FEDERAL COURT OF AUSTRALIA

Deppeler, in the matter of Deppeler [2017] FCA 768

ORDERS

THE COURT ORDERS THAT:

1.    Under sub-section 20-70(2) of Schedule 2 to the Corporations Act 2001 (Cth), the Court extends to 4:30 pm on 12 July 2017 the time within which the Plaintiffs may apply to the Australian Securities and Investments Commission to have the Plaintiffs’ registration as a liquidator renewed.

2.    The proceedings be adjourned to a date to be fixed.

3.    Costs reserved.

4.    Liberty to apply

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

REASONS FOR JUDGMENT

(Revised from transcript)

O’CALLAGHAN J:

1    In these two separate proceedings, Mr Deppeler and Mr Cooper seek orders as follows:

(1)    an order under s 20-70(2) of Sch 2 to the Corporations Act 2001 (Cth) (Corporations Act) extending until 4.30 pm on 12 July 2017 the time within which each of them may apply to the Australian Securities and Investments Commission (ASIC) to have their registrations as liquidators renewed; and

(2)    an order that, subject to ASIC renewing their registration as liquidators, the non-renewal of their registration in the intervening period does not affect the validity or effectiveness of their appointment to the companies outlined in the evidence before me and any action taken by them in connection with their roles as liquidators or administrators of those companies.

2    The applications are self-evidently urgent, and, for that reason, I delivered these reasons at the conclusion of the submissions made on behalf of the plaintiffs, by Mr McAloon of counsel, on 6 July 2017.

3    The applications are supported by affidavits of Mr Deppeler (in VID731/2017) and Mr Cooper (in VID736/2017), each sworn 4 July 2017, and an affidavit of Mr Cantone (in VID736/2017), sworn 5 July 2017.

BACKGROUND

4    Mr Deppeler and Mr Cooper are experienced insolvency practitioners. Mr Deppeler is a partner of Worrells Solvency and Forensic Accountants, primarily practicing from that firm’s Ballarat office. Mr Cooper is the managing director of Worrells Solvency and Forensic Accountants (SA) Pty Ltd. His practice is based in Adelaide. Mr Cooper has been a registered liquidator since 2002. Mr Deppeler has been a registered liquidator since 2012.

5    Recent amendments to the Corporations Act, which introduced by the Insolvency Law Reform Act 2016 (Cth) and came into effect on 1 March of this year, have imposed upon liquidators an obligation to renew their registrations with ASIC.

6    The registrations of Mr Deppeler and Mr Cooper expired because they did not renew their registrations by the due date, which, as I will explain, in both their cases, happened to be 3 May 2017.

7    Under the repealed provisions in the Corporations Act, the registration of a liquidator had no specified end date. It remained in force until, among other things, the registration was cancelled or until the person died. That is no longer so.

8     As the explanatory memorandum to the Insolvency Law Reform Bill 2015 (Cth) said:

Under the new law, the process for the registration of corporate insolvency practitioners will be aligned with the current personal insolvency process in order to improve the integrity of the registration process … Corporate insolvency practitioners will no longer be registered for life, but be required to renew their registration every three years.

9    ASIC has published Regulatory Guide 258, which is headed “Registered Liquidators: Registration, Disciplinary Actions and Insurance Requirements”. Under the heading “Renewal, lodgement of annual liquidator return and notifications to ASIC”, the following appears:

RG 258.75    If you are registered as a liquidator and your registration commenced before 1 March 2017, see RG258.83-RG258.87 to understand how the transitional arrangements associated with the commencement of the Insolvency Law Reform Act 2016… will affect your current registration as a liquidator.

10    RG 258.83 provides as follows:

RG 258.83    If you were a registered liquidator immediately before 1 March 2017, on 1 March 2017 you will be taken to be registered as a liquidator under the new provisions contained in subdivision (b) of division 20 of schedule 2 to the Corporations Act: subsection (1) of section 1553 of the Corporations Act.

11    RG 258.84 provides that: “The Corporations Act refers to such as person as an ‘old Act registrant’: s 1553(4) of the Corporations Act”.

12    RG 258.85 provides:

RG 258.85     Your registration as an old Act registrant is for the period ending on the first anniversary date of your existing registration that occurs on or after 1 March 2017: s 1555 (1) of the Corporations Act.

13    The following note gives this example of what was intended:

Note: For example, if you were registered as a liquidator on 17 July 2001, the date of your first anniversary after 1 March 2017, and hence the date your transitional registration expires, is 17 July 2017. You will need to renew your registration before this date if you wish to continue practicing as a liquidator and accept new appointments.

14    RG 258.77 provides:

RG 258.77     The renewal application must be lodged with ASIC in the approved form (form RL05 application for renewal of registration as a liquidator):

(a)     before your current registration as a liquidator ceases to have effect (section 20-70(2)); or

(b)     if the Court makes an order under section 20-70(3) extending the time within which you may lodge your renewal application - on or before the time specified in the Court order.

