Litigation funding: International Litigation Partners Pte Ltd v Chameleon Mining NL [2012] HCA 45

The matter of International Litigation Partners Pte Ltd v Chameleon Mining NL (Receivers and Managers Appointed) [2012] HCA 45 was an appeal to the High Court of Australia from the Supreme Court of New South Wales.

International Litigation Partners Pte Ltd (ILP) entered into a litigation funding deed (the Deed) with Chameleon Mining NL (Chameleon) to fund litigation by Chameleon against Murchison Metals Ltd and others, claiming compensation for breach of statutory and fiduciary duties. Judgment was reserved in the Federal Court proceeding, and there was a restructure of Chameleon which triggered an 'Early Termination Fee' in the Deed. The fee was substantial, and was defined to mean 'an amount equal to "the Legal Costs (including Security for Costs)" expended by ILP up to the date of termination under cl 4.1 and a further amount being the higher of $9 million or the value of 20 per cent of the share capital of Chameleon at the "strike price" of its shares by the acquirer of the Change in Control' (at [10]).

In response to a claim by ILP for the fee, Chameleon gave a notice of rescission of the Deed under s925A Corporations Act, claiming that ILP ought to have had an Australian financial services license when entering into the Deed with Chameleon. While carrying on the business of litigation funding, ILP was not the holder of an Australian financial services license under Part 7.6 of the Corporations Act, and Chameleon argued that ILP should have been so licensed.

The majority (French CJ, Gummow, Crennan and Bell JJ) describe the operation of Part 7.6 of the Corporations Act as follows:

7. Part 7.6 of Ch 7 of the Act (ss 910A-926B) establishes a scheme for the licensing of providers of "financial services". Section 925A is of critical importance. It applies (by dint of s 924A) to an agreement with a client entered into in the course of a "financial services business" by a non-licensee who does not hold a licence and is not exempt from the requirement to do so, where the agreement constitutes or relates to the provision of a financial service by the non-licensee. Section 925A empowers the client to give to the non-licensee a written notice stating that the client wishes to rescind the agreement. This has the effect given by s 925E that the non-licensee is not entitled to enforce the agreement or to rely on it by way of defence or otherwise as against the client.

ILP argued that the provision of litigation funding to Chameleon was a 'credit facility' within the meaning of s765A(1)(h)(i) of the Corporations Act, which was exempt from the licensing requirement under Chapter 7 of the Corporations Act.

The Majority considered the Revised Explanatory Memorandum to the Financial Services Reform Act 2001 which stated that credit facilities were not covered by the definition of 'financial product' and to the extent they were consumer credit, they would be regulated by the State based Uniform Consumer Credit Code (which was displaced by the National Consumer Credit Protection Act 2009) (at [23]).

The majority considered the definition of a credit facility under the Corporations Regulations (at [26]):

26. Subject to exclusions which do not apply, the provision of "credit ... for any period", with or without prior agreement between the credit provider and the debtor and whether or not both credit and debit facilities are available, is a "credit facility" (reg 7.1.06(1)(a)). The term "credit" is defined in reg 7.1.06(3)(a) as meaning a contract, arrangement or understanding under which payment of a debt to the credit provider "is deferred", and as including "any form of financial accommodation" (reg 7.1.06(3)(b)(i)). The use in this way of the concept "means and includes" is to avoid any doubt that what is identified by the inclusion falls within the scope of the designated meaning of "credit"[11]. The result is that a contract, arrangement or understanding that is any form of financial accommodation is "credit", and its provision "for any period" will be a "credit facility".

The majority noted that the principal obligation of ILP in the Deed was to pay 'Legal Costs' within 28 days of receipt of written notification requiring payment, and upon resolution of the proceedings in favour of Chameleon, whether by settlement of judgment, ILP would be entitled to repayment of the 'Legal Costs' paid by it together with a 'Funding Fee'. The majority held that this was a form of financial accommodation provided by ILP to Chameleon, notwithstanding that ILP was to pay the 'Legal Costs' incurred by Chameleon, rather than advancing to it the moneys to enable it to do so itself (at [29] to [32]):

