Smolarek v Liwszyc

The appeal in Smolarek v Liwszyc was brought against the appellants, Hanna Smolarek and David Liwszyc, by the respondents, who sought to challenge several interlocutory orders made by the primary Judge in the context of control over Eznut Pty Ltd, a company in voluntary administration. The appellants were directors and shareholders of Eznut, which was formed in 2002 by Smolarek and Liwszyc to commercialise a new type of commercial fastener. The company did not adopt a constitution, opting instead to operate under the replaceable rules of the Corporations Act 2001 (Cth). The dispute arose from disagreements between the parties over the management and direction of Eznut, leading to legal actions regarding the validity of director appointments, procedural irregularities in meetings, and the enforceability of statutory injunctions.

The legal issues before the court included whether a director appointed under section 201H of the Corporations Act automatically ceases to be a director after two months if not confirmed by the board, whether procedural irregularities invalidate the actions of a meeting under sections 1322(2) and 1322(4) of the Act, and whether directors must be given an opportunity to refuse to register a transfer of shares. The court also considered the implications of the absence of a quorum in a members' meeting and the potential for substantial injustice under section 1322(2) of the Act.

The court held that the primary Judge's decision to reinstate a director was valid and created legal rights and duties that should not be antedated. The court emphasised that the appointment of administrators for Eznut did not constitute an exceptional circumstance warranting antedating of the order. Furthermore, the court found no procedural irregularities that would invalidate the primary Judge's decision and upheld the enforceability of the statutory injunctions granted. The court also concluded that the absence of a quorum did not necessarily cause substantial injustice if the meeting's decisions did not significantly affect the company's interests.

The final orders of the court set aside the primary Judge's order for the reinstatement of the second respondent as a director, effective from the date of the Court's pronouncement. The court emphasised the importance of maintaining the status quo pending further determination of the substantive issues in the case.