One Tree Agriculture Pty Ltd v Lye

Background

1. 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.
2. 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.
3. 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.
4. On 19 January 2017, Mr Lye was declared bankrupt.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. Mr Lye was discharged from bankruptcy on 18 January 2021.
11. 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.
12. It was said that Mrs Lye agreed with that proposal.
13. 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.
14. Despite Mr and Mrs Lye being in agreement vis-à-vis the proposed changed in directorship, miscommunication appears to have muddled the manner in which it was to be effected. In her affidavit, Mrs Lye says she assumed her husband would arrange for the filing of the documents that were necessary to effect an alteration of directorship with ASIC. Mr Lye did not do so. Nor can he recall whether he undertook to do so, or why he did not instruct Robertson Scannell to cause the documentation to be prepared and the relevant notice of Mrs Lye's resignation to be filed. He did, however, refer to the occurrence of the COVID-19 pandemic, that he was home-schooling his two children during that time, and that he was suffering from depression.
15. It is a matter of comment that, whilst Mr Lye asserted that he was unable to attend to instructing his accountants to effect the proposed change of directorship, he nevertheless engaged in substantial grain brokering activities between November 2021 and February 2022. The statement of claim in the main proceedings identifies that A&B entered into several grain sale contracts with One Tree during that period totalling at least some $800,000. It is not explained how Mr Lye could engage in trading to that extent, but not be capable of instructing his accountant to file documents to regularise what he said was a change of directorship of A&B. On the other hand, it may be that his diminished capacity to attend to the functions necessary to run a commercial business was causative of A&B's financial downfall.
16. On 28 March 2022, One Tree served A&B with a statutory demand in relation to certain debts that had been invoiced between 31 January and 10 March 2022 and remained outstanding.
17. It is likely that this precipitated concern for Mr and Mrs Lye and, around that time, the former was informed that Mrs Lye was still recorded as director of A&B on ASIC's database. It was only then that he instructed Robertson Scannell to prepare the necessary documentation to cause the change in directorship to be recorded.
18. On 14 April 2022, several documents were executed by Mrs Lye and Mr Lye which were to be lodged with ASIC to cause the details of A&B's directorship to be changed.
19. These documents purporting to effect the change of directorship were filed with ASIC on 27 April 2022, being outside the 28-day period from the date on which Mrs Lye now claims she stopped being a director of A&B. As a result, the date of cessation of Mrs Lye's directorship was recorded on the ASIC register as being 27 April 2022, being the date on which the documents were lodged: see s 203AA(1)(b) of the Corporations Act.
20. A&B did not comply with terms of the statutory demand of 28 March 2022, and, on 20 May 2022, notification was given to ASIC of an application to wind-up A&B.
21. On 8 July 2022, A&B was wound up in insolvency and Mr Steven Gladman was appointed as liquidator.
22. The current proceedings were commenced by One Tree on 16 February 2024, and they have proceeded through some interlocutory steps, including the filing of pleadings and the filing of several affidavits.
23. It is undoubted that the fact that Mrs Lye was registered as director of A&B prior to 27 April 2022 (when the indebtedness that is the subject of the alleged insolvent trading occurred) encouraged One Tree to commence the action. It had conducted public examinations and searches of the property held by Mr and Mrs Lye and ascertained that it was only Mrs Lye who was the owner of any substantial property.
24. The current applications under the Corporations Act were filed by Mrs and Mr Lye on 7 August 2024 and 2 October 2024 respectively.
25. The liquidator of One Tree was served with the applications but has since indicated that he has no interest in them.
26. Mr Lye's application, if successful, would have the consequence that he would be entitled to avoid the civil liability consequences of his failure to lodge the appropriate documents with ASIC and, as a result, ASIC has been appropriately served with the application. On 3 February 2025, it indicated that it would abide by the orders of the Court.

