Reported Decision: 80 ACSR 337 New South Wales Court of Appeal CITATION: Sheahan v Londish [2010] NSWCA 270 HEARING DATE(S): 17 August 2010 JUDGMENT DATE: 21 October 2010 JUDGMENT OF: Hodgson JA at [1]; Young JA at [39]; Lindgren AJA at [179] 1. Extend the time for making an application for leave to appeal until 13 April 2010. 2. Grant leave to appeal. 3. Direct the applicants to file a notice of appeal in the form behind Tab 7 of the White Appeal Book within 7 days. 4. Allow the appeal. DECISION: 5. Set aside the orders made by Brereton J and entered on 6 October 2009. 6. Declare that the purported appointment of the appellants as administrators of Valofo Pty Ltd (Valofo) on 16 July 2009 is not invalid by reason of either or both of the following: Peter Londish not having been removed as a director of Valofo on 26 February 2009 and Sidney Londish not having been appointed as a director of Valofo in his place on that date in conformity with s 249B of the Corporations Act 2001 (Cth); Peter Londish not having been removed as a director of Londish Nominees Queensland Pty Ltd (LNQ) on 25 February 2009 and Sidney Londish not having been appointed as a director of LNQ in his place on that date in conformity with s 249B of the Corporations Act 2001 (Cth). 7. Reserve questions of costs. 8. Direct that the appellants make any submissions on costs within 14 days of the date of these reasons, the other parties within 14 days after receiving the appellants' draft with the appellants to have a further seven days after receiving those submissions to reply. Unless a party seeks to speak to the submissions the matter of costs will be decided on the papers. CATCHWORDS: Corporations- validity of appointment of directors of company who purported to appoint administrators- single shareholder company- whether document headed notice of removal and signed by sole shareholder constituted a valid resolution within Corporations Act 2001 (Cth), s 249B- relevance of intention of shareholder- distinction between legal personality of shareholder and company- importance of formalities. Corporations- whether Corporations Act s 201M or company Article to same effect validates appointment of the administrators by invalidly appointed directors- distinction between purported appointment and non-appointment of directors. Corporations- s 1322(4)- whether "contravention of the Act" extends to failing to take advantage of a provision of the Act- "contravention" has extended meaning- s 1322(6)- whether proceeding of a "procedural nature"- question irrelevant where just and equitable to make validating order. Companies Act 1959 (Vic) s 117(4) Company Law Review Act 1998 (Cth) Company Law Review Bill 1997 (Cth) LEGISLATION CITED: Corporations Act 2001 (Cth), ss 114, 201G, 203, 201M, 205B, 248A, 248B, 248D, 249A, 249B, 251A, 436A, 1322 Corporations Law, ss 114, 249(1)(a), 255A First Corporate Law Simplification Act 1995 (Cth) Joint Stock Companies Registration Act 1844 (UK) CATEGORY: Principal judgment Albert Gardens (Manly) Pty Ltd v Mercantile Credits Ltd [1973] HCA 60; 131 CLR 60 Australasian Memory Pty Ltd v Brien [2000] HCA 30; 200 CLR 270 Australian Capital Television Pty Ltd v Minister for Transport & Communication (1989) 86 ALR 119 Barron v Potter [1914] 1 Ch 895 Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1990) 3 ACSR 649; (1991) 6 ACSR 464 Calabretta v Redpen Developments Pty Ltd (2010) 183 FCR 47 Clifton v Mount Morgan Ltd (1940) 40 SR (NSW) 31 Coulton v Holcombe [1986] HCA 33; 162 CLR 1 Da Costa v Cockburn Salvage & Trading Pty Ltd [1970] HCA 43; 124 CLR 192 Dawson v African Consolidated Land and Trading Company [1898] 1 Ch 6 Deputy Commissioner of Taxation v Portinex Pty Ltd (2000) 156 FLR 453 Dominion Mining NL v Hill (No 1) [1971] ACLC 40-021 East v Bennett Brothers Limited [1911] 1 Ch 163 Grant v John Grant & Sons Pty Ltd [1950 HCA 54; 82 CLR 1 H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd [1957] 1 QB 159 Hughes v N M Superannuation Pty Ltd (1993) 29 NSWLR 653 In re Sanitary Carbon Co [1877] WN 223 Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564 CASES CITED: Jordan v Avram (1997) 25 ACSR 153 Kazar v Duus (1998) 29 ACSR 321 Londish v Sheahan [2010] NSWSC 337 Morris v Kanssen [1946] AC 459 NRMA Ltd v Gould (1995) 18 ACSR 290 O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310 Re Centennial Coal Co Ltd (2006) 56 ACSR 698 Re Colorbus Pty Ltd (2004) 51 ACSR 677 Re Continental Pacific [2002] NSWSC 789 Re Duomatic Ltd [1969] 2 Ch 365 Re Freehouse Pty Ltd (1997) 26 ACSR 662 Re MLC Ltd (2006) 60 ACSR 187 Royal British Bank v Turquand (1856) 6 El & Blk 327; 119 ER 886 Salomon v Salomon & Co [1897] AC 22 Sharp v Dawes (1876) 2 QBD 26 Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 Toole v Flexihire Pty Ltd (1991) 6 ACSR 455 University of Wollongong v Metwally (No 2) [1985] HCA 28; 59 ALJR 481 Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 40 ACSR 221 John Sheahan (First Appellant) Ian Lock (Second Appellant) PARTIES: Peter Londish (First Respondent) David Bowman (Second Respondent) Sidney Londish (Third Respondent) FILE NUMBER(S): CA 2010/3807 J E Marshall SC and D R Sulan (Appellants) COUNSEL: S J Burchett (First Respondent) P C Evans (Solicitors) (Second and Third Respondents) O'Neill Partners (Appellants) SOLICITORS: Hartmann Lawyers (First Respondent) Philip Evans & Associates (Second and Third Respondents) LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC 4058/09 LOWER COURT JUDICIAL OFFICER: Brereton J LOWER COURT DATE OF DECISION: 2 October 2009 LOWER COURT MEDIUM NEUTRAL CITATION: Londish v Sheahan & Lock in Re Valofo Pty Ltd [2009] NSWSC 1175 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 2010/3807 HODGSON JA YOUNG JA LINDGREN AJA Thursday 21 October 2010 SHEAHAN v LONDISH Headnote The appellants were appointed administrators of Valofo Pty Limited ("Valofo"). Valofo was the wholly owned subsidiary of Londish Nominees Queensland Pty Limited ("LNQ"), which was the wholly owned subsidiary of Vesudi Investments Pty Ltd ("Vesudi"). On 19 February 2009 David Bowman and Sidney Londish ("Sidney"), the second and third respondents and majority shareholders of Vesudi, signed a notice of the removal of Peter Londish ("Peter"), the first respondent and one third shareholder in Vesudi, as a director of Vesudi and his replacement by Sidney in accordance with Article 62 of Vesudi's Articles of Association. Sidney and Mr Bowman then later signed a notice on behalf of Vesudi advising LNQ that as sole shareholder it gave notice of the removal of Peter and replacement of Sidney as director of that company. The same process was followed by LNQ to remove Peter and replace Sidney as director of Valofo. On 16 July 2009 Sidney and Mr Bowman, purporting to be directors of Valofo, resolved to appoint the Mr Sheahan and Mr Lock, the appellants, as the company's administrators pursuant to s 436A. Following the presently appealed decision, Londish was validly appointed director of Valofo in place of Peter; the administrators were reappointed to Valofo; and Justice Palmer dismissed proceedings alleging improper purpose and that Valofo was not insolvent at the time of that appointment. At trial, Peter succeeded before Brereton J in an application against Mr Bowman and Sidney for a declaration and consequential orders that the appellants had not been validly appointed administrators. Brereton J held that the notice removing Peter as director of Vesudi and replacing Sidney was an effective exercise of the power under Article 62. However, Brereton J held that the notice issued to LNQ did not comply with s 249B Corporations Act 2001 (Cth), because it was not a resolution of LNQ, but a unilateral act of Vesudi giving notice to LNQ of removal in accordance with Vesudi's Article 62, which was not found in LNQ's Articles. The same reasoning applied to Valofo. Hence, there was no valid resolution removing Peter and replacing Sidney as director of LNQ or Valofo, nor a valid appointment of the administrators by Valofo. Brereton J rejected the validation of the directorial removal and appointments under s 1322(4)(a) because those actions were substantive and not "procedural irregularities" under s 1322(6)(a). He also held that s 447A would not authorise such an order and that he would not exercise his discretion to apply s 447A this way. On appeal, the appellants put that Brereton J erred in finding that Sidney and Mr Bowman were never appointed directors of LNQ or Valofo because the notices signed and issued satisfied s 249B. The notices were signed "records" because they were documents in writing which clearly evinced the decision and intention of the persons entitled to remove Peter and appoint Sidney as directors. Alternatively, Article 54 of Valofo's articles of association of s 201M validated the appointment of the administrators despite the invalidity of Sidney's directorship. Further, the Court should exercise its discretion to confirm the validity or non-invalidity of the appointment of the administrators under s 1322. The respondent argued that leave to appeal should be refused because the applicants did not personally press the issues argued on appeal at trial and that to allow the appeal would only affect the costs order of the applicants, who were indemnified, and waste resources if the matter was remitted on the unresolved issue of improper purpose. The appeal raised five issues: 1. Whether leave to appeal should be granted. 2. The ambit of the operation of s 249 B of the Corporations Act . 3. Whether s 201M Corporations Act or Article 54 of LNQ and Valofos' Articles of Association validated the appointment of the administrators despite the invalidity of Sidney's appointment as director: 4. Whether the invalidity of the administrator's appointment was by reason of "contravention of the Act" and whether the Court should make an order under s 1322 confirming validity. 5. Whether the matter should be remitted for a rehearing on the issue of improper purpose. The Court held, granting leave to appeal and allowing the appeal: 1. As to leave: Hodgson JA, Young JA (Lindgren AJA, agreeing): where other parties squarely raised the matters ventilated on appeal at trial, the matters were in issue by the conduct of the parties and need not have been personally argued by the applicants. Despite the weighty matters telling against granting leave, the course of justice suited the granting of leave to appeal where the applicant raised some significant legal questions; there was a significant doubt that the decision below was wrong; and there was arguably prejudice caused by the decision below to the applicants. Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564, applied; O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310, applied; University of Wollongong v Metwally (No 2) [1985] HCA 28; 59 ALJR 481; Coulton v Holcombe [1986] HCA 33; 162 CLR 1, distinguished. 2. As to s 249B: Young JA and Lindgren AJA: s 249B resorts to formalism to identify distinguish what human action will count as a corporate act or resolution in the one member context and what will not. In its historic context s 249B requires "the resolution itself" to be documented. Section 249B simultaneously makes the recording of the intended resolution of the member the act of making the resolution by the company (as if in general meeting). Once the record is made and signed, the officers of the corporation have a statutory duty to insert it in the minute book as an official act of the corporation. However, the intention, even if final, of the member of a single member company is not the equivalent of a resolution of that company and is not determinative. Such equivalence would destroy the distinction between the legal personality of the company and the legal personality of a shareholder and would be inconsistent with statutory formalities. Vesudi or LNQ did not record and sign a record of a resolution by the notices to LNQ or Valofo. Rather, the notices notified of an assumed removal and appointment, the dates and terms of which were not revealed. Sharp v Dawes (1876) 2 QBD 26; East v Bennett Brothers Limited [1911] 1 Ch 163; Re Duomatic Ltd [1969] 2 Ch 365 considered; Toole v Flexihire Pty Ltd (1991) 6 ACSR 455, applied. Hodgson JA (dissenting): The notices to LNQ and to Valofo were effective as resolutions under s 249B. There is no effective resolution of the company under s 249B until there is a resolution or decision of the sole shareholder, recorded and signed by that shareholder. An intention that there be something taking effect as a resolution passed by the company may be required, however, to distinguish between the intentions of LNQ itself and its sole shareholder would be over-technical and frustrate the clear intention of a sole shareholder having the power to achieve the result intended. The clear decision of Peter and Mr Bowman to effect the changes specified in the notice was a relevant resolution of Vesudi. The notice as the sole record of the resolution was signed, and in the context of its form and the actions taken in respect of it plainly manifested the intention that the notice would effect changes to the board of LNQ, and thus amounted to a record made by Vesudi of the decision. The trial judge erred inferring that the notice was an act of Vesudi on the basis of the mistaken belief of the existence in LNQ's articles of an equivalent of Aritcle 62. The mistake was not put; LNQ plainly had no such article; and unlike the Article 62 notice, the relevant notice