One Tree Agriculture Pty Ltd v Lye

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FEDERAL COURT OF AUSTRALIA

One Tree Agriculture Pty Ltd v Lye [2025] FCA 126

File number: QUD 78 of 2024
Judgment of: DERRINGTON J
Date of judgment: 27 February 2025
Catchwords: CORPORATIONS – directors – appointment and resignation – application to fix date of resignation – delay in filing notice of resignation – whether applicant established date on which they stopped being a director – whether just and equitable to fix date of resignation after ASIC register had been relied on by third party – application dismissed
Legislation: Corporations Act 2001 (Cth)
Cases cited:

Barboutis v The Kart Centre Pty Ltd (No 2) [2020] WASCA 41

Bell v Burton (1993) 12 ACSR 325

Cain v Aero Marine Consulting Pty Ltd (2003) 133 FCR 1

Career Employment Australia Ltd v Shepley (2021) 166 ACSR 54

Collins v Zernike Australia Pty Ltd (2006) 198 FLR 126

Forkserve Pty Ltd v Jack [2000] NSWSC 1064

Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296

Hayes (liquidator), in the matter of Container Freight Services Pty Ltd (in liq) v Sinadinos [2024] FCA 885

Hedges v NSW Harness Racing Club Ltd (1991) 5 ACSR 291

In the Matter of ACN 092 745 330 [2017] NSWSC 241

Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151

Knight v Bulic (1994) 13 ACSR 553

Kocic v Deputy Commissioner of Taxation [2011] NSWCA 322

Latchford Premier Cinema Ltd v Ennion [1931] 2 Ch 409

McIntosh v CMX Technologies Pty Ltd (2005) ACSR 283

Nilant v RL & KW Nominees Pty Ltd [2007] WASC 105

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Re Concreting and Formwork Personnel Pty Ltd (in liq) [2023] NSWSC 512

Re Deterra Royalties Ltd [2024] FCA 891

Re Energy Resources of Australia [2022] FCA 176

Re Whitsunday Clean Sands Pty Ltd [2017] NSWSC 1199

Rowntree v Commissioner of Taxation (2018) 125 ACSR 318

Savoy v Insurance and Care NSW (2020) 142 ACSR 200
Division: General Division
Registry: Queensland
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 114
Date of hearing: 5 February 2025
Counsel for the Plaintiff: Mr M Callanan
Solicitor for the Plaintiff: Kerrs
Counsel for the Defendants: Mr S Hogg
Solicitor for the Defendants: Doyle Wilson Solicitors

ORDERS

QUD 78 of 2024
BETWEEN:

ONE TREE AGRICULTURE PTY LTD ACN 168 726 592

Plaintiff
AND:

LOUISE JANE LYE

First Defendant

COLIN STUART LYE

Second Defendant

ORDER MADE BY:

DERRINGTON J

DATE OF ORDER:

27 FEBRUARY 2025

THE COURT ORDERS THAT:

1.The first defendant’s application filed 7 August 2024 be dismissed.

2.The first defendant pay the plaintiff’s costs of her application to be taxed or agreed.

3.The second defendant’s application filed 2 October 2024 be dismissed.

4.The second defendant pay the plaintiff’s costs of his application to be taxed or agreed.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

  1. These reasons for judgment concern two…

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Details
Case
[2025] FCA 126
Decision Date

CaseChat Overview and Summary

One Tree Agriculture Pty Ltd sought to establish the date of resignation of a director of the company, Lye. The company argued that Lye had ceased to be a director on 1 July 2021, based on an alleged conversation with the former director, Mrs Lye, which took place after Mr Lye had been discharged from bankruptcy but before 1 July 2021. The primary issue was whether Mrs Lye had effectively resigned on that date and whether it was just and equitable to fix the date of resignation after the Australian Securities and Investments Commission (ASIC) register had been relied on by a third party.

The court considered whether Mrs Lye had indeed stopped being a director on 1 July 2021, based on the conversation with Mr Lye. The court noted that while a director may resign orally, there was no evidence that Mrs Lye had formally tendered her resignation in writing, as required by the company’s constitution, or that she had accepted any such resignation. The conversation, though detailed, did not constitute a valid resignation under the company's constitution or relevant statutory requirements. Additionally, the court found that fixing the date of resignation after the ASIC register had been relied upon by a third party would not be just and equitable.

The court dismissed the application, concluding that the applicant had not established that Mrs Lye had effectively resigned on 1 July 2021. The court held that the reliance on the ASIC register by a third party after the alleged resignation date made it unjust and inequitable to fix the resignation date retrospectively. The court further ordered that the defendants pay the plaintiff’s costs of the applications.