Legislative provisions

1. In the course of their submissions, the parties referred to the following provisions of the Corporations Act: 201D Consent to act as director (1) A company contravenes this subsection if a person does not give the company a signed consent to act as a director of the company before being appointed. (2) The company must keep the consent. (3) An offence based on subsection (1) or (2) is an offence of strict liability. Note: For strict liability, see section 6.1 of the Criminal Code. 201H Directors may appoint other directors (replaceable rule - see section 135) Appointment by other directors (1) The directors of a company may appoint a person as a director. A person can be appointed as a director in order to make up a quorum for a directors' meeting even if the total number of directors of the company is not enough to make up that quorum. Proprietary company - confirmation by meeting within 2 months (2) If a person is appointed under this section as a director of a proprietary company, the company must confirm the appointment by resolution within 2 months after the appointment is made. If the appointment is not confirmed, the person ceases to be a director of the company at the end of those 2 months. Public company - confirmation by next AGM (3) If a person is appointed by the other directors as a director of a public company, the company must confirm the appointment by resolution at the company's next AGM. If the appointment is not confirmed, the person ceases to be a director of the company at the end of the AGM. 203A Director may resign by giving written notice to company (replaceable rule - see section 135) A director of a company may resign as a director of the company by giving a written notice of resignation to the company at its registered office. 203AA Resignation of directors - when resignation takes effect When resignation takes effect (1) A person's resignation as a director of a company takes effect on: (a) if, within 28 days after the day the person stopped being a director of the company, ASIC is notified of that fact under subsection 205A(1) or 205B(5) - the day the person stopped being a director of the company; or (b) in any other case - the day written notice is lodged with ASIC stating that the person has stopped being a director of the company. Note 1: A director includes a person appointed to the position of alternate director, see the definition of director in section 9. Note 2: For the application of this section, see Part 10.37. (2) However, if: (a) because of paragraph (1)(b), the person's resignation takes effect on a day that is not the day the person stopped being a director of the company; and (b) the person or the company applies to ASIC or the Court for it to fix, as the day the person's resignation takes effect, the day (the resignation day) that the person stopped being a director of the company; and (c) the application is made in accordance with subsection (5); and (d) the applicant satisfies ASIC or the Court that the person stopped being a director of the company on the resignation day; ASIC or the Court may fix the resignation day as the day the person's resignation takes effect. (3) The Court must not fix the resignation day as the day the person's resignation takes effect unless it is satisfied that it is just and equitable to do so. … Application to ASIC or the Court (5) For the purposes of paragraph (2)(c), the application: (a) if made to ASIC - must: (i) be made within 56 days after the day the person stopped being a director of the company; and (ii) be lodged in the prescribed form; or (b) if made to the Court - must be made within either: (i) 12 months after the day the person stopped being a director of the company; or (ii) such longer period as the Court allows. 203AB Resignation of directors - resignation has no effect if company has no other directors (1) The resignation of a director of a company does not take effect if, at the end of the day that the resignation is to take effect, the company does not have at least one director. Note: For the application of this section, see Part 10.37. (2) However, subsection (1) does not prevent the resignation of a director of a company taking effect if the resignation is to take effect on or after the day that the winding up of the company is taken, because of Division 1A of Part 5.6, to have begun. (Emphasis in original).
2. In the context of the present case, s 203AA is significant. If Mrs Lye resigned on 1 July 2021, she would not have been a director of A&B during the period when the indebtedness undergirding the insolvent trading claim arose. However, if effective resignation instead occurred on 22 April 2022, Mrs Lye would then have been a director of A&B during the period when the indebtedness arose and, as such, might be liable to repay the debt owed to One Tree.
3. Indeed, it is due to the consequences of s 203AA(1) that Mrs Lye now seeks an order under s 203AA(2) to the effect that she stopped being a director of A&B some ten or so months prior to the date on which her written notice of resignation was lodged with ASIC. The order sought is in the nature of a declaration of Mrs Lye's status vis-à-vis A&B and is intended to bind all persons who may have an interest in Mrs Lye's involvement in the control of A&B. In this manner, it is in the nature of a decision in rem.
4. Section 203AA has been afforded scant consideration since its introduction in 2020, though it was referred to briefly by Jackson J in Re Deterra Royalties Ltd [2024] FCA 891. His Honour observed (at [28]): 28 Section 203AA of the Corporations Act was introduced to ensure that directors are held accountable for misconduct by preventing the improper backdating of their resignations, and relatedly, to reduce illegal phoenix activity and its effect on employees, creditors and government revenue: Explanatory Memorandum, Treasure Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (Cth) paras 3.1, 3.10, 3.14. The facts of this matter as outlined above are far removed from the mischief the provisions were intended to remedy. As with s 1322(4), s 203AA(2) has a remedial and practical purpose: cf Weinstock, above.
5. The section is substantive in nature and concerned with the date on which a person stops being a director of a company. Its purposes are clear enough. They include, inter alia, ensuring that persons who deal with a company can, within reason, rely on ASIC's register as accurately recording those who have directorial control of a company at any particular time.
6. The essential determinant for the purposes of ss 203AA(1) and (2) is when the relevant person "stopped being a director". The term "director" is defined by s 9AC of the Corporations Act: (1) A director of a company or other body is: (a) a person who: (i) is appointed to the position of a director; or (ii) is appointed to the position of an alternate director and is acting in that capacity; regardless of the name that is given to their position; and (b) unless the contrary intention appears, a person who is not validly appointed as a director if: (i) they act in the position of a director; or (ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation).
7. This definition identifies two broad classes of directors. Those persons who are validly appointed within subparagraph (a) (de jure directors), and those who have not been validly appointed but are nevertheless treated as directors for the purposes of the Act where they meet either of the descriptions in subparagraph (b) (being de facto directors and shadow directors, respectively). For present purposes, it is appropriate to maintain this ostensibly academic distinction between validly appointed directors and non-validly appointed directors.
8. It is also important to appreciate the subtleties that inhere in the expression "act in the position of a director" in s 9AC(1)(b)(i). Much ink has been spilled on the correct understanding of that phrase, but it suffices to say that it requires an assumption of directorial responsibility with the express or implied knowledge and consent of the company: see, eg, Hayes (liquidator), in the matter of Container Freight Services Pty Ltd (in liq) v Sinadinos [2024] FCA 885, [18], citing In the Matter of ACN 092 745 330 [2017] NSWSC 241, [100] - [113]. In this respect, by requiring proof in the aggregate that a person has assumed or performed functions which only a de jure director or board can properly perform or which are the sole responsibility of a director or board: Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296, 323 [70]: the establishing of a person as a de facto director necessarily has a temporal element to it which is markedly different from the immediacy of the effect of a valid appointment.
9. There is no reason why s 203AA should not apply to de jure directors as well as to directors who are not validly appointed, such that nothing prevents the latter from resigning as a director by giving an appropriate notice.
10. Unless otherwise indicated, all references to legislative provisions in the remainder of these reasons are to the Corporations Act.

