Re MIG Property Services Pty Ltd (No 2)
[2012] VSC 606
•19 December 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
No. 5072 of 2012
| IN THE MATTER of MIG PROPERTY SERVICES PTY LTD DAVID MOND | Plaintiff |
| v | |
| GEOFFREY NIELS HANDBERG (IN HS CAPACITY AS LIQUIDATOR OF S&D INTERNATIONAL PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)) | Defendant |
---
JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 September 2012 | |
DATE OF JUDGMENT: | 19 December 2012 | |
CASE MAY BE CITED AS: | Re MIG Property Services Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 606 | |
---
CORPORATIONS – Application to rectify ASIC register to remove references to the company being wound up where order for winding up overturned on appeal – Whether removal of references constitutes rectification of the register – Consideration of circumstances justifying rectification – Application refused – Section 1322(4)(b) of the Corporations Act 2001.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | P Tree SC D Triaca | Mason Black Lawyers |
| For the Defendant | MJ Golvan | Mills Oakley |
HIS HONOUR:
Introduction
In February 2012, application was made by S&D International Pty Ltd (receivers and managers appointed) (in liquidation) (S&D) to wind up MIG Properties Pty Ltd (MIG), alleging that MIG owed some $200,000 to S&D, which amount it had failed to pay under a statutory notice. The application was successful, and an order was made for the winding up of MIG and a liquidator appointed. MIG successfully appealed that order. The winding up order was set aside and the application to wind up adjourned (pending the hearing and determination of the appeal). The debt the subject of the statutory notice and the winding up application has now been compromised (together with the appeal), and S&D has no claims against MIG.
Pursuant to statutory obligations, notification of the application to wind up MIG, notification of the appointment of a liquidator to MIG by the Court, notification of the resignation or removal of the liquidator to MIG and notification that a Court order set aside the winding up of MIG, were lodged with ASIC and recorded on a register kept by ASIC. ASIC is obliged to make this information available to the public if a search of the company is made.
Mr Mond is and always has been the sole director and shareholder of MIG. Mr Mond seeks an order that the “register” containing this information be “rectified” by removing this information pursuant to s 1322(4)(b) of the Corporations Act 2001 (the Act). Mr Mond is an accountant and conducts a large debt collecting business. He fears his reputation will be damaged if this information remains on the ASIC register. ASIC neither consents to or opposes the application.
The application raises the following issues:
(a) Is the information kept on a register kept by ASIC under the Act?
(b) Is the application seeking “the rectification” of the register?
(c) Should the Court in its discretion make such an order?
The power to rectify the register
Section 1322(4)(b) provides that the Court may, on the application by any interested party involved, make an order directing the rectification of any register kept by ASIC under the Act. The Court must not make an order under this provision unless it is satisfied that no substantial injustice has been or is likely to be caused to any person (s 1322(6)(c)).
How the winding up of MIG arose
Before answering the questions raised in the application, it is first necessary to set out in a little more detail how MIG came to be wound up. MIG was the first defendant to an application brought by Mr Handberg in his capacity as liquidator of S&D. The background facts are more fully set out in Re S&D International Pty Ltd (receivers and managers appointed) (in liquidation).[1] It is convenient, however, if I set out the relevant facts.
[1]Re S&D International Pty Ltd (receivers and managers appointed)(in liquidation) [2009] VSC 225.
Each of the plaintiffs and the defendants to the proceeding in Re S&D International Pty Ltd (the principal proceeding) claimed an interest over assets held on trust for the S&D International Unit Trust. The Trust assets included a property at 580 Barkly Street, Footscray, which was sold by the first mortgagee, MIG (the first defendant in the principal proceeding), and another property at 45 Boronia Drive, Hillside, which was in the possession of the receiver, Mr Vartelas, the second defendant in the principal proceeding, who was appointed by the registered first mortgagee and mortgage debenture holder, MIG. The Hillside property has now been sold by the liquidator.
Previously, the trustee of the unit trust, S&D (the second plaintiff in the principal proceeding), carried on an Indian wholesale grocery business (known as Bharat Traders International) at the Footscray property. The business was initially established as a partnership in 1991 by Dinesh Malhotra (the third defendant in the principal proceeding), his brother Vinod Malhotra, and Markandey Tiwari. In 1992, Markandey Tiwari divorced his wife Sheela Tiwari, who then married Dinesh Malhotra. Also in 1992, Markandey and Vinod left the partnership and Dinesh Malhotra was registered as sole proprietor of the business name.
The business was thereafter built up and conducted by Sheela Tiwari and Dinesh Malhotra. In 1996, the unit trust was established and S&D appointed the trustee. S&D took over the wholesale grocery business and acquired the Footscray property in 1996. Subsequently, in 2000, S&D as trustee purchased the Hillside property. S&D mortgaged these properties to the Commonwealth Bank of Australia (CBA) and also granted to CBA a mortgage debenture over the assets and undertaking of S&D. Subsequently, these securities were transferred to MIG.
Sheela Tiwari held the two units in the unit trust. Dinesh Malhotra resigned as a director in 1999; although he claimed that at all times he was the beneficial owner of half the units in the trust and half the shares in the trust held by Sheela Tiwari. In April 2002, for reasons it is not necessary to canvass, Dinesh Malhotra was locked out of the Footscray property by Sheela Tiwari (where they also resided). He soon thereafter lodged a caveat over both properties claiming to have an estate in fee simple in each property.
After Dinesh was excluded from the Footscray property, Sheela Tiwari and her son Pradeep Tiwari caused S&D to grant an unregistered mortgage to the ANZ Bank over the Footscray property and a registered mortgage debenture over the assets and undertaking of S&D in exchange for a business loan and a home loan, which were both used by Sheela Tiwari to buy a home at Point Cook. The ANZ Bank lodged a caveat giving notice of its unregistered second mortgage over the Footscray property.
In August 2002, Dinesh Malhotra instituted legal proceedings in the Supreme Court of Victoria to establish his half interest in the properties and the business. Thus began a long series of court cases which led to the principal proceeding. Sufficient to say, Dinesh Malhotra succeeded in his initial proceedings in establishing that he was beneficially entitled to a half interest in the unit trust and its assets.
Sheela Tiwari retained the firm of Velos and Davis to act for her and S&D in the initial proceedings instituted by Dinesh. She also caused S&D to give an equitable charge over the Footscray property and the Hillside property to secure legal fees incurred on her behalf and S&D’s behalf in the Supreme Court proceedings. Mr Bill Velos of the firm of Velos and Davis was the fourth defendant in the principal proceeding. On 6 August 2007, Mr Velos and his partner Peter Davis obtained judgment against Sheela Tiwari for $190,708.52 plus costs in respect of fees and charges incurred in acting for her and S&D in the Supreme Court proceedings. This debt had not been paid and Mr Velos and Peter Davis claimed to be entitled to the moneys in Court as a matter of priority by virtue of the equitable charges.