29. The principal obligation undertaken by ILP in the Funding Deed was its agreement in cl 2.1 to pay the "Legal Costs" within 28 days of receipt of written notification requiring payment. "Legal Costs" were defined as all costs associated with procuring the files of Chameleon's previous solicitor in the Federal Court proceedings, and all future agreed legal costs and disbursements incurred by Chameleon and ILP in relation to those proceedings or any appeal (cl 1). Upon resolution of the proceedings in favour of Chameleon, whether by settlement or judgment, ILP would be entitled (cl 3.1(a)) to "Repayment" of the Legal Costs it had paid in accordance with cl 2.1; ILP also would be entitled to payment of the "Funding Fee" (cl 3.1(b)). This was an amount being the higher of three times the costs incurred by ILP under cl 2.1 and the "Percentage Payment" out of the "Resolution Sum", being the gross amount received upon settlement or judgment in the proceedings. The "Resolution Sum" was to be held by Chameleon's solicitors on trust for ILP, as to so much thereof as was due to ILP under the Funding Deed (cl 3.3). 

30. Hodgson JA was of the view that what the Funding Deed provided to Chameleon was a form of financial accommodation[13]. This was so, in our opinion, notwithstanding that ILP was to pay the Legal Costs incurred by Chameleon rather than advancing to it the moneys to enable it to do so. 

31. In its submissions, Cape Lambert emphasised that reg 7.1.06(1)(a)(i) defined "credit facility" for s 765A(1)(h)(i) of the Act as "the provision of credit ... for any period". This was said to require identification in the Funding Deed of a period of time when there was money owing by Chameleon but not payable. This reflected too narrow a view of what might amount to the provision for a period of "credit" by a form of financial accommodation. This is true also of the submission made by Chameleon that "financial accommodation" postulated an obligation by Chameleon to pay money which was deferred, the deferral representing the accommodation. A bank overdraft may be subject to a term that it be repayable on demand by the bank, but the facility is one of accommodation for that period which elapses before the demand is made. 

32. Clause 2.1 of the Funding Deed contained a present promise by ILP to pay the Legal Costs within 28 days of receipt of written notification. The temporal limitation upon the performance of that promise was that the notification relate to costs in relation to the Federal Court proceedings or any appeal from a judgment or order therein. For its part, Chameleon undertook to make the payments identified in cl 3.1 if the Federal Court proceedings yielded a receipt whether by way of settlement or judgment.

Heydon J agreed with the majority in separate reasons.

The ILP v Chameleon decision is important for the litigation funding industry as it is authority for the proposition that similar funding agreements are 'credit facilities' which are exempt from the licensing requirements under Chapter 7 of the Corporations Act.

Reinstatement of pre-Corporations Law (1991) companies: Part 3

In my previous post I noted that the balance of authorities consider that the Corporations Act is not the appropriate legislation for reinstatement of a company which was registered and deregistered/dissolved under pre-1991 corporations legislation.

In City West Water Limited v Mr D Investments Pty Ltd [2002] VSC 553, Senior Master Mahony of the Supreme Court of Victoria considered that the legislation applicable at the time of the deregistration / dissolution is the appropriate legislation for the reinstatement of the deregistered company (at [28]). In Armitage v HXE Limited [2010] NSWSC 1109 White J of the New South Wales Supreme Court held that on the basis of the reasoning of Senior Master Mahony in City West Water, the Companies Act 1961 (NSW) was the appropriate legislation for reinstatement of a company deregistered at the time that the Companies Act 1961 (NSW) applied.

However, one issue with the application of these Acts is that they have been repealed. For instance:

• The Companies Act 1961 was repealed on 10 February 2010 by s3 (Schedule 1) of the Legislation Reform (Repeals No. 5) Act 2010.
• The Companies (Victoria) Code and Companies (Application of Laws) Act 1981 were repealed in 2008.

So how can these Acts be used to reinstate a company deregistered under them?

In Armitage, White J applied the Companies Act 1961 to effect the reinstatement of a company, whereas the Companies Act 1961 had been repealed. The basis for this was that there is legislation allowing for the survival of certain parts of previous corporations legislation which is not carried over into the Corporations Act (at [9] and [10]):

9 In Baird v WJT Howes Investments Pty Ltd [2008] NSWSC 1232; (2008) 68 ACSR 485, Barrett J followed City West Water Ltd v Mr D Investments Pty Ltd [2002] VSC 553; (2002) 43 ACSR 622 in holding that where a company had been deregistered under the Companies (New South Wales) Code, the provision of that Code remained applicable to applications for reinstatement. This was by virtue of s 85 of the Corporations (New South Wales) Act 1990 (NSW) pursuant to which the Code continued to apply by its own force in relation to matters arising directly or indirectly out of matters that arose before the commencement of that Act.

