Re Spitfire Q Pty Ltd

[2021] NSWSC 866

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Spitfire Q Pty Ltd [2021] NSWSC 866

Hearing dates:

25 June 2021

Date of orders:

25 June 2021

Decision date:

25 June 2021

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Orders made in accordance with short minutes of order.

Catchwords:

CORPORATIONS — Reinstatement application pursuant to s 601AH — Whether company has standing as a “person aggrieved” by the deregistration of its wholly owned subsidiary — Whether “just” to reinstate the registration of the deregistered company.

CORPORATIONS — Winding up — Grounds for winding up — Whether “just and equitable” — Where substratum of company has failed — Where holding company in liquidation.

Legislation Cited:

- Corporations Act 2001 (Cth), ss 461, 467A, 601AH, 1322

Cases Cited:

- Melluish v Underwood Development Pty Ltd [2004] NSWSC 429

- Owners of Strata Plan No 91349 v Australian Securities and Investments Commission (ASIC) (2020) 147 ACSR 456; [2020] NSWSC 685

- Re Catombal Investments Pty Ltd [2012] NSWSC 775

- Re CNPR Ltd [2018] NSWSC 989

Category:

Procedural rulings

Parties:

Katherine Elizabeth Barnet and Damien Mark Hodgkinson in their capacities as joint and several liquidators of Spitfire Corporation Ltd (in liq) (First and Second Plaintiffs)
Spitfire Q Pty Ltd (First Defendant)
Investar Research Pty Ltd (Second Defendant)

Representation:

Counsel:
T Rogan (Plaintiff)

Solicitors:
Mills Oakley (Plaintiff)

File Number(s):

2021/126746

Judgment

Amendment of Originating Process

1. By Interlocutory Process filed on 4 June 2021, the Plaintiffs, Ms Barnet and Mr Hodgkinson in their capacities as joint and several liquidators of Spitfire Corporation Ltd (in liq) (“Spitfire Corporation”) apply to join Spitfire Corporation as an additional Plaintiff in the proceedings, and to file an Amended Originating Process which will also seek an order under s 601AH(2) of the Corporations Act 2001 (Cth) that the Australian Securities and Investments Commission (“ASIC”) reinstate the registration of the First Defendant, Spitfire Q Pty Ltd (“Spitfire Q”). It appears from the evidence that Spitfire Corporation is the holding company of Spitfire Q and, at the time these proceedings were commenced by the liquidators seeking a range of other orders, they had not appreciated that Spitfire Q had been deregistered.

2. The principles as to amendment and joinder are well established, and are to be exercised having regard to the just, quick and cheap resolution of the real issues in dispute in the proceedings. I am satisfied that Spitfire Corporation has standing to seek the order for reinstatement of Spitfire Q under s 601AH(2) of the Act, as a person aggrieved by the deregistration, and in those circumstances the order for its joinder as Plaintiff and for the amendment of the Originating Process should be made.

3. Accordingly, I will, in making orders 1 and 2 of those set out in the Plaintiffs’ short minutes of order, when making orders at the conclusion of the application.

Order for reinstatement of Spitfire Q and validation of certain actions

4. The Plaintiffs, the liquidators of Spitfire Corporation and Spitfire Corporation also seek an order reinstating the registration of Spitfire Q under s 601AH(2) of the Corporations Act, and consequential orders under s 601AH(3) of the Act, validating certain steps taken by Spitfire Q, which were directed to bringing about a winding up of Spitfire Q. Those steps took place in the context of attempts by the liquidator of Spitfire Corporation to realise the value in that liquidation, and in particular, to realise the value of certain intellectual property held by Spitfire Q. The Plaintiffs have read evidence including affidavit evidence of one of the liquidators, Ms Barnet, in support of the application, but it is not necessary to address that evidence in detail since the facts are in narrow compass. ASIC has indicated, in customary form, that it does not oppose the application for reinstatement and would not attend the hearing of the matter, on specified terms.