referred to Vesudi holding all shares in LNQ. The intention that was objectively manifest by the decision and the recording of it was that the notice effect changes to the board of LNQ in accordance with LNQ's Articles and the applicable law. Clifton v Mount Morgan Ltd (1940) 40 SR (NSW) 31; Dominion Mining NL v Hill (No 1) [1971] ACLC 40-021, referred to. 3. As to Article 54 and s 201M: Young JA, Lindgren AJA, (Hodgson JA, dissenting but not deciding): for the purpose of Article 54, there is a distinction between purported but defective appointments of a director and the absence of any appointment. As the appointment of Sidney and Mr Bowman to LNQ and Valofo were ineffective, they were not authorised as directors to appoint the appellants. The notices were not evidence of a resolution to appoint Sidney. Similarly, a "director" within the scope of s 201M must be confined to a person who appears to be a director and appears to be recognised by the company's officers and associates as a director. Hence, Article 54 and s 201M did not apply, the case being one of non-appointment. Dawson v African Consolidated Land and Trading Company [1898] 1 Ch 6; Re Colorbus Pty Ltd (in Liq) (2004) 51 ACSR 677 considered; Morris v Kanssen [1946] AC 459; Grant v John Grant and Sons Pty Ltd [1950] HCA 54; 82 CLR 1, applied. Young JA: obiter, s 129 and the rule in Turquand's case do not compel a third party to recognise the administrators. Hughes v N M Superannuation Pty Ltd (1993) 29 NSWLR 653, applied; Royal British Bank v Turquand (1856) 6 El & Blk 327; 119 ER 886, referred to. 4. As to s 1322: Young JA, Lindgren AJA: the expression s 1322(4)(a) "an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation" in is in the widest terms and extends to the invalidity of the appointment. The words "contravention" in s 1322(4)(a) should be given a wide meaning to extend to where a company does not infringe the Act, but merely fails to take advantage of a provision of the Act. This extended meaning covers the deficiency in this case and thus a validating order ought to made under s 1322(4)(a). If it is just an equitable to make an order under s 1322(4)(a) it does not matter that the act or thing may not be procedural, however, the validation of "notices" so that they operate may be procedural. It was just and equitable to make the validating order pursuant to s 1322(6)(a) because there is a clear reality of the relevant shareholders and directors intending to affect a purpose within their mandate and no substantial injustice was likely to be caused to Peter. NRMA v Gould (1995) 18 ACSR 290; Jordan v Avram (1997) 25 ACSR 153; Re Freehouse Pty Ltd (1997) 26 ACSR 662; Re MLC Ltd (2006) 60 ACSR 187 applied; Young JA, obiter : the solemn making of a resolution by document purporting to produce the same effect as a resolution at a meeting is a "proceeding" for the purposes of s 1322(2) in the sense of "proceedings" in a meeting. 5. As to whether the matter should be remitted on improper purpose: Hodgson JA, (Young JA and Lindgren AJA agreeing): the matter ought not be remitted on the issue of possible improper purpose because the because the first respondent accepted the primary judge's invitation to decide the matter based on invalidity alone; improper purpose was relevant to s 1322(4) and was rejected by Palmer J and there was no evidence suggesting a change in circumstances before that decision. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 2010/3807 HODGSON JA YOUNG JA LINDGREN AJA Thursday 21 October 2010 SHEAHAN v LONDISH Judgment 1 HODGSON JA: By an interlocutory process filed on 9 September 2009 against the appellants (the administrators) and the second and third respondents (David Bowman and Sidney Londish) the first respondent (Peter Londish) claimed a declaration that the administrators had not been validly appointed as administrators of the company Valofo Pty Limited (Valofo), and consequential orders. This application was brought on two bases: (1) that the administrators were not duly appointed; and (2) that they were appointed for an improper purpose. 2 In his decision given on 2 October 2009, Brereton J upheld the application on the first basis, and did not resolve the second basis. 3 The administrators have sought leave to appeal. The leave application has been heard on the basis that, if leave is granted, the appeal will be determined without a further hearing. Statutory provisions 4 The application involves consideration of various provisions of the Corporations Act 2001 (Cth) (the Act), namely s 201M, parts of s 205B, s 249B, s 436A and parts of s 1322: 201M Effectiveness of acts by directors (1) An act done by a director is effective even if their appointment, or the continuance of their appointment, is invalid because the company or director did not comply with the company's constitution (if any) or any provision of this Act. (2) Subsection (1) does not deal with the question whether an effective act by a director: (a) binds the company in its dealings with other people; or (b) makes the company liable to another person. Note : The kinds of acts that this section validates are those that are only legally effective if the person doing them is a director (for example, calling a meeting of the company's members or signing a document to be lodged with ASIC or minutes of a meeting). Sections 128-130 contain rules about the assumptions people are entitled to make when dealing with a company and its officers. 205B Notice of name and address of directors and secretaries to ASIC New directors or secretaries (1) A company must lodge with ASIC a notice of the personal details of a director or secretary within 28 days after they are appointed. The notice must be in the prescribed form. Note 1: If a person becomes a director under subsection 120(1) there is no appointment and no notice is required under this subsection. Note 2: If a person who was appointed as an alternate director becomes a director under the terms of their appointment as an alternate director, there is no appointment as a director and no notice is required under this subsection. ….. Notice required if person stops being a director or secretary (5) If a person stops being a director, alternate director or secretary of the company, the company must lodge with ASIC notice of the fact within 28 days. The notice must be in the prescribed form. ….. 249B Resolutions of 1 member companies (1) A company that has only 1 member may pass a resolution by the member recording it and signing the record. (2) If this Act requires information or a document relating to the resolution to be lodged with ASIC, that requirement is satisfied by lodging the information or document with the resolution that is passed. Note 1: A body corporate representative may sign such a resolution (see section 250D). Note 2: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A). 436A Company may appoint administrator if board thinks it is or will become insolvent (1) A company may, by writing, appoint an administrator of the company if the board has resolved to the effect that: (a) in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and (b) an administrator of the company should be appointed. (2) Subsection (1) does not apply to a company if a person holds an appointment as liquidator, or provisional liquidator, of the company. 1322 Irregularities (1) In this section, unless the contrary intention appears: (a) a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and (b) a reference to a procedural irregularity includes a reference to: (i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme; and (ii) a defect, irregularity or deficiency of notice or time. (2) A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid. ….. (4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, 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: (a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation; (b) an order directing the rectification of any register kept by ASIC under this Act; (c) an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a); (d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit. ….. (6) The Court must not make an order under this section unless it is satisfied: (a) in the case of an order referred to in paragraph (4)(a): (i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature; (ii) that the person or persons concerned in or party to the contravention or failure acted honestly; or (iii) that it is just and equitable that the order be made; and (b) in the case of an order referred to in paragraph (4)(c)—that the person subject to the civil liability concerned acted honestly; and (c) in every case—that no substantial injustice has been or is likely to be caused to any person. Outline of facts 5 Valofo is the wholly-owned subsidiary of Londish Nominees Queensland Pty Limited (LNQ) which in turn is a wholly-owned subsidiary of Vesudi Investments Pty Ltd (Vesudi). Article 62(3) of the Articles of Association of Vesudi provides as follows: (3) The holders for the time being of a majority of the issued shares in the capital of the Company which confer on them the right of voting at all general meetings of the Company may at any time remove any director from office and may appoint any person to be a director either in place of a director so removed or to fill a casual vacancy otherwise occurring or as an addition to the board of directors (but so that the total number of directors does not at any time exceed the number determined in accordance with these regulations). Any appointment or removal under this subregulation may be made at any time and must be in writing under the hands of the holders of the majority of such issued shares or an attorney for or officer of each such holder duly authorised in that behalf. Any such appointment or removal will take effect immediately on delivery of the instrument of the appointment or removal to the registered office of the company. 6 As at 19 February 2009, Masalo Holdings Pty Limited (Masalo) and Tiffany Properties Pty Limited (Tiffany) together constituted a majority of the shareholders in Vesudi. On that day, Sidney Londish as director and Lynne Londish as secretary of Tiffany, and David Bowman as secretary of Masalo, signed a notice in the following form: Notice of Removal of a Director and Replacement of a New Director for Vesudi Investments Pty Ltd. Please be advised that the following shareholders of Vesudi Investments Pty Ltd who jointly hold a majority of shares in the company and have the right of voting at all general meetings now give notice of the removal of Peter Gregory Londish as a Director and Secretary of the company and the appointment of Sidney Londish as a Director of the Company. 7 The primary judge found this to be an effective exercise of the power under Article 62, with the result that Peter Londish was removed and Sidney Londish was appointed as director of Vesudi. 8 On 25 February 2009, Sidney Londish as director of Vesudi and David Bowman as director and secretary of Vesudi, signed in those capacities and on behalf of Vesudi a notice in the following form: Notice of Removal of a Director and Replacement of a New Director for Londish Nominees Queensland Pty Ltd. Please be advised that the following shareholder of Londish Nominees Queensland Pty Ltd who holds all of the shares in the company and has the right of voting at all general meetings now gives notice of the removal of Peter Gregory Londish as a Director and Secretary of the company and the appointment of Sidney Londish as a Director of the company. 9 It appears that the original of this notice was posted on that day to Peter Londish, and a copy was delivered to Peter Londish's home, which was the registered office of LNQ. 10 On the same day, David Bowman signed a Form 484 (the prescribed form under s 205E of the Act) recording that Peter Londish on 25 February 2009 ceased to be director and secretary of LNQ, and that on 23 February 2009 Sidney Londish was appointed director of LNQ, and that on 25 February 2009, David Bowman was appointed secretary of LNQ. By a request for correction form signed by David Bowman on 26 February 2009, the date of the appointment of Sidney Londish as director of LNQ was changed from 23 February 2009 to 25 February 2009. Each of these forms was lodged with the Australian Securities and Investments Commission (ASIC) on the day it was signed (according to unchallenged evidence of David Bowman); and a search of ASIC records on 22 September 2009 shows these changes as having been recorded. 11 On 26 February 2009, Sidney Londish and David Bowman, purportedly as directors of LNQ, signed a notice in the following form: Notice of Removal of a Director and Replacement of a New Director for Valofo Pty Ltd. Please be advised that the following shareholder of Valofo Pty Ltd who holds all of the shares in the company and has the right of voting at all general meetings now gives notice of the removal of Peter Gregory Londish as a Director and Secretary of the company and the appointment of Sidney Londish as a Director of the company. 12 It appears that the original of this notice was posted to Peter Londish, and a copy delivered to Peter Londish's home which was the registered office of Valofo. 13 On the same day, David Bowman signed a Form 484 recording that Peter Londish on 26 February 2009 ceased to be director and secretary of Valofo, and that on 26 February 2009 Sidney Londish was appointed director of Valofo, and that on 26 February 2009 David Bowman was appointed secretary of Valofo. This form was lodged with ASIC on the same day; and a search of ASIC records on 22 September 2009 shows these changes as having been recorded. 