10 Section 20 of the Companies (Application of Laws) Act 1981 (NSW) provided that unless the contrary intention appeared all things and circumstances appointed or created by or under the Companies Act 1961 should, subject to the Companies (New South Wales) Code, continue to have the same status, operation and effect as they would have had if the Companies (Application of Laws) Act had not been enacted.

It appears that s85 of the Corporations (Victoria) Act 1990 may allow for the survival of the Corporations (Victoria) Code to the extent that the Corporations Act does not deal with those matters. s85 provides as follows:

(1) This section provides for the national scheme laws of this jurisdiction to supersede the co-operative scheme laws, which are to continue to operate of their own force only in relation to-

(a) matters arising before the commencement of this section; and

(b) matters arising, directly or indirectly, out of such matters-

in so far as the national scheme laws or the Corporations legislation do not deal with those matters.

Unfortunately s85 is unclear in its application and scope.

In respect of the survival of the reinstatement provisions of the Companies Act 1961, the Victorian equivalent of the survival legislation for the Companies Act 1961, being the Companies (Application of Laws) Act 1981, appears to have been repealed.

It is therefore unclear how any company could be reinstated if it was dissolved under pre-1991 corporations legislation. This issue was confronted by Barrett J in Tan v ASIC [2011] NSWSC 58 in which Barrett J was asked to reinstate a company deregistered under pre-1991 corporations legislation. Barrett J noted the lack of clarity, complexity and resultant difficulties in the equivalent New South Wales provisions at [6] to [9] as follows:

6. I am bound to say, however, that I have a distinct discomfort about continuing resort to the Companies (New South Wales) Code , given that its applicability and availability rest solely on the insubstantial foundation of s 85 of the Corporations (New South Wales) Act 1990 (NSW). The Companies (New South Wales) Code is otherwise not in force following repeal of the Companies (Application of Laws) Act 1981 (NSW) by the Statute Law (Miscellaneous Provisions) Act 2008 (NSW) which was itself repealed by the Statute Law (Miscellaneous Provisions) Act 2009 (NSW). 

7. As regards a company deregistered under New South Wales companies legislation before 1 January 1991, a combination of: 

(a) transitional provisions that came into effect upon the creation of the Corporations Law of New South Wales on 1 January 1991 by the Corporations (New South Wales) Act 1990 (NSW); 

(b) insertion into the Corporations Law of New South Wales by the Company Law Review Act 1998 (Cth) of not only reinstatement provisions corresponding with those in the present s 601AH but also the particular transitional provision that became s 1362CH;

(c) non-inclusion of that s 1362CH in the Corporations Act 2001(Cth); and 

(d) the wide-ranging but sometimes very generally and imprecisely expressed transitional provisions now in force through Division 6 of Part 10.1 of the Corporations Act 2001 (Cth)   

does not seem to provide a basis for a conclusion that reinstatement of registration may be dealt with by the court and by ASIC under s 601AH of the present Corporations Act.

8. It is in my opinion desirable that Parliament enact legislation dealing in a clear and concise way with reinstatement of the registration of a company either deregistered or dissolved before 1 January 1991 under State or Territory legislation then in force. 

9. Such cases arise fairly frequently. Identification of the correct basis on which to order and effect reinstatement is not something that is remote from practical affairs. 

The take-home message here is the following:

• Unless the issue is resolved by a Court of Appeal, it is unclear whether there is any scope for the reinstatement of a company deregistered before 1991.
• A practitioner needs to be very careful and thorough when faced with an application to reinstate a company dissolved before 1991.

s1324 Injunctions - AGBC Pty Ltd & Anor v Dessa & Ors [2012] VSC 118

The matter of AGBC Pty Ltd & Anor v Dessa & Ors [2012] VSC 118 was an application by a liquidator for an interim injunction under s1324(4) of the Corporations Act 2001 (Cth).  The liquidator was seeking to restrain a previous director of the company in liquidation from removing the assets and confidential information of the company.

s1324 provides as follows:

(1) Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:

(a) a contravention of this Act; or
(b) attempting to contravene this Act; or
(c) aiding, abetting, counselling or procuring a person to contravene this Act; or
(d) inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or
(e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or
(f) conspiring with others to contravene this Act;

the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.