The Constitution of A&B

1. Though it was produced very late in the course of the interlocutory applications, it appears that A&B had a constitution which modified the operation of certain provisions of the Corporations Act to some extent. For present purposes, the following clauses are relevant:
2. Effectiveness of acts by directors If it is discovered that: (a) there was a defect in the appointment, or in the continuance of the appointment, of a person as a director, alternative director or member of a directors' committee; or (b) a person appointed to one of these positions was disqualified, all acts of the director or the directors' committee before the discovery was made are as valid as if the person had been duly appointed and was not disqualified. …
3. Number and period of office of directors (replaces section 203A) (1) This clause replaces section 203A. (2) Until the company resolves otherwise there will be: (a) a minimum of one director; and (b) a maximum of ten directors. (3) The office of a director immediately becomes vacant if the director: (a) is prohibited by the Corporations Act 2001 from holding office or continuing as a director; (b) dies or cannot manage the company because of his or her mental incapacity and is a person whose estate or property has had a personal representative or trustee appointed to administer it; (c) resigns by giving a written notice of resignation to the company at its registered office; (d) is removed by a resolution of the company; or (e) is absent from directors' meetings for three consecutive meetings without leave of absence from the directors. (4) If a managing director is suspended from office, he or she will not be entitled to attend or vote at any meeting of directors.

Application of the relevant law

1. Here, the impact of s 203AA(1)(b) is that Mrs Lye ceased being a director of A&B on 27 April 2022 when the documents recording her resignation were lodged with ASIC. Had notice been lodged within 28 days of the date on which she now claims she ceased being a director, her resignation would have taken effect on that date: s 203AA(1)(a). She now seeks the fixing of the date on which she ceased to be a director of A&B as 1 July 2021, when, so it is said, she in fact stopped being a director: s 203AA(2).
2. To succeed on her application, Mrs Lye is required to satisfy the following matters specified in ss 203AA(2), (3) and (5) (respectively):
3. 27 April 2022 is not the date on which she stopped being a director because 1 July 2021 is the date on which she stopped being a director;
4. it is just and equitable that the date fixed for Mrs Lye's resignation be 1 July 2021; and
5. the time in which she had to make an application under s 203AA has been extended by the Court to the date on which the application was made.

When, if ever, did Mrs Lye stop being a director of A&B?

1. The meaning of the expression "stopped being a director of the company" in s 203AA is not entirely clear. However, in the context in which the expression is used, it would appear to be the equivalent of ceasing to act as a director or to carry out the functions of a director. The Explanatory Memorandum to the Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (Cth) offers the following general example: Example 3.1 Inappropriate backdating of director resignations Bill is the sole director of Panorama Designs Pty Ltd, a building company that is insolvent. On 10 July 2019, Panorama Designs borrows $50,000 it claims is for the purpose of finalising the construction of a small apartment complex. On 15 July, Panorama Designs transfers the $50,000 and other assets to another company, Panorama Designs (No. 2) Pty Ltd, of which Bill is also a director. On 20 October 2019, the creditors of Panorama Designs commence proceedings to have a liquidator appointed to the company. On 1 November 2019, Panorama Designs lodges a notice with ASIC that Bill resigned from the company and was replaced by Theo on 1 July 2019. Bill claims that he should not be held accountable for the misconduct that occurred in July 2019 as he was not a director. However, Bill's resignation is taken to be effective from 1 November 2019. Bill can be prosecuted for breaching his duty as a director to prevent the company from trading while insolvent and for causing the company to make a creditor-defeating disposition. … Example 3.2 Application to Court Further to Example 3.1, Bill cannot apply to ASIC to backdate the effective date of his resignation because the company provided the notification to ASIC after the end of the 56-day period. Bill applies to the Court to have the effective date of his resignation backdated. Bill cannot adduce clear evidence to substantiate his position that he resigned on 1 July 2019. ASIC responds to the application and adduces evidence that Bill was still involved in the management of the company during July 2019. The Court refuses the application. (Emphasis added).
2. In the defendants' written outline of argument of 21 October 2024, it was put:
3. Mrs Lye submits that the Court ought be satisfied that she stopped being a director of A & B on 1 July 2021. The directors meeting minutes and accompanying documentation show that the intended date of her resignation was always 1 July 2021 in particular from the use of the words 'It was RESOLVED on 1 July to appoint [Mr Lye as director]'. (Footnote omitted).
4. At the hearing, the thrust of the defendants' submission seemed to be that that evidence, taken with Mrs Lye's alleged prospective, oral resignation in the early months of 2021, was sufficient to establish that she had stopped being a director of A&B on 1 July 2021.
5. So framed, the defendants' submission gives rise to three questions:
6. 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?
7. 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?
8. Did Mrs Lye, in fact, ever stop being a director of A&B?

