FEDERAL COURT OF AUSTRALIA Albarran v Geshrai Pty Ltd [2016] FCA 350 File number(s): QUD 227 of 2016 Judge(s): GREENWOOD J Date of judgment: 5 April 2016 Catchwords: CORPORATIONS – consideration of an application under s 447A(1) to vary the operation of Part 5.3A of the Corporations Act 2001 (Cth) Legislation: Corporations Act 2001 (Cth), ss 447A, 449C, Part 5.3A Cases cited: Australasian Memory Pty Limited v Brien, (2000) 200 CLR 270 - cited Date of hearing: 5 April 2016 Date of last submissions: 5 April 2016 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-Area Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 1 Solicitor for the Applicant: Taylor David Lawyers ORDERS QUD 227 of 2016 BETWEEN: RICHARD ALBARRAN AND MOHAMMED SHAHIN HUSSAIN AS JOINT AND SEVERAL ADMINISTRATORS OF GESHRAI PTY LTD (ADMINISTRATORS APPOINTED) ACN 099 304 088 Applicant AND: GESHRAI PTY LTD (ADMINISTRATORS APPOINTED) ACN 099 304 088 Respondent JUDGE: GREENWOOD J DATE OF ORDER: 5 APRIL 2016 THE COURT ORDERS THAT: 1. Pursuant to section 447A (1) of the Corporations Act (the 'Act') that: (a) section 449C(1)(c) of the Act has been satisfied by the making of this order and the resignation of Richard Albarran and Mohammed Shahin Hussain as Joint and Several Administrators of Geshrai Pty Ltd (Administrators Appointed) ACN 099 304 088 is effected; and (b) section 449C(1) of the Act be modified to provide that when an Administrator resigns, the Court may appoint someone else in his or her place. 2. Pursuant to Order 1(b) above, that Domenic Calabretta be appointed as Administrator of Geshrai Pty Ltd (Administrators Appointed) ACN 099 304 088. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. EX TEMPORE REASONS FOR JUDGMENT GREENWOOD J: 1 This is an application under s 447A(1) of the Corporations Act 2001 (Cth). That section provides that the "Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company". The Part in question is Pt 5.3A of the Act. Sections 449C(1) and (2) fall within Pt 5.3A of the Act and thus, those sections are susceptible of orders as to their operation within Pt 513A, under s 447A(1). The circumstances in relation to this matter can be briefly put this way. The Administrators, who are the applicants today, were appointed Administrators of the company, Geshrai Pty Ltd, on 7 March 2016 pursuant to s 436A of the Act by reason of a resolution of the company's sole director. Since that time, the Administrators have conducted investigations into the affairs of the company including completing the first report to creditors; considering a pre-appointment sale agreement for assets of the company, later described as the "Agreement"; and attending to and negotiating the adjournment of a winding-up application on foot against the company filed by the Commissioner of Taxation. On 18 March 2016, the Administrators discovered that the registered office of the purchaser described in the Agreement was "Williams Hall Chadwick" and, because of this, a potential conflict was perceived by the current Administrators. The Administrators are members of the firm Hall Chadwick, Chartered Accountants. That firm is affiliated with other accounting practices, namely, Maxim Hall Chadwick, Williams Hall Chadwick and HKF Limited. Each of those three firms is a financially independent firm of accountants in the Hall Chadwick association of firms. Nevertheless, the Administrators perceived that there might be a potential conflict of interest having regard to the association. They also thought that creditors of the company might also perceive there to be a conflict. The Administrators say that on the basis of the work completed to date, the potential perceived conflict of interest and their role as officers of the Court, they believe that the proper course is to make this application to the Court in the interests of transparency for the stakeholders in the administration. The particular difficulty is described in the affidavit of Mohammed Shahin Hussain sworn 1 April 2016 at paras 9 and following. The deponent there explains the circumstances which have given rise to an apprehension of a potential conflict. The application is also supported by the affidavit of Dane Grauf sworn 4 April 2016. It follows from these circumstances that the Administrators think the right course is to resign as Administrators and, in those circumstances, an alternative person ought to be appointed. That person is Mr Dominic Calabretta. Mr Calabretta has sworn a Consent to Act. Section 449C(1) of the Act sets out the protocols, for want of a better word, that would apply in circumstances where Administrators have resigned. In the ordinary course of events, the company, as appointor, would pass a resolution to appoint Mr Calabretta. Having regard to the circumstances which have arisen as to the resignation of the Administrators on the basis of an apprehension of bias in the mind of persons who might deal with the company, the Administrators have taken the view that the interests of transparency are served by bringing an application to the court to enable the court to make the appointment. There is a lot to be said in circumstances such as these for an application of this kind as it makes plain that the Australian courts have considered the questions in issue and have made a decision about the future Administration of the company. In order for the court to make the appointment as proposed, it is necessary to exercise the powers conferred under s 447A to vary the operation of Pt 5.3A as set out in s 449C(1). There is plain authority about the scope of s 447A, and although it is not necessary to set out in these reasons the relevant paragraphs, the decisive expression of opinion is by the Court, Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ in Australasian Memory Pty Limited v Brien, (2000) 200 CLR 270 at [24] and [26]. There is simply no doubt that the power resides to make orders of this kind and I am satisfied that an order ought to be made. The material shows that the director and the company have been notified of the application. They support the application and, in relation to the obligation to have regard to "the rights of the various groups of people that are affected" by the order, I am satisfied that the rights of various groups of people that are affected by the Administration are protected by the transparency of this application and the orders made today. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate: Dated: 5 April 2016