Carrello v Aluminex Resources Ltd

[2009] WASC 98

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   CARRELLO -v- ALUMINEX RESOURCES LTD [2009] WASC 98

CORAM:   BEECH J

HEARD:   7 APRIL 2009

DELIVERED          :   7 APRIL 2009

PUBLISHED           :  22 APRIL 2009

FILE NO/S:   COR 179 of 2008

BETWEEN:   GIOVANNI MAURIZIO CARRELLO

ANTHONY HAYES DOUGLAS-BROWN
Plaintiffs

AND

ALUMINEX RESOURCES LTD (ADMINISTRATORS APPOINTED) (ACN 109 245 418)
First Defendant

DAVID ALAN ZOHAR
Second Defendant

DAVID CHARLES O'FARRELL
JOHN ADRIAN WATTS
Third Defendants

JULIE ZOHAR
SHOSHANNA ZOHAR
Fourth Defendants

Catchwords:

Corporations - Administration - Application for declaration that appointment as administrators is valid - Dismissal of application by consent of administrators and parties who had challenged validity of appointment of administrators

Corporations - Administration - Meeting of creditors - Convening period - Application for extension

Corporations - Administration - Resignation of administrator - Protection of interests of creditors and members

Legislation:

Corporations Act 2001 (Cth), s 447A, s 447C, s 449C

Result:

Application dismissed

Category:    B

Representation:

COR 179 of 2008

Counsel:

Plaintiffs:     Mr G D Cobby

First Defendant              :     No appearance

Second Defendant         :     Mr P G Clifford

Third Defendants           :     In person

Fourth Defendants         :     Mr P G Clifford

Solicitors:

Plaintiffs:     Kott Gunning

First Defendant              :     No appearance

Second Defendant         :     Lawton Gillon

Third Defendants           :     In person

Fourth Defendants         :     Lawton Gillon

Case(s) referred to in judgment(s):

Nil

BEECH J:  (These reasons are an edited version of the reasons delivered extemporaneously on 7 April 2009.)

Introduction

1. These proceedings were commenced on 27 November 2008 by the plaintiffs as the persons appointed, or purportedly appointed, as administrators on 18 November 2008 of the first defendant company. By these proceedings, the plaintiffs seek a declaration under s 447C of the Corporations Act 2001 (Cth) that the appointment of the plaintiffs as joint and several administrators of the first defendant is valid. The plaintiffs also seek alternative relief under s 447A in the event that the appointment is found to be invalid.

Background facts

1. The evidence filed in support of the application establishes that prior to 30 October 2008 the board of the first defendant company (Aluminex) comprised the third defendants, Mr David O'Farrell and Mr John Watts; the second defendant, Mr David Zohar; and a fourth person, Mr Simon England.  On the case of the second and fourth defendants in these proceedings, on 30 October 2008 a resolution was passed by the board appointing the fourth defendants, Ms Julie Zohar and Ms Shoshanna Zohar, as directors.

2. Mr England resigned as a director on 31 October 2008.

3. The minutes of a board meeting on 18 November 2008 record that Messrs O'Farrell and Watts voted in favour of resolutions for the appointment of administrators to Aluminex, and the second and fourth defendants expressed an intention to vote against these resolutions. On the second and fourth defendants' case in these proceedings, the resolutions were not supported by a majority because the second and both of the fourth defendants were by then directors. The second and fourth defendants also advance other grounds on which they say the resolution was not valid. Further, they seek, in the alternative, an order under s 447A to bring the administration to an end because the company is solvent.

4. There is evidence that on 16 December 2008 at a shareholders' meeting the fourth defendants were appointed as directors and the third defendants removed as directors.  Thus counsel for the second and fourth defendants submits that the current position is that the second and fourth defendants comprise the board.  Certainly the third defendants do not now claim to be directors of Aluminex.

The agreement between the plaintiffs and the second and fourth defendants

1. I have been informed that the plaintiffs and the second and fourth defendants have reached an agreement as to these proceedings.  I am also informed that the plaintiffs resigned as administrators on 27 March 2009.  The plaintiffs and the second and fourth defendants seek the dismissal of this application with no order as to costs.  Evidently neither the plaintiffs, who are the persons appointed as administrators, nor the second or fourth defendants, who are the persons who sought to impugn the validity of that appointment, now seek to agitate the issues as to the validity of the appointment of the plaintiffs as administrators.