Non-contemporaneous evidence of an intention to resign

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. There is also the added difficulty that Mrs Lye's alleged resignation is said to flow, not from any act(s) that she performed on or about 1 July 2021, but from a conversation that transpired in the months preceding that date. In this context, counsel for Mr and Mrs Lye submitted that the decision in Cain stood for the proposition that a director could resign his office by forming an intention to resign at some point in the future. As framed, that submission was: MR HOGG: … So there was no actual written record of Mr Cain's intention to resign. Despite that, Goldberg J held that the parties always intended that Mr Cain was going to resign, even though there was no formal document recording his resignation. So in my submission, the decision in Cain is consistent with the principle that a director can resign prospectively by demonstrating an intention to resign before the actual date of their resignation. …
9. At issue in Cain was the question of whether Mr Cain had resigned as a director of a company (AMC) in the absence of any evidence that he had signed a written resignation, as required by AMC's Articles of Association. By reference to a sequence of events and conduct that occurred both before and after the date on which Mr Cain was alleged to have resigned, Goldberg J held that it was apparent that the common intention of Mr Cain and AMC was that the former would cease to be a director of the latter upon the happening of certain events. His Honour reasoned: 30 Although it was contemplated by the parties that a formal resolution by the directors of AMC would be passed accepting Mr Cain's resignation, it was apparent, and I am satisfied, that the intention of the parties was that such resignation would take effect on and from 16 September 2002. So much appears from TAO's solicitors' letter of 12 September 2002 (at [28]) and the fact that Mr Cain appointed Mr Griffin and Mr Brown as directors on 16 September 2002. … 49 I am satisfied that Mr Cain resigned as a director and secretary of AMC on 16 September 2002 albeit not in writing, and that this form of resignation was agreed to or accepted on behalf of AMC either on that date or at the latest by 20 September 2002. The sequence of events and conduct of the parties to which I have referred makes it clear that it was the intention of the parties and, in particular Mr Cain, that Mr Cain resign as director and secretary of AMC on the date of settlement of the Agreement on 16 September 2002. That position was accepted by AMC, and on its behalf, by 20 September 2002 at the latest which was after the approval of CASA had been obtained to Mr Griffin as the responsible person for the purposes of the AO certificate. … 50 In any event, TAO, the sole shareholder in AMC, assented to and accepted Mr Cain's resignation as a director and secretary when Mr Botting, its general counsel and agent, told Mr Cetrola on 20 September 2002 to prepare Mr Cain's resignation as a director and secretary. This conclusion is supported by the surrounding circumstances where it was clearly the intention of the parties that Mr Cain resign as director and secretary upon the appointment of Mr Griffin and Mr Brown as directors and the acceptance by CASA of an alternative responsible person, and these conditions were in fact met.
10. Prima facie, the circumstances that confronted Goldberg J bear semblance to those before this Court. There, the conduct of a director (Mr Cain) over a period of several months was such as to evince an intention, which was accepted and shared by the company in question (AMC), that he would resign upon the happening of certain events (the appointment of Messrs Griffin and Brown as directors of AMC on 16 September 2002 and acceptance by CASA of an alternative responsible person). Putting the question of company acceptance to one side, here, the conduct of a director (Mrs Lye) is said to evince the intention that she would resign upon the happening of certain events (the passing of 1 July 2021 and appointment of Mr Lye as director of A&B).
11. There is, however, at least one significant difference. In Cain, the pre-conditions to Mr Cain's resignation came to pass; here, for reasons explored below, Mr Lye was never validly appointed as a director of A&B. In any event, the evidence of the parties' common intention in Cain was far more plentiful and robust than that tendered in this proceeding. In that case, Mr Cain made clear his intention to resign as director in a Heads of Agreement, several conversations with his proposed successors, correspondence exchanged between his solicitors and those of TAO and AMC, and a settlement agreement: Cain, 8 - 10 [26] - [31]. Reference was also made to Mr Cain's conduct on, and immediately after, the date of alleged resignation, as well as the positive acts taken by TAO and AMC to effect the resignation: Cain, 10 - 11 [32] - [39]. Here, one is left to conjure the requisite intention from a single conversation (the contents of which must be treated with caution: Rowntree, 328 [49], citing Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151, [72] - [74]) and a series of documents created some ten months after 1 July 2021.
12. The finding in Cain should not be extrapolated to dissimilar circumstances. The present case is far from that before Goldberg J and none of the important factors referred to are present here.
13. Whilst there is no doubt that the management of the corporate affairs of small companies can be achieved with a degree of informality and casualness, it is inappropriate to devine the actions of a company by mere inference when conformity with the necessary processes - being those in the Corporations Act and Constitution - was not in the director's contemplation at the time.
14. Ultimately, the conversation in question can only be taken as a statement of Mr and Mrs Lye's then-present intention as to what they would do on 1 July 2021. Absent any evidence that they then sought to carry out, or did in fact carry out, that intention when the day came to pass, it is going too far to derive from their words the existence of both a resignation and an appointment which were to take effect at some time in the future. Even if this were not the case, the efficacy of the conversation in relation to the appointment of Mr Lye faces the flaws referred to below.

