Cadwallader v Bajco Pty Ltd & Ors

[2002] NSWCA 328

NSW Court of Appeal

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Interrogate

Catchwords

1. Corporations
2. › Directors' duties
3. › Breach of fiduciary duty
4. › Improper purpose
5. › Resolution to appoint administrator to prevent removal of directors at requisitioned meeting
6. › Whether dominant purpose improper
7. › Corporations Law, s 436A
1. Corporations
2. › Administration
3. › Voluntary administration
4. › Appointment of administrator
5. › Voidability of appointment where directors acted for improper purpose
6. › Appropriate remedy
7. › Whether transactions should be avoided ab initio or company treated as having entered voluntary administration
8. › Corporations Law, ss 435A, 436A, 447A
1. Corporations
2. › Administration
3. › Administrators
4. › Remuneration and expenses
5. › Lien and indemnity
6. › Whether administrators entitled to fees beyond date of defective report
7. › Whether limitation of fees punitive
1. Equity
2. › Waiver
3. › Whether shareholder's vote at creditors' meeting constituted waiver of right to challenge administration
4. › Whether waiver of private rights affects company's rights

Quick Take

Where directors of a solvent company resolve to appoint administrators for the improper purpose of preventing their own removal at a requisitioned members' meeting, the appropriate remedy is avoidance of the resolutions and appointment ab initio under the general law, not treatment under Part 5.3A of the Corporations Law. Part 5.3A, which is directed at insolvent companies, provides no contrary policy applicable to a solvent company. The mental state of the administrators regarding the directors' improper purpose is not material to whether the transactions should be avoided ab initio. Arguably, the defence of unclean hands requires actual improper conduct, not merely an intention or preparation to act improperly.