Sheela Tiwari appealed the Supreme Court decision under which Dinesh Malhotra succeeded in establishing that he was beneficially entitled to a half interest in the unit trust and its assets. While the matter was pending in the Court of Appeal, Sheela Tiwari and Dinesh Malhotra agreed to appoint an administrator to run the business until their dispute could be resolved. They appointed Stirling Horne and Peter Vince (the sixth and seventh defendants) as administrators. Despite the business being previously profitable, Dinesh Malhotra alleged that Messrs Horne and Vince (with the connivance of Sheela Tiwari and her son Pradeep Tiwari) recommended that the trustee (S&D) be wound up. At that stage, S&D owed CBA approximately $240,000 as a secured creditor. In June 2005, the creditors of S&D resolved to wind up the company and appointed Messrs Horne and Vince as liquidators.
Dinesh Malhotra then instituted further proceedings in the Supreme Court to terminate the winding up and to remove Messrs Horne and Vince as liquidators. At first instance, he failed to have the winding up terminated and Messrs Horne and Vince removed as liquidators. He successfully appealed the decision of the Court not to remove Messrs Horne and Vince, but failed in his appeal to have the winding up terminated. In June 2007, Mr Handberg (the first plaintiff) was appointed as the liquidator of S&D in their stead. In November 2004, Messrs Horne and Vince lodged a caveat against the properties, notifying their claim to a lien over the assets for their unpaid fees and expenses.
Previously, Messrs Horne and Vince had sought to have Dinesh Malhotra’s caveats removed. In July 2006, the Supreme Court refused their application.
As mentioned above, the CBA held securities over S & D and the properties and at about the time S & D was placed in administration the CBA called up its loan owed by S & D. In June 2005, Dinesh Malhotra was able to arrange for the CBA to be paid out by Colonel Naresh Malhotra (no relative of Dinesh Malhotra), who took over the securities but assigned them to MIG on 11 September 2006. Mr Mond, the sole shareholder and director of MIG, was an accountant for Sheila Tiwari at the time.
On 25 October 2006, MIG appointed Mr Vartelas receiver and manager of the assets and undertaking of S&D under the mortgage debenture held by MIG. In August 2007, MIG appointed Mr Vartelas as the agent of MIG and MIG, and through its agent Mr Vartelas entered into possession of the two properties. At that time, the principal debt secured by the mortgages now held by MIG was $242,540.38.
On or about 19 September 2007, MIG (through its agent Mr Vartelas) sold the Footscray property at public auction for the total sum of $1,360,000 to Tiwari Enterprises Pty Ltd (a company associated with Sheela Tiwari). Settlement of the sale occurred on 18 October 2007. On 19 October 2007, the estate agents accounted to MIG for the deposit. At settlement, withdrawals were provided for the Dinesh Malhotra caveat, the ANZ Bank caveat and the Horne and Vince caveat.
Mr Dinesh Malhotra agreed with MIG to provide his withdrawal on the basis that MIG would pay the surplus (if any) into Court. Contrary to MIG’s agreement with Mr Malhotra, MIG did not pay the surplus into Court, nor had MIG done so by the time the principal proceeding commenced. At or after settlement, MIG did not properly account to the mortgagor or the subsequent interest holders for the moneys it was retaining in satisfaction of its secured debt. MIG did not treat its mortgage and other securities as satisfied in full.
Despite not properly calculating what MIG was entitled to retain from the sale proceeds, in October and November 2007, Mr Mond caused MIG to transfer some $410,000 of the settlement proceeds to Israel to be used in the acquisition of a home for Mr and Mrs Mond. A public examination was conducted of Mr Mond that disclosed the following about this transfer.
On 26 October 2007, some eight days after settlement, Mr Mond authorised payment of $350,000 from the proceeds of the sale of the Footscray property to a bank account in Israel to fund the purchase of a property in his name and his wife's name. Then, on 13 November 2007, a further payment of $52,000 was made from the sale proceeds to the Israel account by a telegraphic transfer. On 21 November 2007, a further payment of $8,000 was made from the sale proceeds to the Israel account.
In the principal proceeding, I made certain findings about the conduct of MIG before and after the sale of the Footscray property that are relevant to the issues at hand:
[40] Before MIG and Mr Vartelas were able to sell the Footscray property, they negotiated with the several caveators to remove their caveats. These negotiations were extensive and took place over several months. On 28 September 2007, the liquidator demanded that “the entire net proceeds of the sale of the land (after your reasonable fees and expenses incurred only in getting in, protecting and realizing the property) should be paid to me or into Court”.
[41] MIG and Mr Vartelas informed the caveators and the liquidator that it was their intention to pay into Court the surplus moneys from the sale after satisfying MIG’s mortgage. They agreed with Mr Malhotra that they would pay the surplus into Court. As a consequence the caveats were removed to allow the sale to proceed. The property was then sold for $1,360,000 and settlement took place on 18 October 2007.
[42] Soon after the sale, MIG and Mr Vartelas again informed the caveators that it was still their intention to pay the surplus moneys into Court under s 77(3)(d) of the TLA once the principle, interests and all costs and expenses payable under the mortgage had been paid. On 12 November 2007, the solicitors for MIG and Mr Vartelas told the liquidator’s solicitors that they expected to receive instructions to transfer the moneys into Court “once all accounts had been rendered and all fees and disbursements paid.” In late November 2007, the solicitors for MIG and Mr Vartelas advised the plaintiffs, that once confirmation had been received that MIG had been paid in full, the surplus moneys would be paid into Court. They indicated, however, that if an agreement could be reached between the claimants it would not be necessary to do so.
[43] In the weeks following settlement, MIG and Mr Vartelas assert that they took steps to ascertain the amount of the secured debt including the various costs incurred by MIG and Mr Vartelas. An incomplete accounting of the proceeds of the sale was provided to the liquidator on 27 November 2007. MIG and Mr Vartelas contend that ascertaining the interest rate applicable to the loans was not a simple exercise as it depended upon ascertaining and applying the rates charged by the Commonwealth Bank over the period since the transfer of the mortgage.
[44] In January 2008, after the plaintiffs threatened legal action unless the surplus moneys were paid into Court, MIG and Mr Vartelas took the advice of counsel as to their obligations in respect of the surplus.
[45] Mr Parncutt of counsel gave evidence by affidavit that, in or about November 2007, he was consulted by Comlaw concerning the duties of MIG and Mr Vartelas as agent for the mortgagee in possession with respect to the disposition of the proceeds of sale of mortgaged property and the obligation to account to the mortgagor and the timing of payment into court of the residue of the moneys where there were various claimants to the moneys. He says that he advised Mr Leonidas of Comlaw “that as there were a number of claimants to the surplus of the proceeds of sale, the duty of the mortgagee in possession entitled him to hold the moneys for the purpose of clarifying the claims being made to the surplus of the net proceeds of sale and to ascertain the position of interested parties in the moneys.” He advised that this was a positive duty imposed upon the selling mortgagee to deal with a subsequent mortgagee prior to paying the residue moneys to the mortgagor or into the Supreme Court under ss 77(3)(d) of the TLA. He also advised that MIG and Mr Vartelas were not obliged to deal with the surplus moneys in accordance with any directions of the liquidator of the mortgagor. MIG and Mr Vartelas accepted the advice.