... 

(4) Where in the opinion of the Court it is desirable to do so, the Court may grant an interim injunction pending determination of an application under subsection (1).

Gardiner AsJ referred to ASIC v Mauer-Swisse Securities Limited and Anor [2002] NSWSC 741 and set out the principles for obtaining an injunction under s1324 (at [31]):

31 In Australian Securities and Investments Commission v MauerSwisse Securities Limited and anor,[2] Palmer J of the Equity Division of the Supreme Court of New South Wales considered the principles to be applied in applications for interim injunctions under s 1324(4) of the Act. He described an inconsistency in approach in the authorities as to the principles upon which the Court should act in an application for an interim injunction under the sub-section. In the judgment, he summarised the principles he considered should be applied. Those which have relevance in the present context are as follows:

– the jurisdiction which the Court exercises under s.1324 CA is a statutory jurisdiction, not the Court’s traditional equity jurisdiction;
– Parliament has made it increasingly clear by successive statutory enactments that the Court, in exercising its statutory jurisdiction under s.1324, is not to be confined by the considerations which would be applicable if it were exercising its traditional equity jurisdiction;
– amongst the considerations which the Court must take into account in an application for an injunction under s.1324 CA are the wider issues referred to by Austin J in Sweeney and Parkes, and by Davies AJ in Pegasus; they may be gathered under the broad question whether the injunction would have some utility or would serve some purpose within the contemplation of the Corporations Act;
– these considerations are to be taken into account regardless of whether the application is for a permanent injunction under s. 1324(1) or for an interim injunction under s. 1324(4);
– although the questions whether there is a serious question to be tried and where the balance of convenience lies will not circumscribe the Court’s consideration in an application for an interim injunction under s. 1324(4), the interests of justice will always require that those questions be examined carefully when restrictions are sought to be imposed before the case has been properly examined by the Court, even where the protection of the public is said to be involved: see per Young J (as his Honour then was), in Corporate Affairs Commission (NSW) v Lombard Nash International Pty Ltd (1986) 11 ACLR 566, at 570-571;

In reaching the decision to grant the interim injunction sought by the plaintiff, Gardiner AsJ approached the matter on the principles set out in Mauer-Swisse and then considered that even if the injunction was treated as a conventional application in the equitable jurisdiction of the court, there are sufficient facts to demonstrate a serious question to be tried and that the balance of convenience favours the granting of the orders. Gardiner AsJ referred to the Court of Appeal's decision in Bradto Pty Ltd v Victoria (2006) 15 VR 6 (at [38]):

38 I also consider that the balance of convenience favours the granting of the orders sought. As was observed in Bradto Pty Ltd v Victoria,[4] the Court must in determining whether to grant an interlocutory injunction:

... [T]ake whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”, in the sense of granting an injunction to a party who fails to establish his right at the trial or in failing to grant an injunction to a party who succeeds at trial.

By way of summary:

• In AGBC Gardiner AsJ notes that the jurisdiction to grant an injunction under s1324 is a statutory one, and the considerations are different to those in the exercise of the Court's equitable jurisdiction. 
• The broad consideration for the granting of the injunction appears to be whether the injunction would have some utility or would serve some purpose within the contemplation of the Corporations Act. 
• The considerations in the equitable jurisdiction of whether there is a serious question to be tried and whether the balance of convenience favours the granting of the orders remain relevant.

Reinstatement of pre-Corporations Law (1991) companies: Part 2

In my last post I noted that s601AH of the Corporations Act 2001 (Cth) does not appear to give a Court power to reinstate a company that was registered and deregistered under pre-1991 corporations legislation.

However the authorities diverge on whether the Corporations Act is the appropriate avenue for reinstatement of a company that was either 'deregistered' or 'dissolved' under pre-1991 corporations legislation.