Orders

Orders of the court

1. The first defendant’s application filed 7 August 2024 be dismissed.

2. The first defendant pay the plaintiff’s costs of her application to be taxed or agreed.

3. The second defendant’s application filed 2 October 2024 be dismissed.

4. The second defendant pay the plaintiff’s costs of his application to be taxed or agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Whilst it can be accepted that the conduct of a small company’s internal affairs will regularly involve substantial informality, where the result is that it will affect the rights of persons outside the company, courts should be astute not to construe the company’s alleged aspirational intentions as amounting to actual conduct by it: Nilant v RL & KW Nominees Pty Ltd [2007] WASC 105, [187].Background The following facts are taken from the several affidavits relied upon by the parties. There was no cross-examination of any deponent, with the consequence that no evaluation of competing evidence or credit is required. A&B was incorporated on 1 October 2008. It has, for some time, operated a business trading agricultural commodities and providing agriculture consulting services, and has also acted as trustee of the A&B Family Trust. Mrs Lye is, and has been, the company’s only shareholder. Mrs Lye was appointed as the sole director of A&B on 1 October 2008. She remained in that position until 9 June 2016, on which date she resigned and Mr Lye was appointed in her place. On 19 January 2017, Mr Lye was declared bankrupt. Sometime after Mr Lye’s bankruptcy commenced, he claims to have had a discussion with Mrs Lye to the effect that she should become the director of A&B. She is said to have responded with words to the effect:It has nothing to do with me. I don’t understand companies and prefer not to be involved. That is an unusual statement from a person who had been the sole director of A&B for nearly eight years. However, little is to be made of this oddity in the absence of any cross-examination of Mrs Lye. Notwithstanding her reluctance, Mr Lye claims to have continued to push his wife to re-assume the directorship of A&B, and to have said words to the effect:Once I have been discharged from bankruptcy, I will replace you as the director. Mrs Lye eventually acceded to Mr Lye’s requests and, on 1 April 2017, was appointed as A&B’s director in place of her husband. Despite relinquishing directorship, Mr Lye remained involved in the affairs A&B. He gave evidence to the effect that, should A&B need to file documents, he would arrange for someone from the accountancy firm, Robertson Scannell, to do so. Mr Lye was discharged from bankruptcy on 18 January 2021. Sometime thereafter, but before 1 July 2021, he claims to have had a conversation with Mrs Lye to the following effect:Now I am discharged as a bankrupt I can act as a director as promised. You can resign as a director of A & B as at 1 July 2021 and I will become the sole director of A & B. It was said that Mrs Lye agreed with that proposal. In her affidavit, Mrs Lye recalls a nigh identical series of events:After Colin was discharged as a bankrupt on 18 January 2021 he said to me words to the effect: “Now I am a discharged bankrupt I can act again as a director as agreed. You can resign as a director of A & B as at 1 July 2021 and I will become the sole directors of A & B.”I replied in effect that I agreed with this.

Evidence

Evidence Before The Court

So framed, the defendants’ submission gives rise to three questions:(a)Did Mrs Lye stop being a director of A&B on 1 July 2021 because there is evidence, albeit not contemporaneous with that date, that suggests it was her intention to do so?(b)Could Mrs Lye stop being a director of A&B on 1 July 2021 if no other director was validly appointed in her stead on or by 1 July 2021?(c)Did Mrs Lye, in fact, ever stop being a director of A&B?Non-contemporaneous evidence of an intention to resign Much reliance was placed upon the conversation that is alleged to have transpired between Mrs Lye and Mr Lye sometime after 18 January 2021, but before 1 July 2021. The content of that conversation has been set out above but is nonetheless repeated here for convenience. In Mr Lye’s words:Sometime after 18 January 2021 I had a conversation with Louise to the effect:“Now I am discharged as a bankrupt I can act as a director as promised. You can resign as a director of A & B as at 1 July 2021 and I will become the sole director of A & B.”She indicated her agreement with this. In Mrs Lye’s words:After Colin was discharged as a bankrupt on 18 January 2021 he said to me words to the effect: “Now I am a discharged bankrupt I can act again as a director as agreed. You can resign as a director of A & B as at 1 July 2021 and I will become the sole directors of A & B.”I replied in effect that I agreed with this. That event is relied upon as proof of both Mrs Lye’s effective resignation of her position on 1 July 2021 and Mr Lye being appointed as director on that day. It was not identified how that could occur if Mrs Lye’s resignation took place before Mr Lye’s appointment, and there being no one to appoint him. It may have been intended that Mr Lye would be appointed in advance by Mrs Lye, but the appointment was only to take effect on 1 July 2021 or, it may be that Mrs Lye was to resign only after she appointed Mr Lye. Unfortunately, all of this is speculation. The suggestion that Mrs Lye could resign prospectively by (orally) demonstrating an intention to do so before the actual date of resignation encounters several difficulties, chiefly being that is at odds with the terms of cl 12(3) of the Constitution. That provision provides that the office of a director of A&B becomes vacant if the director, amongst other things, “resigns by giving a written notice of resignation to the company at its registered office”. There is no suggestion that Mrs Lye provided such a notice at the time of her conversation with Mr Lye or thereafter. Notwithstanding the force of cl 12(3), it can nonetheless be accepted that a director may resign their office by tendering his or her resignation orally and the company subsequently accepting that resignation: Knight v Bulic (1994) 13 ACSR 553, 561 (Knight), citing Latchford Premier Cinema Ltd v Ennion [1931] 2 Ch 409; but see Bell v Burton (1993) 12 ACSR 325, 329. The difficulty here is that there is a lacuna of evidence that A&B accepted any resignation that was tendered by Mrs Lye. Conceivably, in her position as sole director and shareholder of the company, she may have accepted her own resignation: see, eg, s 198E(1); Cain v Aero Marine Consulting Pty Ltd (2003) 133 FCR 1, 13 [50] (Cain): although there is an absence of evidence on her part of doing so, qua shareholder, and there is nothing to suggest when she did so. Of course, it is also true that the Corporations Act is largely silent about how a sole director and shareholder should evidence what they cause a company to do: Rowntree v Commissioner of Taxation (2018) 125 ACSR 318, 328 [50] (Rowntree). But that observation pre-supposes the existence of some modicum of evidence. Here, for example, there was no suggestion that Mrs Lye passed a resolution, or made a declaration, accepting her proposed resignation on or before 1 July 2021: s 248B: or recorded any such documents in A&B’s minute books: s 251A.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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