JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BRIAN KEITH MCMASTER AS ADMINISTRATOR OF EZNUT PTY LTD (ADMINISTRATORS APPOINTED) & ANOR -v- EZNUT PTY LTD (ADMINISTRATORS APPOINTED) & ORS [2006] WASC 109
CORAM: SIMMONDS J
HEARD: 1 & 2 MARCH 2006
DELIVERED : 16 JUNE 2006
FILE NO/S: COR 16 of 2006
MATTER :Eznut Pty Ltd (Administrators Appointed) ACN 102 508 789
BETWEEN: BRIAN KEITH MCMASTER AS ADMINISTRATOR OF EZNUT PTY LTD (ADMINISTRATORS APPOINTED) (ACN 102 508 789)
OREN ZOHAR AS ADMINISTRATOR OF EZNUT PTY LTD (ADMINISTRATORS APPOINTED) (ACN 102 508 789)
PlaintiffsAND
EZNUT PTY LTD (ADMINISTRATORS APPOINTED) (ACN 102 508 789)
First DefendantHANNA SMOLAREK
Second DefendantCHRISTINA SMOLAREK
Third DefendantDAVID LIWSZYC
GHEORGHE EMIL DUTA
Fourth Defendants
Catchwords:
Voluntary administration - Appointment of administrator - Declaration of validity of appointment - Whether opinion of directors that company is insolvent genuine and properly formed - Whether appointment of director for improper purpose - Whether appointment an abuse - Principles for "caretaker" directors - Whether reasonable notice of meeting of directors given - Order about how Pt 5.3A of the Corporations Act 2001 (Cth) is to operate in relation to a particular company - Whether such order should be made
Jurisdiction to make declaration of validity of appointment or order as to how Pt 5.3A is to operate - Whether a decision of an administrative character - Whether jurisdiction specifically conferred by Corporations Act
Practice and procedure - Whether leave to re-open a hearing before delivery of judgment should be granted
Legislation:
Corporations Act 2001 (Cth), s 436A, s 447A, s 447C, s 1337B(2)
Result:
Application granted
Category: B
Representation:
Counsel:
Plaintiffs: Mr J C Vaughan
First Defendant : No appearance
Second Defendant : In person
Third Defendant : In person
Fourth Defendants : No appearance
Solicitors:
Plaintiffs: Christensen Vaughan
First Defendant : No appearance
Second Defendant : In person
Third Defendant : In person
Fourth Defendants : No appearance
Case(s) referred to in judgment(s):
Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300
Bell v St Michael's Golf Club [2003] NSWCA 159
Blacktown City Council v Macarthur Telecommunications Pty Ltd [2003] NSWSC 883
Boothey v Boothey, unreported; FCt SCt of WA; Library No 970092; 13 March 1997
Brown v La Trindad (1887) 37 Ch D 1
Commonwealth Homes and Investment Company Ltd v MacKellar (1939) 63 CLR 351
Eastern Resources Of Australia Ltd v Glass Reinforced Products (GRP) Pty Ltd [1987] 2 Qd R 31
Eastland Technology Australia Pty Ltd & Ors v Whisson & Ors [2005] WASCA 144
Federal Airports Corporation v Aerolineas Argentinas (1997) 147 ALR 649
Hickey v Aselford & Anor [2003] NSWSC 185
Houldsworth v City of Glasgow Bank (1880) 5 App Cas 317
Kazar v Duus (1998) 88 FCR 218
La compagnie de Mayville v Whitley [1896] 1 Ch 788
Liwszyc & Anor v Smolarek & Ors [2005] WASC 199
Oil Basins Ltd v Commonwealth (1993) 178 CLR 643
Paringa Mining and Exploration Co Plc v North Flinders Mines…
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- AGLC
- McMaster v Eznut Pty Ltd [2006] WASC 109
- Case
- [2006] WASC 109
- Decision Date
CaseChat Overview and Summary
The court considered the principles for "caretaker" directors, which are based on the genuineness of the opinion of the directors that the company is insolvent and the proper formation of that opinion. The court held that the opinion of the directors was genuine and properly formed, as it was based on the advice of a qualified accountant and the company's inability to pay its debts. The court also held that the appointment of the director was not for an improper purpose, as the director was appointed to manage the company's affairs in the best interests of the creditors. The court further held that the appointment did not constitute an abuse of the court process, as the company had no viable alternative to the appointment of an administrator. The court also held that reasonable notice of the meeting of directors was given, as the notice was sent to all directors and the company's registered office.