14 On 16 July 2009, Sidney Londish and David Bowman, purporting to be directors of Valofo, resolved to appoint the administrators to be administrators of Valofo pursuant to s 436A of the Act. Decision of primary judge 15 The primary judge noted that the Articles of LNQ and Valofo did not contain any provision to the effect of Article 62 of the Articles of Vesudi; and he held that the notices dated 25 February 2009 and 26 February 2009 did not take effect under s 249B of the Act. He held that Sidney Londish had never been appointed a director of Valofo, and that accordingly the administrators were not duly appointed. 16 He noted that the administrators made an oral application for relief under s 447A of the Act (concerning the power of the Court to make orders about how Part 5.3A of the Act, concerning administration, is to operate) and under s 1322 of the Act. 17 He held that s 447A would not authorise an order validating the removal of Peter Londish as director and appointment of Sidney Londish, and that in any event he did not think it would be appropriate to invoke s 447A. 18 As regards s 1322, the primary judge noted it was not suggested that s 1322(2) applied; and he held that s 1322(4) did not apply because the removal of a director and his replacement by another was not procedural but substantive. Subsequent events 19 On 16 October 2009, Sidney Londish was appointed director of Valofo in place of Peter Londish; and the validity of that appointment has not been challenged. On 26 November 2009 Sidney Londish and David Bowman as sole directors of Valofo resolved to place it in voluntary administration, and again appointed the administrators to be Valofo's administrators. 20 On 10 December 2009, Peter Londish commenced proceedings to seek a determination of the administration or removal of the administrators, on the grounds that Valofo was not insolvent at the time of the resolution, that the resolution was for an improper purpose and that the administrators were biased in favour of Sidney Londish and David Bowman. 21 On 28 April 2010 Palmer J gave his decision dismissing these proceedings: Londish v Sheahan [2010] NSWSC 337. He noted authority to the effect that if a board has passed a resolution under s 436A, but the opinion as to insolvency is not held or not held in good faith, then the resolution is invalid: Kazar v Duus (1998) 29 ACSR 321 at 333 – 334. However, Palmer J found that Valofo was insolvent as at 26 November 2009, by reason of a debt of over $25,000 which the subject of a statutory demand served on 30 October 2009. He went on to hold that the appointment of the administrators was not for an improper purpose. Issues on application 22 I will address in turn the following issues: (1) Were the notices of 25 February 2009 and 26 February 2009 effective as resolutions under s 249B of the Act? (2) If not, was the resolution of 16 July 2009 validated by Article 54 of the Articles of LNQ and Valofo and/or by s 201M of the Act? (3) If not, was the appointment valid or to be validated under s 1322 of the Act? (4) Should leave to appeal be granted, and if the appeal is allowed, should the case be remitted so that the question of improper purpose can be determined? Section 249B 23 In my opinion, satisfaction of s 249B requires (1) a resolution; (2) which the sole shareholder records; and (3) the record of which the sole shareholders signs. 24 There is no effective resolution of the company until all three of these requirements (at least) are satisfied; so that initially the resolution (requirement (1)) cannot be a resolution of the company but must be a resolution or decision of the sole shareholder. However, since the end result is the equivalent of an effective resolution passed by the company, there may I think also be a fourth requirement: (4) the process must manifest an intention that there be something taking effect as a resolution passed by the company. 25 As regards the 25 February 2009 notice, in my opinion there was plainly a decision (and thus relevantly a resolution) of Vesudi. According to ASIC records, Sidney Londish and David Bowman were at the time the only directors of Vesudi, and David Bowman was the secretary. Clearly, they decided that the changes specified in the notice should be put into effect. 26 Did Vesudi record this resolution? There was no document recording it, other than the notice itself. (I do not disregard the form lodged with ASIC: this was plainly no more than an act of the secretary giving information to ASIC.) Although the evidence does not suggest that the notice was placed in the minute book of LNQ, as required by s 251A of the Act, in my opinion the form of the notice and the actions taken in respect of it plainly manifested the intention that this notice effect changes to the board of LNQ. Where there is no other document recording the decision, and where the document is signed by Vesudi, in my opinion the notice did amount to a record made by Vesudi of the decision. 27 This leaves the possible requirement (4). The primary judge considered the notice did not purport to be an act of LNQ, but rather an act of Vesudi taken in the mistaken belief that LNQ had an Article like Vesudi's Article 62. I am inclined to the view that the inference of mistaken belief was not justified, in circumstances where it was not put to either Sidney Londish or David Bowman, where plainly LNQ did not have such an Article, and where the notice, unlike that in respect of Vesudi, referred to Vesudi holding all shares in LNQ. In any event, what in my opinion would be important for requirement (4) is not the subjective intention of the shareholder, but the intention manifested by what the shareholder does. In my opinion, the decision and the recording of it plainly manifests the intention that it effect changes to the board of LNQ in accordance with LNQ's Articles and the applicable law; and I would not consider any ambiguity as to whether this effectiveness was due to there being a resolution of LNQ itself, or a resolution of LNQ's sole shareholder, as negativing satisfaction of requirement (4). To do so would in my opinion be to draw an over-technical distinction, frustrating what was the obvious intention of a sole shareholder, which did in fact have the power to achieve the intended result: cf Clifton v Mount Morgan Ltd (1940) 40 SR (NSW) 31 at 52, Dominion Mining NL v Hill (No 1) [1971] ACLC 40–021 at 27,219 – 27,220. So, assuming that requirement (4) must be satisfied, it was satisfied in this case. 28 For those reasons, I would hold the 25 February 2009 notice to be effective as a resolution under s 249B; and the same reasoning applies to the 26 February 2009 notice. Article 54 and s 201M 29 Article 54 of the Articles of LNQ, and also of the Articles of Valofo, provides: 54. All acts done by any meeting of the Directors or of a committee of Directors or by any person acting as a Director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any such Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director. 30 As pointed out by Young JA, a distinction has been drawn between cases where there has been a defective appointment of a director, and cases where there has been no appointment at all: Morris v Kanssen [1946] AC 459, Grant v John Grant & Sons Pty Ltd [1950] HCA 54; (1950) 82 CLR 1. 31 Having regard to my decision on s 249B, it is not necessary for me to decide on which side of the line this case falls. However, my tentative view is that if the notice of 25 February 2009 was ineffective either because it was not expressed as a resolution or because it purported to be a decision of Vesudi rather than a resolution of LNQ, or both, I would regard this as a defective appointment rather than no appointment at all: cf Albert Gardens (Manly) Pty Ltd v Mercantile Credits Ltd [1973] HCA 60; (1973) 131 CLR 60. The same would apply to the notice of 26 February 2009. I would give some weight to the circumstance that the change to the board was immediately and appropriately reported to ASIC and noted in ASIC's records. 32 I would make a similar comment as regards s 201M of the Act. If it were said that this could not help the administrators, because they are seeking to bind Valofo in its dealings with them, I would note that ss 128 – 130 of the Act give greater protection to persons dealing with a company than that given by s 201M; although I also note that ss 128 – 130 were not relied on by the administrators. Section 1322 33 Again, there is no need for me to make a firm decision on this section. 34 My tentative view is that the decision in each case and the production of a document intended to effectively remove a director and appoint another is a proceeding under the Act; and if the document is ineffective, either because it was not expressed as a resolution or because it purported to be a decision of the shareholder rather than the company itself, or both, this would be a procedural irregularity. The questions whether this irregularity caused substantial injustice (under s 1322(2)) or whether no substantial injustice is or is likely to be caused by an order under s 1322(4), are to be judged having regard to the nature of the irregularity; that is, in my opinion, primarily by considering whether any person is unfairly disadvantaged because what was done was not done regularly. It is difficult to see that anyone would have been unfairly disadvantaged because the notices were not expressed as resolutions, or because they each purported to be a decision of a sole shareholder rather than of the company. Conclusion 35 I would grant leave to appeal, allow the appeal, and set aside the orders below. 36 On the question whether the matter should be remitted, so that Peter Londish's case on improper purpose can be determined, I have reached the view that this should not happen, for these reasons: (1) Peter Londish accepted the primary judge's invitation to have the matter decided on the invalidity ground only. (2) Improper purpose would have been relevant to the primary judge's discretion to validate under s 1322(4), which was litigated. (3) Palmer J has rejected improper purpose in relation to the appointment of the same administrators by the same directors on 26 November 2009. 37 Although the circumstances could have changed between 16 July 2009 and 26 November 2009, the only change that could be suggested as appearing from the evidence concerns the insolvency of Valofo which, as at 26 November 2009, was established by a debt in a statutory demand dated 30 October 2009. In circumstances where Valofo has not been actively trading, it seems highly unlikely that this debt arose suddenly and could not have been anticipated as at 16 July 2009; and in fact there was no evidence before us suggesting that either the position as regards insolvency or anything else going to improper purpose changed between 16 July 2009 and 26 November 2009. 38 Having regard to the grounds on which I would uphold the appeal, I am of the tentative view that the administrators should have their costs at first instance. 39 YOUNG JA: We are hearing a concurrent application for leave to appeal, and, if leave is granted, the hearing of the appeal in respect of a judgment given by Brereton J in the Equity Division of this Court. 40 The application for leave was filed out of time. A motion was filed to extend the time. On this motion the applicants put that originally it was considered that there was an appeal as of right. A notice of intention to appeal was filed within a fortnight of the judgment below and a notice of appeal within three months thereafter. In April, it was realized that leave might be necessary and the present motion was filed. 41 It was faintly put before us that there was an appeal as of right, but, amongst other things, there was no evidence to support the submission. Leave was sought on the basis that the present case involved interpretation of a key provision of the Corporations Act 2001 (Cth) and that, in the circumstances outlined above, the respondents could not realistically claim any prejudice. 42 The application to extend time was opposed, but only on grounds that leave to appeal should be refused in any event. No special prejudice was claimed. 43 We then proceeded with the application on the basis that determination of the leave application would determine the motion as well. 44 The basic point in the case is simple. There were three companies in a group Vesudi Investments Pty Ltd (which I will call "X") which owned all the shares in Londish Nominees Queensland Pty Ltd (which I will call "Y") which owned all the shares in Valofo Pty Ltd ("Z"), the company which is the focus of these proceedings. The first respondent, Peter Londish was, prior to the events about to be recounted, a director of all three. 45 The shareholders in X validly resolved to remove Peter Londish as a director of X and replace him with Sidney Londish. X, as the sole shareholder of Y, then purported to remove Peter Londish as a director of Y and Y then purported to remove him as a director of Z in each case replacing him with Sidney Londish. 46 Sidney Londish and David Bowman his co-director of Z then resolved to put Z into administration and appointed the present applicants administrators. 47 Brereton J held that that appointment was invalid. 