The effect of Mr Lye's "appointment" on Mrs Lye's "resignation" on 1 July 2021

1. One Tree submits that, even if Mrs Lye intended to resign on 1 July 2021 and purported to do so, any act by her was ineffective because Mr Lye was not validly appointed on that day. In the latter respect, it was submitted that Mr Lye had signed no written consent to act as a director of A&B prior to his alleged appointment (as required by s 201D) with the consequence that he had not been validly appointed on 1 July 2021 and, therefore, any attempt by Mrs Lye to resign was thwarted because there would be no director of A&B at the end of that day to continue the business of the company. In such a scenario, the effect of s 203AB(1) is that Mrs Lye's resignation would not be effective (see also cl 12(2)(a) of the Constitution).
2. For obvious reasons, the defendants did not advance any submission to the effect that Mr Lye had, through a course of conduct or otherwise, become a director of A&B at some point prior to 1 July 2021; that is, it was not suggested that Mr Lye was a director by reason of s 9AC(1)(b). Thus, to avoid the operation of s 203AB(1), the defendants were required to prove that Mr Lye had been validly appointed to the position of director of A&B on 1 July 2021: s 9AC(1)(a).
3. It did not appear to be doubted that Mr Lye did not give his signed consent to act as a director prior to his purported appointment. There was no relevant document signed by him prior to April 2022 and nothing appears to have been signed prior to 1 July 2021 or even on that date. The resulting issue, being whether this failure to comply with s 201D renders the appointment invalid - that is, whether a person can be appointed as "director" in the absence of any written consent - concerns a matter of statutory construction and determining whether the purpose of the legislation was that an act done in breach of the section should be invalid: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 374 - 375 [41], 390 - 391 [93].
4. For this discussion, it is necessary to keep steadily in mind that there exists a fundamental distinction between (a) the act of appointing a director; and (b) a person being a director. By reason of paragraph (b) of the definition within s 9AC, the latter is not conditioned upon the validity of the former. A person who acts in the position of a director, or whom the directors are accustomed to acting in accordance with their instructions, are directors even though they have not been formally appointed. Therefore, whilst the concept of a "director" encompasses both persons appointed by the valid intended act of the company (being, in that sense, de jure directors) and others who act in a particular way and are thereby deemed to be directors, the distinction between them remains and is important. In particular, the validity of an appointment is crucial when considering the validity of a person's acts on behalf of a company in circumstances where the person has not previously acted as a director; being that they do not satisfy the requirements of paragraph (b) of the definition. Additionally, as in this case, it may be important to know with some precision when a person did, in fact, become a director.

The language of the Corporations Act

1. It can be immediately noticed that there is some contextual support for the conclusion that the existence of a prior signed consent is essential to the validity of an appointment. Paragraph (a) of the definition of "director" in s 9AC sets out the characteristics of a validly appointed director, whereas the chapeaux to paragraph (b) relevantly refers to "a person who is not validly appointed as a director" and that which follows is descriptive of the characteristics of those who will fall within its scope. Assessed objectively, the language of the chapeaux appears to be a legislative intimation that there exist certain deficiencies in the appointment of a director, possibly an absence of prior written consent, which will render said appointment "not valid[]". The definition in s 9AC(1)(b) also has a remedial aspect to it, and by deeming persons who are "not validly appointed" as directors to be treated as such in certain circumstances, it evinces a clear legislative intent that infelicities in the appointment process can render the appointment invalid. Put another way, a person who is "not validly appointed" and then does not engage in activities to meet the requirements of paragraph (b) will not be a director.
2. It is, perhaps, due to the remedial effect of paragraph (b) that any real issue concerning the appointment of a director rarely arises. It is often the case that where a director's appointment is invalid, they nevertheless take up the position and, with the consent and knowledge of the company, act in the position of director. In this way, any deficiency in the appointment process is overcome. But that is not the case here.
3. It is also important to keep in mind that the relationship between a director and the company of which they are a director is consensual and, necessarily, a person must consent before the arrangement between them is complete: Hedges v NSW Harness Racing Club Ltd (1991) 5 ACSR 291, 293 (Hedges). This is a matter which has assumed significance in the authorities which have considered the effect of non-compliance with s 201D, as the section takes the essential element of consent and legislates for its occurrence and the manner in which it is to be given: see Barboutis v The Kart Centre Pty Ltd (No 2) [2020] WASCA 41, [60] (Barboutis).
4. It is relevant to any assessment of the veracity of a purported appointment that does not comply with ss 201D(1) - (2) that an offence based upon their contravention is a strict liability offence: s 201D(3). The relevant offence is provided for by the prescription in ss 1311 and 1311A that it is an offence to contravene a section of the Act. In general terms, it might be expected that, where a step or procedure prescribed by an act imposes a penalty for non-compliance, the non-compliance also invalidates the step taken. The imposition of a penalty is indicative of the importance which the legislature attributes to compliance with the statutory obligation.