In terms of what companies laws have previous applied, I note that the following are some of the main acts which are the equivalent of the modern Corporations Act since the 1960's:

• The Companies Act 1961, being uniform State Acts.
• The Companies (Victoria) Code and the Companies (Application of Laws Act) 1981, being uniform State Acts.
• The Corporations Act 1989 (Cth) (the Corporations Law)
• The Corporations Act 2001 (Cth) (the Corporations Act).

In Parker v Australian Asbestos [2002] NSWSC 520, Austin J formed the view that although s601AH did not appear to apply to a company registered and deregistered under pre-1991 corporations legislation, there were other provisions in the Corporations Act which allowed s601AH to apply to such companies.

The reasoning and provisions are as follows (and contained at [11] to [14] of Parker):

1. S610AH Corporations Act provides for the reinstatement of a 'company'. 
2. ‘Company’ is defined under the Corporations Act as a company registered under that Act. As such, a company deregistered before the commencement of the Corporations Act is not a company for the purposes of the Corporations Act. 
3. S1400 Corporations Act provides that if a right was acquired under a provision of the Corporations Law (being the Corporations Act 1989) in force before 15 July 2011 and corresponds to a provision of the Corporations Act, then that carries over. 
4. S601AH Corporations Act has a corresponding s601AH in the Corporations Law. 
5. S1362CH of the Corporations Law (which does not have a corresponding provision in the Corporations Act) extends s601AH Corporations Law to reinstatement of companies incorporated under previous laws, including state laws, such as the Companies Act 1961. 
6. Because 601AH is a carried over provision, and because the carried over provision extends to earlier acts such as the Companies Act 1961, the company can be reinstated under s601AH of the Corporations Act.

For that reason, Austin J held that a company that was registered and deregistered under the Companies Act 1961 could be reinstated under s601AH of the Corporations Act.

For clarity, s1362CH Corporations Law provides the following:

ASIC's powers under section 601AH extend to the reinstatement of the registration of a body corporate that: 

(a)was at some time before commencement incorporated or taken to be incorporated under a previous law of this jurisdiction corresponding to Chapter 2 of the old law; and
(b)was deregistered before commencement.

In City West Water Ltd v Mr D Investments Pty Ltd [2002] VSC 553, Senior Master Mahony (now Associate Justice Mahony) disputed the correctness of the reasoning of Austin J. Associate Justice Mahony noted that s1362 of the Corporations Law only applied to ASIC's powers, and not the Court's powers. The criticism of the reasoning is set out at [26]:

With respect, as has been seen, the subject of s 1362CH was limited to `ASIC's powers' and the section did not have such a general operation with respect to the whole of s 601AH as Austin, J suggests in the passage quoted in [25]. In particular, it had no application to the jurisdiction of the Court under s 601AH (2).

For that reason, Associate Justice Mahony was 'compelled to conclude that, the company having been deregistered under the Code, the Court's jurisdiction to make the order for reinstatement of its registration is still to be found in s 459 (6) of the Code' (at [28]).

This decision has been followed an applied in Armitage v HXE Limited [2010] NSWSC 1109 to reinstate a company under the Companies Act 1961.

Armitage and City West Water are authorities in strong support of the proposition that if a company is deregistered/dissolved under pre-1991 corporations legislation, particularly the Companies Act 1961 and the Companies (Victoria) Code, then it is to be reinstated under those past Acts.

Reinstatement of pre-Corporations Law (1991) companies: Part 1

I was recently briefed to remove a caveat from a property that was lodged by a company that was registered and dissolved (now termed 'deregistered') under the Companies Act 1961 (Vic). The application was successful, however the process of getting there was complex.

This post discusses how a company, which existed and was deregistered before the Corporations Act 2001 (Cth) and before the Corporations Act 1989 (Cth) can be reinstated.

s601AH of the Corporations Act provides for the reinstatement of a company that has been deregistered. s601AH provides as follows:

Reinstatement by ASIC 

(1) ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered. 

Reinstatement by Court 

(2) The Court may make an order that ASIC reinstate the registration of a company if:

(a) an application for reinstatement is made to the Court by:

(i) a person aggrieved by the deregistration; or(ii) a former liquidator of the company; and

(b) the Court is satisfied that it is just that the company's registration be reinstated.

 (3) If the Court makes an order under subsection (2), it may:

(a) validate anything done between the deregistration of the company and its reinstatement; and(b) make any other order it considers appropriate. 

