CITATION: Cadwallader v Bajco Pty Ltd & Ors [2002] NSWCA 328 revised - 14/10/2002 FILE NUMBER(S): CA 40190/02 HEARING DATE(S): 28, 29 August 2002 JUDGMENT DATE:
26 September 2002PARTIES :
Alan Cadwallader (Appellant)
Bajco Pty Ltd (First Respondent)
Keith William Skinner and David John Franke Lombe (Second Respondents)
David Ewart Cadwallader and Marilyn Alice Wintzloff (Third Respondents)JUDGMENT OF: Heydon JA at 1; Santow JA at 275; Gzell J at 276
LOWER COURT JURISDICTION : Supreme Court LOWER COURT
FILE NUMBER(S) :ED 1347/98 LOWER COURT
JUDICIAL OFFICER :Austin J
COUNSEL: Mr J B Whittle SC/Mr J T Svehla (Appellant)
Mr D J Hammerschlag SC/Mr C R C Newlinds (Second Respondents)
Mr J W J Stevenson (Third Respondent)SOLICITORS: A R Conolly & Company (Appellant)
Tress Cocks & Maddox (First and Second Respondents)
Watson & Watson (Third Respondent)CATCHWORDS: Corporations - directors' duties - breach - company placed in administration - whether directors' purpose in so doing improper - propriety of directors' resolution to pay themselves increased fees - Corporations - administration - meetings - notice - whether valid - Corporations - administrators - whether administrators knew of directors' improper purpose in seeking to place company in administration - accessorial liability - relevance - Remedies - general law and statutory remedies - setting aside of company resolutions - whether appropriate in circumstances - whether company should be taken to have entered voluntary administration - Corporations Law s 447A - Evidence - drawing of inferences - rule in Jones v Dunkel - application - requirements - Equity - waiver - Equity - discretionary defences - unclean hands - D LEGISLATION CITED: Corporations Law
Trade Practices Act 1974 (Cth)CASES CITED: Abalos v Australian Postal Commission (1990) 171 CLR 167
Barnes v Addy (1874) LR 9 Ch App 444
Barclays Bank plc v Boulter [1997] 2 All ER 1002
Bradshaw v McEwans Pty Ltd (High Court of Australia unreported 1951)
Browne v Dunn (1893) 6 R 67
Commonwealth v Verwayen (1990) 170 CLR 394
Cook v Cook (1986) 162 CLR 376
Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373
Coulton v Holcombe (1986) 162 CLR 1
Cousins v International Brick Co Ltd [1931] 2 Ch 90
Devries v Australian National Railways Commission (1993) 177 CLR 472
DPC Estates Pty Ltd v Grey and Consul Developments Pty Ltd [1974] 1 NSWLR 443
Giorgianni v R (1985) 156 CLR 473
Hambro v Burnand [1904] 2 KB 10
Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483
Harrigan v Brown [1967] 1 NSWR 342
Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) ATPR 41-831
House v R (1936) 55 CLR 449
Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
Jenyns v Public Curator (Q) (1953) 90 CLR 113
Jones v Dunkel (1959) 101 CLR 298
Kettles and Gas Appliances Ltd v Anthony Hordern & Sons Ltd (1934) 35 SR (NSW) 108
Luxton v Vines (1952) 85 CLR 352
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Details
- AGLC
- Cadwallader v Bajco Pty Ltd [2002] NSWCA 328
- Case
- [2002] NSWCA 328
- Decision Date
CaseChat Overview and Summary
Cadwallader v Bajco Pty Ltd concerned a dispute brought by Mr Cadwallader, a director and shareholder of Bajco Pty Ltd, against the company and its other directors. Mr Cadwallader alleged that the directors had breached their duties by improperly placing the company into voluntary administration and by passing resolutions to increase their remuneration shortly before this occurred. The case was heard in the Court of Appeal of the Supreme Court of New South Wales.
The central legal issues before the Court of Appeal were whether the directors' resolution to place Bajco Pty Ltd into administration was invalid due to an improper purpose, and whether the directors' subsequent resolutions to pay themselves increased fees were also improper and thus voidable. The court also considered whether the administrators were aware of any alleged improper purpose by the directors and the implications of such knowledge for accessorial liability. Further questions arose regarding the validity of notices for meetings and the appropriateness of remedies, including the setting aside of resolutions and the potential application of section 447A of the Corporations Act 2001 (Cth) to deem the company to have entered voluntary administration.
The Court of Appeal applied established principles of directors' duties, including the duty to act in good faith in the best interests of the company and for a proper purpose. The court considered the evidence to determine the true purpose behind the directors' decision to enter administration, drawing inferences where appropriate, including the application of the rule in *Jones v Dunkel*. The court also examined the requirements for valid notice of meetings and the equitable doctrines of waiver and unclean hands as potential defences. The court's reasoning focused on whether the directors' actions were motivated by a desire to benefit themselves at the expense of the company or its creditors, and whether the administrators' conduct was affected by any knowledge of such improper purpose.
The Court of Appeal ultimately made orders concerning the validity of the resolutions and the administration of the company, the specifics of which are detailed in paragraph 274 of the judgment.
The central legal issues before the Court of Appeal were whether the directors' resolution to place Bajco Pty Ltd into administration was invalid due to an improper purpose, and whether the directors' subsequent resolutions to pay themselves increased fees were also improper and thus voidable. The court also considered whether the administrators were aware of any alleged improper purpose by the directors and the implications of such knowledge for accessorial liability. Further questions arose regarding the validity of notices for meetings and the appropriateness of remedies, including the setting aside of resolutions and the potential application of section 447A of the Corporations Act 2001 (Cth) to deem the company to have entered voluntary administration.
The Court of Appeal applied established principles of directors' duties, including the duty to act in good faith in the best interests of the company and for a proper purpose. The court considered the evidence to determine the true purpose behind the directors' decision to enter administration, drawing inferences where appropriate, including the application of the rule in *Jones v Dunkel*. The court also examined the requirements for valid notice of meetings and the equitable doctrines of waiver and unclean hands as potential defences. The court's reasoning focused on whether the directors' actions were motivated by a desire to benefit themselves at the expense of the company or its creditors, and whether the administrators' conduct was affected by any knowledge of such improper purpose.
The Court of Appeal ultimately made orders concerning the validity of the resolutions and the administration of the company, the specifics of which are detailed in paragraph 274 of the judgment.
Orders
Orders of the court
See paragraph 274
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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