5. Section 601AH(2) of the Act provides that the Court may order that ASIC reinstate the registration of the company if an application for reinstatement is made by a person aggrieved by the deregistration. I have already observed, in allowing an amendment of the Originating Process, that Spitfire Corporation is plainly aggrieved by the deregistration of Spitfire Q, so far as it has the consequence that it may be deprived, at least temporarily, of the value of assets in which it has an economic interest, through its shareholding in Spitfire Q. The basis for reinstatement under that section is that the Court is satisfied that it is just that the company's registration is reinstated. Section 601AH(3) in turn provides that, if the Court makes an order for reinstatement under s 601AH(2), then it may validate anything done during the period beginning when the company was deregistered and ending when the company's registration is reinstated.

6. Mr Rogan, who appears for the liquidators and Spitfire Corporation, in helpful submissions outlines the principles applicable to an order for reinstatement and notes, relevantly, that such an order may be made by reference to considerations including the circumstances in which the company was deregistered, the purpose of seeking the reinstatement, any likely prejudice to third parties by the reinstatement and the public interest generally: Owners of Strata Plan No 91349 v ASIC (2020) 147 ACSR 156; [2020] NSWSC 685 at [74]. He also points out, uncontroversially, that the Court may reinstate a company in circumstances that an application will be made at the same time or subsequently to place that company into liquidation: Melluish v Underwood Development Pty Ltd [2004] NSWSC 429. Here, it is arguable that Spitfire Q could be reinstated without appointing a liquidator, because it is not trading, although it may still have difficulties with solvency so far as it would become liable for annual ASIC fees after its reinstatement. However, little turns on that where an application will be made, in the course of this hearing, to appoint the liquidators of Spitfire Corporation as liquidators of Spitfire Q in any event.

7. Mr Rogan submits that, as I have noted above, Spitfire Corporation has standing as a person aggrieved where it is the sole shareholder in Spitfire Q, which in turn held assets which had a substantial book value, and which, I infer, may also have a market value, and that the reinstatement would assist the liquidator of Spitfire Corporation in realising the value of those assets for distribution among creditors of Spitfire Corporation. I note that Spitfire Q was deregistered by administrative action of ASIC because it had no directors, although liquidators of its holding company were in place. The consequence of reinstatement would be, as I have noted above, to make assets of Spitfire Q available to Spitfire Corporation and ultimately, potentially, to its creditors, and, plainly, the public interest is served by that course. I am satisfied that it is just to reinstate Spitfire Q for that reason.

8. As I have noted above, orders are also sought to validate certain steps which have been taken while Spitfire Q was deregistered, in ignorance of the fact that it had been deregistered, including steps that were taken towards its voluntary liquidation. I am satisfied that it is appropriate to make such orders to validate those steps, consequential upon the reinstatement of Spitfire Q, where those orders will assist the liquidators with their efforts to realise the value of assets of Spitfire Corporation for the benefit of its creditors.

9. Accordingly, I will, in making orders in the application, also make orders 5–9 in the Plaintiffs’ proposed short minutes of orders.

Winding up of Spitfire Q

10. The Plaintiffs also seek an order under, alternatively, s 461(1)(a) or s 461(1)(k) of the Corporations Act that Spitfire Q be wound up.

11. It seems to me that an order could have been made under s 461(1)(a) of the Act, and I would have made that order had it been necessary to do so. I am satisfied that a specific resolution was passed for the purposes of s 461(1)(a) of the Act, by special resolution, that Spitfire Q be wound up by the Court, and I validated that resolution in earlier orders that I have made. A further difficulty would have arisen, because the liquidators have been unable to lodge notice of that special resolution with ASIC within 14 days after the resolution was passed, because Spitfire Q had been deregistered at the relevant time. It seems to me that that difficulty could have been addressed, as Mr Rogan points out, either because it is simply a defect or irregularity in the winding up application under s 467A of the Act, or by an order under s 1322(4)(d) of the Act, which is sought by the liquidators, extending the time to give notice of that special resolution. I am also satisfied that, in the relevant circumstances, the fact that Spitfire Q could have adopted, notionally, other steps including proceeding to a voluntary winding up would not have been reason for the Court not to make such an order, particularly in the context of the other orders that are sought.