Note: For example, the Court may direct ASIC to transfer to another person property vested in ASIC under subsection 601AD(2). 

ASIC to give notice of reinstatement 

(4) ASIC must give notice of a reinstatement in the Gazette . If ASIC exercises its power under subsection (1) in response to an application by a person, ASIC must also give notice of the reinstatement to the applicant. 

Effect of reinstatement 

(5) If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim.

The definition of 'company' under the Corporations Act is 'a company registered under this act...'. This immediately gives the impression that s601AH will not apply to companies registered under previous companies legislation which applied before 2001. However, s1378 Corporations Act provides for the carrying over of companies registered under previous companies legislation, and therefore the application of the Corporations Act to those companies. Unfortunately, s1378 does not apply to companies that have been registered and deregistered under old companies acts.

s1378 provides as follows:

(1) If: 

(a) before the commencement, a company was registered under Part 2A.2 of the old Corporations Law of a State or Territory in this jurisdiction; and
(b) that registration was still in force immediately before the commencement;

the registration of the company has effect (and may be dealt with) after the commencement as if it were a registration of the company under Part 2A.2 of this Act as a company of whichever of the company types listed in subsection (2) corresponds to its previous class and type.

In Parker v Australian Asbestos [2002] NSWSC 520 this was recognised as a problem for reinstatement of old companies which have been deregistered under previous companies legislation, particularly pre-1991 corporations legislation. At [8] to [10] Austin J discussed the issue:

8 The first question to consider is whether the Court can order the reinstatement of the three companies under s 601AH of the present Corporations Act. Section 601AH (2) permits the Court to make an order that the Commission reinstate the registration of a company if, relevantly, the application for reinstatement is made to the Court by a person aggrieved by the deregistration, and the Court is satisfied that it is just that the company's registration be reinstated. Section 601AH of the present Corporations Act is in substance identical with s 601AH of the previous Corporations Law. Section 601AH was introduced into the Corporations Law by the Company Law Review Act 1998, which commenced on 1 July 1998. The 1998 Act also introduced the transitional provision in s 1362CH, to which I shall refer.

9 The Court's jurisdiction to make a reinstatement order under s 601AH is available only in the case of a "company". The word "company" is defined in s 9 of the Corporations Act, to mean a company registered under the Corporations Act. Section 1378 has the effect that if a body was registered as a company under the former Corporations Law and the registration was still in force immediately before the commencement of the Corporations Act on 15 July 2001, then as from 15 July 2001 the body is treated as if it were registered as a company under the new Corporations Act. Consequently, the body is a "company" for the purposes of the definition in s 9 of the Corporations Act, and if it is deregistered after the new Act commenced on 15 July 2001, the Court has jurisdiction to reinstate it under s 601AH (2).

10 For the sake of clarity, consider next the case of a body that was a company formed and registered under the Corporations Law of New South Wales, and was deregistered before 15 July 2001. That body is not a "company" within the definition in s 9 of the Corporations Act, since it has not been registered under the Corporations Act and is not deemed by s 1378 to have been so registered. Therefore the present power of the Court in s 601AH (2) of the Corporations Act could not be used to reinstate that body, absent any supplementation from the transitional provisions to which I shall refer below.

For that reason recent authorities have formed the view that s601AH is not the appropriate route for reinstatement of a company that was registered and deregistered under pre-1991 corporations legislation. However there have been diverging authorities on whether the Corporations Act empowers the Court to reinstate a company deregistered under pre-1991 corporations legislation.

In the next post I will discuss the avenues for reinstatement for such companies and the state of the authorities.

The Centro matter: ASIC v Healey [2011] FCA 717 and breach of director's duties.

The matter of Australian Securities and Investments Commission v Healey [2011] FCA 717 was a hearing in relation to the Centro group in the Federal Court of Australia before Middleton J. It concerned the scope of a director's duty to exercise reasonable care and skill in the context of understanding the financial reports of a company.

The judgment of Middleton J is an excellent read because it commences with a summary of His Honour's findings in relation to the scope of the director's duty to exercise reasonable care and skill. I have included a case summary and extracts of the judgment below.

