The Case
Kay v Playup Australia Pty Ltd [2018] NSWSC 1579 (Parker J)
This recent case in the Supreme Court of New South Wales speaks caution to entities that approach the Court seeking to rectify references to it on ASIC’s public record. The case is of particular interest to insolvency practitioners and entities facing statutory demand and winding up proceedings.
An order to rectify the ASIC record is not as simple as one might think at first blush…
The issue
The issue in the proceedings was whether the Court had power to order the “rectification” of ASIC’s public database and was it proper to compel ASIC to remove material from its database concerning an entity that had been subject to winding up proceedings (but was no longer).
Background
Playup Australia Pty Ltd, the applicant, is in the business of fastasy sports and betting websites. That is a mere aside.
A statutory demand had been served on Playup. No application had been made to set it aside. Then, in the usual course, winding up proceedings were commenced against “Playup”. The proceedings were entirely valid.
But, during the winding up proceedings, the matter was settled on a commercial basis. Playup agreed to pay the debt owing. The proceedings were then discontinued.
However, in the midst of the litigation, various entries about Playup had been (legitimately) recorded on the public register maintained by ASIC. This was in consequence of the winding up proceedings.
Having regard to the discontinuation of the winding up proceedings, Playup approached the Court. It sought an order requiring ASIC to remove any reference to the winding up proceedings on ASIC’s public database.
Playup’s application relied on the Court’s power under section 1322(4)(b) of the Corporations Act. It states:
1322(4) …the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:…(b) an order directing the rectification of any register kept by ASIC under this Act;
Alternatively, Playup relied on the Court’s power under section 467(1)(c) of the Corporations Act to orders on the hearing of the winding up application.
Playup’s commercial drivers
The commercial imperative driving Playup’s application was corporate reputation. Playup stated it wanted to “float” later in the year. And, the notification on the ASIC register about the “winding up proceedings” was “spooking both investors and punters”. It contended that for investors and customers to take into account a winding up application that was later withdrawn would be irrational. His Honour Justice Palmed summed it up as being a concern that the reference to the winding up proceedings gave rise to “some sort of ongoing stain on its corporate reputation.”
Application refused
Playup’s application was refused. That is, ASIC was not ordered to rectify the register, despite the Court’s power to order rectification under section 1322(4)(b).
Playup’s application was considered contrary to the intention of Parliament and impermissible. His Honour Justice Parker considered that the legislature had decided that the fact of the making of a winding up application is to be recorded by ASIC and made publicly available. For the Court to order ASIC to remove reference to a winding up application from its database would be to require it to act contrary to the intention of Parliament. And, the result would be that the database, by its incompleteness, would be inaccurate. It is not for the Court to restrict the information based on the Court’s judgment about its relevance or utility.
His Honour noted:
I cannot see any justification for pretending that these events did not occur. It could hardly be suggested that upon the withdrawal of the winding up application in these proceedings, the Court would order that its file be destroyed, or take steps to prevent a member of the public who attended the hearings from publishing the fact that the proceedings had been brought.
And if the investors or customers are “spooked” by the truthful revelation that a winding application was made, and later withdrawn, that is not the Court’s concern.
Authorities
Numerous authorities were cited in the proceedings. For example, Re Voxson Sales Pty Ltd [1989] 1 Qd R 711, in which Ambrose J stated that once an application to wind up 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.
His Honour Justice Parker distinguished the approach stated by Finkelstein J in OneSteel Reinforcing Pty Ltd v Westpoint Constructions Pty Ltd (2005) 23 ACLC 1384 as being too wide. In that decision, Finkelstein J was satisfied that the ASIC register should be rectified following a scenario that but for a statutory demand coming to the attention of the debtor, a dispute would have never arisen.
His Honour Justice Parker also averred to Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd (2008) 71 NSWLR 262. He observed that in none of the authorities which post-date Miltonbrook has an order been made for the removal of reference to a winding up application.
Distinction
A distinction is made to cases where orders have been made that concern transactions notified to ASIC which the Court later concluded were invalid, or notifications which were erroneous, in the sense that they did not accurately reflect the actual transaction.
For example, the Court has power to order ASIC to alter or remove particulars of a winding up application recorded by it against a company where no valid application has been made or the particulars recorded are in some other way inaccurate.
But, importantly, it is a different thing to exercise the Court’s power so as to remove reference to a winding up application which has been validly made.
Take out
The judgment serves as a clarification of the scope of the Court’s power under section 1322(4)(b) and the circumstances where that power can be validly exercised. It is not a power that can be used where an entity wants to protect its reputation merely as a result of winding up proceedings coming to an end. The ability to validly invoke the Court’s power is dependent on there being something invalid or erroneous on the public record which does not accurately reflect the actual transaction.
As such, section 1322(4)(b) cannot be used as a quick fix solution to corporate reputation in consequence of winding up proceedings. To do so is contrary to the intention of Parliament.
Judgment
A link to the judgment is here.