Commonwealth of Australia v Castel Electronics Pty Ltd, in the matter of Castel Electronics Pty Ltd

• Jurisdiction: Australia Federal only
• Judgment Date: 13 April 2022
• Neutral Citation: [2022] FCA 432
• Date: 13 April 2022
• Court: Federal Court

Federal Court of Australia

Commonwealth of Australia v Castel Electronics Pty Ltd, in the matter of Castel Electronics Pty Ltd [2022] FCA 432

File number:	NSD 251 of 2022
Judgment of:	LEE J
Date of judgment:	13 April 2022
Date of publication of reasons:	22 April 2022
Catchwords:	CORPORATIONS – application for order that Australian Securities and Investments Commission deregister company two years after scheduled deregistration date – s 509(2) of the Corporations Act 2001 (Cth) that ASIC deregister the company – whether to exercise discretion to make order – considerations relevant to the exercise of discretion – application allowed
Legislation:	Corporations Act 2001 (Cth) ss 433, 509, 560 Personal Property Securities Act 2009 (Cth) s 340
Cases cited:	Programmed Maintenance Services Ltd v Ranelagh House Pty Ltd (in liq) [2008] FCA 1974 Re ACN 002 408 040 (in liq) [2013] NSWSC 470; (2012) 94 ACSR 485 Re Rosaub Pty Ltd [2005] NSWSC 689; (2005) 192 FLR 395
Division:	General Division
Registry:	New South Wales
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Number of paragraphs:	12
Date of hearing:	13 April 2022
Counsel for the Plaintiff:	Mr J Hynes
Solicitor for the Plaintiff:	King & Wood Mallesons
Counsel for the Defendants:	The First and Second Defendant did not appear

ORDERS

		NSD 251 of 2022
IN THE MATTER OF CASTEL ELECTRONICS PTY LTD (ACN 074 561 087)
BETWEEN:	COMMONWEALTH OF AUSTRALIA AS REPRESENTED BY THE ATTORNEY-GENERAL'S DEPARTMENT (ABN 92 661 124 436) Plaintiff
AND:	CASTEL ELECTRONICS PTY LTD (ACN 074 561 087) First Defendant ; AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Second Defendant

order made by:	LEE J
DATE OF ORDER:	13 APRIL 2022

THE COURT ORDERS THAT:

1. Pursuant to s 509(2) of the Corporations Act 2001 (Cth), the second defendant, the Australian Securities and Investments Commission, deregister the first defendant, Castel Electronics Pty Ltd (ACN 074 561 087), on 21 April 2024.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from the transcript)

LEE J:

1. Before the Court is an application for an order pursuant to s 509(2) of the Corporations Act 2001 (Cth) (Corporations Act), that the deregistration of Castel Electronics Pty Ltd (Castel) be deferred until 21 April 2024, being a date two years after the scheduled deregistration of Castel.

2. The background to the application can be shortly stated. In January 2018, receivers were appointed to Castel and, approximately six months later, a liquidator was appointed. In September 2018, the Commonwealth, through the Attorney-General’s Department (Department), made advances totalling approximately $630,000 to former employees of Castel under what is described as the “Fair Entitlements Guarantee scheme” (FEG Advance). It is said that, by virtue of s 560 of the Corporations Act, the Commonwealth became a subrogated priority creditor of Castel and, in September 2018, it lodged a proof of debt in respect of the funds advanced. The Commonwealth has received no distribution in the external administration.

3. The Commonwealth has now considered the returns lodged via the receivers in the external administration. The returns record receipts of approximately $1.75 million in respect of “legal recoveries”, approximately $1.252 million in payments to Castel’s secured creditor, and approximately $450,000 on account of the receivers’ remuneration, expenses and legal fees.

4. On 23 December 2021 and 24 January 2022, the Commonwealth sent correspondence to the receivers identifying concerns in relation to the payments made to the secured creditor and also the receivers’ fees.

5. In particular, it was identified that the receivers’ recoveries were likely proceeds of a circulating asset, as defined in s 340 of the Personal Property Securities Act 2009 (Cth), such that, by virtue of the operation of s 433 of the Corporations Act, the FEG Advance should have been satisfied ahead of any debt owing to the secured creditor. The Commonwealth has not received what it considers to be a satisfactory response in relation to these matters. Indeed, the evidence does not disclose whether the Commonwealth has received any reasoned or substantive response.

6. In January 2022, the liquidator lodged an end of administration return in respect of the company’s liquidation and advised the Department that the winding up of the company had been finalised. The liquidator also advised that necessary forms had been lodged with ASIC for deregistration. It was subsequently confirmed that this was scheduled to occur, as noted above, on 21 April 2022. In the event that the Commonwealth does not secure an order, the position of ASIC is that the registration will take place on the scheduled deregistration date provided for by the statutory scheme.

7. I am informed by counsel that the Commonwealth has determined to commence proceedings against the receivers for breach of s 433 of the Corporations Act in relation to the treatment of the company’s assets. The evidence before the Court reveals concerns that the continued existence of Castel will be necessary to allow the company (as well as the receivers) to be included as defendants in the proposed proceedings, and the company’s continued existence may be necessary to allow an orderly disbursement of funds realised from any proceedings ultimately brought. Additionally, references were made to the concern that the deregistration may lead to an earlier than otherwise destruction of books, records, and working papers that may be relevant to both the external administration and the issues in the proposed proceedings.

8. The principles upon which the discretion in s 509(2) of the Corporations Act is founded are well established and do not require any further elaboration.

9. There can be no doubt in the present circumstances the...