[46] Mr Parncutt says that “as it became clear that there were a number of claimants to the moneys, he advised that once the subsequent mortgagee and chargee had been paid from the surplus, the residue would necessarily have to be paid into Court, but that it would be appropriate first to ascertain whether there was any disagreement to the payment of the subsequent mortgagee or chargee prior to payment into Court, so as to avoid an erosion of the moneys by protracted proceedings.” Mr Parncutt also says that unregistered mortgages fell within s 77(3)(c) based on his research of the authorities, including Ex parte Australian Co-operative Development Society Ltd (in liq), which I discuss below.
[47] Mr Parncutt’s evidence that he was consulted in or about November 2007, is not easy to reconcile with Mr Vartelas’ evidence that he took Mr Parncutt’s advice in January 2008 and on 21 February 2008. In any event, on 16 January 2008, the solicitors for MIG and Mr Vartelas advised the caveators that MIG and Mr Vartelas had taken advice and that they would not be paying the surplus moneys into Court as they previously said they would. MIG and Mr Vartelas thereupon set about informing themselves on the interests claimed by the caveators.
Neither MIG nor Mr Vartelas paid any moneys to the subsequent interest holders, nor did they pay the moneys into Court until in September 2008, when (on the application of the liquidator of S&D) MIG and Mr Vartelas were ordered by Judd J to pay the balance of the moneys which they still retained from the sale of the Footscray property and the receivership of S&D into Court. Some $628,000 was paid into Court.
The principal proceeding initially sought to resolve the entitlement of several parties to the moneys paid into Court, their entitlement to the Hillside property, and other issues related to the conduct of MIG as mortgagee and Mr Vartelas as agent for the mortgagee and receiver of S&D.
There were two proceedings before the Court. In the main proceeding, the plaintiffs were Mr Handberg (the current liquidator of S&D) and S&D itself. The liquidator sought an order that he had first priority to the funds in Court on the basis he had a lien over them, arising out of his efforts to preserve them from misuse by MIG and Mr Vartelas. The liquidator also sought orders resolving the entitlements of the other defendants. The liquidator and S&D also sought orders against MIG and Mr Vartelas, challenging their conduct as mortgagee and as agent in possession and as receiver and manager of S&D respectively.
MIG and Mr Vartelas denied any improper conduct as mortgagee, as agent in possession or as receiver of S&D respectively, and claimed that MIG and Mr Vartelas were entitled to the moneys in Court to meet MIG’s mortgage. MIG and Mr Vartelas also claimed that the surplus (if any), after being delivered back to MIG and Mr Vartelas, should be dealt with according to the Court’s directions.
Dinesh Malhotra claimed that he was entitled to a half interest in the moneys in Court on the grounds that he was found to be the beneficial owner of a half interest in the Footscray property in the initial Supreme Court proceedings.
Mr Bill Velos was the fourth defendant in the principal proceeding. As mentioned above, his firm, Velos and Davis, acted for Sheela Tiwari and S&D in the initial proceedings taken by Dinesh Malhotra to establish Mr Malhotra’s half interest in the trust and the trust assets. To secure their legal fees, S&D (then under the control of Sheela Tiwari and her son Pradeep Tiwari) gave equitable charges in favour of Velos and Davis over both properties. Mr Velos was owed some $198,000 in fees. He had a judgment debt for the sum. He claimed that he had priority next after MIG to the moneys in Court.
As mentioned above, Pradeep Tiwari (the son of Sheela Tiwari) was the fifth defendant in the principal proceeding. In July of 2008, the ANZ Bank assigned to Pradeep Tiwari its unregistered second mortgage and mortgage debenture it held over the assets and the undertaking of S&D. Mr Tiwari claimed that he had priority next after MIG to the moneys in Court.
As mentioned above, Messrs Horne and Vince were the sixth and seventh defendants in the principal proceeding. In November 2004, they lodged caveats over the Footscray and Hillside properties, claiming an equitable interest as lien holders for their costs. They claimed that they were entitled to their costs in priority to any claim that the liquidator may have had to his costs.
The second proceeding was commenced in May 2008 by Pradeep Tiwari against MIG and Mr Vartelas, seeking a declaration that, by operation of s 77(3) of the Transfer of Land Act 1958, the defendants were bound to pay to the ANZ Bank such moneys as were payable for moneys owing under or in respect of the second ranking ANZ mortgage from the sale of the Footscray property.[2] Pradeep Tiwari also sought an order that the defendants pay out the ANZ mortgage. Pradeep Tiwari was a guarantor of the ANZ Bank loan to S&D that was used to buy the house for his mother. Soon after commencing the proceeding, Pradeep Tiwari paid out the ANZ Bank and took an assignment of its securities. Pradeep Tiwari claimed he was entitled to the moneys in Court next after MIG.
[2]Plaintiff, ‘Writ of Summons’ in Tiwari v MIG Property Services Pty Ltd, S CI 6325/2008, 23 May 2008.
On 9 June 2009, the Court delivered judgment in the principal proceeding. Insofar as MIG is concerned, in substance the Court held that MIG as mortgagee of the Footscray property ought to have accounted to S&D for the balance of the proceeds from the sale after the satisfaction of the moneys owed to it. The Court also ruled that MIG was not entitled to recover under the mortgage on some specific items of expenditure that MIG had expended.
On 19 June 2009, the Court ordered that there should be an inquiry into the amount and sums that should have been included in the account of MIG in its capacity as controller in possession of the property of S&D and that MIG should have rendered to the liquidator on settlement of the sale of the Footscray property.
Subsequently on 3 July 2009, MIG appealed the orders that were made against it in the principal proceeding. Nevertheless, MIG and the liquidator subsequently resolved the inquiry issue and agreed on the sum MIG should pay to S&D.
On 5 October 2009, the Court made orders pursuant to an agreement between the plaintiffs and MIG that MIG pay to the liquidator $164,944 with interest of $35,139.52 in satisfaction of the order of 19 June 2009, on the basis that the settlement would not prejudice MIG’s appeal to the Court of Appeal. Under the order, the agreed sums were to be paid by the liquidator into Court to be held with the other moneys paid into Court from the sale of the Footscray property. MIG failed to make the agreed payments to the liquidator.