Judicial consideration of s 201D

1. It is appropriate to now turn to the authorities which consider whether non-compliance with the requirement in s 201D that a person consent in writing prior to being appointed, renders a purported appointment invalid. It is safe to observe that there is not a great deal of conformity amongst them.
2. The suggestion that a person could consent to act as a director through a non-written medium was briefly considered by Hayne J in Knight, albeit some seven years before the introduction of s 201D. In that case, there was no suggestion that Mr Knight, the validity of whose directorship was in issue, did not take office as a director and act as such, even though he did not execute a consent to act as such. It is also important that no issue was taken to the absence of a written consent to act, and it was not suggested that Mr Knight was not a director due to that fact. Nevertheless, his Honour observed (at 560) in relation to the Companies (Victoria) Code, that no person might be appointed as a director unless they consent to act and, whilst it is prudent to obtain consent in writing, it is not necessary. In the case before the Court, it was patent that Mr Knight had consented to act as a director and the company had treated him as such, with the consequence being that the failure to exercise the consent form was immaterial.
3. The decision in Knight really concerned the issue of only whether consent is required in order for a person to be a director. Hayne J made no determination of whether non-compliance with a requirement of writing invalidated an appointment. As such, his Honour's observations are not directly relevant to the issues under consideration.
4. In Kocic v Deputy Commissioner of Taxation [2011] NSWCA 322 (Kocic), the Court of Appeal (NSW) seemingly held that non-compliance with the requirements of s 201D did not have the effect that a person purportedly appointed was not a director. It reached this conclusion (at [32] - [35]) on the basis that no appointment or pre-appointment consent was required for a person to become a director within the meaning of s 9 (as s 9AC then was). With the greatest respect, there is some difficulty with that reasoning, and it suffers from the failure to maintain the distinction between the validity of the act of appointment and the issue of whether a person is within the statutory definition of "director".
5. Consideration was given to the same issue in Barboutis, which involved some complex factual circumstances that are not necessary to consider at present. There, the Court referred to s 201D and appeared to accept, as did the parties, that non-compliance with the requirement of s 201D rendered any appointment of a director invalid (at [59] - [61]). There was, unfortunately, little discussion of the issue and it appears that the Court was not referred to the decision in Kocic.
6. In Re Whitsunday Clean Sands Pty Ltd [2017] NSWSC 1199 (Re Whitsunday Clean Sands), the issue was addressed by Black J in the following terms: 15 The case law establishes that, where a person has not consented to appointment as director or secretary, either by a written consent or by consent in fact, then his or her appointment will be invalid, not only by reason of s 201D and s 204C of the Corporations Act, but also at general law. In Hedges v NSW Harness Racing Club Ltd (1991) 5 ACSR 291 at 293, McLelland J held, simply enough, that: The status of director of a company, which involves significant statutory and fiduciary obligations, cannot be imposed on any person without his consent. The same view has also been taken by two other judges with particular expertise in corporations matters, by Hayne J in Knight v Bulic (1994) 13 ACSR 553 at 560 and by Santow J in Forkserve Pty Ltd v Jack [2000] NSWSC 1064; (2001) 19 ACLC 299. The subsequent decisions in Xie v Crisp [2011] VSC 154 and Kocic v DCT [2011] NSWCA 322 are not to the contrary, since the former involved a person who had informally consented to act as a director, and that amounted to consent in fact, and the latter amounted to the position where a person had acted as a director as a matter of fact. No such informal consent or conduct as a director is established in this case.
7. Whilst those reasons generally concern the question of consent, the reference to s 201D indicates that his Honour held the opinion that non-compliance with it would be sufficient to invalidate the company's act of appointment: see also Re Concreting and Formwork Personnel Pty Ltd (in liq) [2023] NSWSC 512, [22].
8. That is in accord with what is said in Austin & Black's Annotations to the Corporations Act, Ch 2D - Officers and Employees, Pt 2D.3 - Appointment, Remuneration and Cessation of Appointment of Directors at [2D.201D], as to the consequences of non-compliance with s 201D: The obligation to have a signed consent is cast by s 201D(1) upon the company rather than the director. It appears to be implied that the company must not, by its existing directors, appoint someone to the board who has not provided a signed consent to act as director.
9. In their discussion, however, the learned authors cite the decision in Savoy v Insurance and Care NSW (2020) 142 ACSR 200 (Savoy), which appears to hold that non-compliance with the requirements of s 201D does not invalidate the appointment of a director. In that case (at [49] - [51]), Basten J held: 49 That section implicitly imposes two obligations on a company by providing that it contravenes the provision if the obligations are not complied with. The section does not provide that the appointment will be invalid if the company contravenes the provision. The caselaw generally does not support a finding of invalidity of an appointment resulting from a failure to comply with s 201D. 50 There is no doubt that a person cannot have the status of director imposed on her without her consent: Hedges v NSW Harness Racing Club Ltd. However, it is clear that a person may be a "director" within the meaning of that term in the Corporations Act, absent a valid appointment: s 9 of the Corporations Act, director. 51 Reading s 201D in its statutory context, it is not plausible that it contains an unexpressed intention to invalidate an appointment if a company fails to carry out its obligations. The broad definition of "directors" in s 9 is inconsistent with a procedural limitation on the validity of an appointment. Further, authorities which have held appointments invalid on the basis of lack of actual consent must have ignored an evidentially simpler course, namely absence of a signed document recording consent. (Emphasis added).