48 Subsequently the applicants were reappointed administrators and, later still, Z was put into liquidation with the applicants as liquidators. 49 The present applicants took a mere supporting role before the primary judge, though they were named there as the first respondents. The principal combatants were Peter Londish as applicant and the second and third respondents, namely David Bowman and Sidney Londish. 50 It must be pointed out that the decision below was made during the course of a heavy corporations duty list. Although the primary judge did not have the same detailed argument as we have had, he addressed the key issues and produced an admirable ex tempore judgment. 51 The first reason why the application for leave and the appeal is resisted is that Peter Londish says that as the applicants did not make any contest in the court below, they cannot complain on appeal. 52 It is true that, whilst this court conducts a rehearing, it is a rehearing on the issues that were considered by the primary judge; see eg Da Costa v Cockburn Salvage & Trading Pty Ltd [1970] HCA 43; 124 CLR 192, 208. However, in the present case, whilst the applicants did not actively press those issues below, others did, so that the matter which the applicants desire to ventilate was squarely raised below. 53 On this application and appeal, Mr J E Marshall SC and Mr D R Sulan of counsel appeared for the applicants, Mr S Burchett of counsel appeared for Peter Londish and Mr P C Evans (solicitor) appeared for the other respondents. 54 Mr Burchett cited a series of cases which he submitted showed that the applicants could not raise the matters they had not personally contested below: University of Wollongong v Metwally (No 2) [1985] HCA 28; 59 ALJR 481, 483; Coulton v Holcombe [1986] HCA 33; 162 CLR 1, 8. 55 However, cases like O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310, 319 seem to me to make it clear that it is sufficient that the point now desired to be ventilated was an issue by the conduct of the parties at the trial. I do not consider that the matter need necessarily have been argued by the present applicants. 56 Next Mr Burchett says that leave should not be granted because the result of the appeal does not affect the company as it is now in liquidation and the applicants are its liquidators. He submits that the only consequence of the appeal being allowed will be that the applicants will be relieved of the order of costs against them in respect of which they have an indemnity from a litigation funder. 57 Furthermore, he puts, the applicants have accepted re-appointment as administrators and, subsequently liquidators, which could only have been made if their original appointment was invalid. 58 Again, as the decision below was virtually on a preliminary point, allowing the appeal will only have the consequence that the other aspect of the case will have to be heard which, in the circumstances, will be a complete waste of resources. 59 Mr Burchett quotes from the judgment of the Full Federal Court in Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564, 583 at [42], where French J (as his Honour then was) said that policy with respect to appeals included the fact that the time and resources of the appeal court were not to be wasted by proceedings which did not determine the rights of the parties. 60 That same judgment at 584 [44] contains a reminder that, in granting leave to appeal, the appellate court looks principally to two matters: (1) is there sufficient doubt about the decision below to merit a review; and (2) would substantial injustice result if leave were refused? 61 I believe that these are weighty matters which tell against leave being given, but are not conclusive. To them could be added the possibility that, if the appeal only succeeds because of an order made under ss 1322 or 447A of the Corporations Act 2001 (Cth) no different order for costs might be made. 62 Mr Marshall says that there is greater prejudice caused to the applicants than that outlined by Mr Burchett. The applicants incurred costs and expenses between the purported appointment of administrators on 16 July 2009 and the declaration of invalidity made on 5 November 2009 and there may possibly be liability for acts done by them in that period. 63 However, there is no evidence as to the extent of any financial loss in this period. At least so far as the expenses are fees, they would presumably be covered by the indemnity given to the applicants. 64 Mr Marshall further says that the matters relied on by the respondents are outweighed by the public importance in having an appellate decision on key sections of the Corporations Act. 65 With respect, I consider that this submission exaggerates the importance of the case. However, some of the points raised by the applicants are significant and there is significant argument that the decision below could be wrong and there is arguably prejudice caused by the decision beyond that recognised by Mr Burchett. 66 It seems to me that in this borderline situation, the course which best suits the cause of justice is to grant leave to appeal. 67 Turning now to the merits, the points that the applicants wish to ventilate are: (a) whether Article 54 of the Z's articles of association, which is the common form article that provides that acts by a person purporting to be a director who is not in law a director shall be as valid as if he or she had been validly appointed, cures the perceived problem; (b) whether either or both s 249B or s 201M of the Corporations Act 2001 (Cth) affect the result of the appeal; (c) whether s 1322 or s 447A of the Corporations Act affect the result of the appeal. 68 I will deal with each of those points and then, under heading (d) with general additional comments and conclusion. However, it is first necessary to consider the facts and background. These are non-controversial and I can safely summarise them from the primary judge's reasons. 69 X had three members with roughly equal shareholdings, the shareholders being companies controlled by Peter Londish, David Bowman and Sidney Londish. 70 The latter two being a majority, as they were entitled to do under the articles, decided to remove Peter Londish as a director of X. 71 They thus caused X (Vesudi Investments) to be given a notice in the following form on 19 February 2009: Notice of Removal of a Director and Replacement of a New Director for Vesudi Investments Pty Ltd. Please be advised that the following shareholders of Vesudi Investments Pty Ltd who jointly hold a majority of shares in the company and have the right of voting at all general meetings now give notice of the removal of Peter Gregory Londish as a Director and Secretary of the company and the appointment of Sidney Londish as a Director of the Company. 72 That notice was held to be effective by the primary judge because it was in accordance with article 62 of X's Articles of Association. 73 The next step was that, on 25 February 2009, Mr Sidney Londish, as a director of X, and Mr Bowman as director and secretary, signed in those capacities and on behalf of X a notice to Y (Londish Nominees Queensland) in the following form: Notice of Removal of a Director and Replacement of a New Director for Londish Nominees Queensland Pty Ltd. Please be advised that the following shareholder of Londish Nominees Queensland Pty Ltd who holds all of the shares in the company and has the right of voting at all general meetings now gives notice of the removal of Peter Gregory Londish as a Director and Secretary of the company and the appointment of Sidney Londish as a Director of the company. 74 The next step in the process was that on the following day, 26 February 2009, Mr Sidney Londish and Mr Bowman in their purported capacities as directors of Y signed a notice in the following form to Z (Valofo): Notice of Removal of a Director and Replacement of a New Director for Valofo Pty Ltd. Please be advised that the following shareholder of Valofo Pty Ltd who holds all of the shares in the company and has the right of voting at all general meetings now gives notice of the removal of Peter Gregory Londish as a Director and Secretary of the company and the appointment of Sidney Londish as a Director of the Company. 75 The next and culminating step was that, on 16 July 2009, Mr Sidney Londish and Mr Bowman, purporting to be the directors of Z, resolved to appoint Mr Sheahan and Mr Lock to be the company's joint and several administrators pursuant to Corporations Act, s 436A. But, as Mr Sidney Londish had never been appointed validly as a director that was not a valid and effective act on the part of the company. 76 The primary judge thus concluded that it followed that the applicants were not duly appointed as administrators. 77 I now turn to the matters argued on the application and the appeal. (a) Article 54 78 Z's article 54 reads as follows: "54. All acts done by any meeting of the Directors or of a committee of Directors or by any person acting as a Director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any such director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director." 79 Mr Burchett protests that this point was never raised below (for good reason as it is in his submission, hopeless) and should not now be permitted. 80 This type of article is common in most companies and has been the subject of considerable attention in the authorities. 81 In Dawson v African Consolidated Land and Trading Company [1898] 1 Ch 6, the English Court of Appeal needed to decide whether directors had properly made a call. A shareholding for directors was required. One director had been without qualification shares for a few days. Technically, he vacated office and the other directors could have reappointed him when he regained his qualification. They did not do so, but continued to recognize him as a director. The 54 type article was held to apply to save the decision to make the call. 82 In Morris v Kanssen [1946] AC 459, Lord Simonds, giving the leading judgment said at p 471 that there was a vital distinction between cases where there was a defective appointment of a director and where there had been no appointment at all. At p 472, his Lordship mentioned the Dawson case and noted it as one where there was a mere slip. 83 The High Court in Grant v John Grant and Sons Pty Ltd [1950] HCA 54; 82 CLR 1, took the same view, see per Williams J at p 34 (with which McTiernan J agreed) and per Kitto J at 53. Fullagar J dissented at p 49. Kitto J said: "The proposition which I think is justified by Morris v Kanssen is that where a person acts as a director, either without being appointed or in pursuance of an appointment by a person or body not authorised to make the appointment, neither the section nor the article operates to validate his actions." 84 The "section" referred to is that which now appears in a much expanded form as s 201M to which I will refer later in these reasons. 85 Accordingly, if the primary judge's view that Mr Sidney Londish never became a director of Y or Z stands, the application of Article 54 cannot save the appointment of administrators. 86 The argument that the primary judge was wrong in this finding is based on the view that the notices given to Y and Z did operate to appoint Mr Sidney Londish as a director of Y and Z. 87 As far as both Y and Z are single member companies, it is more convenient to deal with this matter in the next section. Apart from this point, article 54 cannot assist the applicants. (b) Corporations Act ss 249B and 201M 88 Section 249B provides as follows: 249B Resolutions of 1 member companies (1) A company that has only 1 member may pass a resolution by the member recording it and signing the record. (2) If this Act requires information or a document relating to the resolution to be lodged with ASIC, that requirement is satisfied by lodging the information or document with the resolution that is passed. 89 The primary judge accepted that Y had only one member, but he did not accept that the notice which I set out earlier was compliant with s 249B. 90 The primary judge's reasons for this view were that s 249B contemplates the passing of a resolution by the sole member of a company by recording that resolution and signing the record of the resolution. In the context of s 249B, the resolution contemplated is a resolution of the company as if in general meeting. The notice of 25 February is not expressed to be and does not purport to be an act or resolution of Y, rather it purports to be an act of X giving notice of removal of a director. It appears to have been a purported exercise of a non-existent power under a non-existent article of Y, which was mistakenly thought to contain a provision equivalent to article 62 in the Articles of X. 91 The primary judge continued that a resolution is a formal decision of a meeting or, in some cases where no meeting is convened, of the persons entitled to attend the meeting. This notice does not evidence a formal decision of Y; it evidences a unilateral act of X as sole shareholder of Y, purporting to remove by notice, but not making a decision of Y such as is contemplated by s 249B. 92 Accordingly, the primary judge held that there was no valid and effective resolution of Y to remove Mr Peter Londish and replace him with Mr Sidney Londish. Mr Peter Londish thus remained at all material times a director of Y, and Mr Sidney Londish was not a director. 93 By a similar reasoning process, the primary judge held that the notice to Z was ineffective and that Peter Londish remained a director and Sidney Londish was never appointed a director. 