As a consequence, in February 2011, the liquidator of S&D issued a statutory demand against MIG (served on 13 July 2011) requiring MIG to pay the judgment debt of $200,134 plus interest. On 4 August 2011, MIG applied to have the statutory demand set aside. The application was heard by an Associate Justice on 26 August 2011. Prior to the hearing, on 24 August 2011, MIG applied to the Court of Appeal for orders that:
(a) until the appeal proceeding had been heard and determined there be a stay on the order made by the Supreme Court on 9 June 2009 in the proceeding against MIG; and
(b) until further order, Mr Handberg be restrained from taking any further steps in the winding up of MIG.
On 30 September 2011, the learned Associate Justice dismissed MIG’s application to set aside the statutory demand. On 13 October 2011, the stay application was heard by the Court of Appeal and was dismissed.
On 23 November 2011, S&D applied to wind up MIG on the grounds of insolvency arising from the failure of MIG to pay the statutory demand. On 2 February 2012, as required under the Act, the liquidator of S&D lodged a “Notice of Application to Wind Up a Company” with ASIC.
On 29 February 2012, the application for winding up of MIG was heard by an Associate Justice. An application for an adjournment of the application to have MIG wound up until such time as an appeal against the judgment upon which the application was based was heard and determined by the Court of Appeal was made to the Associate Justice and rejected. His Honour found that MIG was not a trading company and that MIG was operating solely for the purpose of prosecuting the appeal before the Court of Appeal.
On 29 February 2012, the learned Associate Justice ordered that MIG be wound up in insolvency under the provisions of the Corporations Act 2001. Matthew Muldoon of Sellers Muldoon Benton, Chartered Accountants, was appointed liquidator of MIG and on 8 March 2012 a “Notification of Appointment of Liquidator” was lodged with ASIC.
MIG appealed against the winding up order to a judge of the trial division of this Court. On 23 March 2012, the appeal was heard by me and allowed. I set aside the order winding up MIG. On 5 April 2012, the liquidator of MIG notified ASIC of his removal as liquidator and of the Court order setting aside the winding up of MIG. However, the application to wind up MIG remained on foot. That application was not dismissed.
In my reasons for judgment setting aside the winding up of MIG, I found that MIG had no assets and in substance no liabilities save for the moneys owed to S&D. In my reasons I considered Adamopoulos v Olympic Airway SA,[3] Ahern v Deputy Commissioner of Taxation (Qld)[4] and Re Shmee Pty Ltd.[5] I held that the broad principle that applied in bankruptcy also applied in a company winding up; that is:[6]
… in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided the appeal is based on genuine and arguable grounds[.]
[3](1990) 95 ALR 525.
[4](1987) 76 ALR 137 (Ahern) (Davies, Lockhart and Neaves JJ).
[5][2009] VSC 657.
[6]Ahern (1987) 76 ALR 137, 148 (citations omitted).
I found that MIG’s appeal did raise genuine and arguable grounds. I allowed the appeal on condition that Mr Mond undertake to the Court to indemnify MIG in relation to any costs orders that may be made against MIG hereafter or until MIG be wound up on the application of S&D on the present application (if that be the case).
On 15 April 2012, an application by S&D for leave to appeal against my order setting aside the winding up order was dismissed by the Court of Appeal.
On 11 July 2012, S&D and MIG reached settlement of all outstanding issues between them subject to the Court direction that the liquidator was justified in entering into the settlement agreement. In Re S&D International Pty Ltd (in liquidation) (No 7),[7] I gave a direction that the liquidator was justified in entering into the settlement agreement. During those proceedings I was informed by the liquidator that S&D had no assets. This was not challenged by MIG.
[7][2012] VSC 551.
ASIC database
ASIC’s database contains five relevant documents:
(1) Form 519G, ‘Notification of Application to Wind Up Company’ (date processed: 2 February 2012);
(2) Form 505G, ‘Notification of Appointment of Liquidator by the Court’ (date processed: 8 March 2012);
(3) Form 562, ‘Notice of Extension of Time by Liquidator by the Court’ (date processed: 19 March 2012);
(4) Form 505R, ‘Notification of Resignation or Removal of Liquidator’ (date processed: 5 April 2012); and
(5) Form 504S, ‘Court Order Setting Aside Order for Winding Up’ (date processed: 1 May 2012).
Mr Mond applies for an order that, as soon as practicable, ASIC remove from any publicly available register which ASIC keeps pursuant to the Act:
(a) any reference to proceedings S CI 2011 6361;
(b) any reference to the Form 519 in respect of MIG lodged by S&D on 2 February 2012;
(c) any reference to any further forms relating to the discontinuance or withdrawal of proceedings S CI 2011 6361 which are lodged with ASIC or, if not then lodge, as soon as practicable following any such document;
(d) any reference to any form annexing a court order, and any order so annexed lodged by the respondent with the ASIC in compliance with regulation 1.0[.]20(j) of the Corporations Regulations 2001.
The position of ASIC
ASIC was served with the application. By letter, ASIC advised Mr Mond’s solicitors that ASIC neither opposed or consented to the orders being made and did not intend to attend the hearing.
The letter stated:
ASIC will, as far as possible, provide assistance in ensuring that ASIC is able to comply with the terms of the orders made. To this end, please be aware that ASIC is no able to “remove any publicly available register which [ASIC] keeps pursuant to the Corporations Act …” However, if ordered to do so, ASIC is able to remove from public access specific documents which have been lodged (Re Voxson Sales Pty Ltd [1989] 1 Qd R 711).
Please note, if the Court makes orders under s 1322(4)(b) of the Act, those orders must be lodged with ASIC with a Form 105 Cover page of office copy of a court order in accordance with regulations 1.0.20 and 1.0.21 of the Corporations Regulations 2001.
Is the information kept on a register maintained by ASIC under the Act?
Part 9.1 of the Act is headed “REGISTERS AND REGISTRATION OF DOCUMENTS”. Part 9.1 deals with the lodgement of documents with ASIC and the maintenance by ASIC of registers of documents and information.
The Act provides that ASIC may refuse to receive or register certain documents that have been submitted for lodgement (s 1274(8)).
As for the documents lodged with ASIC, any person may inspect any documents lodged with ASIC other than certain specified documents (s 1274(2)). The documents that may not be inspected include certain notices, applications and reports. The exemptions treat notices, applications and reports as documents for the purposes of the Act.
As for registers, the Act provides that ASIC must, subject to the Act, keep such registers as it considers necessary in such form as it thinks fit (s 1274(1)). Provision is made for any person to search any prescribed register in order to obtain prescribed information (s 1274A). In one case, the Act provides that copies of documents must be contained in the register. The Act provides that the register of disqualified directors and other officers must contain a copy of the relevant court orders.
There are some sixteen registers prescribed for searching under s 1274A (Regulation 9.1.01).[8] The first register prescribed is the register of companies, for companies registered under certain provisions of the Act.[9] Then follows the register of Disqualified Company Directors and Other Officers kept under s 1274AA of the Act and other registers.
