- Australian Securities and Investments Commission v Plymin

Supreme Court of NSW|2018-02-14|Before: Black J

Solicitors: Bridges Lawyers (Plaintiff) Swaab Attorneys (Second and Third Defendants) Somerset Ryckmans (Fourth Defendant) File Number(s): 2018/9353

Judgment

These proceedings concern the validity of the appointment of a voluntary administrator to the First Defendant, Bean & Sprout Pty Ltd (admin apptd) ("Company"). It will be convenient to say something about the parties to the proceedings before returning to the nature of the relief sought in the proceedings. The Plaintiff, Mr Kong Yao Chin was purportedly appointed as voluntary administrator of the Company by resolution passed on 7 January 2018. The Second Defendant, Ms Jiayi Hui, is a procurement manager with the Company and claims to be a director of the Company, and I will refer to her, without disrespect, by her Anglicised first name, Joyce. The Third Defendant, Mr Jianshu Li is the "supervisor" of the Company's Chinese holding company, Guangzhou Aomai Information & Technology Ltd ("GA") and also claims to be a director of the Company. I will refer to him, without disrespect, by his Anglicised first name, Charles. The Fourth Defendant, Mr Weiguang Huang is a director of GA and also claims to be a director of the Company, and had purportedly appointed Mr Chin as voluntary administrator of the Company. I will refer to him without disrespect by his Anglicised first name, Allan.

Background and appointment of the voluntary administrator

The Company and other associated entities conduct a business procuring and selling baby products and vitamins from Australian suppliers to mostly Chinese markets, largely by on-line stores. It appears the Company procures the relevant products from suppliers, mostly based in Australia. Other companies within the group are involved in the sale of the relevant products. The Company leases commercial premises at Ryde, under a lease which commenced in February 2017, which are used for storage of inventory and as an office for staff. The Company employs three staff members, who are involved with administration, the warehouse and sales, and casual staff from time to time, and maintains several bank accounts.
GA is the sole shareholder in the Company, and the three shareholders in GA are Guangzhou Kaitao Investment and Management Ltd ("GKIML"), which holds a 51% interest in GA, Harbin Aoshengyuan Trading Co Ltd which holds a 25% interest and is owned by Mr Sheng Qu who now also claims to be a director of GA and the Company (to whom I will refer, without disrespect, as "Alex"), and by Allan who owns a 24% interest. The shareholders in GKIML are, as to a 51% interest, Mr Ruiqing Li, and, as to a 49% interest, Ms Zhu Jing who is either the current or the former chair and a director of GA (to whom I will refer, without disrespect as "Therese"). In March 2016, GA "advanced" approximately $1.1 million to the Company and contributed a further amount of about $600,000, characterised as an "equity contribution" to the Company, when an amount was repaid to a former shareholder (Joyce 31.1.18 [41]-[43]). The evidence does not establish the steps that were taken to deal with any shares held by the former shareholder or the issue of new shares to GA in respect of any such "equity contribution". GA is also the sole shareholder in Brother Wu Pty Ltd ("BW") and Australian Perfect Resources Pty Ltd ("APR") and the Company is the sole shareholder in 51 Market Pty Ltd ("51 Market"). The parties led evidence that related to the affairs of those companies, but it is not necessary to reach any conclusion as to those companies in order to determine this application.
All parties led evidence as to disputes that developed between them during 2017. Although those matters indicate the developing dispute between persons interested in the Company, and would be relevant to any oppression claim or claim for winding up of the Company on the just and equitable ground, it is not necessary to address them for the purposes of this application. I will set out the particular corporate acts of GKIML, GA and the Company that are in issue in assessing their validity and legal effect below.
A key issue in the proceeding is the validity of the resolution passed on 7 January 2018, when Allan, purportedly as sole director of the Company, resolved: "That in the opinion of the Board of the sole Director, the company is insolvent or is likely to become insolvent at some future time, and an Administrator should be appointed to the Company. That K Y Chin be appointed by the Board as Administrator of the Company under Part 5.3A of the Corporations Act 2001." On the same date, Allan signed a notice of appointment of Mr Chin as voluntary administrator of the Company (Ex P1, 17-18). Notice of that appointment in a Form 505 dated 7 January 2018 was in turn given to ASIC.