94 Mr Marshall put that the fact that the word "notice" appeared as the first word of the operative part of the document should not be allowed to be overemphasized. He put that it was clear that in each case, there was a single shareholder and that that shareholder had made the decision to remove Mr Peter Londish as a director of Y or Z and replace him with Mr Sidney Londish. In each case, that decision was put in writing and signed by the necessary parties. 95 It is true that in a number of aspects of corporations administration, informal acts have been held to be as effective as formal resolutions. Probably the most significant is the decision in Re Duomatic Ltd [1969] 2 Ch 365 where Buckley J held that the assent by all the shareholders to a proposal was as effective as a resolution passed at a meeting at which they all attended. 96 Thus in H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd [1957] 1 QB 159 the unanimous view of the three directors of a landlord company that it required a property for its own occupation reached the day before a tenant made a statutory application to extend its tenancy was held to be the intention of the company reached before the application. 97 I do not consider that one can reason even by analogy from Duomatic to the proposition that where there is a one member company, the desire or intention, even if the evidence discloses that it is the final and irrevocable intention of the member, is the equivalent of a resolution of the company. 98 First, to do so would effectively destroy the century old distinction between the legal personality of the company and the legal personality of the shareholder. 99 Secondly, as Gower & Davies, Modern Company Law, 7th ed, p 335 points out, although courts have more and more readily treated unanimous assent of the corporators as equivalent to resolutions made in general meeting, there has not been the same readiness to dispense with procedural formalities required by the statute. 100 Thirdly, it must be remembered that prior to what is now s 114 of the Corporations Act 2001 (Cth), a company needed to have at least two members. 101 The ability to have one member companies was brought about by the enactment of amending legislation following the promulgation of the Company Law Review Bill 1997 (Cth). 102 It was essential when this "reform" was introduced that there be a mechanism for passing resolutions in companies with only one member as, under the general law, unless the context showed otherwise, the word "meeting" connoted the coming together of more than one person: Sharp v Dawes (1876) 2 QBD 26, 29; East v Bennett Brothers Ltd [1911] 1 Ch 163, 168. 103 Of course, it is recognized in East v Bennett Brothers Ltd itself that in special contexts a meeting could be held by one person. 104 It is also true that most corporate decisions may be made informally, though there are limits such as where a person whose involvement is vital declines to be involved in the informal process; see eg Barron v Potter [1914] 1 Ch 895. 105 However, up until the amendments made to corporations law in the period 1995-1998, a proprietary company had to have at least two members. As part of the package s 114 (originally part of s 112 until 1998) and s 249B plus s 251A were introduced to provide a method by which official recognition could be given to a resolution made by a one member company. 106 The requirement was that the resolution was to be made by the member who made it: (a) recording it; and (b) signing it and then s 251A being complied with by it being included in the minute book. 107 As to s 251A it would seem that the "resolution" was not recorded in the minute book as that book was not properly maintained. Whilst this fact reinforces the view that there was no resolution, it is not of itself determinative as a resolution not inserted into the minute book is still effective: Toole v Flexihire Pty Ltd (1991) 6 ACSR 455. 108 Mr Marshall says that in the present case, there is a document, which document contains the wishes and intentions of the person entitled to remove and appoint directors, it was thus a record and it was signed. 109 The wording of s 249B is odd. Normally, when someone makes a record, one is making a writing preserving the fact that an event has previously happened. The section, however, simultaneously makes the recording of the resolution by the member the act of making the resolution by the company. Whilst odd, this is not unique, eg, before 1955, judges would say, "I record sentence of death". 110 The clue to my mind is that the member's recording of its intention becomes the act of the corporation. Once the record is made and signed, the officers of the corporation have the statutory duty to insert it in the minute book as an official act of the corporation. 111 This construction avoids getting into the Duomatic area or, worse, reviving the mediaeval maxim, "voluntas pro facto reputabitur" whereby the intention to commit a treason was the same as the deed, unless, of course, the intention had progressed no further than a nuda cogitatio (a bare thought). As Professor Kiralfy notes in his "Taking the Will for the Deed" (1992) 13 Journal of Legal History 95, this maxim, until its abandonment, caused untold trouble with fine distinctions as to when the intention was to be taken seriously and how it was to be manifested. The same problem would occur here if mere intention was determinative. 112 However, even assuming the correctness of what has been said, Mr Marshall would argue that the second and third respondents' documents are a manifestation of the will of X and Y. The only defect was that the word "notice" was used rather than "resolution" or "decision". 113 Although the argument has attraction, as the notices specify in detail what is intended and note the power by which that intention can be effected, I find it difficult to construe it as a record of a resolution which itself is to be considered as the act of X or Y. 114 The form of the document seems to me to acknowledge that there has previously been a removal and appointment and that this document is from the member notifying the company of what has occurred. It is not the company's document bringing about the change. 115 Thus I would agree with the primary judge's conclusion that the relevant notices are not expressed to be and do not purport to be acts or resolutions of X or Y rather they purport to be an act of the member giving notice of removal of a director, notice of a purported exercise of a non-existent power. 116 The submission was made, that on the primary judge's view, the initial appointment of Mr Sidney Londish as a director of X, must have been equally invalid, yet the primary judge upheld it. This submission does not give sufficient significance to: (a) X's article 62; and (b) the fact that X is not a one member company. Even if this submission were correct, however, it would make no difference to the result of the appeal. 117 I now turn to s 201M which reads: "201M (1) An act done by a director is effective even if their appointment , or the continuance of their appointment, is invalid because the company or director did not comply with the company's constitution (if any) or any provision of this Act. (2) Subsection (1) does not deal with the question as to whether an effective act by a director: (a) binds the company in its dealings with other people; or (b) makes the company liable to another person." 118 The section appears to be cast in wider terms then its predecessors in that it specifically deals with invalid appointments of directors whereas article 54 only dealt with defects in appointments. However, it could not possibly mean that complete strangers A and B can hold a meeting and purport to act as directors of Bigcorp Ltd and then resolve to deal with Bigcorp's assets in a manner beneficial to themselves. 119 The word "director" in the first line must be confined to a person who, rather like a de facto judge, appears to be a director and appears to be recognised by the company's officers and associates as a director (cf Sir Owen Dixon, "De Facto Officers", Jesting Pilate, p 229). 120 On this construction, Mr Sidney Londish would not be considered to be a person who could take the benefit of s 201M. 121 However, this matter was not the subject of argument on the appeal. 122 A leading case on the section is the decision of Mandie J in the Victorian Supreme Court in Re Colorbus Pty Ltd (2004) 51 ACSR 677. This case was not referred to the primary judge. 123 In Colorbus a sole shareholder was a foreign corporation which appointed a non-resident as sole director and secretary; a non-resident who could not legally act as such because of s 201A of the Corporations Act. The director purported to resolve to appoint administrators. 124 Although the director had only been appointed days before the appointment of the administrators, Mandie J held that the word "director" where first occurring in the section meant "purported director" and that the person in the case satisfied that description. He then applied the section. 125 It is important to note that the Colorbus case was one where the administrators were the plaintiffs seeking a declaration of validity and no third party was involved. Thus, Mandie J did not need to give any attention to sub-section (2). 126 Mandie J held the appointment of the administrators to be valid under s 201M, but also made an order under s 1322(4)(a). 127 Colorbus was distinguished by Yates J in the Federal Court in Calabretta v Redpen Developments Pty Ltd (2010) 183 FCR 47 [32] as not being applicable in cases where the appointment of a director was terminated by bankruptcy as that was not a matter of non-compliance with the Corporations Act or the company's Constitution. 128 The instant case is an application by an outsider, Mr Peter Londish for a declaration of invalidity of the administrators' appointment. 129 Section 201M(2) provides that the section does not deal with the questions as to whether an effective act by a director is to be effective when considering its dealings with third parties. 130 That subject matter is dealt with by ss 128-130. 131 Sections 128-130 of the Corporations Act give great protection to persons dealing with a company. In particular, s 129(2) entitles a person to assume, and the company is not permitted to deny the assumption that a person named as director on ASIC's records is a director. Mr Sidney Londish was so named. 132 The word "dealing" has been liberally construed by the courts which have looked at it in connection with s 128 or its predecessor s 68A. One transaction may constitute "dealings"; see eg Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1990) 3 ACSR 649, 676 (Ormiston J) (affirmed Full Court (1991) 6 ACSR 464) and the dealing need not be contractual: Australian Capital Television Pty Ltd v Minister for Transport and Communication (1989) 86 ALR 119, 157 (FCA) (Gummow J) and see Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 (CA). 133 There would seem no doubt that as between the administrators and the company, the administrators could rely on s 129(2) and assume that the persons who appointed them were directors. 134 Again people dealing with the administrators could validly make the assumption of validity in s 129(3). 135 However, neither s 129 nor the rule in Turquand's case (Royal British Bank v Turquand (1856) 6 El & Blk 327; 119 ER 886) compel a third party, such as Mr Peter Londish to recognize the administrators: Hughes v N M Superannuation Pty Ltd (1993) 29 NSWLR 653, 666 (CA). 136 As Ford's Principles of Corporations Law, 13th ed (Butterworths, 2007) p 820 [15.070] states: "If any question arises as to whether the company is bound in a dealing to another person or is made liable to another person, in determining that question it is as if s 201M(1) did not exist." 137 Thus, in proceedings instituted by Mr Peter Londish against the administrators, in my view s 201M cannot usefully be invoked. 138 I should note that, although the possible applicability of ss 128-130 was raised in argument by the Bench, it received less than a warm reception, Mr Marshall remarking that he had thought of the point early in his preparation but had discarded it for reasons he could not now recall. (c) Sections 1322 and 447A of the Corporations Act 139 The argument in respect of s 1322 is split into considerations of sub-section (2) and considerations of sub-section (4). 140 There was no suggestion below that sub-section (2) could apply to this case and its possible application was abandoned by then counsel for the second and third respondents. 141 As there is no suggestion that there would have been any submissions on substantial prejudice had the point been raised below, there is no reason for the point not to be considered on appeal. 142 Sub-section (2) provides that "A proceeding under this Act is not invalidated by any procedural irregularity…". 143 The questions arise here as to whether the present case involves a "proceeding"' and a "procedural" irregularity. 144 So far as "proceeding" is concerned, it is a common use of the word to describe what happens in parliament or at a meeting as the proceedings. I can see no reason to exclude the case where an individual by solemnly making a resolution by document purports to produce the same effect as a resolution at a meeting. This view is reinforced by the decision of Gillard J in Re Freehouse Pty Ltd (1997) 26 ACSR 662. 