[8]Corporation Regulations 2001, Part 9.1 – REGISTERS AND REGISTRATION OF DOCUMENTS.
[9]Under ss 118 or 601BD of the Act or the registration of which is continued by s 1378 of the Act.
The prescribed information to be kept in the prescribed registers is set out in r 9.1.02, headed “prescribed information.” Regulation 9.1.02(a) prescribes the information to be kept on the register of companies. The regulation provides as follows:
For subsections 1274A(3) and (4) of the Act, the following information is prescribed:
(a)in relation to each company registered under section 118 or 601BD of the Act or the registration of which is continued by section 1378 of the Act:
(i)its full name, the date of its registration and its registration number;
(ii)whether it is a public company or a proprietary company;
(iii)whether it is a company limited by shares, a company limited by guarantee, a company limited by both shares and guarantee, an unlimited company or a no liability company;
(iv)its contact address;
(iva)its principal place of business;
(v)its registered office;
(vi)its officers;
(vii)any scheme of arrangement it has entered into with its creditors, its placement under voluntary administration or a deed of company arrangement or receivership or its liquidation;
(viii)its paid-up and unpaid capital;
(ix)its deregistration;
(x)any charges on its property that have been lodged with ASIC or entered in the Australian Register of Company Charges;
…
Section 1274A provides as follows:
(1) In this section:
”data processor“ means a mechanical, electronic or other device for the processing of data.
”register“ means a register kept by ASIC under this Act.
”search“ includes inspect.
(2) ASIC may permit a person to search, otherwise than by using a data processor, a prescribed register.
(3) ASIC may permit a person to search a prescribed register by using a data processor in order to obtain prescribed information from the register.
(4) ASIC may make available to a person prescribed information (in the form of a document or otherwise) that ASIC has obtained from a prescribed register by using a data processor.
(5) Nothing in this section limits:
(a)a power or function that ASIC has apart from this section; or
(b)a right that a person has apart from this section.
The Regulations prescribe the forms that are to be used to be lodged with ASIC (r 1.0.03). For example, the applicant for the winding up of a company must file a notice (s 470(1)(a)). The form is prescribed in the Regulations (r 1.03.03A, Item 10).
Thus, under the scheme established by the Act, ASIC must obtain from the documents lodged with ASIC the information referred to above and record it in the register of companies which is made available for searching by any person.
ASIC Company Extract
Mr Mond tendered a document that is described as an ASIC Current Extract. The document says that “this extract contains information derived from …. [ASIC’s] database under s 1274A of the Corporations Act. Please advise ASIC of any error or omission which you may identify.” I infer that this document was obtained by a search provided for under s 1274A.
Under the heading of “Documents Received” in the extract are the following entries:
| Form Type | Date Received | Date Processed | No. Pages | Effective date | |
| 5045 | 27/04/2012 | 01/05/2012 | 3 | 27/04/2012 | 028002679 |
| 5045 | Court Order Setting Aside Order For Winding Up | ||||
| 505 | 05/04/2012 | 05/04/2012 | 2 | 23/03/2012 | 7E4339649 |
| 505R | Notification of Resignation or Removal of Liquidator/provisional liquidator |
There were similar entries for “Notice of Extension of Time By Liquidator For Submitting Report of Affairs”, “Notice of Appointment of Liquidator by The Court” and “Notification of Application to Wind Up Company under s 459p [sic], 462 or 454.”
The extract itself says that the information in the extract has been derived from ASIC’s database under s 1274A of the Act.
I infer that the ASIC “database under s 1274A of the Corporations Act” referred to in the ASIC company extract (as quoted above) is in fact the register of companies prescribed under r 9.1.01(a). The prescribed information on that register relating to a registered company includes information of “its liquidation.”
I would have been assisted by further evidence from ASIC on this issue. Unfortunately, ASIC did not appear. However, on the evidence available to me, I conclude that the information Mr Mond seeks to “rectify” is prescribed information kept on the prescribed register of companies, relating to MIG’s liquidation.
From the submissions of Mr Mond’s counsel I do not understand that Mr Mond seeks any order about the forms that were filed with ASIC from which ASIC extracted the information to include in the prescribed register of companies. In any event, Mr Mond would not be entitled to any orders under s 1322(4)(b) in relation to those documents (for the reasons discussed below).
Is the application seeking the rectification of the register?
The law on this issue has been the subject of different views. In particular, views have differed on whether the power of rectification goes beyond correcting misstatements of fact to removing a record of an event that did happen but has since been found to have been invalidly obtained.
In Re Voxson Sales Pty Ltd,[10] receivers and managers were appointed to the company. The receivers and managers lodged notice of their appointment with the Commissioner for Corporate Affairs in the prescribed form and subsequently – when the debt was paid – notice of their retirement. The forms were registered by the Commissioner when they were microfilmed and the microfilm inserted into microfiche jackets allotted specifically to the company involved. The applicants sought the removal of these forms and other related documents from the register, on the basis that the receivers and managers had been wrongly appointed.
[10][1989] 1 Qd R 711(Voxson).
Justice Ambrose of the Supreme Court of Queensland held that the microfiche jacket constituted part of a register kept by the Commissioner. He held that the power to rectify the register contained in the Companies (Queensland) Code did not permit the removal or destruction of the microfilm of documents lodged with the Commissioner. His Honour said:[11]
Steps may well have been taken by the applicants prior to those documents being lodged to prevent their lodgment. From time to time proceedings are taken to prevent the filing of an application to wind up a company. Once an application to wind up however has been made that fact cannot be “hidden” from public gaze merely because upon the hearing of the application it is shown that the application ought never to have been made.
[11]Ibid 717.
In Re Peter Conyers Holdings Pty Ltd,[12] Senior Master Mahony applied s 1322(4)(b). The learned Senior Master found that an order for the reinstatement of the registration of a company should not have been made. Senior Master Mahony found it would be incongruous to set aside the order, but for the company to remain on the register of companies maintained by ASIC’s predecessor. Accordingly, the learned Senior Master ordered, under s 1322(4)(b), that the register of companies be rectified by deleting the registration of the company. Senior Master Mahony held:[13]
I have considered this further and continue of the view that exercise of the power to order rectification of the register is appropriate in such a case as this. The alternative would be that the court could set aside an order under s 574(3) on the ground that it had been improperly obtained but could not later the effect which that order had on lodgement. That would be a consequence not to be accepted unless there were no alternative, because it would mean that there would be no effective redress where such an order had been obtained in circumstances rendering it liable to be set aside. The power to order rectification the register answers the need for an alternative.
[12](1996) 14 ACLC 1,835 (Peter Conyers Holdings).
[13]Ibid 1,857.