10. A view to a similar effect was advanced by Flannagan J in Career Employment Australia Ltd v Shepley (2021) 166 ACSR 54 (Shepley): 136 However, failure to comply with s 201D(1) does not invalidate an otherwise valid appointment of a director. In Hedges v NSW Harness Racing Club Ltd, McLelland J stated that the "status of director of a company, which involves significant statutory and fiduciary obligations, cannot be imposed on any person without his consent". Consent to be appointed as a director need not be in writing at general law. It follows that a person may withdraw their consent to be appointed other than by writing. (Emphasis added). See also Collins v Zernike Australia Pty Ltd (2006) 198 FLR 126 at 130 [26] - [29], as well as McIntosh v CMX Technologies Pty Ltd (2005) ACSR 283 at 285 [14].
11. As in Kocic, the observations of Basten J in Savoy and Flannagan J in Shepley appear to conflate the twin issues of (a) the validity of the act of appointment by a company; and (b) the fact of a person being a director. In that context, the fact that a person may be a director by reason of the broad definition in s 9AC, absent a valid appointment, does not necessarily justify the conclusion that non-compliance with s 201D does not vitiate an act of appointment.
12. Despite observations to the contrary, the preferred approach is that of Black J in Re Whitsunday Clean Sands and as apparently adopted in Austin & Black's Annotations to the Corporations Act. Though the requirements of s 201D are not expressed in mandatory terms, that is certainly the necessary implication. The company's obligations are to have the signed consent prior to the appointment and to retain it, and the importance of those requirements for the purposes of establishing the validity of a director's acts is self-evident.
13. The importance of obtaining written consent is also apparent in the additional requirement for the company to retain it: s 201D(2). That secondary obligation, which is cast in mandatory language and may also result in the imposition of a penalty if not fulfilled, is another indication that the section's requirements are more than mere aspirations of good practice.
14. Similarly, the significance of the subject matter of s 201D supports the conclusion that non-compliance affects the validity of an appointment. As has been mentioned, the director's agreement to act as such is critical to the relationship with the company and, no doubt, the requirement that the prior consent be evidenced in writing is designed to prevent a person being effectively appointed as a director of a company without their express agreement and thereby being subject to the obligations and responsibilities of that position, not to mention the possible imposition of substantial liabilities for any failure to fulfil them: Hedges, 293.
15. Logic also compels the conclusion that a failure to observe the conditions of s 201D will invalidate the appointment of a director. Section 9AC provides for two classes of director: (a) persons who become directors through a valid act of appointment: s 9AC(1)(a); and (b) persons who, in the absence of any such act of appointment, nonetheless assume directorship through their actions: s 9AC(1)(b). In either case, the relevant person must consent to act as director. In the latter case, that consent may be evidenced in writing or through a course of conduct ("consent in fact"): Re Whitsunday Clean Sands, [15]; see also Forkserve Pty Ltd v Jack [2000] NSWSC 1064, [21]. In the former case, where the inquiry is temporally limited to some alleged act of appointment, the consent can logically only be evidenced in writing. Were it otherwise, the purpose and effect of s 201D would be rendered otiose. It is in this sense that the validity of the appointment of a director must be conditioned on compliance with ss 201D(1) and (2).
16. On behalf of the defendants, it was submitted that the existence of s 201M(1) provided some inferential support for the conclusion that non-compliance with s 201D did not invalidate a director's appointment. That section provides: 201M Effectiveness of acts by directors (1) An act done by a director is effective even if their appointment, or the continuance of their appointment, is invalid because the company or director did not comply with the company's constitution (if any) or any provision of this Act.
17. Clause 10 of the Constitution is drafted in largely the same terms.
18. Contrary to the defendants' submissions, s 201M supports the conclusion that invalidity flows from non-compliance with s 201D. It acknowledges the appointment of a director "is invalid" in circumstances where it did not comply with the Corporations Act or the Constitution. For that reason, the section is required to validate that which would otherwise be invalid consequent upon the appointment being ineffective. If non-compliance did not invalidate the appointment, s 201M would be rendered nugatory.
19. It might be added that there is a significant benefit from the existence of a legislative process for the appointment of directors, compliance with which establishes validity. In such circumstances, it will be possible to ascertain whether a person has been validly appointed by reference to the prior signed consent. In its absence, one is forced to assess the circumstances in which the consent was allegedly given. That may have been orally or allegedly so, or by conduct or, again, by alleged conduct. Once the requirement of a signed consent is put to one side, there will be necessary uncertainty on the question.
20. As mentioned, the preferable view is that in order for a person to be validly "appointed" as a director under s 9AC(1)(a), it is necessary that they first provide signed consent. Importantly, that proposition says nothing as to whether a person, who does not give such written consent, does not become a director by satisfaction of paragraph (b) of the definition.
21. On the other hand, if the effect of an attempted appointment without prior signed consent is that there was no appointment at all, it is difficult to imagine how s 201D might be contravened. On its face, the contravention is the appointment of a person without their prior written consent, not the attempted or purported appointment of that person. Nevertheless, as the annotations in Austin & Black's Annotations to the Corporations Act suggest, the section should be read as prohibiting any attempt to appoint a director absent the receipt of the required document.