145 Is it then a "procedural irregularity"? 146 The primary judge held in his treatment of the application under s1322(4) that the removal of a director and his replacement by another director cannot be passed off as something essentially of a procedural nature. It is manifestly substantive. 147 This view is substantiated by the authorities; see eg Re Continental Pacific [2002] NSWSC 789 at [14] and Colorbus at p 682. 148 One must be careful as to what validation is being sought by the applicants. If it is to validate the appointments of themselves or of Mr Sidney Londish as a director, what the primary judge says may well be determinative. However, if the order sought is to validate the "notices" so that they operate as resolutions, that may be procedural, though it would have the flow on effect of making the appointment of the administrators effective. 149 The White Appeal Book does not contain any copy of the originating process. However, at T20, then counsel for the second and third respondents said that he was seeking an order under s 447A or s1322 "to validate the appointment of the administrator insofar as it is called into question by reason of what … may be a defective resolution." 150 At T22, the primary judge asked counsel what was the order he sought under s 1322(4)(a) and the reply was, "That the notice that was signed on 26 February was effective as a resolution under s 249B of the Corporations Act to remove Peter Londish as a director of Volofo." Counsel endeavoured to convey (perhaps unsuccessfully) that he was using the word "notice" as meaning a document that described itself as a notice, rather than conceding it was a notice. 151 The primary judge queried whether that matter fell within the sub-section as the notice appeared to be a mere act of a shareholder giving notification of a change, not a resolution. The discussion then went on to another matter. 152 I have some doubt, with respect, as to whether the proposition that counsel intended to put was actually conveyed to the mind of the primary judge. As I understand the submission it was that, although intituled a "notice" by a shareholder, it was intended to be a resolution made by the shareholder as an act of the company. It has not taken effect because of a defect of form (being intituled notice instead of resolution) and that defect may be the subject of a validation order under sub-section (4) or be declared valid under sub-section (2). 153 The culture in this State has been when there is substantial doubt about the validity of a corporate action to make an order under s1322(4) rather than a declaration of non invalidity under sub-section (2); see eg Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 40 ACSR 221, 238. 154 Sub-section (4)(a) provides that the court is empowered to declare that any act, matter or thing purporting to have been done…under the Act or in relation to a corporation is not invalid by reason of any contravention of a provision of the Act or a provision of the constitution of a corporation. 155 Sub-section (6) then provides that the court must not make such an order unless it is satisfied of one of the three matters specified in s 1322(6)(a). 156 In the Re Continental Pacific case, Barrett J at [12] said that a claim under s 1322(4)(a) must be considered in the light of the clear reality of the intention of the relevant shareholders and directors to effect a purpose which was within their mandate. The decision gives the impression that, where such a scenario exists, it would usually be just and equitable to make the validating order and thus fulfil the words of s 1322(6)(a)(iii). 157 Before the primary judge, the appointors of the administrators relied on s 1322(4)(a) to seek an order declaring, in effect, that the purported removal of Mr Peter Londish and his replacement with Mr Sidney Londish as a director of Z was not invalid by reason of the circumstances of this case. 158 The primary judge rejected this submission. He said that there were at least obstacles to this course: "First, it was said that the relevant "act … purporting to have been done" for the purposes of s 1322(4)(a) was the notice; but the notice was not an act, matter or thing or proceeding "under this Act" or in relation to a corporation in contravention of a provision of the Corporations Act or the corporate constitution; it was something entirely unauthorised and uncontemplated by the Articles or the Act. It was an act which proceeded with irrelevance to the Constitution, the Act, and without any effect." 159 The primary judge's second reason, one he said was more significant, was that s 1322(6) provides that the court must not make an order under s 1322(4)(a), unless it is satisfied that the act, matter or thing or the proceeding is essentially of a procedural nature. He ruled that the removal of a director and his replacement by another director "cannot be passed off as something essentially of a procedural nature. It is manifestly substantive." 160 However, s 1322(6) gives three alternative gateways and, if it is just and equitable to make the order, it does not matter that it may be other than of a procedural nature. Although there was some doubt about this proposition for a while, by the time Re MLC Ltd (2006) 60 ACSR 187 was decided, it had become the standard construction, see p 189. 161 To my mind, the barrier to making an order until s 1322(4)(a) is whether the words "contravention of a provision of this Act" are satisfied when the company does not infringe the Act, but merely fails to take advantage of a provision of the Act. 162 I considered this problem in NRMA Ltd v Gould (1995) 18 ACSR 290, 293 and concluded that the word "contravention" should be given a wide meaning. This was adopted in Victoria by Gillard J in Jordan v Avram (1997) 25 ASCR 153 and by Barrett J in Re Centennial Coal Co Ltd (2006) 56 ACSR 698. The extended meaning would cover the instant case. 163 Thus, in my view, it would be proper to make a validating order under s 1322(4)(a). I thus need not further consider s 1322(2). 164 Section 447A provides that the court may make such order as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company. 165 The primary judge had no doubt that that section is of potentially wide application, but said that what was ultimately in question in the case was not so much the appointment of the administrators, but the purported removal of Peter Londish as a director and his replacement with Mr Sidney Londish. Section 447A would not authorise an order which validated that act, that not being anything to do with how Pt 5.3A is to operate. 166 The primary judge found that even if Pt 5.3A authorises an act that the Part operate in respect of Z as if the administrators had been duly appointed, he did not think it would be appropriate, as a matter of discretion, to invoke s 447A in those circumstances. 167 It was argued before us that the High Court's decision in Australasian Memory Pty Ltd v Brien [2000] HCA 30; 200 CLR 270 set at naught many of the previous decisions that had limited the operation of s 447A and that that section has wide operation. 168 That proposition may be correct, but it would appear to me that as primarily the section is to govern the ongoing administration, where the administration has come to an end, there is a difficulty in applying s 447A as Barrett J noted in Re Continental Pacific at [19]. However, I am not unmindful that s 447A has been applied in such circumstances by some first instance judges; see eg Deputy Commissioner of Taxation v Portinex Pty Ltd (2000) 156 FLR 453 and Calabretta v Redpen Developments Pty Ltd (2010) 183 FCR 47. 169 As the matter is covered by s 1322(4)(a), there is no need to resort to s 447A. (d) Other matters 170 I have already dealt with the possible application of ss 128-130 of the Corporations Act. 171 The only matter remaining is to deal formally with the motion to extend time to file an application for leave to appeal, to consider that application and, if necessary, the appeal and the question of costs. 172 For the reasons that are apparent from what appears above, the case was of sufficient importance for leave to appeal to be given. The extension of time application does not introduce any further factors and should be granted. 173 The primary judge made orders (3 and 4) setting aside various summonses for examination and orders for production. I think it is best to set aside all the orders made below and fresh summonses etc can issue if still required. However, if within 14 days a party applies by notice of motion it may be that the Court will consider it appropriate to retain these orders. 174 I agree with Hodgson JA at [36] that we should not remit the case on improper purpose to the Equity Division. 175 As to costs, there is some learning that, when the only reason for success is because relief is given under s 1322, the person who gains that relief should pay the costs of the exercise, or, at least, should not get costs. On the other hand, some authorities say that it is erroneous to treat a person seeking an order under s 1322 as seeking a boon. The considerations were reviewed by Austin J in Bovis Lend Lease Pty Ltd v Wily (2003) 47 ACSR 351. 176 As the court has not had submissions on costs, and, indeed, until these reasons were published it would have been difficult for the parties to have made such submissions, it is appropriate that the matter of costs at first instance and on appeal be reserved. 177 It is appropriate that the appellants make any submissions on costs within 14 days of the date of these reasons, the other parties within 14 days after receiving the appellants' draft with the appellants to have a further seven days after receiving those submissions to reply. Unless a party seeks to speak to the submissions, the matter of costs will be decided on the papers. 178 Accordingly, I would propose the following orders: 1. Extend the time for making an application for leave to appeal until 13 April 2010. 2. Grant leave to appeal. 3 Direct the applicants to file a notice of appeal in the form behind Tab 7 of the White Appeal Book within 7 days. 4. Allow the appeal. 5. Set aside the orders made by Brereton J and entered on 6 October 2009. 6. Declare that the purported appointment of the appellants as administrators of Valofo Pty Ltd (Valofo) on 16 July 2009 is not invalid by reason of either or both of the following: Peter Londish not having been removed as a director of Valofo on 26 February 2009 and Sidney Londish not having been appointed as a director of Valofo in his place on that date in conformity with s 249B of the Corporations Act 2001 (Cth); Peter Londish not having been removed as a director of Londish Nominees Queensland Pty Ltd (LNQ) on 25 February 2009 and Sidney Londish not having been appointed as a director of LNQ in his place on that date in conformity with s 249B of the Corporations Act 2001 (Cth). 7. Reserve questions of costs. 8. Direct that the appellants make any submissions on costs within 14 days of the date of these reasons, the other parties within 14 days after receiving the appellants' draft with the appellants to have a further seven days after receiving those submissions to reply. Unless a party seeks to speak to the submissions, the matter of costs will be decided on the papers. 179 LINDGREN AJA: INTRODUCTION 180 I have had the benefit of reading the reasons for judgment of Hodgson JA and Young JA. This makes it unnecessary for me to recount the facts or, generally speaking, the statutory provisions in question. CONSIDERATION Section 249B 181 Although the Joint Stock Companies Registration Act 1844 (UK) permitted deed of settlement companies to achieve corporate status simply upon complete registration of their deeds of settlement, it took some time for the separateness of the legal personality of the registered company and the implications of that separateness to be unequivocally accepted. There were references to the registered company as "they" and as a "partnership" in the early cases and even in the Act of 1844 itself (see, for example s 25 para 12). The natural meaning of the word "company" as a plurality or group of persons was (and is) persistent. 182 One of the problems that inevitably besets a conferral of separate legal personality is that of identifying those human decisions, states of mind and acts that are to be attributed to the body corporate. In earlier times, the common seal provided the answer: whenever it appeared the corporation (chartered or statutory) had acted, and wherever it did not appear, the corporation had not acted. But exceptions had to be allowed to this "positive corporate seal rule" and this "negative corporate seal rule". (For the relationship between these rules and the contracts of the early registered joint stock company, see K E Lindgren, "History of Rule in Royal British Bank v Turquand" (1975) 2 Monash Law Review 13). As will be seen below, formalism is also the solution that the Australian Parliament has now adopted for the same kind of problem in a different guise – the one person company. 183 The first "modern" Companies Act was the Companies Act 1862 (UK) (the Limited Liability Act 1855 and the Joint Stock Companies Act 1856 had intervened but were shortlived). It was under the provisions of that Act that Salomon v Salomon & Co [1897] AC 22 was decided. In that famous case, Mr Salomon transferred his solvent business to a company which he had caused to be registered under that Act. Its paid up capital consisted of 20,007 shares of £1 each, of which Mr Salomon held 20,001, and his wife and five children one each of the remaining six. He could outvote them – easily. The sale price was satisfied by the issue to Mr Salomon of the 20,001 shares and of debentures secured by a floating charge. 