Affidavit evidence

I turn now to the affidavit evidence. Mr Chin relies on his affidavit dated 9 January 2018 which sets out the background to his appointment. Mr Chin's evidence is that he had a telephone conversation with Allan on 8 January 2018 (Chin 9.1.18 [27]) in which Mr Chin referred to his understanding, when he was appointed as voluntary administrator of the Company, that the Company was insolvent because it owed a debt to GA that it could not pay, and Allan responded that: "I do not have the documents about the debt but basically it is a $1.5m debt which is not due to be repaid yet but I think [GA] will require it to be repaid soon." Mr Chin then rightly noted that, if GA had not yet called up the debt, the Company may not currently be insolvent, and Allan responded that: "But when they do ask for the debt to be repaid the [C]ompany will not be able to repay it because it doesn't have sufficient assets to pay a debt of $1.5m."
On 9 January 2018, Allan had a further telephone discussion with Mr Chin (Chin 9.1.18 [23]), in which Allan contended that a resolution purportedly passed by GA on 5 January 2018 was invalid, a matter that I will address below. By that date, real questions had plainly arisen as to whether Allan was a director of the Company on the date that he purportedly appointed Mr Chin as voluntary administrator of the Company and whether the Company was insolvent or likely to become insolvent at the date of that appointment. Sensibly, Mr Chin commenced these proceedings on 10 January 2018, to seek to determine the validity of his appointment.
Mr Turner, who appeared for Mr Chin, submitted that Mr Chin's evidence should be accepted, where he was not required for cross-examination, and where Allan substantially accepted Mr Chin's account of the conversation on 8 January 2018 in cross-examination. I accept Mr Chin's evidence and note that no party criticised Mr Chin's conduct in the matter and there would be no basis for such criticism.
Joyce and Charles rely on Joyce's affidavits dated 11 January 2018, 31 January 2018 and 9 February 2018. Joyce gives evidence, inter alia, of her dealings with Allan and as to withdrawals from bank accounts within the Group said to have been made by Allan and to events in late 2017 and early 2018 (Joyce 31.1.18, [58]ff). Joyce also refers (Joyce 9.2.18 [4]) to steps allegedly taken by Allan to limit access by Charles and Joyce to bank accounts of the Company and associated entities at various times. I will refer to aspects of Joyce's evidence below. Joyce and Charles also rely on Charles' affidavit dated 31 January 2018 and 9 February 2018. Charles gives evidence, inter alia, of the circumstances of the incorporation of GA, of Mr Li's investment in GA, of Charles' relocation to Australia in March 2017 to work in the Company's business at the request of GA, and also outlines the business of the Company and associated companies. Charles also addressed the circumstances relating to the purported removal of Therese as director and chair of GA, commencing with the shareholders meeting of GKIML held on 17 December 2017, to which I refer below. Charles also refers to events in late 2017 and early 2018 in relation to access to the Company's bank accounts and to its warehouse which it is not necessary to address in order to determine these proceedings. Charles' further affidavit dated 9 February 2018 deals with bank accounts of 51 Market and the Company and access to those accounts and withdrawals by Allan which may be relevant to other proceedings but which I need not address to determine this application. I will refer to other aspects of Charles' evidence below.
Joyce and Charles also rely on Alex's affidavits dated 30 January 2018 and 9 February 2018. Alex's affidavit dated 30 January 2018 deals with events in late December 2017 and early 2018 and the resolutions passed by GA in early January 2018, to which I refer below. Alex also gives evidence of the advance and equity contribution to the Company from GA and from Mr Li's daughter, Kailin (to whom I will refer, without disrespect, as "Kailin"). By his affidavit dated 9 February 2018, Alex refers to the monies contributed by GA to the Company and to an amount which he transferred, using Allan's wife, Ms Chen (to whom I will refer, without disrespect, as "Carey") as an intermediary, to pay out a former shareholder of BW in March or April 2016. He also refers to an advance made by Kailin to the Company, apparently transacted through Alex's bank account. Alex also responds to Allan's allegations as to the role of Grandview Technology Pty Ltd ("GVT") as a technology services provider to the Company. While the parties led some evidence as to that matter, directed to the question whether GVT was a competitor of the Company, that evidence is relevant to a potential oppression claim or an application for winding up of the Company on the just and equitable ground and it is not necessary to address it to determine the validity of Mr Chin's appointment. It is preferable that I do not do so where it may be in issue in other proceedings.
Joyce and Charles rely on the affidavit of Mr Siewei Li (to whom I will refer, without disrespect as "Ben") dated 1 February 2018, by which Ben claims to be the managing director and chair of GA and GKIML, although that status depends on the disputed transactions within GA, and also addresses GA's intentions as to financial support for the Company. Joyce and Charles also rely on Kailin's affidavit dated 1 February 2018, refers to the relationship between GA, GK and her father, Mr Li; to her having made a loan to GA as to which she has not sought repayment and does not intend to seek repayment; and as to her having made a loan of $500,000 to the Company as to which she had not made a demand for repayment and does not intend to demand repayment now or in the immediate future. Although Kailin does not indicate the source of the funds which she lent to the Company, that matter is not material for present purposes. Mr Rosenblatt, who appears for Allan, relies on the absence of evidence from Mr Li. Ms Fishburn, who appears for Joyce and Charles, responds, with significant force, that it was not necessary for them to lead evidence from Mr Li, even if he is the ultimate source of the relevant funds, where Kailin is the immediate lender of those funds to GA and the Company and has given evidence of her intention in respect of those funds. That matter is in any event of little significance given the findings that I reach on other grounds.
Joyce and Charles also rely on the affidavit and report dated 25 January 2018, of a Chinese lawyer, Mr Jianbin Chen. Mr Chen is duly qualified and licensed to practice the law of the People's Republic of China (with certain exclusions that are not presently relevant) and has specialised in corporate issues with over 20 years of legal experience, including some legal experience outside China. Mr Chen had been provided with and agreed to be bound by the expert witness code of conduct. I will address Mr Chen's evidence as to the validity of particular actions taken or purportedly taken in respect of GKIML and GA under the Company Law of the People's Republic of China ("PRC Company Law") below.
