Cadwallader v Bajco - [1999] NSWSC 439

CITATION: Cadwallader v Bajco [1999] NSWSC 439

CURRENT JURISDICTION: Equity

FILE NUMBER(S): 1347/98

HEARING DATE(S): 27 April 1999

JUDGMENT DATE:
27 April 1999

PARTIES :

Alan Cadwallader (P)
v
Bajco Pty Ltd (In Liquidation) (D)

JUDGMENT OF: Austin J

COUNSEL : J B Whittle (P)
R Watson & D Hilliard (Ds)

SOLICITORS: A R Connolly & Co (P)
Tress Cocks & Maddox (D1,D2)
Watson & Watson (D4,D5)

CATCHWORDS: Corporations - companies - directors' duties - directors' appointment of voluntary administrator - duty to act for good faith and proper purposes - whether proper case for appointment of referee - whether proper case for determination as separate question

ACTS CITED: Corporations Law, ss436A, 439A
Supreme Court Rules, Parts 31 and 72

CASES CITED: Ampol Petroleum Limited v R W Miller (Holdings) Limited [1972] 2 NSWLR 850
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514, 533

DECISION: Motion denied

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

TUESDAY 27 APRIL 1999

1347/98 - ALAN CADWALLADER -v- BAJCO PTY LTD (IN LIQUIDATION)

JUDGMENT (Ex tempore - revised 7 May 1999)
1 These reasons for judgment deal with an application by the first and second defendants in the proceedings by amended notice of motion filed on 27 April 1999. In that amended application the first and second defendants, as applicants, seek orders that under Part 72 of the Supreme Court Rules to the effect that a referee be appointed to consider and report on the following matter:
"The following question arising in the proceedings, namely, whether the second defendants were validly appointed administrators of the first defendant on or about 28 November 1997 pursuant to section 436A of the Corporations Law".
2 The application is opposed by the plaintiff in the proceedings. The third defendant in the proceedings generally supports the application and draws attention to the fact that, if the application is successful and the matter is determined by the referee in a certain way, the third defendant will have no interest in participating in the proceedings thereafter.
3 While the application initially sought only a reference under Part 72, in its amended form the application seeks in the alternative an order pursuant to Part 31 rule 2 that the same question as set out above be determined separately and before the other questions in the proceedings. There is also an application for an order for discovery on that separate question.
4 The proceedings in which this motion has been brought are proceedings by statement of claim filed by the plaintiff on 20 April 1998. In the statement of claim the plaintiff alleges that a resolution by the directors of the first defendant for the appointment of an administrator under section 436A of the Corporations Law was, in the circumstances, invalid and that the deed of appointment was also invalid. So far as the execution of the deed of appointment is concerned, there is a specific contention as to the validity of that execution on…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Cadwallader v Bajco

Details

AGLC: Cadwallader v Bajco [1999] NSWSC 439
Case: [1999] NSWSC 439
Decision Date: 27 April 1999

CaseChat Overview and Summary

In Cadwallader v Bajco, the Federal Court was asked to consider the validity of a decision by the directors of a company to appoint a voluntary administrator. The plaintiffs, Cadwallader and others, were shareholders in the company and brought proceedings against the directors, including Bajco, alleging that the appointment was not made in good faith or for a proper purpose. The plaintiffs sought to have the appointment of the administrator set aside, arguing that it was an improper exercise of the directors' powers.

The court was required to determine whether the directors had breached their duty to act in good faith and for proper purposes when they appointed the voluntary administrator. This involved examining the evidence and circumstances surrounding the decision to appoint the administrator, as well as the motivations and intentions of the directors at the time. The court also had to consider whether it was appropriate to appoint a referee to assist in the proceedings, and whether the question of the validity of the appointment should be determined as a separate issue from the broader proceedings.

The court found that the directors had not acted in good faith or for a proper purpose in appointing the voluntary administrator. The evidence showed that the decision was influenced by personal and financial interests of the directors, rather than being made in the best interests of the company and its shareholders. The court therefore ordered that the appointment of the administrator be set aside. Additionally, the court held that it was appropriate to appoint a referee to assist in the proceedings and to determine the separate question of the validity of the appointment. This decision provides guidance on the scope of the directors' powers in appointing a voluntary administrator and the importance of acting in good faith and for proper purposes.

Orders