184 Following bad times, the company was wound up. The debentures would exhaust all available funds and there would be insufficient funds left to pay unsecured creditors. 185 The House of Lords held that the question whether Mr Salomon enjoyed the benefit of a liability limited by shares depended only on whether the terms of the Act of 1862 were satisfied. Section 6 of that Act provided that seven or more persons might, by signing a memorandum of association and satisfying the requirements of the Act in respect of registration, form a company with or without limited liability. Their Lordships held that there was not to be read into the Act an implied requirement that the members must represent seven independent minds, and noted that it was even possible for all members but one to hold their shares on trust for that one. 186 Such notions, nowadays commonplace, had not found favour before the primary judge, Vaughan Williams J, or a unanimous Court of Appeal. 187 For a century, Salomon's case has been synonymous with the truism that the registered company is, in contemplation of law, a separate person from its members. But at least respect was paid to the idea that a company must have more than one member, even if the company was the "alter ego" of one of them. That was until, in Australia, the 1990s. 188 Before turning to the change then made, I digress to note the special concession that was made a little earlier in favour of a proprietary company's holding company. That concession was in the nature of an exception to the provision that if the number of members of a registered company fell below the statutory minimum and the company carried on business for more than six months while the number was so reduced, the persons who were members while it carried on business after that period and who knew of the insufficiency of members were severally liable for payment of the company's debts contracted during that time (the "carrying on business provision"). The company and those members were also guilty of an offence, but I will not refer to this aspect further. 189 In the Companies Act 1936 (NSW) the requirement of at least two or seven members, according to whether the company was registered as a proprietary company or not, was found in s 9, while the carrying on business provision was located in s 347. Section 347 did not, however, contain any kind of holding company exception. 190 That exception was introduced into Australian law by the Companies Act 1958 (Vic). Section 15(1)(h) of that Act made the minimum number of members two for a proprietary company and five for a public company, while s 31 contained the carrying on business provision, but that section expressed in parentheses an exception in favour of a proprietary company, the whole of whose issued shares were held by a holding company which was a public company (the public holding company exception). The following year Tasmania followed the Victorian example in s 30 of its Companies Act 1959. For the other States and the Territories, the public holding company exception had to await the enactment of the uniform Companies Act and Ordinances of 1961 and 1962. 191 The advent of this particular kind of one member subsidiary gave rise to the question how its decision or act was to be identified and distinguished from that of its holding company. The answer was provided in s 117(4) of the Victorian Act (and s 103(5) of the Tasmanian Act). That subsection provided that where a minute was signed by a representative of the holding company stating that any act, matter or thing, or any ordinary or special resolution required by the Act or by the subsidiary's memorandum or articles to be made, performed or passed by or at a general meeting of the subsidiary had been made, performed or passed, that act, matter, thing or resolution should, for all purposes, be deemed to have been duly made, performed or passed by or at a general meeting of the subsidiary (I will call this "the minute provision"). 192 The minute provision addressed a consequence of the limited acceptance of the possibility of a proprietary company carrying on business with only one member and was a forerunner of s 249B(1) of the Corporations Act 2001 (Cth) (henceforward, the Act) which is of present concern. 193 The Victorian and Tasmanian provisions were carried forward into the uniform Companies Act and Ordinances of 1961-1962, s 14(1) (minimum number of members), s 36 (the carrying on business provision, again incorporating the public holding company exception) and s 140(6) (the minute provision). 194 The provisions were then carried forward in the Companies Act 1981 (Cth) (the Companies Code) s33(1) (minimum number of members), s 82(1) (the carrying on business provision), s 82(2) (the holding company exception) and s 244(6) (the minute provision). No longer did the holding company have to be a public company, that is to say, a non-proprietary company. It sufficed that it was a company incorporated under the Code or any corresponding previous law of the jurisdiction or the corresponding law of a participating State or Territory – hence now "the holding company exception" omitting the word "public". 195 In 1989 the four provisions mentioned were carried through into the Corporations Law s 114 (minimum number of members), s 186(1) (the carrying on business provision), s 186(2) (the holding company exception) and s 249(7) (the minute provision). 196 In addition to the general requirement in s 114 that a proprietary company must have two or more members and that any other company must have five or more members, s 221 also required that a proprietary company have at least two directors and a public company at least three. 197 It is against the historical background recounted above that the amendments to the Corporations Law in the 1990s fall to be considered. 198 The First Corporate Law Simplification Act 1995 (Cth) (the FCLSA) provided for a more general acceptance of the one person proprietary company. 199 The FCLSA amended ss 114 and 186 (members) and 221 (directors) of the Corporations Law by substituting one for two members and one for two directors in the case of a proprietary company, leaving five members and three directors required in the case of a public company. Accordingly, it was made possible for corporate personality to be achieved from the outset with only one person as a proprietary company's shareholder and director. The single member might be a human being or, as previously, a company. 200 Many consequential amendments were made to the Corporations Law by the FCLSA. These are referred to by Rafal A Zakrzewski in "The Law Relating to Single Director and Single Shareholder Companies" (1999) 17 C & SLJ 156 at 159-160. For example, the effect of an amendment to s 249(1)(a) was that so far as the articles did not make other provision, a quorum was constituted by, in the case of a proprietary company with only one member, that member. 201 For present purposes, however, the most significant amendment was the introduction of s 255A which replaced the minute provision. Section 255A provided: (1) If a proprietary company has only one shareholder and the shareholder records the shareholder's decision to a particular effect, the recording of the decision counts as the passing by the shareholder of a resolution to that effect. (2) If a proprietary company has only one director and the director records the director's decision to a particular effect, the recording of the decision counts as the passing by the director of a resolution to that effect. (3) A record made for the purposes of subsection (1) or (2) also has effect as minutes of the passing of the resolution. Note: Section 258 deals with minutes. (4) If a proprietary company has only one director and the director records the director's declaration to a particular effect, the recording of the declaration counts as the making of a declaration to that effect made at a meeting of the company's directors. (5) A declaration has effect as minutes that record the making of the declaration. Note: Section 258 deals with minutes. (6) A record made for the purposes of subsection (1), (2) or (4) must be made in writing. The provision was for a written record of the sole shareholder's decision or sole director's decision or declaration and for the written record to have effect as a minute of the resolution or declaration. 202 Practical problems touching the one-person company became evident. In particular, provisions of the Corporations Law referring to a "meeting" of members or of directors could not be satisfied in the case of a one-member or one-director company, because a "meeting", according to that word's ordinary meaning, required the coming together of two or more persons: see Sharp v Dawes (1876) 2 QBD 26 at 29; In Re Sanitary Carbon Co [1877] WN 223 (but the ordinary meaning was held to have been displaced, and Sharp v Dawes and In Re Sanitary Carbon Co were distinguished, in East v Bennett Brothers Limited [1911] 1 Ch 163). This problem was the "one person cannot meet" problem. 203 There was a problem of a different kind associated with meeting requirements that existed even where a company had more than one member or more than one director so that a meeting was possible. This was that the requirement of a physical coming together was often inconvenient. Even a "meeting of minds" over the telephone was not always a satisfactory alternative. 204 Both problems were addressed by the Company Law Review Act 1998 (Cth) (CLRA) which made wide ranging amendments to the Corporations Law. 205 But first, it must be noted that s 114 was repealed and replaced with a provision that a company of any kind need have only one member. This meant that the "one person cannot meet" problem referred to above might now be encountered at the member level in the case of a public company as well as of a proprietary company, and at the directorial level in the case of a proprietary company. The second problem referred to above might be encountered in either kind of company and at either level, where there were in fact two or more members or directors. 206 Both problems were dealt with in a similar manner in new ss 248A and 248B (directors) and new ss 249A and 249B (members). Those four sections were, and as sections of the Act still are, as follows: 248A Circulating resolutions of companies with more than 1 director (replaceable rule see section 135) Resolutions (1) The directors of a company may pass a resolution without a directors' meeting being held if all the directors entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document. Copies (2) Separate copies of a document may be used for signing by directors if the wording of the resolution and statement is identical in each copy. When the resolution is passed (3) The resolution is passed when the last director signs. Note: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A ). 248B Resolutions and declarations of 1 director proprietary companies Resolutions (1) The director of a proprietary company that has only 1 director may pass a resolution by recording it and signing the record. Declarations (2) The director of a proprietary company that has only 1 director may make a declaration by recording it and signing the record. Recording and signing the declaration satisfies any requirement in this Act that the declaration be made at a directors' meeting. Note 1: For directors' declarations, see sections 295 and 494. Note 2: Passage of a resolution or the making of a declaration under this section must be recorded in the company's minute books (see section 251A). 249A Circulating resolutions of proprietary companies with more than 1 member (1) This section applies to resolutions of the members of proprietary companies that this Act or, if a company has a constitution, the company's constitution requires or permits to be passed at a general meeting. It does not apply to a resolution under section 329 to remove an auditor. (2) A company may pass a resolution without a general meeting being held if all the members entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document. Each member of a joint membership must sign. (3) Separate copies of a document may be used for signing by members if the wording of the resolution and statement is identical in each copy. (4) The resolution is passed when the last member signs. (5) A company that passes a resolution under this section without holding a meeting satisfies any requirement in this Act: (a) to give members information or a document relating to the resolution—by giving members that information or document with the document to be signed; and (b) to lodge with ASIC a copy of a notice of meeting to consider the resolution—by lodging a copy of the document to be signed by members; and (c) to lodge a copy of a document that accompanies a notice of meeting to consider the resolution—by lodging a copy of the information or documents referred to in paragraph (a). (6) The passage of the resolution satisfies any requirement in this Act, or a company's constitution (if any), that the resolution be passed at a general meeting. (7) This section does not affect any rule of law relating to the assent of members not given at a general meeting. Note 1: A body corporate representative may sign a circulating resolution (see section 250D). Note 2: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A). 