Mr Rosenblatt advances several criticisms of the adequacy of Mr Chen's evidence of the PRC Company Law. I am not persuaded by those criticisms, and I am also not persuaded by Mr Rosenblatt's submission as to several provisions of the PRC Company Law on which Allan relied in closing submissions, which was undermined by, inter alia, the absence of expert evidence in Allan's case to support the propositions of Chinese law now advanced by Mr Rosenblatt and the fact that Mr Chen was not required for cross-examination and those propositions were not put to him for comment. Ms Fishburn rightly points to the difficulties in this Court seeking to construe the provisions of the PRC Company Law to which Mr Rosenblatt refers, as if it were an Australian statute: compare Neilson v Overseas Projects Corporation of Victoria Ltd [2005] 223 CLR 331 at [115]. There is also a possibility that, as Ms Fishburn submits, several of the provisions on which Mr Rosenblatt relied relate only to particular forms of Chinese company and may or may not be applicable to GKIML or GA.
Allan relies on his affidavits dated 31 January 2018 and 8 February 2018 and on his wife's, Carey's, affidavit dated 8 February 2018. By his affidavit dated 31 January 2018, Allan sets out the history of the Company, including his responsibility for running its business until about February 2016, and the circumstances in which Mr Li and Therese acquired an indirect interest in the Company and Alex and Therese became part of the management of the Group from February 2016. Allan also refers to a loan of $1.1 million made by Kailin to GA and a further amount lent by his wife, Carey, to GA. Allan sought to lead evidence of a failure by GA to pay principal and interest due under that loan to it, which was inadmissible in form and was not admitted. In any event, a failure to pay interest by GA on a loan made to it (rather than to the Company) would, at best, only be indirectly relevant to the Company's solvency. Allan's evidence was that the funds advanced by Kailin and Carey were lent by GA to the Company; however, that evidence was admitted as a submission only, and does not prove that fact. Allan's evidence was also that he was a guarantor under the loan agreements between Kailin and Carey and GA and under the Company's lease agreement.
Allan's evidence is that, in October 2017, he sought to initiate a general meeting of the Company to have a discussion about the business, but Charles and Alex did not support that proposal and that meeting did not proceed (Allan 31.1.18 [49]). Allan also alleged that GVT (which Alex contends is a technology supplier to the Company) was carrying on a business in competition with the Company's business. Allan's concern as to that matter appears to have been a substantial factor in the breakdown of the relationship between the parties and in his appointment of a voluntary administrator to the Company, but that does not assist him in this application for the reasons noted below. Allan also leads evidence, largely admitted with limiting orders under s 136 of the Evidence Act 1995 (NSW) as submission only, in respect of the documents which purportedly brought about the removal of Charles and Alex as directors of the Company on 29 December 2017 and as to the circumstances surrounding his removal as a director of the Company. Allan also advances allegations as to access to the Company's information technology system and the alleged removal of Company files on Charles' instructions, which it is also not necessary or appropriate to address for the purposes of this application.
Allan also relies on a document purporting to establish that Therese remains as chair of the Company in January 2018, which he says Therese collected from the Guangzhou Administration for Industry and Commerce. The evidence raises a real question as to whether that document recorded the position at an earlier time; the document appears to be incomplete; and Therese was not called to corroborate Allan's second hand account of when or how she obtained it. Allan appears to have accepted in cross-examination that the document recorded the position when GA was established in 2016, rather than the position in January 2018, although it was not entirely clear whether he recognised the significance of that matter (T93-94). I am not persuaded that significant weight should be given to that document.
Allan's affidavit summarises his position, in evidence admitted with a limiting order under s 136 of the Evidence Act, as that the resolution he and Therese passed removing Charles and Alex as directors of the Company on 29 December 2017 is valid; he was not validly removed as a director of the Company on 5 January 2018; he was a director of the Company on 7 January 2018 when he appointed Mr Chin as voluntary administrator to the Company; and his appointment of Mr Chin as administrator on 7 January 2018 was valid and appropriate having regard to the circumstances and his obligations as a director of the Company.
Allan's further affidavit dated 8 February 2018 refers to dealings with the bank account of the Company and responds to the affidavits on which Joyce and Charles rely. Significant parts of that affidavit appear to be directed to an application to wind up the Company on just and equitable grounds, which is not in issue in this application.
Allan also relies on the affidavit of his wife, Carey, dated 8 February 2018, which refers to the circumstances in which Alex became involved with the Company's business, her involvement in promoting the Company's business prior to January 2016, a loan that she made to GA (rather than to the Company) and the fact that she has not received payment from GA for the first year's interest on that loan. Allan also served an affidavit of Therese, immediately prior to the commencement of the proceedings, but did not seek to read it.
Ms Fishburn submitted that the evidence of the witnesses called by Joyce and Charles, and particularly Charles, Alex and Joyce, should be preferred to the evidence given by Allan and Carey, and points out that Allan and Carey were present in Court while each other was cross-examined. It appears that Carey had also read Allan's affidavit before giving evidence, as she accepted in cross-examination (T71). Ms Fishburn also identified other matters that she submitted may give rise to cause for concern as to Allan's credit, including the fact that the version of the 28 December 2017 minute which appears in Allan's affidavit was purportedly signed both by Therese and Allan, whereas the version of that minute which he had provided to Mr Chin and which Mr Chin put in evidence was signed only by Therese. Ms Fishburn also refers to aspects of the dispute between the shareholders which she submits are adverse to Allan's credit. I expressly reach no finding as to any of those matters which may be in issue in other proceedings between the parties. I do not find it necessary to reach findings of credit in order to determine the matter, although I do not accept Allan's evidence to the extent that it was inconsistent with the objective probabilities to which I refer below.