12. However, it is more straightforward to make a winding up order under s 461(1)(k) of the Act, under which it is alternatively sought, rather than under s 461(1)(a) of the Act. Mr Rogan points to circumstances in which the Court has been prepared to make an order under s 461(1)(k) of the Act on the basis that it is just and equitable that a company be wound up, and those include circumstances where the substratum of the company has failed: Re Catonbal Investments Pty Ltd [2012] 30 ACLS 12/031; [2012] NSWSC 775. As I observed in Re CNPR Ltd [2018] NSWSC 989, the words "just and equitable" are not limited by particular categories. It seems to me here that, as Mr Rogan points out, the substratum of Spitfire Q has failed, so far as it was established to hold intellectual property within an ongoing business, and that ongoing business is now in liquidation; but, even if that is not the case, I would hold that it is just and equitable to make the winding up order that is sought, where there can be no suggestion that Spitfire Q can continue as a going concern, without a director being appointed, and in circumstances that its holding company is in liquidation. The orders sought will, as I have noted above, promote the conduct of the liquidation and the potential distribution of assets of the group to creditors.

13. For these reasons, I will amend order 10 that is sought by the Plaintiffs to refer to s 461(1)(k) of the Act, I will make order 11 and delete order 12 which is no longer necessary. I will add a further order 17, reserving liberty to apply on two business days' notice. If any difficulty arises in respect of the winding up under s 461(1)(k) of the Act, it will then be open for the Plaintiffs to pursue orders under s 461(1)(a) of the Act and s 1322(4) of the Act, which I would have made had it been necessary to do so. I am satisfied that it is appropriate that Ms Barnet and Mr Hodgkinson be appointed as joint and several liquidators of Spitfire Q, where it is plainly convenient that the winding up of the subsidiary be addressed by the same liquidators as the winding up of the holding company, particularly in circumstances where an attempt is being made to realise the assets of the group for the benefit of creditors of the holding company.

Winding up of Investar Research Pty Ltd

14. The Plaintiffs also seek an order that the Second Defendant, Investar Research Pty Ltd (“Investar”) be wound up under s 461(1)(a) or alternatively s 461(1)(k) of the Corporations Act. By her affidavit dated 4 May 2021, Ms Barnet refers to a company search of Investar, which indicates that Spitfire Corporation is the sole shareholder in Investar, and that Investar now has no directors, and the latter position is confirmed by paragraph 24 of Ms Barnet's affidavit. Ms Barnet refers to the fact that Investar had acquired a share analysis platform for a substantial sum in March 2019, and it is at least possible that that share analysis platform has continuing value. Ms Barnet refers to a liability of Investar, in a relatively modest amount, to a third party in her affidavit dated 4 May 2021, and to a potential liability to another third party in a larger amount in her affidavit dated 26 May 2021.

15. It appears that the position in respect of an order under s 461(1)(a) of the Act would be the same in respect of Investar as in respect of Spitfire Q. Orders for an extension of time to give notice of that resolution would again be necessary, because it appears that the liquidators were unable to give that notice, possibly because a strikeout action by ASIC in respect of Investar was then under way. Again, it seems to me not to be necessary to address that difficulty, where an order for the winding up of Investar should be made on the just and equitable ground under s 461(1)(k) of the Act, for the same reasons that it was made in respect of Spitfire Q. That order will facilitate the realisation of the assets of Investar for the benefit of its creditors, and then, after its creditors' claims are discharged, for the benefit of its contributory, Spitfire Corporation and the creditors of Spitfire Corporation. It is likely for the benefit of the creditors of Investar that a liquidator be appointed, so far as that liquidator can realise relevant assets and deal with claims of creditors of Investar in the course of the winding up. The order under s 461(1)(k) is also supported by the fact that, as I have noted, Investar presently has no directors in place and therefore cannot be managed in a proper manner. I am satisfied that Ms Barnet and Mr Hodgkinson, as liquidators of Spitfire Corporation, are also appropriately appointed as liquidators of Investar.

16. For that reason, I will amend order 3 sought in the Plaintiffs’ short minutes of order to refer to s 461(1)(k) and will make order 4 sought in those short minutes of order.

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