Disposition of the application

1. Subject to the matters to which I will come, I am satisfied that it is appropriate to dismiss the application in the circumstances of this case.  An aspect of that is that I am satisfied that dismissal of the application will not irremediably prejudice any party.

2. At the hearing today, the third defendants sought an adjournment for a period of about two or three weeks.  Mr O'Farrell says on the third defendants' behalf that they wish to have further time to consider their position and what steps might be taken.  Prior to today the third defendants have not indicated any opposition to what is proposed by the plaintiffs and the second and fourth defendants, or that any adjournment would be sought.

3. I am not persuaded that it is necessary to adjourn the application in order to provide reasonable protection to the interests of the third defendants. 

4. First, Mr O'Farrell mentioned the possibility of an application to the court for the appointment of a provisional liquidator to Aluminex.  Any such application must be dealt with on its own merits and would not be prejudiced by what is now proposed to occur in these proceedings. 

5. Further, the interests of the third defendants will be accommodated to a sufficient degree by the proposal for notice to creditors to which I now come. 

6. In the context of a company in administration, the interests of creditors need to be brought to bear in determining what orders are appropriate.  In that context, I note that because the plaintiffs have resigned as administrators they do not now represent the interests of creditors.

7. Upon the resignation of the administrators in this case the directors have a power to appoint a replacement: s 449C(1), read with s 449C(2)(b)(i). If that power is not exercised by the directors, an officer, member or creditor of the company can apply to the court for someone to be appointed as administrator: s 449C(6). In this context, s 447E(2) and s 447E(3) should also be noticed.

8. When the matter was before Master Sanderson on 4 December 2008, he ordered that the convening period be extended until sometime after the hearing of this application.  If the application is now to be dismissed, as is sought by the plaintiffs and by the second and fourth defendants, it is necessary to consider what extension should be granted of the convening period.

9. In determining the appropriate length of an extension of the convening period, it is necessary to ensure that rights of creditors and members are not defeated by the expiry of the convening period before a creditor or member could, in a practical sense, take any step.  The expiry of the convening period would, of course, bring the administration to an end:  s 435C(3)(d).

10. For that reason, I would not make orders in the form initially proposed by the second and fourth defendants. To accommodate the concerns in relation to the interests of creditors, during the hearing counsel for the second and fourth defendants proposed an order that requires the solicitors for the second and fourth defendants to send a letter to creditors that gives notice of the resignation of the administrators, the extension of the convening period, and of the right of creditors to bring an application under s 449C(6).

11. I am satisfied that a notice of this kind sufficiently accommodates the interests of creditors to make the orders sought by the plaintiffs and the second and fourth defendants appropriate in the circumstances of this case.  That approach also seems to me to sufficiently accommodate the concerns and interests of the third defendants which underlie their application to adjourn the proceedings.

12. Therefore, I would make orders to the following effect:

    (1)The application be dismissed.

    (2)Order 7 made by Master Sanderson on 4 December 2008 be recalled.

    (3)By 4.00 pm 9 April 2009 the solicitors for the second and fourth defendants send, by post, facsimile, and if possible email, to the creditors or claimed creditors of the first defendant a letter informing them that:

    (a)The Administrators of Aluminex Resources Ltd resigned on 27 March 2009;

    (b)The current directors of Aluminex do not intend to appoint a replacement administrator;

    (c)The time for convening the meeting of creditors pursuant to s 439A(6) of the Corporations Act 2001 (Cth) has been extended to 1 May 2009;

    (d)A creditor may, if it wishes, make an application to the court pursuant to s 449C(6) of the Corporations Act 2001 (Cth) for the appointment of a person as administrator of the company; and

    (e)Such application, if any, must be supported by an affidavit and be filed and served by 4.00 pm 28 April 2009.

    (4)The convening period for the meeting of creditors to be held pursuant to s 439A of the Corporations Act 2001 (Cth) relating to Aluminex Resources Limited be extended to 1 May 2009.