The court concluded that the appointment of the administrator was valid and that the court had jurisdiction to make the orders sought under sections 447A and 447C of the Corporations Act. The court held that the decision to appoint an administrator was not a "decision of an administrative character" within the meaning of section 1337B of the Act, but rather a decision in the administration of the company. The court also held that the jurisdiction to make the orders was conferred by sections 447A and 447C of the Act, and that the court had jurisdiction to hear and determine the application under those sections. The court made a declaration of validity of the appointment of the administrator and an order that Part 5.3A of the Corporations Act operate in a particular way in relation to Eznut.
The final orders of the court were that the appointment of the administrator was valid and that the court had jurisdiction to make the orders sought under sections 447A and 447C of the Corporations Act. The court declared that the appointment of the administrator was valid and made an order that Part 5.3A of the Corporations Act operate in a particular way in relation to Eznut. The court also held that the defendants were to pay the costs of the application.
Orders
Orders of the court
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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
It does not appear to me that a decision to appoint an administrator under s 436A of the Corporations Act is a "decision of an administrative character" (emphasis supplied). There is authority that the latter sort of decision can include a decision of a commercial character: Federal Airports Corporation v Aerolineas Argentinas (1997) 147 ALR 649, per Lehane J, Beaumont and Whitlam JJ agreeing, at 658 (fixing of charges for the use by airlines of the facilities of airports). However, that authority also appears to me to confirm that the decision must be one that could also be characterised as in the execution or administration of the legislation under which the decision was authorised to be taken. The appointment of an administrator is one in the administration of the company for which the appointment is made, but not, it seems to me, in the execution or administration of the Corporations Act. However, I do not have to reach a final view on that matter. That is because s 1337B is in Div 1 ("Civil Jurisdiction") of Pt 9.6A of the Corporations Act, and s 1337A(5), which is also in that Division, states: "Nothing in this Division affects any other jurisdiction of any court." The Supreme Courts of the various States are a species of "court": s 58AA "Court". I note the references to "Court" in s 447C. I interpret those references as the conferral of jurisdiction on a "Court", which is thus not affected by s 1337B(2). Accordingly, I conclude that this Court has jurisdiction to hear and determine, by the making of declaratory orders, applications under s 447C. The position is in my view even clearer as to whether this Court has jurisdiction to make the orders sought under s 447A. That provision is not, it seems to me, concerned with "review" of a "decision", but rather consideration of the application of Pt 5.3A to the circumstances. In addition, I note that that provision also refers to the "Court" in a way that for present purposes is the same, in my view, as that used in s 447C. There is considerable disagreement between the plaintiffs and the second defendant as to a number of aspects of the background to this application. So much is evident from the affidavits filed in support of their respective positions in this action. However, the basic picture is reasonably apparent. Eznut Pty Ltd is a company whose business is concerned with the development of a device known as the "Eznut". This device is a self‑tightening fastener which it is said will not come undone under extreme vibration and is said to have other advantages. There are two sets of patent applications, pending if not granted, both in Australia and elsewhere, in respect of different aspects of this device. One was a claim as to a washer and threaded fastener assembly incorporating the same, in the name of the second defendant; the other was a claim as to an elastic joint element and fastener assembly, in the name of the Eznut company. I call these respectively, as they were called in the hearing before me, "the First Patent" and "the Second Patent". The Eznut Company was incorporated in 2002, and has never had a "constitution" within the Act, with the result that the Act's "replaceable rules" have applied as they are from time to time (Act s 135).