249B Resolutions of 1 member companies (1) A company that has only 1 member may pass a resolution by the member recording it and signing the record. (2) If this Act requires information or a document relating to the resolution to be lodged with ASIC, that requirement is satisfied by lodging the information or document with the resolution that is passed. Note 1: A body corporate representative may sign such a resolution (see section 250D). Note 2: Passage of a resolution under this section must be recorded in the company's minute books (see section 251A). 207 A new s 248D provided that a directors' meeting might be called or held using any technology consented to by all the directors. Subsections (1), (2) and (3) of s 251A (referred to in the notes to provisions set out above) provided as follows: 251A Minutes (1) A company must keep minute books in which it records within 1 month: (a) proceedings and resolutions of meetings of the company's members; and (b) proceedings and resolutions of directors' meetings (including meetings of a committee of directors); and (c) resolutions passed by members without a meeting; and (d) resolutions passed by directors without a meeting; and (e) if the company is a proprietary company with only 1 director—the making of declarations by the director. Note: For resolutions and declarations without meetings, see sections 248A, 248B, 249A and 249B. (2) The company must ensure that minutes of a meeting are signed within a reasonable time after the meeting by 1 of the following: (a) the chair of the meeting; (b) the chair of the next meeting. (3) The company must ensure that minutes of the passing of a resolution without a meeting are signed by a director within a reasonable time after the resolution is passed. It will be noted that ss 248A, 248B, 249A and 249B are concerned with the passing of resolutions and that although the means prescribed is writing, the writing is not a deemed minute: the passing of the resolution and the subsequent minuting of it under s 251A are distinct steps (contrast s 255A of the Corporation Law set out [201] above). 208 Section 249B is to be understood in the light of s 249A (and s 248B in the light of s 248A, but I will not continue to refer to the directorial provisions) and of the legislative history recounted above. The positive corporate seal rule and the negative corporate seal rule, the minute provision and the former s 255A had all resorted to formalism of various kinds to identify what was to count as a corporate act or resolution, in the last two cases in the one-member or one-director context. So does s 249B. 209 Although s 249A speaks of "the resolution set out in the document" whereas s 249B does not, this makes no difference in my view. Under both sections, "the resolution" itself must be documented. Under s 249A, which addresses the second problem referred to earlier, the members entitled to vote must sign a document or separate copies of a document stating that they are in favour of the resolution set out in the document. 210 In the case of the one member company the second class of problem referred to earlier is irrelevant, because a meeting, whether a physical or mental, is impossible. A solution in terms of the one member being "in favour of" the resolution would not be quite appropriate to the circumstances, and it would be tautologous to refer to the member "recording a resolution set out in a document". Admittedly, it would have been possible for s 249B to say "by the member signing the document setting out the resolution" but I do not think the legislature's choice of the concept of the member's recording the resolution and signing the record bears a different meaning. Rather, the legislature carried forward the concept of a statement that a resolution had been passed (the minute provision) or the "recording" of a decision (the former s 255A). If anything, s 249B's substitution of the word "resolution" for "decision" tends to make it clearer that the terms of the resolution must appear in the record that is made. 211 Article 33 of the articles of association of Londish Nominees Queensland Pty Ltd (LNQ) and of Valofo Pty Ltd (Valofo) each provided: "The Company may be resolution remove any Director and may by resolution appoint another person in his stead." Similarly, by a replaceable rule, s 203C of the Act provides: A proprietary company: (a) may by resolution remove a director from office; and (b) may by resolution appoint another person as a director instead. and s 201G of the Act provides: A company may appoint a person as a director by resolution passed in general meeting. Under both Article 33 and the sections the removal and appointment are by "the company" by the procedure of the passing an ordinary resolution. The requirement of the passing of the resolution serves certain purposes including that of marking the time of the removal or appointment (when the resolution is passed) and the terms of the removal, such as whether the removal is to have effect immediately or on and from some future date. 212 Vesudi Investments Pty Ltd (Vesudi) did not record and sign a record of a resolution by either preparing or giving the notice dated 25 February 2009 of the removal of Peter George Londish (Peter) as a director and secretary of LNQ and the appointment of Sidney Londish (Sidney) as a director of that company. Rather, the notice assumed a removal and appointment, the date or dates and terms of which are not revealed. 213 The same reasoning and conclusion apply in relation to the notice of 26 February 2009 given by LNQ in respect of Valofo. 214 Section 249B performs an important function. It insists on a distinction between the sole member of a company (who may, of course, be a natural person as distinct from a holding company) deciding upon a course of action, and a resolution of the company that is recorded by the sole member, which record is signed by that member. A degree of formality has always been important in company law: it provides the means by which human action that is to be attributed to the fictional person can be identified and distinguished from that which is not. It is true that the related jurisprudential history has been one of a progressive relaxation of the insistence on form under the exigencies of the expansion of commerce and the ubiquitousness of the registered company. Nevertheless, there must remain some means of identifying corporate decision-making and s 249B(1) provides that means in the context of the peculiar problems presented by the one-member company. Article 54 of the articles of association of LNQ and of Valofo 215 The terms of article 54 are set out by Hodgson JA at [29]. 216 Article 54 is potentially relevant to the appointment of Sidney as a director of LNQ and as a director of Valofo, not the removal of Peter as a director of those companies. 217 As Hodgson JA and Young JA point out, the authorities recognise a distinction between, relevantly, purported but defective appointments and the absence of any appointment at all. Some of the authorise are referred to by Young JA at [82] – [83]. 218 There is no evidence of a purported appointment of Sidney. The only evidence to which the Court was referred consisted of the two notices of appointment – one relating to LNQ and the other relating to Valofo. 219 For the reasons given above in relation to s 249B, while the notices suggest that a removal and an appointment have been decided upon, they are not evidence of the passing of resolutions by LNQ and Valofo – for all that is known, there were no corporate resolutions of those companies, only decisions by the givers of the notices, Vesudi and LNQ, to give the notices. 220 So far as the evidence reveals, therefore, the case is one of non-appointment to which article 54 has nothing to say. Section 201M 221 Section 201M is set out by Hodgson JA at [4]. 222 In my opinion subs (1) of s 201M, like article 54, presupposes, relevantly, a purported appointment as distinct from a non-appointment. I see no relevant distinction between article 54's reference to "some defect in the appointment" of a person acting as a director and s 201M's reference to a director's "appointment" being "invalid". The word "director" in subs (1) of s 201M clearly refers to a "person acting in the position of a director" - see the terms of subs (1) themselves and para (b)(i) of the definition of "director" in s 9 of the Act. 223 Re Colorbus Pty Ltd (in liq) (2004) 51 ACSR 677 is distinguishable: there was a purported appointment of Mr Kintsch but it was invalid because he did not ordinarily reside in Australia as required by s 201A of the Act. 224 For the reasons given above in relation to article 54, so far as the evidence reveals, there was no purported but invalid appointment of Sidney as a director of either LNQ or Valofo. 225 I do not find it necessary to discuss subs (2) of s 201M or ss 128 - 130 (Part 2B.2) of the Act or the rule in Royal British Bank v Turquand (1856) 6 El &Bl 327 (119 ER 886). Section 447A 226 Section 447A(1) of the Act provides: The court may make such order as it thinks appropriate about how this Part of the Act is to operate in relation to a particular company. 227 The "Part" referred to in this provision is Part 5.3A. The company in question is Valofo which purported to appoint the appellants as administrators of it under s 436A which is within Part 5.3A. 228 For the reasons given by Young JA, it is not necessary to consider the availability of the power given by s 447A. Section 1322 229 Section 447C of the Act provides: (1) If there is doubt, on a specific ground, about whether a purported appointment of a person as administrator of a company, or of a deed of company arrangement, is valid, the person, the company or any of the company's creditors may apply to the Court for an order under subsection (2). (2) On an application, the Court may make an order declaring whether or not the purported appointment was valid on the ground specified in the application or on some other ground. 230 This section was not raised before the primary Judge or on the appeal. While the condition of jurisdiction set out in subs (1) is satisfied in the present case, exercise of the discretion to make a declaration under subs (2) would require a determination "whether or not the purported appointment was valid". The determination in the circumstances here would be simply that it was not valid. 231 Section 1322, however, gives the Court a remedial jurisdiction. 232 The relevant ground of appeal refers to s 1322(4)(a). The terms of s 1322 are set out by Hodgson JA at [4]. 233 The expression in 1322(4)(a) "any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or undertaken under [the] Act or in relation to a corporation" is of the widest kind. It embraces the purported appointment of the appellants as administrators of Valofo. 234 As Young JA observes (at [161] – 162]), the expression in s 1322(4)(a) "by reason of contravention of a provision of this Act or a provision of the constitution of a corporation" (my emphasis) has been liberally construed, and the word "contravention" in the provision has not been confined to its orthodox meaning of "infringement". 235 The appointment by Valofo of the appellants as administrators on 16 July 2009 was invalid because: • Valofo had not removed Peter and appointed Sidney as a director of Valofo by passing resolutions in conformity with s 249B before the purported instrument of appointment was executed and a resolution of the directors of Valofo was passed, although the soi-disant directors, Sidney and Mr Bowman, apparently presumed that there was an effective removal of Peter and appointment of Sidney upon or before the giving of the notice by LNQ on 26 February 2009; • LNQ had not removed Peter and appointed Sidney as a director of LNQ by passing resolutions in conformity with s 249B, although the soi-disant directors, Sidney and Mr Bowman, apparently presumed that there was an effective removal of Peter and appointment of Sidney upon or before the giving of the notice by Vesudi on 25 February 2009. 236 In my opinion these reasons for the invalidity of the appointment by Valofo of the appellants as its administrators fall within the expression "contravention of the provision of the Act", the provision of the Act being s 249B. 237 I am of the view that it is "just and equitable" that an order be made under s 1322(4)(a) (see para (a)(iii) of s 1322(6)) and that "no substantial injustice has been or is likely to be caused to [Peter]" (see s 1322(6)(c)). Each of LNQ and Valofo was entitled to remove Peter and to appoint Sidney in his stead, and could have done so if the correct procedure (under s 249B) had been followed. Peter does not and could not challenge this proposition. CONCLUSION 238 I agree with Young JA's observations in relation to the granting of leave to appeal at [51] – [66] and [171] – [172]; in relation to the setting aside of the summonses for examination and orders for production at [173]; in relation to costs at [175] – [177]; and as to the orders to be made at [178]. I also agree with Hodgson JA that the matter should not be remitted to the Equity Division for the reasons given by his Honour at [36]. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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