Oswal v Burrup Holdings Limited [2011] FCA 609 - access to company records

The matter of Oswal v Burrup Holdings Limited [2011] FCA 609 (Oswal) was a hearing in the Federal Court of Australia before Barker J. The applicant was a director of two companies which had receivers appointed, and that director wanted access to company records. The receivers opposed this.

Oswal is interesting because of the depth of the Court's consideration of the right of a director to access company documents. I have included a case summary below.

Opensoft Australia Pty Limited v Miller Street Pty Limited [2011] FCA 653 - service under s459G and 109X

The matter of Opensoft Australia Pty Limited v Miller Street Pty Limited [2011] FCA 653 (Opensoft) was an application involving a jurisdictional question before Jagot J in the Federal Court of Australia. Jagot J was asked to determine if service of an application was in accordance with s459G of the Corporations Act 2001 (Cth), which is a provision which allows a company to apply to set aside a creditor's statutory demand that has been served upon it.

By way of summary, on the last day for service of an application to set aside a demand served on it, the plaintiff company did the following (in chronological order):

• At around 4pm attempted to file the application and affidavit at the Federal Court Registry, which was closed.
• At around 4.05pm served, at the address for service in the demand (being the address of the business of the agent of the defendant) unsealed copies of the application and affidavit by attending at that address and hand delivering them.
• Filed, by way of e-lodgment with the Federal Court, the application and affidavit and obtained a sealed copy of this at around 5.20pm that day.
• Emailed the sealed copies to the email address of the agent listed in the address for service in the demand and CC'd the defendant. The email addresses were not set out in the demand and the plaintiff company obtained these from other sources.

The defendant gave evidence that the email was received by the agent that day, but the defendant never received the email which was alleged to have been CC'd to it. The Court found that service was not effected pursuant to s459G and the Court therefore could not hear the application.

I have included a case summary and discussion below.

Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186

In the matter of Anton Fabrications (NSW) Pty Ltd - Bentley Smythe Pty Ltd v Anton Fabrications (NSW) Pty Ltd [2011] NSWSC 186 (Anton Fabrications) was an hearing for the winding up of a company. The main issue was whether the creditor properly served a creditor's statutory demand (the demand).

In Anton Fabrications, a creditor served a demand on a company in respect of a loan for $500,000 said to be made by the creditor to the company. A process server purportedly served the demand in a sealed envelope addressed to the company by leaving it in the letterbox situated inside the boundaries of a residential property which was nominated as the company's registered office.

The time of service on companies - s109X and 'deemed' service

When a company owes a debt which is over $2,000, the creditor has the option of serving on the company a statutory demand for payment of that debt (demand) or suing the company for the debt. If the company fails apply to the Court to set aside the demand (because it disputes the debt) or pay the demand within 21 days of service of the demand, then the creditor may apply to wind up that company under the Corporations Act 2001 (Cth).

Similarly, when a company is sued in Court by a creditor for a debt, the company usually has a fixed time period from service of the process in which to file an appearance or a defence in response to the originating process (process) served upon it (e.g. 10 days to file an appearance, 21 days to file a defence). If the company does not take action within the specified time, then the creditor can obtain judgment by applying to the Court.

So what is the position when a creditor believes that a demand or process was delivered a day or more earlier than the company says it was actually received? What if a director comes back from leave three weeks after the demand or process was actually delivered to the registered office? What happens when a company has moved its registered office and receives the demand or process much later than when it was posted because of a diversion to another address or a PO Box? In this situation, the company may think it has a certain time from receipt of the demand or process to respond, but the actual time to respond may be much less than that.

Part IVAA Wrongs Act 1958 (Vic) and joining corporate non-parties in liquidation

Part IVAA of the Wrongs Act 1958 (Vic) (Part IVAA) is a powerful tool for defendants being sued in negligence (or for a failure to take reasonable care in general) or for misleading or deceptive conduct when there may be other parties responsible for the loss being sued for. In such matters, the defendant can reduce its liability based on the comparative responsibility of other parties, provided the other parties are parties to the proceedings (unless they are dead or 'wound up'). When a defendant wants to join, as another defendant, a corporate non-party in liquidation, the authorities are unclear as to whether or not leave of the Supreme of Federal Court is required. This is an important consideration for matters issued in inferior jurisdictions, which do not have the power to give leave.