…

15    I will not set out separately s 20-70 of Sch 2 of the Corporations Act because it is relevantly identical to the description of it contained in Regulatory Guide 258: RG 258.77. I should, however, note expressly sub-s (3) of s 20-70, which provides as follows: “The Court may, on application, extend the time within which the individual may apply to ASIC to have the individual’s registration as a liquidator renewed”.

16    Subsection (4) of s 20-70 further provides that: “The application for renewal is properly made if subsection (2) is complied with”.

17    Section 20-75(1) of Sch 2 to the Corporations Act further provides:

(1)     On application under section 20-70, ASIC must renew the registration of the applicant as a liquidator if:

(a)    the application is properly made; and

(b)     the applicant has produced evidence in writing to ASIC but the applicant maintains:

(i)     adequate and appropriate professional indemnity insurance; and

(ii)     adequate and appropriate fidelity insurance;

against the liabilities that the applicant may incur working as a registered liquidator; and

(c)     the applicant has complied with any condition dealing with continuing professional education to which the applicant is subject during the applicant's current registration.

18    In the case of Mr Cooper and Mr Deppeler, their first anniversary date was 3 May 2017. They were, accordingly, required to lodge with ASIC, in the approved form, their applications for renewal no later than 3 May 2017. As things currently stand, because they did not do so, they are not registered liquidators.

19    The evidence before me is that neither Mr Cooper nor Mr Deppeler became aware that their respective registrations had expired until 30 June 2017, just a few days ago.

20    In the intervening period, Mr Deppeler and Mr Cooper have continued to act as liquidators and administrators and have continued to accept new appointments to companies pursuant to the Corporations Act, both as liquidators and as administrators. Details of their dozens of existing and new appointments are set out in the affidavit material. As I say, there is no doubt about the Court’s power to grant the extensions sought in this case.

Consideration

21    Mr McAloon has not been able to refer me to any decision dealing with an application of this sort. However, in my view, the principles governing such an application for an extension of time are analogous to those applicable in circumstances where a party must seek an extension of time to lodge an appeal. The considerations that are usually relevant to the exercise of such a discretion include the length of the delay, whether the applicant has provided an acceptable explanation for the delay and whether there is any prejudice to any other party: see, by way of example, Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1984) 3 FCR 344 at 348-349; and Mehmood v Attorney-General (Commonwealth) [2013] FCA 406; 141 ALD 339 at [3]-[6].

22    The evidence before me demonstrates, as counsel submitted, that the plaintiffs have made their applications promptly, only days after becoming aware of the expiry of their respective registrations. They have provided a frank explanation of the circumstances giving rise to the need for an extension, which circumstances include that, unlike at least one other of their partners, they did not receive a reminder or notice in the form that has apparently been provided by ASIC to other liquidators. The plaintiffs have also adduced evidence as to why it is highly likely that their respective registrations will be renewed, which evidence is to the effect that they are experienced liquidators who have satisfied all of the relevant continuing professional development requirements and have not been the subject of any ethical or related complaints. ASIC has been served with the applications, although that only occurred yesterday. At least as things currently stand, it is also difficult to point to any prejudice that could be caused by the extensions that are sought.

23    For those reasons, I propose to make an order in each of the proceedings in the terms set out at [1(1)] above.

24    As to the second order sought by each of the plaintiffs, which seeks to regularise the position with respect to their appointments as liquidators and administrators, as at present advised, I am of the view that there is some considerable doubt about whether the Court has power to make such orders, unless and until the plaintiffs again become registered liquidators, which they currently are not. I say that because s 45-1 of Sch 2 to the Corporations Act provides in sub-s (1): “The Court may make such orders as it thinks fit in relation to a registered liquidator”.

25    In circumstances where counsel appearing for the plaintiffs is unable to point to any other power in the Court to make the second of the orders sought this morning, and in circumstances where the Court has not yet received the benefit of any submissions from ASIC, the better course now is to adjourn to a date to be fixed the further hearing of the application by each of the plaintiffs for those orders.

26    In the meantime, the plaintiffs, obviously enough, will proceed as counsel has assured me they will proceed, as soon as is possible, to file their respective applications for renewal via ASIC’s online portal. As I understand the submissions from counsel for the plaintiffs, it is not possible for the plaintiffs to make any application for renewal out of time, or otherwise, other than through that portal. It will accordingly be necessary for ASIC, upon receipt of the Court’s order and these reasons, as a matter of urgency, to do that which is necessary to enable each of the plaintiffs to make their applications for renewal out of time in accordance with the Court’s order.

27    I should also add, because counsel for the plaintiffs, in his very helpful submissions, referred to it, that ASIC has acknowledged the prospect of judicial intervention in respect of acts taken by liquidators at a time when their registrations are expired by reason of the new regime for renewals. In particular, RG 258.77(b) of Regulatory Guide 258, to which I earlier referred, includes the following note:

Note: Your registration may cease to have effect even though you obtain an extension of time to lodge your renewal. You may need to take steps to obtain court orders in relation to actions taken by you after your registration ceases to have effect.

28    Accordingly, the further hearing of these applications will be adjourned to a date to be fixed.

Associate:

Dated:    7 July 2017