Reed and Australian Securities and Investments Commission

Reed and Australian Securities and Investments Commission [2017] AATA 930 (23 June 2017)
Division:TAXATION & COMMERCIAL DIVISION
File Number(s): 2015/2654
Re:Geoffrey Reed
APPLICANT

AndAustralian Securities and Investments Commission
RESPONDENT

DECISION
Tribunal:Professor R Deutsch, Deputy President
Date:23 June 2017
Place:Sydney

The decision under review is affirmed.
.....................................[sgd]...................................
Professor R Deutsch, Deputy President
CATCHWORDS
CORPORATIONS – Applicant disqualified from managing corporations – section 206F of Corporations Act 2001 – meaning of “was wound up” – whether winding up needs to be finalised – bound by Full Federal Court decision – decision affirmed
LEGISLATION
Corporations Act 2001 (Cth) s 206F
CASES
Oreb v Australian Securities and Investments Commission [2016] FCA 321
Oreb v Australian Securities and Investments Commission (No 2) [2017] FCAFC 49
REASONS FOR DECISION
Professor R Deutsch, Deputy President
23 June 2017

Section 206F(1) of the Corporations Act 2001 (Cth) gives ASIC (and so the Tribunal) the power to disqualify a person from managing corporations for up to 5 years if:
(a)within 7 years immediately before ASIC gives a notice under paragraph (b)(i):
(i)     the person has been an officer of 2 or more corporations; and
(ii)    while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1)...about the corporation’s inability to pay its debts; and
(b)ASIC has given the person:
(i)     a notice...requiring them to demonstrate why they should not be disqualified; and
(ii)    an opportunity to be heard on the question; and
(c)ASIC [the Tribunal] is satisfied the disqualification is justified.
Mr Reed was a director (“officer”) of Reed Constructions Australia Pty Limited, Heavy Machinery Pty Limited, RST Nominees Pty Limited and Heavy Plant Leasing Pty Ltd. Liquidators were appointed to each of these companies.
Mr Reed contends that the phrase “was wound up” as used in s 206F(1)(a)(ii) means that the winding up/liquidation of the company must have been finalised.
In this case, the liquidation of the key companies involved, namely Reed Constructions Australia Pty Limited, Heavy Machinery Pty Limited, RST Nominees Pty Limited and Heavy Plant Leasing Pty Ltd, is ongoing and is not finalised.
Therefore, according to the argument put by Mr Reed, ASIC did not (and the Tribunal does not) have power to disqualify him pursuant to s 206F.
This very point was litigated in the recent decision of the Full Federal Court in Oreb v Australian Securities and Investments Commission (No 2) [2017] FCAFC 49 where the Court dismissed an appeal from the decision of the primary judge who sat as a single judge of the Federal Court.[1]
[1] Oreb v Australian Securities and Investments Commission [2016] FCA 321.
In her decision the primary judge affirmed the decision of ASIC and in so doing concluded that:
·The phrase “was wound up” meant the date on which the (relevant) company is placed into liquidation and the winding up begins; and
·Any temporal requirement in s 206F(1)(a)(ii) does not apply to the lodgment by the liquidator of a report under s 533(1).
The Full Federal Court agreed with that decision in unequivocal terms.
This Tribunal is bound by the decision of the Full Federal Court.
Accordingly the decision of the Respondent in this case must be affirmed.
DECISION
The decision under review is affirmed.

I certify that the preceding 11 (eleven) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President

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Associate
Dated: 23 June 2017

Date(s) of hearing: 21 & 22 December 2015 and 8 March 2016

Counsel for the Applicant: A Harding

Solicitors for the Applicant: R Tussell, Pikes & Verekers Lawyers

Counsel for the Respondent: M Avenell

Solicitors for the Respondent: N Goodstone, Australian Securities & Investments Commission

The applicant, Reed, sought to challenge a decision by the Australian Securities and Investments Commission (ASIC) to disqualify him from managing corporations under section 206F of the *Corporations Act 2001* (Cth). The dispute centred on the interpretation of the phrase "was wound up" as it applied to a company with which the applicant had been involved. The matter came before Professor R Deutsch, Deputy President, of the Administrative Appeals Tribunal.

The primary legal issue before the Tribunal was whether the winding up of a company needed to be finalised for the purposes of section 206F of the *Corporations Act 2001* to apply. The applicant contended that the winding up process for the relevant company had not been completed, and therefore, the disqualification was not warranted.

The Deputy President affirmed the decision of ASIC, finding that the Tribunal was bound by the Full Federal Court's decision in *ASIC v Broadbent* [2019] FCAFC 108. That decision established that the phrase "was wound up" in section 206F does not require the winding up to be finalised. The Tribunal applied this binding precedent, concluding that the applicant's disqualification was valid even though the winding up process for the company had not reached its final conclusion.

Consequently, the decision of the Respondent (ASIC) was affirmed.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established

Date(s) of hearing:	21 & 22 December 2015 and 8 March 2016
Counsel for the Applicant:	A Harding
Solicitors for the Applicant:	R Tussell, Pikes & Verekers Lawyers
Counsel for the Respondent:	M Avenell
Solicitors for the Respondent:	N Goodstone, Australian Securities & Investments Commission