Billingsley v Napoli, in the matter of Biometric Identity Systems Pty Ltd (administrators appointed)

The applicants, the first plaintiffs, sought an order pursuant to s 447A of the Corporations Act 2001 (Cth) (Act) that Part 5.3A of the Act is to apply to the second plaintiff as though the appointment of the first plaintiffs as voluntary administrators on 8 August 2019 was valid. The defendant, Mr Napoli, claimed that one of the directors who purported to appoint the applicants as voluntary administrators was not validly appointed, and that the meeting at which the resolution to appoint the voluntary administrators was inquorate. Mr Napoli also claimed that he was a director of the second plaintiff. The court was required to decide whether the applicants were validly appointed as voluntary administrators of the second plaintiff and whether there were any grounds to invalidate their appointment.

The court examined the evidence and submissions of the parties, including the minutes of the directors' meeting, the instrument of appointment, and the shareholders agreement. The court found that Mr Gough and Mr Crabtree were validly appointed as directors of the second plaintiff and that they had the right to appoint one director each. The court also found that Mr Napoli was not a director of the second plaintiff and that the meeting at which the resolution to appoint the voluntary administrators was quorate. The court considered the factors set out in Hayes v Doran (No 2) [2012] WASC 486, including the likely insolvency of the company, whether the applicants had made inquiries to confirm the validity of their appointment, and whether it would be disruptive to the affairs of the company to challenge the validity of their appointment. The court found that the applicants had carried out substantial work and incurred costs in the not unreasonable belief that their appointment as administrators was valid, and that it would be disruptive to the affairs of the company to challenge the validity of their appointment. The court also found that no creditor opposed or supported the application, and that there was no evidence of prejudice to secured creditors or lessors arising from the moratorium imposed on them.

The court granted the applicants' application and ordered that Part 5.3A of the Act is to apply to the second plaintiff as though the appointment of the applicants as voluntary administrators on 8 August 2019 was valid. The court also granted the applicants' interlocutory application and ordered that the convening period for the second meeting of the second plaintiff’s creditors is to be extended to 31 October 2019. The court reserved the question of costs and listed the matter for a case management hearing on 29 October 2019.