The issue next arose in OneSteel v Westpoint Constructions.[14]OneSteel had applied to wind up Westpoint. A statutory notice was sent to Westpoint, but was not received by it. Notice of the application to wind up Westpoint was lodged with ASIC. Westpoint immediately paid the debt. Westpoint was a company of substance which sought to protect its reputation. Westpoint applied for a rectification of the register to remove the entry on the register kept by ASIC. Justice Finkelstein distinguished the matter before him from the decision in Voxson. His Honour said that in the case before him there was no application to destroy records lodged with ASIC. His Honour said Westpoint only sought removal of an entry from the register. His Honour said that “one meaning of “rectify” is to “reform” and I am asked to order the register be reformed by the removal of an entry. I am in no doubt that I have the power to make that order.”[15]
[14](2005) 23 ACLC 1,384 (OneSteel).
[15]Ibid [10].
A similar matter came before Barrett J in Lavercombe v Auscott Ltd.[16]In that case, however, Barrett J found that no register existed to rectify.
[16](2006) 24 ACLC 1,197 (Lavercombe).
In that case, Mr Lavercombe served a statutory notice on Auscott for payment of a debt. The company did not pay in the prescribed time. Mr Lavercombe applied to wind up the company and filed the appropriate notice with ASIC. The winding up application was dismissed by consent. The company sought an order that ASIC rectify its records by removing all references to the winding up application.
Justice Barrett drew a distinction between the forms lodged by Mr Lavercombe and a register kept by ASIC. In the case before him, Mr Lavercombe had filed a Form 519 containing details of his application to windup Auscott. Upon dismissal of the application, he was required to lodge a form 519 containing particulars of the dismissal.
Justice Barrett examined the provisions of the Act relating to the registers kept under the Act. His Honour observed that under the Act some documents were merely lodged and others received. His Honour said that “[o]nly those which, under some particular provision, are to be “registered” will be “registered” in consequence of lodgement. Others will be merely received.”[17]
[17]Ibid [25].
Justice Barrett said that the requirement in relation to Form 519 was that it be lodged. His Honour found there was no obligation on ASIC to extract the information notified by reason of lodgment of a completed Form 519 and enter it in a register, nor was there any requirement that the form itself be “registered”. Justice Barrett said that in Westpoint the Court assumed that there was a register separate from the lodged forms. It is apparent his Honour considered that Finkelstein J had erred in this assumption.
Justice Barrett agreed with Ambrose J in Voxson that the power to rectify did not allow the destruction of documents or stored images of documents’ content.
Importantly, Barrett J went on to consider whether, assuming that a relevant register existed and the content of Form 519 was entered in it, an order should be made for ASIC to remove references to the application to wind up the company.
After a review of several English cases considering similar applications to rectify, his Honour said that those cases: [18]
emphasise that publicly available registers and records of the kind typically kept by a registrar or similar official under companies legislation are creations of statute and that the content of those registers and records is entirely a statutory matter. Provisions with respect to the rectification or correction of registers and records exist to ensure that they are kept as the statute requires them to be kept.
[18]Ibid [36].
Turning to s 1322(4)(b), Barrett J considered the approach to “rectify” taken by Finkelstein J in OneSteel. His Honour said the OneSteel approach would permit the Court to expunge content that had been properly recorded under the statutory scheme. His Honour said that under what he called the “wider reformatory approach”, it would be necessary for the Court to weigh up the merits of cases where a winding up application had been dismissed to decide whether the content properly entered on the register should be expunged.[19] Justice Barrett concluded that s 1322(4)(b) did not create a general reformatory jurisdiction. His Honour said it allowed “the court to make orders ensuring the content of registers kept by ASIC under the Corporations Act accords with statutory requirements with respect to such content.”[20]
[19]Ibid [38].
[20]Ibid [39].
His Honour prescribed the parameters of rectification consistently with this approach (and the consequences for the application to remove from a register reference to the winding up application) as follows:[21]
[39] … Every decision as to whether such an order should be made will be informed by the statutory requirements regarding register content. If the register does not contain something that the legislation requires it to contain, the jurisdiction to order rectification is enlivened. If the register contains something that the legislation says it must not contain, the jurisdiction to order rectification is also enlivened (also, perhaps, where something not required to be included is included). But if a particular thing is in the register and its presence there represents precise compliance with a requirement imposed by the statute, the jurisdiction to order rectification is not enlivened. Nor is the jurisdiction enlivened if there is absent from the register something that the legislation does not require to be there.
[40] In the present case, the plaintiff made an application for winding up. The application was not a nullity. When the application came before the court, the defendant showed that the plaintiff’s debt had been paid and that the plaintiff consented to dismissal of his application. It was thereupon dismissed. The order of dismissal was not a nullity. These are the simple facts. I am unable to see any basis on which the ordinary consequences of the filing of the application and its dismissal, in terms of content introduced into ASIC records by the two Forms 519 required in the circumstances, could or should be disturbed. This is not a case in which something was recorded by ASIC without reasonable cause. Records were regularly and properly made in accordance with the statutory requirements and in consequence of lodgments reflecting undisputed facts. There is nothing to rectify.
[21]Ibid [39]-[40].
If this be the law, then there would be no power in the Court to accede to Mr Mond’s application. All the information currently kept on the register of companies that he seeks to expunge was legally required to be so kept.
Justice Barrett next visited s 1322(4) in Westbury Holdings Kiama Pty Ltd v ASIC.[22] Westbury was overturned on appeal, but it is necessary to consider this case because Barrett J again applied the reasoning that his Honour had adopted in Lavercombe. In this case, Churnwood became party to two deeds with Miltonbrook and Embrook. By the deeds, Miltonbrook and Embrook granted an option to purchase property to Churnwood “or its nominee.”
[22](2007) 25 ACLC 466 (Westbury).
During the process of voluntary liquidation of Churnwood, it nominated Westbury to purchase the property. Churnwood was then deregistered. Following the deregistration of Churnwood, Westbury purported to exercise the options to purchase the property relying on documents purportedly executed by Churnwood after it was deregistered.
Westwood applied to the Supreme Court of New South Wales for the reinstatement of Churnwood’s registration in accordance with s 601AH of the Act in order to remedy the defect in the exercise of the options. Barrett J heard the application, and on 5 March 2007 his Honour ordered that ASIC be directed to reinstate the registration of Churnwood. Soon after, Miltonbrook and Embrook applied to set aside the order of 5 March 2007. Miltonbrook and Embrook claimed that they had not been heard on the initial application, and, if heard, would have opposed the application.
The application of Miltonbrook and Embrook came on before Barrett J. Justice Barrett held that there would be no utility in an order setting aside his order of 5 March 2007. His Honour held that under the Act it was the actions of ASIC in reinstating Churnwood that constituted Churnwood’s reinstatement and not his order of 5 March 2007. His Honour held that it was not the Court that reinstated Churnwood. His Honour further held that termination of the order of 5 March 2007 would not alter the fact that ASIC had reinstated the company, which reinstatement was complete and its effect ongoing.