Validity of corporate acts of GKIML and GA in late 2017

Whether Mr Chin was validly appointed as voluntary administrator of the Company depends, first, on whether Allan was the sole director of the Company as at 7 January 2018 when he resolved to make that appointment. That resolution would be ineffective either if Allan was not a director, or was not the sole director, of the Company on that date. In order to determine that question, it is necessary to address several corporate acts of GKIML and GA that took place in late 2017, the validity of which depends on matters of PRC Company Law and not Australian company law. Mr Chin submits, and I accept, that Joyce and Charles bear at least an evidentiary onus of establishing the events by which they contend that Allan was removed as a director of the Company before he appointed Mr Chin as administrator, where they propound the validity of the relevant corporate documents as having been made on the date and time they bear: Re Sydney Project Group Pty Ltd (admins apptd) (recs and mgrs apptd) [2017] NSWSC 881 at [83].
On 17 December 2017, GKIML (which holds 51% of the shares in GA), at a shareholders meeting constituted by its 51% shareholder Mr Li, purportedly resolved to remove Therese as chair of GA and appoint Ben as chair of GA (Ex D2-1, 74-75; Charles 31.1.18 [35], Alex 30.1.18 [28]-[29]). Charles maintained in cross-examination that Ben had replaced Therese as chair of GA following that resolution, although I recognise that that is ultimately a matter of the law of the People's Republic of China (including the PRC Company Law) rather than a matter of Charles' understanding (T23). Ben was not cross-examined as to that matter since he was not given sufficient notice that he was required for cross-examination. Documentation relating to that resolution was filed with the Chinese provincial government registry, the Guangzhou Administration for Industry and Commerce, on 22 December 2017 (Charles 31.1.18 [38], Ex D2-1, 82).
In opening submissions, Mr Rosenblatt submitted that an "overwhelming implication" arose from the evidence that the resolution of GKIML on 17 December 2017 was an "after the fact creation… to avoid the administration". This allegation is tantamount to an allegation of fraud and it cannot be established in respect of that resolution, where there is evidence of notification of that resolution to the Guangzhou Administration for Industry and Commerce shortly after it was passed. That resolution seems to me to have been within power, since article 15 of GA's articles of association provides that the chair of GA is appointed by GKIML.
On 25 December 2017, a letter of appointment to which the seal of GKIML was affixed appointed Ben in place of Therese as the chair of GA (Charles 31.1.18 [39], Ex D2-1, 85; Alex 30.1.18 [25], Ex D2-2, 104). Mr Chen's evidence was that the procedure for removal and appointment of a chair for GKIML and GA was, by article 48 of the PRC Company Law, governed by their articles of association; that article 15 of GA's articles of association provided that GKIML would appoint the chair of GA; that GK could appoint a new chair of GA at its discretion, even if the standard tenure of three years of the previous chairman had not expired; that that could occur by the issue of an appointment letter affixed with the seal of GKIML, and no resolutions were required by any laws of PRC; and that, under PRC Company Law, a chair is appointed on the date of the letter of appointment (Chen [8], [10], [13]). I find that GKIML appointed Ben in place of Therese as chair of GA no later than 25 December 2017.
A Notice of Approval of Registration Alteration issued by the Guangzhou Administration for Industry and Commerce dated 4 January 2018 subsequently recorded the directors, supervisor, manager and joint management committee of GA as having changed from Allan, Ben, Alex and Therese to Allan, Charles, Ben and Alex and thereby recorded Therese having ceased to be the chair and a director of GA. Mr Chen's evidence was also that, after the appointment of a new chair, a Chinese company must conduct a filing or registration at the local branch of the State Administration for Industry and Commerce in the People's Republic of China, which was entitled to accept or not accept that filing or registration and, if it accepted that filing or registration, would issue a receipt. Mr Chen's evidence is that that is an administrative matter, which records the relevant change on the public record, but does not affect the validity or enforceability of the appointment of a new chair. I have referred to the relevant filing above, although it seems to have taken place prior to the letter of appointment. At least by 10 January 2018, a company search of GA obtained from the Guangzhou Administration for Industry and Commerce recorded Alex as director and manager, Allan as director, Charles as director and Ben as managing director and chair.

