In the matter of: Supreme Imports Pty Limited (In Liquidation); Re Antony Anne De Vries [2002] NSWSC 246

New South Wales Supreme Court

CITATION : In the matter of: Supreme Imports Pty Limited (In Liquidation); Re Antony Anne De Vries [2002] NSWSC 246 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 5824/01 HEARING DATE(S) : 10 December 2001 JUDGMENT DATE : 10 December 2001

PARTIES : Antony Anne De Vries - (Plaintiff) JUDGMENT OF : Campbell J

COUNSEL : J B Conomy SOLICITORS : Pigott Stinson Ratner Thom CATCHWORDS : CORPORATIONS - management and administration - validation of procedural deficiencies concerning giving notice of meeting, and quorum at meeting - CORPORATIONS LAW SECTION 447A, 1322 - prejudice or detriment perse is not injustice - orders can operate with effect from a date prior to the date of making the order Shirlaw v Graham [2001] NSWSC 612 Deputy Commissioner of Taxation v Portinex/Slindale/Dalvale [2000] NSWSC 99 CASES CITED : In the Matter of Inventive Marketing Pty Limited [2000] VSC 432 Sydney Appliances Pty Limited (in liquidation) v Robert Bosch (Australia) Pty Limited [2000] NSWSC 32 Sambah Holdings Pty Limited v Lord [2001] NSWSC 1004. DECISION : Orders made