Importantly for Mr Mond’s application, his Honour then considered a submission that an order setting aside the order of 5 March 2007 would justify a further order under s 1322(4) of the Act for the removal of the registration of Churnwood. His Honour referred to his reasoning in Lavercombe and confirmed that “the jurisdiction to order rectification of a register kept by ASIC is exercisable where the content of the register does not conform with the law and is for that reason in need of correction. If the content already conforms with the law, there is nothing to correct.”[23] Consistently with this principle, his Honour held that s 1322(4)(b) was not capable of ordering the removing the registration of Churnwood when it was validly reregistered. His Honour said:[24]
I regret that I find myself unable to accept that s.1322(4)(b) is capable of any such operation. That section does not allow the court to direct anything beyond the steps necessary to ensure that a register is kept in conformity with the statutory provisions applicable to it. Once it is recognised that the reinstatement of the registration of Churnwood effected by ASIC on 14 March 2007 was effected in accordance with the Corporations Act, there is nothing in need of rectification or capable of being rectified.
[23]Ibid [40].
[24]Ibid [44].
Justice Barrett referred to research his Honour had done on the origins of s 1322(4)(b), as follows:[25]
It is perhaps worth noting, as an aside, that, so far as my own brief researches reveal, the origin of s.1322(4)(b) is obscure. It first appeared as s.539(4)(b) of the Companies Act 1981 (Cth) and corresponding State and Territory codes. The draft Companies Bill circulated in April 1980 contained no such provision. It was, however, included in the draft Companies Bill of August 1980. The accompanying explanatory memorandum (at paragraph 834) merely paraphrased proposed s.539 as a whole and said that it was “based on ss.215 and 366” of the uniform Companies Acts. There was no indication of thinking behind the perceived need for a provision empowering the court to direct rectification of registers kept by the Commission.
[25]Ibid [48].
As indicated above, Westbury was overturned on appeal to the Court of Appeal of the Supreme Court of New South Wales in Miltonbrook Pty Ltd v Westbury Holdings,[26] a judgment of Spigelman CJ, with whom Tobias JA and Campbell JA agreed.
[26](2008) 71 NSWLR 262 (Miltonbrook).
Chief Justice Spigelman agreed with Barrett J that an order setting aside his order of 5 March 2007 would have been of no utility, and turned to whether or not the Court had power to rectify the register of companies under s 1322(4)(b).
Chief Justice Spigelman considered the line of cases relied on by Barrett J in Lavercombe, and came to the conclusion that the power under s 1322(4)(b) “is broader than that suggested by Barrett J in Lavercombe …, that is, to ensure that ‘registers … are kept as the statute requires them to be kept’.”[27] Chief Justice Spigelman held that:[28]
[45] The line of authority on statutory provisions for rectification of a register of members reflects the general proposition that the scope of a statutory power of this character must be commensurate with the circumstances which call its exercise into existence. This, in turn, is a specific application of the overriding principle of statutory interpretation that words must be construed in their context.
…
[47] “Rectify” is a protean word with a range of meanings: to correct, to remedy, to make right, to abolish. It should be given a scope that encompasses a response to the full range of circumstances that trigger the exercise of the power to rectify. Whether it is to be given a narrow or a wide scope requires attention to the purpose and subject matter of the legislative scheme.
[48] In the present case, the word rectify must be understood in its textual context, particularly s 1322, and the broader context of the legislative scheme, including the [Act] and CorporationsRegulations (Cth). The fact, if it be such, that the word “rectify” has been given a particular meaning in case law on rectifying the register of members (the word “rectify” has been replaced by “correct” in the most recent version in s 174 of the [Act]) is of limited assistance.
[27]Ibid [53] (pinpoints omitted).
[28]Ibid [45], [47]-[48].
In the matter before the Court, Spigelman CJ said that “the power to rectify the register of companies under s 1322(4)(b) extends to removing a company from the register where the process by which the company was place on the register was invalid.”[29] His Honour held that where, as in the case before him, the process involved a denial of natural justice, there would be the relevant invalidity. After considering whether there had been procedural unfairness, the Court ordered that ASIC rectify the register kept under s 118 of the Act by vacating the reinstatement of the registration of the second respondent.
[29]Ibid [60].
Spigelman CJ referred to and relied on his judgment in BP Australia Ltd v Brown,[30] where his Honour considered the application of s 1322(4) by relevantly saying the following about s 1322 generally:[31]
[78] Section 1322 confers a series of powers designed to mitigate the strict application of the various kinds of provisions found elsewhere in the legislative scheme of the Corporations Act. It constitutes a recognition by the legislature that, in the wide variety of unpredictable circumstances that arise in the conduct of the affairs of corporations, the precise rules for which the statute provides may operate unfairly or unjustly in some circumstances.
[79] Nevertheless the requirements of certainty or of deterrence or of other objectives performed by particular regulatory sub-regimes within the legislative scheme, may be such that the flexibility for which s1322 makes provision is not appropriate. Such a conclusion is particularly likely where, as with respect to s588FF, the sub-regime makes its own particular provision for flexibility. The general words found in s1322 may need to be read down with respect to any section which is intended to operate to the exclusion of the general power. However, as a remedial provision, s1322 is to be construed liberally and will be read down only where the specific power is intended to cover the field with regard to the sub-regime under consideration.
[30](2003) 58 NSWLR 322.
[31]Ibid [78]-[79].
His Honour repeated these observations in Miltonbrook.[32] Relevant to this case is his Honour’s statement that the purpose of s 1322 is to ameliorate the strict application of the Act where it may operate unfairly or unjustly in some circumstances, and that as a remedial provision “s 1322 is to be construed liberally and will be read down only where the specific power is intended to cover the field with regard to the sub-regime under consideration”.
[32]Miltonbrook (2008) 71 NSWLR 262, [55] (his Honour cited only the first part of [79]).
The decision of the Court of Appeal confirmed the correctness of the approach to s 1322(4)(b) taken by Senior Master Mahony in Peter Conyers Holdings, where the learned Senior Master had ordered the register to be rectified after finding that the order of reinstatement should not have been made.
In the absence of any other greater authority, I should apply the principles laid down by the New South Wales Court of Appeal in considering Mr Mond’s application.
Summary of relevant principles
The relevant principles appear to be as follows:
(a) The power of the Court to rectify a register under s 1322(4)(b) goes beyond ensuring that registers are kept as the statute requires them to be kept.
(b) The power of the Court to rectify a register may extend to directing ASIC to rectify information in a register that was validly entered on the register in compliance with law.
(c) The power of the Court to rectify a register may be exercised where the process by which the event recorded in the register was invalid.
(d) The scope of the power must be commensurate with the circumstances that call for its exercise.
(e) Rectify is a protean word with a range of meanings: to correct, to remedy, to make right and to abolish.
(f) Section 1322 is a remedial provision and should be construed liberally.