Allan's and Therese's purported removal of directors of the Company other than Allan

On 28 December 2017, Allan and Therese alone attended a meeting of the directors of GA conducted by telephone, which purported to remove the directors of the Company other than Allan. Ben's evidence was that he did not convene or preside over that meeting (Ben 1.2.18 [30]); he was not cross-examined as to that evidence since he was not given sufficient notice to attend for cross-examination; and that matter seems uncontroversial in any event. Ms Fishburn contends, and I accept, that an inference should be drawn consistent with Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 that any evidence led by Therese, whose affidavit was served but not read by Allan, would not have assisted Allan in establishing the validity of that resolution.
Mr Chen's evidence was that only the chair of GA could convene a meeting of the board of directors of GA, pursuant to the PRC Company Law. Mr Chen expressed the opinion, for the reasons which he set out, that Therese had no authority to convene a meeting of the board of directors of GA or sign the resolution dated 28 December 2017 to change the directors of the Company, after her removal as chair of GA, and that resolution was invalid and had no effect as a matter of the law of the People's Republic of China. Ms Fishburn submits that Ben and not Therese was the chair of GA as at 25 December 2017, where, as I have noted above, a resolution for his appointment in place of Therese as chair had been passed by GKIML on 17 December 2017; the letter appointing Ben was dated 25 December 2017; and, as I noted above, Mr Chen's evidence is that, under Chinese law, a chair is appointed on the date of the letter of appointment (Chen [10], [13]). Ms Fishburn submits, and I accept, that where Ben and not Therese was chair of GA from 25 December 2017, Therese did not have capacity to call the meeting of 28 December 2017.
Mr Rosenblatt responds that a governing director of the Company could be appointed at a meeting of shareholders under cl 47(b) of its constitution. However, that proposition requires that there be a valid act by GA as the Company's sole shareholder to appoint Allan as its governing director and the meeting of the directors of GA held on 28 December 2017 could not bring about that result where it was not effective under the PRC Company Law. Allan also submits that a governing director may, under cl 56(g) of the Company's constitution (Ex P1, 30), remove a director of the Company, and that he passed resolutions to do so on 29 December 2017, causing Charles and Alex to cease to be directors of the Company. That proposition cannot be accepted where Allan had not validly been appointed as governing director of the Company.
I am satisfied that the meeting of GA's directors purportedly held on 28 December 2017 was not effective under the PRC Company Law. It follows that Allan was at least not the sole director of the Company when he appointed Mr Chin as voluntary administrator of the Company, and could not make that appointment where Charles and Alex were also directors of the Company and had not voted for that appointment.
Charles caused a change to company details to be filed with ASIC on 2 January 2018 correcting the register by recording the appointment of Charles and Alex as directors of the Company, with effect from 29 December 2017 (Ex D2-1, 102). Charles also sent an email to Therese, copied to others, on that date contesting the resolution passed by Therese and Allan as directors of GA on 28 December 2017 on the basis that notice of the relevant meeting had not been given to Alex or Ben, referring to the fact that the then copy of that resolution had not been signed by Allan and also referring to the notification that he had lodged with ASIC. Allan places significant weight on a reference to Ben as "supervisor" in that email, and it appears that the "supervisor" of GA cannot also be the chair of GA under the PRC Company Law. Charles' evidence in cross-examination was that that reference was in error and reflected Ben's previous position. I am not persuaded that I should give significant weight to that reference, at least to the point of being able to reach any finding that Ben had not been appointed as chair of GA by the resolution passed by GKIML and subsequent letter of appointment.
On 5 January 2018, the board of GA purported to pass a resolution verifying that the process of removing Therese as director of GA had begun on 22 December 2017 and finished on 4 January 2018 and that she had no powers to sign the resolutions for the removal of Charles and Alex as the directors of, inter alia, the Company, and resolving to remove Allan as a director of, inter alia, the Company (Charles 31.1.18 [68], Ex D2-1, 127; Alex 30.1.18 [39]-[41]; Ben 1.2.18 [36]). Each of Ben, Alex and Charles gave evidence that they had attended the meeting that passed that resolution (Ben 1.2.18 [36], Alex 30.1.18 [39], Charles 31.1.18 [68]). The document recording that board resolution bears Alex's and Ben's signatures and the stamp of GA (Alex 30.1.18 [40]-[41], Ben 1.2.18 [37]). Ben was not cross-examined as to that matter since he was not given sufficient notice to attend for cross-examination and it was not put to Alex that these documents were false.
Mr Chin rightly identifies a question as to whether the member's resolution purportedly passed by GA on 5 January 2018 was validly passed on that date, under the law of the People's Republic of China. If that resolution was valid, Allan was no longer a director of the Company after that date and did not thereafter have power to appoint a voluntary administrator of the Company. It is not strictly necessary to decide this question since, in any event, I have found that Allan was not the Company's sole director on that date. However, it seems to me that that resolution was passed by GA at a meeting convened in accordance with the law of the People's Republic of China, so far as a meeting of directors of GA was required to be convened and presided over by the then chair of the board, Ben, being the person appointed by GKIML under article 15 of GA's articles of association.
By a further resolution purportedly passed by GA as the sole member of the Company dated and purporting to have effect from 5 January 2018, Joyce and Charles were appointed as directors of the Company and Allan was removed as a director of the Company (Ex D2-1, 133; Ex D2-2, 140). It appears that the meeting of 5 January 2018 was sufficient to comply with the requirements of article 53 of the Company's constitution for change of a director (Ex P1, 29) which required a resolution of the Company which could be passed by GA as the sole shareholder of the Company. Ms Fishburn submits, and I accept, that Alex and Ben had power to pass that resolution for GA, since article 18 of GA's articles of association permitted a decision by two of three directors (Ex D2-4, 155). Ms Fishburn also points out that s 249B of the Corporations Act enables the passage of that resolution by the sole member of the Company, GA, signing that resolution, and that resolution records its signature by and on behalf of GA. Allan accepted that he had been provided with a copy of the 5 January 2018 resolutions at about noon on 8 January 2018 (Allan 8.2.18 [27]).
Mr Rosenblatt submits that an "overwhelming implication" arises from the evidence that the resolutions of GA on 5 January 2018 were also "after the fact creations to avoid the administration". This is tantamount to an allegation of fraud and the evidence is not sufficient to reach a finding of that serious character in respect of that resolution. I do not accept Mr Rosenblatt's further submission that an adverse inference should be drawn from the fact that Joyce or Charles have not exhibited contemporaneous communications between themselves or with their solicitors, relating to the resolution passed on 5 January 2018, since evidence of such communications was not necessary to establish the matters for which they contend and communications between them and their solicitors would likely be within the scope of legal professional privilege in any event.
On 8 January 2018, after the purported appointment of a voluntary administrator by Allan, to which I refer below, the solicitors for Joyce and Charles sent Allan an email attaching the resolutions passed by GA removing Allan and appointing Joyce and Charles as directors of the Company (Charles 31.1.18 [75], Ex D2-1, 139) and those resolutions were also provided to Mr Chin at least by 9 January 2018 when it was exhibited to his affidavit. Also by 8 January 2018, ASIC's register had been updated to record the directors of the Company as Joyce and Charles, effective from 5 January 2018 (Charles 31.1.18 [80], Ex D2-1, 151ff).
Mr Chin submits that if Joyce and Charles establish the passage and validity of the resolutions of GKIML and of GA's board which I have addressed above, then an order should be made declaring his appointment as voluntary administrator invalid under s 447C of the Corporations Act, on the basis that Allan was not a director of the Company and was therefore unable to appoint a voluntary administrator to the Company on 7 January 2018. That matter has been established, although I also find that the appointment of the voluntary administrator was invalid on the other grounds to which I refer below.
In closing submissions, Ms Fishburn articulated Joyce's and Charles' case as that, when Mr Chin was appointed as voluntary administrator by resolution passed by Allan as sole director of the Company on 7 January 2018, Allan was either no longer a director of the Company or was no longer its sole director, so as to be able to pass the resolution under s 436A of the Corporations Act without the concurrence of the other directors of the Company. The former proposition depends on the resolution passed by GA, as sole shareholder of the Company, on 5 January 2018 which I have found to be valid. The latter proposition depends upon the invalidity of the board resolution of GA purportedly passed on 28 December 2017 by Allan and Therese. I have held above that that resolution was not valid, as a matter of the law of the People's Republic of China, where the relevant meeting could only be convened and presided over by the chair of GA and Therese was not then the chair of GA. Joyce and Charles have therefore established both aspects of that case.
In closing submissions, Mr Rosenblatt submitted that Charles and Joyce have not established that Allan lacked the authority to appoint the administrator, on the basis that he was not a director at the time of appointment; the submission does not expressly address the question whether he was the only director at the time of appointment. Mr Rosenblatt submits that, for Charles and Joyce to establish that Allan lacked the authority to appoint the administrator, they must show that the resolutions relied upon by GKIML and GA were passed as alleged, and that the procedure adopted was valid under the law of the People's Republic of China, based on what he submits is "scant expert evidence and in circumstances that infringe essential notions of fairness under Australian law". It seems to me that the expert evidence led by the Plaintiff was of substance and it is not necessary or appropriate for me to express evaluative views as to the fairness of the substantive law of the People's Republic of China to determine this application.
Mr Rosenblatt also submits that Charles and Joyce must establish the validity of all of several resolutions, namely the resolution of GKIML dated 17 December 2017; the resolution of GA dated 25 December 2017 (which was, in fact, not a resolution but a letter of appointment); the resolution of GA of 5 January 2018 and the resolution of the Company dated 5 January 2018. Ms Fishburn submits that, even if the Court was not satisfied as to the validity of the 5 January 2018 resolution of the Company, Allan would still lack authority to appoint the voluntary administrator because he would not then have been the sole director of the Company, if the resolution of 28 December 2017 was invalid. I accept that the invalidity of any one or more of those resolutions would not necessarily have had the result that Allan was the sole director of the Company when he appointed the voluntary administrators. In any event, I have held above that the validity of those resolutions is established, as a matter of the law of the People's Republic of China, and in the case of the 5 January 2018 resolution of the Company passed by GA as its sole shareholder, also as a matter of Australian law.
Mr Rosenblatt also submits that no notice was given to Allan or Therese of the relevant resolutions, where they were "substantial stakeholders in the respective companies". There is no evidence that notice of a directors' meeting or shareholders' meeting of a subsidiary (GA or the Company) needed to be given to a person who held shares only in the ultimate holding company (GKIML) as a matter of the PRC Company Law, and that would ordinarily also not be required as a matter of Australian law. It follows that I also do not accept Mr Rosenblatt's submission that the lack of notice should cause the Court to question whether the relevant meetings took place as contended by Joyce and Charles. Ms Fishburn made submissions, in response, as to the availability of curative orders under s 447A or s 1322 of the Corporations Act if there was any invalidity in notice of any of the relevant meetings. I need not address that question, since Mr Rosenblatt's submissions were directed, not to a suggestion that those meetings were invalid by reason of any lack of notice, but to a submission that the Court should infer that they had not occurred. I have not accepted that submission above. In any event, the question of notice of the majority of the meetings would largely be determined under the PRC Company Law and not a matter of Australian law.

