In the matter of Creative Memories Australia Pty Ltd (Administrators Appointed)

[2013] NSWSC 652

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Creative Memories Australia Pty Ltd (Administrators Appointed) [2013] NSWSC 652
Hearing dates:	13 May 2013
Decision date:	13 May 2013
Jurisdiction:	Equity Division - Corporations List
Before:	Hammerschlag J
Decision:	Order pursuant to s 447A(1) of the Corporations Act 2001 (Cth) declaring that the appointment of the applicants as joint and several administrators is valid
Catchwords:	CORPORATIONS - Corporations Act 2001 (Cth) ss 436A, 447A and 201A - where as a result of the resignation of a locally resident director, a company has two directors, both of whom are non-resident - where those two directors resolve that the company should appoint an administrator - where the administrators are concerned that their appointment is invalid because there was no locally resident director, as required by s 201A of the Act - order made validating the appointment to dispel any doubt
Legislation Cited:	Corporations Act 2001 (Cth)
Category:	Principal judgment
Parties:	Atle Crowe-Maxwell and James Michael White in their capacity as joint and several administrators of Creative Memories Australia Pty Ltd (Administrators Appointed)
Representation:	Counsel: T. Kerr - Applicant Solicitors: Swaab Attorneys - Applicant
File Number(s):	2013/139963

EX TEMPORE Judgment

1. HIS HONOUR: Part 5.3A of the Corporations Act 2001 (Cth) ("the Act") is entitled "Administration of a company's affairs with a view to executing a deed of company arrangement." Section 436A(1) of the Act provides that a company may, by writing, appoint an administrator if the board has resolved to the effect that, in the opinion of the directors voting for the resolution, the company is insolvent or is likely to become insolvent at some future time and an administrator of the company should be appointed.

1. Section 447A(1) of the Act (which is in Pt 5.3A) provides that:

The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company.

1. The section gives the Court a wide, albeit not unlimited, discretion. It can be used to cure defective appointments or remove uncertainty with respect to doubtful ones.

1. Before the Court is an application (brought by Interlocutory Process filed today with leave) stated, amongst others, to be pursuant to s 447A of the Act. It is brought in connection with the appointment on 30 April 2013 of the applicants Messrs Atle Crowe-Maxwell and James Michael White as joint and several administrators of Creative Memories Australia Pty Ltd (Administrators Appointed) ("the company") pursuant to s 436A(1) of the Act.

1. The application was spawned by a perception that the appointment is defective because it was made by resolution passed by two directors of the company, neither of whom resided ordinarily in Australia at the time of the resolution. Section 201A of the Act provides that a proprietary company must have at least one director and that that director must ordinarily reside in this country.

1. At first the company had three directors, two resident in the United States and one local. But the local director resigned on 19 April 2013. On 30 April 2013 the two remaining non-resident directors determined that the company was insolvent and unable to pay its debts as and when they fell due. They passed a resolution appointing the applicants as administrators.

1. I am far from convinced that the resolution is ineffective or invalid but if it is, this is clearly a case where any doubt should promptly be dispelled by the making of an order pursuant to s 447A(1) of the Act.

1. The application is supported by the affidavit of Mr Crowe-Maxwell. He deposes to a number of matters including that after the resignation of the resident director the two remaining directors concluded that the company would need to continue to trade with a view to the continuing service of its obligations to customers and consultants and to sell its inventory of stock. I was informed from the bar table that the company's business is that of providing scrap booking materials.

1. The judgment of the directors was that continued trade was the best way in which the company might maximise a return from its stock and that this was best accomplished with the utilisation of existing sales channels consisting of some 1,400 customers and consultants.

1. At the time of the appointment there was a significant amount of material in stock. The company has continued to trade and commercial arrangements have been made for the continuation of supply. The administrators have also made commercial arrangements with the company's landlord to secure the provision of premises to allow this to continue.

1. The company had twenty-eight employees at the date of the administration and now has twenty-two. The employment of those twenty-two will gradually be terminated but their continued employment is required to enable the company to trade. A valuation of its existing stock has been undertaken. The information is commercially sensitive and I order that until further order it not be published.

1. The evidence satisfies me that this is an entirely appropriate case in which the Court should exercise its powers under s 447A to declare that the appointment is valid.

1. Pursuant to s 447A(1) of the Act, I order that Pt 5.3A of the Act is to operate in relation to Creative Memories Australia Pty Ltd (Administrators Appointed) ABN 760 801 791 93 to the effect that notwithstanding the absence of a locally resident director, the resolution of directors passed on 30 April 2013 to appoint the applicants as joint and several administrators is valid as a resolution pursuant to s 436A(1) of the Act.

1. The costs of and incidental to this Interlocutory Process will be costs in the administration of the company. The applicants and any person affected by these orders have liberty to restore on forty-eight hours notice.

1. These orders are to be entered forthwith.

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