Beck v LW Furniture Consolidated (Aust) Pty Ltd

The appeal concerned a family company, LW Furniture Consolidated (Aust) Pty Ltd, which was incorporated in 1971. The dispute arose from a lack of validly appointed directors, following the death of the founder and the incapacitation of his wife, with both children ceasing to be directors. The son, acting as a de facto director, purported to appoint his wife as an additional director. The appellant sought the winding up of the company. The primary judge had validated the appointment of the son's wife as a director under section 1322 of the Corporations Act 2001, and consequently declined to order the winding up of the company.

The court was required to determine whether the son's appointment of his wife as an additional director was valid, particularly in light of the company's articles of association and the fact that the son himself was arguably not a validly appointed director. Further issues included whether the son's purported appointment of his wife could be cured by a defect clause in the articles of association, and whether section 1322 of the Corporations Act 2001 could validate such an appointment. The court also considered whether issue estoppel, specifically *Anshun* estoppel, applied to prevent the appellant from challenging the validity of the remaining de facto director's appointment in the current proceedings, and whether there had been a denial of natural justice in relation to the section 1322 issue.

The majority of the Court of Appeal (Young JA and Sackville AJA) held that the son, as a de facto director, was not able to validly appoint an additional director because his own position was not a defect that the articles of association could cure. They found that the default re-election provision in the articles was not effective if a director had not retired at the annual general meeting. Furthermore, they determined that the remedial provisions of section 1322 of the Corporations Act 2001, while to be construed broadly, did not extend to validating an appointment made by a person who was never validly appointed to office. The court also found that *Anshun* estoppel did not apply, as the validity of the director's appointment was not an obvious or complete argument in previous proceedings and would have required substantial additional resources to pursue.

The appeal was allowed, and the orders validating the appointment of the additional director and declining to wind up the company were set aside. The matter was remitted to the primary judge to determine whether the company should be wound up, with the respondents ordered to pay the costs of the appeal and cross-appeal. One judge dissented on the issue of natural justice, believing the matter should be remitted to consider whether a section 1322 order should be made.