Whether Allan's appointment of a voluntary administrator was within power and for a proper purpose

Mr Chin submits that, if Joyce and Charles demonstrate that Allan did not hold a reasonable belief as to the present insolvency or likelihood of insolvency at some future time of the Company, at the time of resolving to appoint Mr Chin as voluntary administrator, then an order should be made declaring Mr Chin's appointment invalid under s 447C of the Corporations Act. For the reasons that I set out below, such a declaration should be made on that basis.
Section 436A of the Corporations Act provides for the appointment of an administrator where the directors voting for the resolution resolve that, in their opinion, the company is insolvent or is likely to become insolvent at some time in the future. A resolution to appoint an administrator is invalid if the relevant directors' opinion is not held or not held genuinely or in good faith: Kazar v Duus [1998] FCA 1378; (1998) 88 FCR 218 at 231. An inability to determine whether a company is insolvent cannot, without more, found an opinion that it is or is likely to become insolvent: Kazar v Duus above at 231; Wagner v International Health Promotions (1994) 15 ACSR 419 at 421. In Re Lime Gourmet Pizza Bar (Charlestown) Pty Ltd (formerly under administration) [2015] NSWSC 244 at [21]-[22], I summarised the relevant principles as follows: "Section 435A of the Corporations Act in turn sets out the purpose of Pt 5.3A of the Corporations Act, namely to provide for the business, property and affairs of an insolvent company to be administered in a way that maximises the chances of the company, or as much as possible of its business, continuing in existence or, if it is not possible for the company or its business to continue in existence, results in a better return for the company's creditors and members than would result from an immediate winding up of the company. An administrator can be appointed under s 436A of the Corporations Act if the board … held the specified belief that the Companies were insolvent or were likely to become insolvent in the future. … if a director's opinion as to insolvency is not held, or is not held genuinely or in good faith, a resolution passed by the directors to appoint an administrator under s 436A of the Corporations Act is invalid: Kazar v Duus above at 333 - 334; Londish v Sheahan - Re Valofo Pty Ltd [2010] NSWSC 337 at [27]. … [I]n Kazar v Duus above at 230 - 231, [Merkel J observed] that it is implicit in the statutory requirement under s 436A of the Corporations Act that the relevant director's opinion as to the insolvency, or likely insolvency, of the company that the opinion be bona fide and genuinely formed. Statements of the directors' opinion are relevant to whether they have formed the requisite opinion but the court must approach that question objectively: Kazar v Duus above; Smolarek v McMaster as Administrator of Eznut Pty Ltd [2008] WASCA 234. … it is not sufficient to support an administrator's appointment that directors are merely uncertain as to a company's solvency: Kazar v Duus above; Wagner v International Health Promotions (1994) 15 ACSR 419 at 421. … [I]n Downey v Crawford [2004] FCA 1264; (2004) 51 ACSR 182 at 218, [Weinberg J observed] that the question whether directors genuinely believed that a company was actually insolvent, or likely to become so at some future time, will depend largely upon whether they took adequate steps to satisfy themselves that the statutory requirements were met before resolving to appoint an administrator."
In Re Warwick Keneally as administrator of Australian Blue Mountain International Cultural & Tourist Group Pty Ltd (admin apptd) [2015] NSWSC 937 at [96 ], I also observed that: "The exercise of the power to appoint an administrator will be invalid, and the purported appointment will be invalid, if that power is exercised for an ulterior or extraneous purpose and that purpose is substantial in the sense that the decision would not have been made but for the ulterior purpose: Kazar v Duus above at 233; Blacktown City Council v Macarthur Telecommunications Pty Ltd [2003] NSWSC 883; (2003) 47 ACSR 391, St Leonards Property Pty Ltd v Ambridge Investments Pty Ltd [2004] NSWSC 851; (2004) 210 ALR 265. … [A]n appointment of an administrator is for an improper purpose if it is for a purpose other than one "in furtherance of the object of Pt 5.3A as set out in s 435A": McMaster v Eznut Pty Ltd above at [135]. … [T]he purpose of the resolution must be ascertained, then characterised as proper or improper, after identifying the actual purpose of the directors who voted in favour of the resolution, and the relevant question is what was the substantial purpose; and whether the resolution would have been passed were it not for the improper purpose: Cadwallader v Bajco [2001] NSWSC 1193 at [224]; Re Lime Gourmet above at [23]."
Ms Fishburn points out that Allan also did not make inquiries with Charles about funds advanced by GA to the Company or about the financial status of the Company (Charles 31.1.18 [79], [84]); Allan did not make inquiries with Alex about the financial status of the Company (Alex 30.1.18 [55]); and Allan also did not ask Joyce about lease repayments, or the Company's solvency (Joyce 31.1.18 [36], [57]). Ms Fishburn also points out that Allan was not aware of the contribution of $100,000 made by Joyce to the Company, recorded in its balance sheet (Allan 8.2.18 [47]), and that matter cannot have supported any belief that the Company was insolvent or likely to become insolvent.
Allan accepted in cross-examination that he had not inspected the financial records of the Company, or, if it were relevant, the financial records of GA, prior to the appointment of the voluntary administrator to the Company (T78-79), although he sought to justify that position on the basis that he was unable to inspect those documents and someone had removed the Company's files prior to the appointment. Allan also referred in cross-examination to his wife having made a demand on her loan, or at least mentioned to him that she had mentioned a demand to others; that also does not establish insolvency or likely insolvency of the Company when it was GA rather than the Company that owed any debt to Allan's wife. Allan also referred in cross-examination to Mr Li having mentioned that he might want his loan to be repaid at any time (T81), but that loan also existed at holding company level or above, rather than having been made to the Company, and the commercial likelihood of Mr Li drawing upon the loan would be reduced by the adverse effect of his doing so upon the value of his investment in GA and the Company. Allan's evidence in cross-examination as to his knowledge of the liabilities of the Company, or indeed GA, was unclear, although he at least accepted that he was not aware that any taxes or rental amounts were owed by the Company (T87), and the evidence is that such amounts were paid when due. Ms Fishburn also relied on an email dated 30 December 2017 sent by Allan to Alex, Charles and Joyce referring to the business being "very busy" (Ex D2-2, 122) and to Allan's cross-examination as to that matter (T77). I give little weight to that matter, which would have only a distant relationship with the Company's solvency.
Ms Fishburn submits, by reference to authority, that a valid exercise of power by a director to appoint a voluntary administrator under s 436A of the Corporations Act requires that the director genuinely believes, on reasonable grounds, that the Company is insolvent or likely to be insolvent. She submits that Allan did not have a genuine belief for the purposes of s 436A, or alternatively such belief was not a reasonable belief and the appointment of the administrator was not made for a proper purpose. Ms Fishburn also submits that the absence of information known to Allan as to the attitude of GA to its loan made to the Company undermines any opinion that he had formed as to the Company's solvency.
In opening submissions, Mr Rosenblatt submits that Allan had a reasonable basis for a belief as to the actual or likely insolvency of the Company on the basis that: "In the present circumstances Al[l]an was aware of the inter-company debt in the sum of $1.1 million which was in default and could not be met by the Company's assets, which is sufficient to form a genuine belief that the Company 'is likely to become insolvent at some future time'. At the time of the appointment he had been shut out of the Companies IT systems by Charles and was unable to make his own direct investigation. It was not unreasonable for Allan to have genuinely believed that the Company's revenue and therefore its cashflow, would reduce or cease as he genuinely believed that the Company business had been diverted by Alex to GVT."
In closing submissions, Mr Rosenblatt similarly submits that Allan met a "prima facie burden" to establish a genuine belief as to the Company's insolvency or likely insolvency: "by deposing to the Company's substantial inter-company and related party debt and finite assets and his belief that the Company's revenue was in jeopardy due to the commencement of the competing business by Alex."
I do not accept these submissions. Their first aspect, that the inter-company debt was in default, confuses the position between an inter-company loan by GA to the Company, as to which there is no suggestion that the debt was either due or carried interest or was in default, and loans made to GA. The absence of information, arising from any lack of access to the Company's systems, does not support a reasonable basis for a belief in the Company's insolvency or likely insolvency. It has also not been established that Allan had any reasonable basis for any belief that any diversion of business to GVT (a matter which it has not been necessary to determine) would have such an impact upon the Company's cashflow such as to affect its solvency. Mr Rosenblatt submits that Allan could not reasonably have been required to make inquiries of Charles, Alex or Joyce. That submission also does not assist Allan, because the absence of such inquiries deprives him of a basis for a belief in the Company's insolvency or likely future insolvency.
I am satisfied that Allan did not hold a reasonable belief as to the present insolvency or likelihood of future insolvency of the Company at the time he appointed Mr Chin as voluntary administrator to the Company, and that the predominant purpose of that appointment was to address his concerns as to the conduct of the Company's affairs rather than any question of its insolvency or likely future insolvency. Mr Chin's evidence of his conversations with Allan on 8 and 9 January 2018 indicate that Allan then relied on the prospect that GA might call in its loan to the Company in the future for any belief that the Company was insolvent or likely to become insolvent in the future. There is no evidence that any threat had been made by GA to do so; Allan made no inquiries of GA's representatives as to whether it had any intention to do so; and Allan had no basis on which to consider that it was commercially likely that GA would do so, where that step would put at risk its existing investment in the Company.
