- Forkserve Pty Ltd v Jack

Nature of the application

By Amended Originating Process filed, by leave, today, the Plaintiffs, Mr Killalea and Mr Findlay, seek leave to commence these proceedings against the First Defendant, a company now known as Sam Beast Mask Pty Ltd ("Company") pursuant to section 500(2) of the Corporations Act 2001 (Cth) ("Act"); declarations that, in effect, they did not consent to act as, and were not appointed as, directors of the Company and did not subsequently resign as directors of the Company; and consequential orders in respect of the rectification of records maintained by the Australian Securities and Investments Commission ("ASIC") in respect of the Company. Applications of this kind have been considered by the Court in earlier case law, including my decision in Re Whitsunday Clean Sands Pty Ltd [2017] NSWSC 1199 ("Whitsunday Clean Sands") and the decision of Williams J in Re Concreting and Formwork Personnel Pty Ltd ACN 627 355 480 (In Liquidation) [2023] NSWSC 512 ("Concreting and Formwork Personnel").

Submissions and determination

The factual position is therefore straightforward, as Ms Kearney, who appears for the Plaintiffs, points out in submissions. The evidence of Mr Killalea and Mr Findlay, which is not contested by anyone who has knowledge of the relevant matters or an interest in the orders that is sought, is that they did not consent to their appointment as directors of the Company, in circumstances that consent to appointment as a director is required for the valid appointment of a director under the Act. The liquidator has confirmed that no document exists which records their consent to act as directors, or their having acted in a manner that is consistent with their having been appointed as directors, so as to cast any doubt on the evidence which they have given in that respect.
Ms Kearney, in turn, draws attention to the case law, which I noted in Whitsunday Clean Sands, where I observed (at [15]) that, where a person has not consented to appointment as director of a company, either by a written consent or by consent in fact, then his or her appointment will be invalid, not only by reason of ss 201D and 204C of the Act, but also at general law: Hedges v NSW Harness Racing Ltd (1991) 5 ACSR 291 at 293; Knight v Bulic (1994) 13 ACSR 553 at 560; Forkserve Pty Ltd v Jack [2000] NSWSC 1064; (2001) 19 ACLC 299. I there also noted (at [16]), that there is no room for the application of s 201M of the Act, which validates the acts of a director where there is a defect in his or her appointment, where no relevant act of the directors requires validation, and where that section does not, on the authorities, validate the appointment of the director, as distinct from any acts which he or she may have undertaken. The same approach was taken by Williams J in Concreting and Formwork Personnel, where her Honour referred to Whitsunday Clean Sands for the proposition that the appointment of a director will be invalid, if he or she has not consented to that appointment, by written consent or by consent in fact, and made declarations as to the invalidity of a director's appointment, where her Honour found on the uncontested evidence in that case that the director had not consented to that appointment.
I am satisfied that, by reference to the uncontested evidence to which I have referred, and the case law which I have noted above, that the Plaintiffs have established their entitlement to the substantive relief sought. An order should be made granting leave to bring the proceedings against the Company, under s 500(2) of the Act, where the relief sought could not be obtained by a proof of debt in a liquidation. The declarations that are sought should be made, where they reflect the uncontested evidence and the consequence that the appointments of Messrs Killalea and Findlay were not effective follows from the absence of their consent to appointment. There is plainly utility in making those declarations, not least because it will resolve, as between the Plaintiffs and the Deputy Commissioner of Taxation, the question as to whether the Plaintiffs were appointed as directors, in a manner which will likely have significant practical impact for the Director Penalty Notices.
I will make an order for the amendment of the initial notice of appointment of the directors, in the form sought by Messrs Killalea and Findlay, but qualified so that it does not require ASIC to amend the relevant registers, if that would be inconsistent with its practice, I recognise ASIC may well take the view that it can only remove, but not alter, documents which are incorrect but are nonetheless a part of the historical record maintained on that register. The order requiring the removal of the notice of resignations can be made, where that will not otherwise effect the integrity of the relevant registers. In any event, as between the parties to the proceedings, the declarations that have been made will resolve the relevant issues in a way that determines that the Plaintiffs are not to be treated as having consented to their appointment as directors or having validly been appointed as directors.

At a glance

Court

Decision date

Before

Source

Judgment (6 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (3)