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

MONDAY 10 DECEMBER 2001

5824/01 IN THE MATTER OF: SUPREME IMPORTS PTY LIMITED (IN LIQUIDATION); ANTONY ANNE DE VRIES JUDGMENT – Ex Tempore (Revised 18.3.02) 1 HIS HONOUR: This is an application by Mr De Vries, who has been acting as the liquidator of Supreme Imports Pty Limited (in liquidation). He seeks an order under s447A of the Corporations Law that Part 5.3 of the Corporations Law is to operate in relation to the company as if the resolution purportedly passed by Michael Wolf on 19 February 1999 was a valid resolution of the board of directors of the company for the purpose of s436A of the Corporations Law, notwithstanding any absence of quorum. 2 The plaintiff also claims a declaration under s1322(4)(a) of the Corporations Law to the effect that the resolution purportedly passed by Mr Wolf as director of the company on 19 February 1999 was not invalid by reason of any contravention of the Articles of Association of the company. 3 He seeks also a declaration that he was validly appointed administrator of the company on 19 February 1999. 4 The plaintiff came to act as liquidator because there was what purported to be a resolution of the company on 19 February 1999 appointing him as administrator, and subsequently a meeting of creditors of the company on 21 April 1999 which purported to appoint him as liquidator. The present application relates to the circumstances in which he was appointed as administrator. 5 The appointment as administrator was made at a time when searches showed that the company had two directors, Mr Wolf and Mr Page. 6 It also showed that the shareholders of the company were Gayant Industries Pty Limited as to two shares and Pages Unlimited Pty Limited as to one share. The shares in Pages Unlimited Pty Limited were held by Mr Page and his wife. 7 Mr De Vries was approached by Mr Wolf on 17 February 1999 to become administrator. Mr De Vries contacted Mr Page and sought to discuss with him the question of his own appointment as administrator. Mr Page told Mr De Vries that he had not been involved in that company for some time. 8 On 18 February 1999 Mr De Vries met with Mr Page's solicitor, who said, in unequivocal terms, that Mr Page was no longer a director of Supreme and had no interest in what happened to it other than being repaid his loan. Mr De Vries enquired of Mr Wolf how this could be the case and was told that Mr Page's notice of resignation had not been filed with ASIC due to a clerical oversight. 9 The evidence on the present application also includes a letter of 23 March 1999 from Mr Page's solicitor which asserted, "Mr Page and Pages Unlimited Pty Limited ceased to have any further involvement with the company from this time" (a reference which, in context, means late January 1999). 10 Proceeding on the basis that the company now only had one director, Mr De Vries went ahead and organised a meeting of the company. That meeting was one where the minutes of which were prepared on the basis that it was a sole directors' meeting. The meeting passed a resolution appropriate for placing the company into administration. As I said earlier, the creditors ultimately decided to appoint a liquidator. 11 The liquidator conducted some public examinations of people, including Mr Page. Those public examinations caused the liquidator to have second thoughts about whether Mr Page had actually resigned as a director at the time of the company going into administration. Hence, the present application is brought to the Court. 12 The Articles of Association of the company contained provisions for giving notice of directors' meetings to directors and for the quorum at a directors' meeting. In those circumstances where there were two or more directors, a quorum of directors' meeting was two directors. If it were the case that Mr Page was a director of the company, he was not given notice of the meeting to appoint an administrator and there was a lack of quorum at that meeting. 13 The Corporations Law under s447A vests a wide discretion in the Court to make orders considered appropriate as to how far Part 5.3 of the Corporations Law is to operate in relation to a particular company. Section 1322 of the law provides that a proceeding is not invalid because of a procedural irregularity unless the Court considers the irregularity will cause substantial injustice that cannot otherwise be remedied. 14 Section 1322(4) empowers the Court to make declaratory orders declaring any act, matter or thing purportedly contained under the law to be valid. Section 1322(1)(b) specifically includes, in its explanation of what counts as a procedural irregularity, the absence of a quorum and a defect, irregularity or deficiency of notice or time. 15 It seems to me that it is established that the Court has power to make orders of the type sought in the present case. 16 See in particular Shirlaw v Graham [2001] NSWSC 612; Deputy Commissioner of Taxation v Portinex/Slindale/Dalvale [2000] NSWSC 99; In the Matter of Inventive Marketing Pty Limited [2000] VSC 432; Sydney Appliances Pty Limited (in liquidation) v Robert Bosch (Australia) Pty Limited [2000] NSWSC 32; Sambah Holdings Pty Limited v Lord [2001] NSWSC 1004. 17 In Sydney Appliances Pty Limited (in liquidation) v Robert Bosch (Australia), Santow J at 54FF stated why he would cure under s447A or s1322(4) any invalidity there might be in an appointment if, contrary to the view which his Honour held, there was indeed any invalidity in it. 18 On the hypothesis his Honour was considering, the case would have been one where there were two directors and only a single director passed the resolution in question. Under those circumstances, his Honour decided (and I respectfully agree) that there was power to make the validation order sought. 19 It is, of course, necessary for the Court to be satisfied that there is no substantial injustice. I respectfully agree with his Honour that individual prejudice or detriment per se is not injustice, substantial or otherwise. 20 In the present case, I cannot see how there would be any prejudice or detriment to Mr Page which amounted to injustice when he was a significant source of the liquidator's error, if indeed there was an error. Nor can I see how there is any detriment to anyone else involved in the affairs of the company. 21 The affairs of the company having been investigated and the creditors having decided it is appropriate for the company to be placed in liquidation, it is far more likely that there would be injustice if the wishes of the creditors in that respect were not able to be carried through. 22 I therefore make the first two orders which were claimed. In these circumstances, the third order is, as counsel for the plaintiff accepts, not necessary and I decline to make it. 23 The orders of the Court are orders 1 and 2 in the application dated 4 December 2001. (Mr Conomy handed up a draft short minutes proposing an amendment to order 1) 24 I withdraw the orders I made orally a moment ago. Counsel for the plaintiff seeks to orally amend the application originally made so as to make it clear that the validating order is effective retrospectively. The decision of Young CJ in Eq in Shirlaw v Graham [2001] NSWSC 612, especially at 14, makes clear that the power under s447A can be a retrospective one. 25 Indeed, the power would be severely limited in its utility if it were not so. 26 I am therefore prepared to make an order which makes clear that the resolution purportedly passed by Mr Wolf is effective not only from the date of this order but also as from 19 February 1999. 27 The orders of the Court are in accordance with short minutes of order which I have initialled, dated with today's date and placed with the papers. **********