(g) A purpose of s 1322 is to ameliorate the strict application of the Act where its application might otherwise operate unfairly or unjustly.
Possible damage to Mr Mond’s reputation
The following evidence was given by Mr Mond, which I accept. Mr Mond is 59 years old. He is an FCPA (Tax), Chartered Tax Advisor and a Registered Tax Agent with over 27 years’ experience in Financial Accounting and Commercial Practices. Mr Mond is the Managing Director of Recoveries Corporation Group Ltd (“Recoveries”) and is a Certified Practicing Accountant and Registered Tax Agent. He is the director of dozens of companies, and he has never been the director of a company that was ordered by a Court to be placed in liquidation. Mr Mond says that his reputation would be damaged by being seen to be a director of a company that was subject to a winding up application or that was wound up.
Recoveries is a leading debt recovery and claims leakage management service provider to Federal Government Departments in Australia. It is a national receivables provider to ASX Companies, including major national banks and insurers. The company employs over 300 people. The industry in which it operates is highly competitive.
Recoveries regularly tenders for government contracts and contracts with public companies. When tendering for contracts with government and public companies, it is common for the prospective client to undertake searches of the ASIC database that extend to other companies of which Mr Mond is a director. Such searches are relatively easily undertaken.
A search of Mr Mond’s name in the ASIC database, and all of the companies of which he is a director can be undertaken. A search can then be undertaken of the separate companies. At present, if such searches were undertaken firstly, of Mr Mond, and then of the companies of which Mr Mond is a director (and hence MIG), they would reveal that Mr Mond is the sole director of MIG, and that during the time of his sole directorship, the company has been the subject of court-ordered winding up and that it has had a liquidator appointed. This information is readily available through ASIC and also when enquiries are made of private entities that have access to the ASIC records.
Mr Mond says that he is very concerned that this could hinder his future endeavours in his capacity as the managing director of Recoveries and the other related companies of which Mr Mond is a director, by deterring prospective clients from looking favourably upon tenders from Recoveries.
Mr Mond says that there is often suspicion of financial instability or unreliability or other similar negative inferences attached to a person who was a director of a company that went into liquidation. He says that it is important to him that he maintain his perfect record in this regard. The debt recovery business is very much driven by reputation, and so Mr Mond’s reputation as Managing Director of Recoveries is vital.
If, as a result of government or public companies carrying out searches of the ASIC register, it becomes known that Mr Mond was the director of a company that had been wound up by the Court and had a liquidator appointed (albeit for a short time) Mr Mond contends that it is likely that some companies or government agencies would be likely to be reluctant to do business with Recoveries, for the reasons set out above.
Mr Mond says that if the records pertaining to the winding up of MIG were stricken from the register and database of ASIC, it would enable Mr Mond to continue in his capacity as the Managing Director of Recoveries and in his role as a director of numerous companies unhindered by any reputational damage arising from the records pertaining to the winding up of MIG.
Mr Mond also operates an accounting business known as David Mond & Associates, Certified Practising Accountants and Tax Agents. He commenced his practice in 1984. Mr Mond says that the presence of the winding up order of MIG on ASIC’s database could have a negative impact upon his business as a Fellow Certified Practising Accountant and Chartered Tax Advisor, although he does not say this is of the same magnitude as the risk to his reputation as Managing Director of Recoveries.
Substantial injustice to any other person
The Court may not make an order under s 1322(4)(b) unless it is satisfied that no substantial injustice has been, or is likely to be, caused to any person.
S&D, the applicant for the winding up order, appeared and offered no objection to the order being sought. ASIC did not appear. There was no evidence before the Court of any injustice being caused to any person by the making of the orders sought. I am satisfied that no substantial injustice has been or is likely to be caused to any person.
Should the Court in its discretion grant Mr Mond’s application?
In my view, the five entries that are sought to be removed must be considered in two groups. This requires an examination of the circumstances surrounding the application to wind up and those consequent upon the winding up order, as now recorded on the register of companies.
The notification of the application to wind up MIG
At the stage that the notification to wind up had been served on MIG on 13 July 2011, MIG had instituted its appeal to the Court of Appeal against the orders of 9 June 2009. At this stage, MIG had also failed to pay the agreed moneys to S&D. Mr Mond’s affidavit material in support of the application provides no explanation why the debt was not paid.
Mr Mond provides no explanation of how or why MIG was stripped of all assets, leaving it unable to meet the judgment debt due to S&D. The inference is open that Mr Mond caused MIG to put beyond the practical reach of S&D, assets of MIG, that might have been required to meet MIG’s liabilities to S&D.
MIG was obliged to pay the demand the subject of the statutory demand and failed to do so. But for the moneys sent overseas, MIG should have been in a position to pay the debt. I do not believe that the application to wind up MIG in those circumstances rendered an injustice or unfairness to MIG.
Accordingly, I am not satisfied that the circumstances are such as to justify the Court exercising its remedial powers to remove from the register the notice of the application to wind up MIG under s 1322(4)(b).
The winding up of MIG
I now turn to the notice of appointment of a liquidator by the Court. As discussed above, the winding up order was set aside. The application to wind up, however, remained on foot. For the reasons I gave in setting the winding up order aside, that order should not have been made at that time. On the other hand, MIG could have avoided the application to wind up and the consequences that flowed from that application if it had paid the sum that it agreed to pay in October 2009.
The actions of Mr Mond in causing MIG to transfer some $410,000 to a bank account in Israel for him and Mrs Mond to use to buy a house should have been fully and frankly explained by Mr Mond to the Court. This is particularly so in the circumstances where a proper accounting by MIG to S&D (and the other security holders) of the sale proceeds from the sale of the Footscray property had not been carried out, and where (as events transpired) MIG should have accounted to S&D for $164,9894 plus interest. Mr Mond should have explained why these transfers were effected prior to the attempt to account to the liquidators in November 2007. Mr Mond should have explained why MIG was fully denuded of assets before these issues were resolved.
In my opinion, in an application such as the one before the Court, the onus lies on Mr Mond to frankly and fully inform the Court of all the relevant circumstances that led to MIG’s inability to pay the judgment debt that it agreed to pay to the liquidator (for the liquidator to pay into Court). Mr Mond has failed to do so. In my view, the Court is unable to form an informed view on whether or not an injustice has been effected by allowing the challenged entries to remain on the register of companies, or whether or not it is otherwise unfair to allow them to remain.
There is little authority in the area of rectifying the register in relation to winding up on the grounds of insolvency. In OneSteel, Finkelstein J dealt with a situation where a major corporation had not received the statutory notice. When it discovered the notice, it immediately satisfied the debt. Clearly, the justice of the situation justified removal of the notice of the application to wind up Westpoint.
I accept that there is a risk to Mr Mond’s commercial reputation. In the circumstances, however, I find that Mr Mond has not satisfied me that these properly made entries should be removed from the register kept by ASIC.
21
3
0