CITATION: Cadwallader v Bajco [2001] NSWSC 1193 revised - 5/03/2002

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 1347/98

HEARING DATE(S): 1, 5-7, 12 December 2000, 4-7, 25 June 2001

JUDGMENT DATE:
24 December 2001

PARTIES :

Alan Norman Cadwallader (P)
Bajco Pty Ltd (D)
Keith William Skinner and David John Frank Lombe (D2)
David Ewart Cadwallader and Marilyn Alice Wintzloff (D3)

JUDGMENT OF: Austin J

COUNSEL : J B Whittle SC (P)
DJ Hammerschlag SC (D1, D2)
J W Stevenson (D3)

SOLICITORS: A R Connolly & Co (P)
Tress Cocks & Maddox (D1, D2)
Watson & Watson (D3)

CATCHWORDS: CORPORATIONS - voluntary administration - whether requisitioned meeting of members to replace directors should be abandoned if administration intervenes - directors resolve to appoint administrators for improper purpose of stopping meeting of members - whether member has standing to complain of breach of directors' duty - whether general law right to sue on behalf of company was abolished retrospectively by s 236(3) - whether appointment of administrators should be set aside - whether company was solvent - admissibility of expert evidence of solvency - whether directors adopted resolution about insolvency in bad faith - effect of failure to comply with notice and time requirements of s 439A - effect of failure to provide details of proposed deed of company arrangement - administrators' report materially false and misleading - whether deed should be terminated under s 445D - whether defendants abused Part 5.3A so that order should be made under s 447A

LEGISLATION CITED: Corporations Act 2001 (Cth), ss 236, 237, 435C, 436, 439A, 445D, 446A, 447A, 1322, 1401
Corporations Law ss 1472
Supreme Court Rules Pt 8 r 11(3), Pt 20 r 4A

CASES CITED: Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 9 NSWLR 464
Advent Investors Pty Ltd v Goldhirsch (2001) 37 ACSR 529
Arthur Yates & Co Pty Ltd v Vegetable Seeds Committee (1945) 72 CLR 37
Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 and (1998) 29 ACSR 344 (Court of Appeal of New South Wales)
Cawthorne v Kiera Constructions Pty Ltd (1994) 13 ACSR 337
Darvall v North Sydney Brick & Tile & Co Ltd (1989) 16 NSWLR 260
Deputy Commissioner of Taxation v Portinex Pty Ltd (1999) 156 FLR 453
Foss v Harbottle (1843) 2 Hare 461 [67 ER 189]
Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd (1985) 9 ACSR 593
Karam v Australia and New Zealand Banking Group Ltd (2000) 34 ACSR 545
Kazar v Duus (1998) 29 ACSR 321
Luxton v Vines (1952) 85 CLR 352
Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 39 NSWLR 128
Powell & Duncan v Fryer, Tonkin & Perry (2000) 18 ACLC 480
Quick v Stoland Pty Ltd (1998) 29 ACSR 130
Re Movitor Pty Ltd (1996) 14 ACLC 587
Re Tosich Constructions Pty Ltd (1997) 143 ALR 18
Re William Felton & Co Pty Ltd (1998) 16…

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 Pty Ltd

Details

AGLC: Cadwallader v Bajco Pty Ltd [2001] NSWSC 1193
Case: [2001] NSWSC 1193
Decision Date: 24 December 2001

CaseChat Overview and Summary

In Cadwallader v Bajco Pty Ltd, the dispute involved the members of a company seeking to replace the directors through a requisitioned meeting, which was challenged by the company's administration. The case was heard in the Supreme Court of New South Wales. The plaintiffs, who were members of the company, sought to replace the directors after they resolved to appoint administrators to prevent the meeting from taking place. The legal issues included whether the members had standing to challenge the directors' actions, the retrospective effect of section 236(3) on the general law right to sue on behalf of the company, the validity of the appointment of administrators, the solvency of the company, the admissibility of expert evidence on solvency, and the directors' intention in adopting the resolution to appoint administrators.

The court found that the members did have standing to challenge the directors' decision to appoint administrators for an improper purpose. The court rejected the argument that section 236(3) had abolished the general law right to sue retrospectively. The court determined that the directors had acted improperly by appointing administrators to thwart the members' requisitioned meeting. The court also ruled that the company was solvent and that the directors had not acted in good faith when they adopted the resolution to appoint administrators. The court found that the administrators' report was materially false and misleading and ordered the termination of the deed of company arrangement. The court concluded that the defendants had abused Part 5.3A of the Corporations Act, warranting an order under section 447A.

The court ordered that the appointment of the administrators be set aside, and the deed of company arrangement be terminated. The court also directed that the defendants pay the costs of the proceedings. The decision highlighted the importance of directors acting in the best interests of the company and the potential consequences of misusing the corporate voluntary administration process.

Orders