v Australian Securities Commission (1995) 57 FCR 173 at 175; 17 ACSR 203 at 205. It does not matter that the person’s interest in the decision to deregister arose after the deregistration: Proserpine at [15].[3]In Arnold World Trading Pty Ltd v ACN 133 427 335 Pty Ltd Barrett J stated:[4]
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 GA & RJ Elliott Pty Ltd (1978) 3 ACLR 523.
[3]Ibid at [14].
[4](2010) 80 ACSR 670 at [43].
The intervenors submit that the plaintiffs are not aggrieved by the deregistration of the Company as the plaintiffs’ cause of action is hopeless and it is futile to bring such a claim. It is said that the alleged constructive trust of which the company is trustee is unaffected by the deregistration of the trustee and therefore a claim against the Company will be futile. Further, it is submitted that there should be no proceedings for a breach of a constructive trust.
The intervenors rely on Danich Pty Ltd; Re Cenco Holdings Pty Ltd,[5] where Barrett J held that Danrich Pty Ltd would not be deregistered. One of the factors that his Honour took into account was that it was not a case in which the existence of the defendant (the sole trustee under a trust deed) was not essential to fulfil the plaintiff’s rights.
[5](2005) 53 ACSR 484.
The facts in Danrich are different to those here. Here there is an allegation of a constructive trust. It is clear that there has been an uncommercial transaction here. For the Body Corporate to licence the rights of the common property for $1 where revenues of at least $25,000 per year are received is uncommercial. The Company which had a contract in place with the plaintiffs to sell lots deprived the Owners Corporation and the plaintiffs of a benefit.
Whatever the cause of action may be, whether it is a breach of trust or a Barnes and Addy claim, is a matter for the pleadings. The plaintiffs have not served their writ and statement of claim and may decide to amend it. To take the view that there is no cause of action or that it is futile would be to construe “person aggrieved” narrowly and that should not be done.
The intervenors submit that the plaintiffs are not entitled to income from the sub‑licences. It is said that the Body Corporate was entitled to deal with the property as it wished without regard to the purchasers. I note that the sole member of the Owners Corporation was the Company and the Company must have organised the benefit it would receive from the licences to the exclusion of the plaintiff to whom it owed a duty. In such circumstances it is arguable that the plaintiffs are entitled to income.
The intervenors submit that the deed of 2002 and the issue of body corporate certificates since 2003, the meeting of the Owners Corporation in February 2010 ratified the licences to the Company. This may be raised as a defence at a trial or may be raised as a potential estoppel. It is a matter of evidence which may be relevant to the trial of any proceeding. It does not make the plaintiffs’ case hopeless or futile.
The role of the Owners Corporation to not bring an action against the Company does not mean that the plaintiffs are unable to bring a claim. The intervenors have a right as tenants in common of a common property to bring an action due to operation of s 30(1)(a) of the Subdivision Act 1988 which provides:
(1)In addition to section 24, when a plan containing common property is registered-
(a)any common property affected by an unlimited owners corporation vests in the owners for the time being of the lots affected by the unlimited owners corporation as tenants in common in shares proportional to their lot entitlement; and
…
The intervenors state the Company was a bare trustee for the Swanston Street Unit Trust. The unit trust deed was terminated and its unit holder has been under external administration since 2009. The licences have been sold by the Company to a third party, Collins Street Pty Ltd. Mr Abeles has deposed that he is not a director of Collins Street Pty Ltd.
The intervenors submit that as the trust has terminated it would be completely futile to re‑register the Company. In my view, the plaintiffs have been aggrieved. If the Company has no assets and there is a judgment against it, then a liquidator may be appointed. It cannot be said that the liquidator would not try to claw back licence fees. He or she may wish to investigate where the funds went.
The plaintiffs are aggrieved because there is arguable breach of duty by the Company, including an uncommercial transaction where funds have been received by the Company.
Is it just?
The intervenors had no right to make submissions as to whether the Company should be registered.[6] It is for the Court to make this determination. I will now deal with their submissions even though I do not need to do so.
[6]Peter Conyers Holders Pty Ltd (in liq) (1996) 14 ACLC 1835.
The power to order reinstatement is discretionary. In Newham v ASIC,[7] Higgins J said:
The discretion [to reinstate the registration of a company under section 601AH] is in terms unfettered but, as with any like conferral of power, it must be exercised judicially and in conformity with the purposes of the relevant legislation. Two considerations should make a court reluctant to revive a defunct company. The first is that to do so revives obligations and liabilities previously considered to be ended thus prejudicing the right and legitimate expectations of the members and officers of the defunct company. The second is that it must create public confusion to have a company blinking out of and into existence. Reinstatement should be permitted only if an unjust result, not remediable otherwise, would follow.[8]
[7][2003] NSWSC 1184 at [3].(2000) 35 ACSR 147.
[8]Ibid at [42].
The intervenors submit that it would not be just to reinstate a company where the issues to be litigated were not signalled at the time of deregistration. Reliance is placed on the meeting of 17 February 2010 where after notice of the claims that the Owners Corporation decided not to institute claims. Mr Abeles deposes that as a result of that meeting, the JGL Group proceeded with a restructure and the Company was deregistered.
In Casali v Crisp,[9] Young CJ in Eq stated:
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.
[9][2001] NSWSC 860 at [31].
The facts of each case must be considered carefully. A balancing exercise may arise as to whether it would be just to allow re‑registration. Other factors important in this exercise include the fact that the plaintiffs have issued a statement of claim, filed it, did not serve it and allowed it to become stale and that the cause of action arose in 2002.
Those factors are in my view outweighed by the uncommercial transaction and the arguable breach of trust. The plaintiffs are aggrieved and it would be unfair to deprive them of the right to bring an action against the Company by refusing to re‑register it.
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SCHEDULE OF PARTIES
| JOHN KARPATHAKIS | Secondnamed Plaintiff |
| ANTONY KARPATHAKIS | Thirdnamed Plaintiff |
| ANTHEA KARPATHAKIS | Fourthnamed Plaintiff |
| DIAMOND LINE JEWELLERY PTY LTD (ACN 051 464 763) | Fifthnamed Plaintiff |
| ADTC PTY LTD (ACN 091 578 817) | Sixthnamed Plaintiff |
| TOMKO PTY LTD (ACN 006 143 335) | Seventhnamed Plaintiff |
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