There were then no objective indicators of insolvency known to Allan and there was, for example, no suggestion that the Company was not meeting its lease payments or taxation obligations as and when they fell due, or that accounting measures of a Company's solvency such as its quick asset ratio indicated that the Company was in a position of insolvency or likely insolvency, or that there existed unsatisfied demands from creditors or payment arrangements with creditors. The structure of the Company's operations, where it collected payments from customers prior to the dispatch of products, would tend to support its solvency. While I recognise that Allan's evidence in cross-examination was that he could not obtain access to some of that information, because of the then issues between the directors and shareholders, the case law makes clear that the absence of such information known to Allan does not provide a reasonable basis for a belief that the Company was then insolvent or likely to become insolvent in the future.
Ms Fishburn also made detailed submissions as to the circumstances in which a Company is solvent, as a matter of law. The relevant principles are well established, and I have drawn here upon my summary of those principles in Re Gladstone Mortgagee No 1 Pty Ltd [2015] NSWSC 1551 at [39]ff and Deputy Commissioner of Taxation v Peter Sleiman Investments Pty Ltd as trustee for the Sleiman Family Trust [2016] NSWSC 1657 at [82]ff, varied on another ground in Peter Sleiman Investments Pty Ltd (Trustee for Sleiman Family Trust) v Deputy Commissioner of Taxation [2016] NSWCA 355. Section 95A(1) of the Corporations Act has effect that, relevantly, the Company is solvent if, and only if, it is able to pay all its debts as and when they become due and payable. Section 95A(2) of the Corporations Act has effect that a person who is not solvent is insolvent. That definition adopts a cashflow test of insolvency which turns upon the income sources available to the Company and the expenditure obligations that it has to meet, rather than a balance sheet test which focuses on the value of its assets and liabilities reflected in its books, although a balance sheet test can provide context for the application of the cashflow test: Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation [2001] NSWSC 621; (2001) 53 NSWLR 213; Australian Securities and Investments Commission v Plymin (No 1) [2003] VSC 123; (2003) 175 FLR 124 at [370]ff. Whether the Company is able to pay its debts as and when they fall due and payable is a question of fact to be determined objectively in all the circumstances, including the nature of its assets and business, and the court will have regard to commercial realities in that regard: Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation above at [54]; Lewis (as liquidator of Doran Constructions Pty Ltd) v Doran [2005] NSWCA 243; (2005) 219 ALR 555 at [93].
I accept that the evidence generally points to the likelihood that the Company was not then insolvent or likely to become insolvent as a matter of fact. Joyce's evidence is that GA had made no loans or money advances to the Company other than those made in March 2016 to which I referred above (Joyce 31.1.18 [45]). Her evidence was that there is no written agreement in respect of the advance of $1.1 million, no repayment date for it and, based on her regular business conversations with Alex and Ben, there was and is no intent to require payment of that amount and no demand had or has been made by GA for repayment of that amount. By contrast with Mr Chin's evidence as to the information that had been provided to him by Allan, Joyce's evidence was that the amount owed by the Company to GA was $1.1 million rather than $1.5 million.
Charles also gave evidence of an advance of $1.1 million made by GA to the Company and an equity contribution of $600,000 to the Company and also gave evidence (admitted with a limiting order as evidence of his understanding only) that GA had no intention of calling on the advance and that the equity contribution could not be brought back, and that neither Alex or Ben had advised him at any time that GA would call on the advance or seek to do so in the future (Charles 31.1.18 [31]-[34]). Alex's evidence was that, to the extent that he made decisions on behalf of GA, it does not seek repayment of the relevant advance and (in evidence admitted with a limiting order under s 136 of the Evidence Act as evidence of his understanding only) to his knowledge, Kailin did not seek repayment of her loan (Alex 30.1.18 [47], [54]). Ben's evidence was also that GA had never demanded repayment of the monies advanced to the Company and did not intend to do so and also did not seek to "get back" its equity invested in the Company and would continue to give financial support to the Company (Ben 1.2.18 [16], [17], [20], [23]).
I do not accept Mr Rosenblatt's submission that the evidence that the lenders were "happy to wait indefinitely for the payment of these loans is simply not credible", where, as I have pointed out, the primary loans are made to GA rather than the Company, although GA has in turn advanced an amount of $1.1 million to the Company and, it appears, invested capital in it, and where calling upon the relevant loans would prejudice the lenders' investment in the Company and associated entities.
It seems to me that the loan arrangements to which evidence was directed do not establish either insolvency or likely future insolvency of the Company. The loan made by GA to the Company is not the subject of a written agreement and has no fixed repayment date and, it appears, does not bear interest, and the evidence is that those in control of GA, including those associated with its majority shareholder, do not intend to call for repayment of that loan and it would be commercially inconsistent with their existing investment in the Company for them to do so. Although evidence was led as to the loans made by Kailin to GA and by Carey to GA, those loans are not directly relevant to the solvency of the Company, and the question of any call for repayment under those loans would be a matter of Chinese law and not Australian law. There is no reason to think that the equity contribution, even if made by informal means, could be required to be repaid as a debt.
Other objective indicators also point to the Company's solvency rather than its insolvency or likely insolvency. Joyce refers to the Company's unaudited balance sheet as at 7 January 2018, which indicates in excess of $115,000 held in bank accounts, in excess of $688,000 as other current assets including trade debtors and inventory, an amount of $43,450 owed by Allan, non-current assets in excess of $562,000 (which include substantial expenditure on software research and development), current liabilities of approximately $204,000, and non-current liabilities of $1,758,762.51, comprising a chattel mortgage loan, a loan from BW, loans from Kailin and Joyce and a shareholder loan from GA. The Company's current assets substantially exceed its current liabilities recorded on that balance sheet although it suffered losses in earnings in earlier years and in the current year and has negative total equity. Joyce calculated the Company's "current ratio" by reference to that balance sheet as 4.23 by dividing total current assets by total current liabilities, and its "quick ratio" as 1.36, by dividing the total of cash and accounts receivable by total current liabilities. Joyce's evidence is also that customers purchasing products by online stores typically make payments upon purchase and that she does not know of any demands on the Company or to the Group by suppliers or creditors for overdue payment or any deferred payment arrangements between the Company and any supplier, and that there are no overdue taxes owed by the Company. She also indicates her preparedness to contribute further funds to support the Company.
It also seems to me clear, both from Allan's evidence as to the disputes between the shareholders, and from the logic of events, that Allan's appointment of an administrator was, in substantial part, an attempt to bring the Company under independent control, as he subsequently sought to do by his late application in these proceedings for an order for the winding up of the Company on the just and equitable ground. Allan's evidence makes clear that at least a significant aspect of the decision to appoint an administrator was the conflicts between shareholders, and his affidavit evidence was that a "key consideration" in his decision to appoint an administrator was Alex's conduct (Allan 31.1.18 [34]). He ultimately accepted in cross-examination that that matter was an "important consideration" in the appointment of an administrator (T88), after having initially denied that matter, and he also accepted in cross-examination that his perception of a conflict of interest affecting Alex and GVT was connected with the appointment of the administrator (T84). There may or may not be reasons why a provisional liquidator might be appointed to the Company, or a winding up order made on the just and equitable ground, or orders made on the basis of oppression. However, a voluntary administrator cannot properly be appointed as an artifice to address issues in a company's internal management, absent insolvency or the likelihood of future insolvency, and as an alternative to bringing oppression proceedings or an application for a winding up.
Alternatively, Mr Rosenblatt submits that if (as I have found) Charles and Joyce have established that Allan did not have the necessary belief in the Company's insolvency or likely insolvency to support the appointment of a voluntary administrator, the Court should nonetheless decline any application to set aside Mr Chin's appointment, as a matter of discretion, where there is a controversy as to the identity of directors of the Company and there is a "substantial concern" about the Company's solvency. The latter proposition is not established. I would otherwise not exercise a discretion in that manner, since Mr Chin seeks, and is properly entitled to obtain, guidance as to the validity of his appointment; I have found that Allan lacked the authority to appoint the voluntary administrator, lacked a reasonable belief in the Company's insolvency or likely insolvency and did not have a proper purpose in making that appointment; and I do not consider that the Court would exercise its discretion so as to leave an apparently solvent company in voluntary administration, in which it had been placed for an improper purpose.
Ms Fishburn submits that the administrator is not entitled to rely on the statutory assumptions under ss 128 and 129 of the Corporations Act. It is not necessary to address that question, where the administrator does not seek to maintain his appointment in reliance on those statutory assumptions.

Section 1322 of the Corporations Act

Ms Fishburn submitted that Allan made no application for a curative order under s 447A(1) or s 1322(4) of the Corporations Act and that, if such an application were made, it ought to be refused on discretionary grounds. Mr Rosenblatt did not advance any submission, in closing submissions, relying on s 1322 of the Corporations Act and it is unclear whether such a submission is pressed. I will address that section, against the contingency that it remains in issue, and where the parties had addressed it in earlier submissions.
Ms Fishburn submitted that the absence of a valid resolution to appoint an administrator could not be cured by s 1322(2) of the Corporations Act, because such a defect went beyond a procedural irregularity. While that is so, it would not necessarily prevent the validation of such an appointment under s 1322(4) of the Corporations Act. Ms Fishburn also submitted that an invalid appointment of Mr Chin as voluntary administrator would not be validated under s 1322(4) of the Corporations Act. That section allows the Court to declare that an act, matter or thing purporting to have been done, or any proceedings purporting to have been instituted or taken, under the Corporations Act or in relation to a corporation is not invalid by reason of a contravention of a provision of the Act or a provision of the corporation's constitution. That power may be exercised where, relevantly, the contravention is essentially procedural, or the persons concerned had acted honestly, or it is just and equitable that an order be made, and provided that no substantial injustice has been or is likely to be caused to any person: s 1322(6). Relief under s 1322(4) is only available if one of these three requirements is satisfied and it is also established that no substantial injustice has been or is likely to be caused to any person. I summarised the applicable principles in Re Warwick Keneally as administrator of Australian Blue Mountain International Cultural & Tourist Group Pty Ltd (admin apptd) above and I need not repeat that summary here.
The relevant contraventions are plainly more than procedural in nature. I consider it preferable not to determine whether Allan acted honesty in respect of the relevant matter where it is not necessary to do so given the findings that I reach on other grounds. I am not satisfied that it would be just and equitable to grant the relief where, as I find below, to do so would cause substantial injustice to the other persons interested in the Company, so that basis for relief under s 1322(4) is not satisfied. It seems to me that placing an apparently solvent company in voluntary administration would amount to substantial injustice to the other persons interested in that company, so as to exclude the possibility of relief under s 1322(4) of the Corporations Act in this case. Even if the conditions for relief under s 1322(4) of the Corporations Act were satisfied, the Court is not obliged to grant such relief, and must exercise a judicial discretion, having regard to the purposes of the section and the interests of the persons affected and the public interest, in determining whether to do so. I would not grant such relief in the circumstances, where the appointment of an administrator to a solvent company would subvert the statutory purposes of Pt 5.3A of the Corporations Act. The basis for an order under s 1322(4) of the Corporations Act is not established.

Validation of administration on other bases

Mr Chin also submits that, if a finding was not made as to the invalidity of Mr Chin's appointment, but the evidence on which Joyce and Charles relied in relation to the nature and status of the loan and other liabilities of the Company was accepted, then it may be appropriate to make orders confirming the validity of Mr Chin's appointment under s 447C of the Act, but order that the administration nevertheless end under s 447A of the Act. It is not necessary for me to determine that question, where I have held that Mr Chin's appointment was invalid, by reason that Allan did not have a reasonable belief that the Company was insolvent or likely to become insolvent at the relevant date, and Allan did not have a proper purpose for making the relevant appointment.

Rectification of register maintained by ASIC

Joyce and Charles also sought an order that the register maintained by the Australian Securities and Investments Commission ("ASIC") in relation to the status of the Company be restored to record the status of the Company as "registered" rather than "under external administration and/or controller appointed", restoring its position prior to the appointment of the administrator. ASIC was not joined as party to the proceedings. Ms Fishburn submits that the Court has power to require rectification of the register under s 1322(4)(b) of the Corporations Act so as to correct incorrect information that was included in a notification to ASIC, including where the process by which the event had been included in the register was invalid: Re MIG Property Services Pty Ltd (No 2) [2012] VSC 606; Re Centura Global Holdings Pty Ltd [2016] NSWSC 62 at [57]. I am satisfied that such an order could properly be made, subject to one matter. Although Ms Fishburn points out that ASIC has been notified of the orders sought (Debono 13.2.18, Annexures A9-A11), it is not party to the proceedings. ASIC would need to be joined to the proceedings and given an opportunity to be heard before such an order was made, consistent with the approach taken in Re Centura Global Holdings Pty Ltd above.

Orders and costs

Accordingly, I will make the declaration sought by Mr Chin in his capacity as administrator of the Company under s 447C(2) of the Corporations Act 2001 (Cth) that his purported appointment as voluntary administrator of the Company, pursuant to s 436A of the Corporations Act, was invalid. I will not make an order under s 447A of the Corporations Act that Part 5.3A of the Act is to operate in relation to the Company as if the resolution signed by Allan on 7 January 2018 to appoint Mr Chin as voluntary administrator of the Company was a valid resolution. I would have made the further declaration sought by Joyce and Charles, under s 447A of the Corporations Act, that Mr Chin's purported appointment as voluntary administrator of the Company on 7 January 2018 was invalid and of no effect, had that declaration not already been made on Mr Chin's application.
The parties should bring in agreed short minutes of order to give effect to this judgment within 7 days. In the ordinary course, costs would follow the event and Allan should be required pay Mr Chin's and Joyce and Charles' costs of the proceedings. However, Allan has foreshadowed a wish to be heard as to that matter and I will hear the parties as to costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 March 2018

Corporations Act 2001(Cth)s 95A, s 436A, ss 95A, 128, 129, 249B, 436A, 447A, 447C, 1322

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