The circumstances in the present case

1. On the basis of the foregoing analysis, the absence of any prior signed consent by Mr Lye to be appointed as a director rendered any purported appointment ineffective. It follows that, any attempt by Mrs Lye to resign as a director on 1 July 2021 was rendered nugatory by reason of 203AB(1), because A&B would not, on that date, have had one other director "at the end of the day". On the other hand, it may well have been the case that evidence could have established that Mr Lye otherwise became a director on 1 July 2021. If he acted "in the position of a director" on and from 1 July 2021, he would have become a director from that date, but the difficulty is that there is no evidence that he did so. Indeed, there is no evidence of any conduct by any relevant person on that date.
2. In circumstances where Mrs Lye must rely upon the effective appointment of Mr Lye as a director, she cannot do so solely by reference to the oral conversation alleged to have occurred sometime after January 2021. Her attempted resignation was ineffective by s 203AB, and she remained a director of A&B after that date, such that the power to fix the date claimed as the date when she stopped being a director was not enlivened. Even if this were not the case, the defendants' case cannot overcome the evidentiary difficulties outlined below.

Did Mrs Lye ever, in fact, stop being the director of A&B?

1. The fundamental difficulty in the present case is that there exists no "clear evidence" of when Mrs Lye stopped being a director of A&B. She said in her affidavit that, after her appointment on 1 April 2017, she had always left the administrative side of the company to her husband and the financial side of the company was handled by its accountants, Robertson Scannell. She also deposed that she did not have any relationship with those accountants.
2. Whilst Mrs Lye does provide a detailed description of the matters which required her attention during the relevant periods, she did not identify anything that she positively did as the director of A&B. She did not depose to those acts which she did as a director before and after 1 July 2021 and, far more importantly, she gave no evidence as to when she stopped doing them. Her affidavit does not address this issue at all.
3. Similarly, Mr Lye tenders no evidence of when Mrs Lye allegedly "stopped being a director". He offers no explanation of what actions she did as a director or when she stopped doing them, if at all.
4. In short, there is no evidence of what steps Mrs Lye took on a day-to-day basis as the director of A&B. For all that appears in the material, it may be that Mrs Lye did not act as a director at all but, instead, was merely registered as director for convenience during Mr Lye's bankruptcy and Mr Lye continued to conduct the affairs of the company. No suggestion of this was made by One Tree and, of course, there is no need to make any finding in relation to it. The difficulty, however, remains that there is an absence of clear evidence as to when Mrs Lye stopped doing the acts which were required of her as a director of A&B for the purposes of s 203AA.
5. It is therefore not possible for the Court to feel any actual persuasion, or otherwise be satisfied, that Mrs Lye stopped being a director of A&B on 1 July 2021.
6. The application must fail on this point alone.
7. It follows, for the reasons which have been given, that the power to make an order under s 203AA is not enlivened.

Is it just and equitable to fix an alternative date for resignation?

1. Even if Mrs Lye satisfied the Court that she had, in fact resigned, on 1 July 2021 and that she stopped being a director on that day, s 203AA(3) requires that, before the Court can fix the date of resignation, it must be satisfied "it is just and equitable to do so".
2. On behalf of Mrs Lye, it was submitted that the test was determined by balancing the benefits and detriments to Mrs Lye of making the order and the benefits and detriments to One Tree of not making it. That should not be accepted. It is true that those matters are factors to be taken into account, however, the party seeking relief must positively establish that the making of the order would be "just and equitable". That may include taking into account the impact on entities who are not parties to the proceedings. That is especially so when the relief sought involves a determination of a person's status and essentially an order in rem: Halsbury's Laws of Australia, Judgments and Orders, Judgments in rem and in personam [325-9015].
3. Nevertheless, if it had been concluded that Mrs Lye had resigned as a director on 1 July 2021, that alone would have substantial weight and, particularly so, if all relevant parties acted as if she had done so: see, eg, Re Energy Resources of Australia [2022] FCA 176, [21]. In this case, however, One Tree interrogated the ASIC records of the directorships of A&B and, from them, believed that in the period until 27 April 2022, Mrs Lye was a director of A&B as, indeed, she was. It had also undertaken a property search in relation to Mrs Lye and identified that she was possessed of real property and was, therefore, a worthwhile target of litigation. It can be accepted that, if the date of Mrs Lye's resignation as a director had been recorded as 1 July 2021, One Tree would not have commenced an action against Mr Lye alone, he being a person who was known to have no assets. The blame for the absence of any accurate record of Mrs Lye's resignation as at 1 July 2021 must necessarily lie with her, given that she was the sole director of A&B when the alleged agreement between her and Mr Lye was struck and up to 1 July 2021. On no view could it be thought that she was without fault in relation to the alleged errors in ASIC's records.

Potential detriment to the plaintiffs

1. The consequence is, if the date of Mrs Lye's resignation was fixed as being 1 July 2021, One Tree will have wasted the amount which it has expended in bringing and pursuing its action and thereby suffer detriment from its reliance on the ASIC records which Mrs Lye now seeks to alter. That determinant can, of course, be overcome were Mrs Lye to reimburse One Tree for all the costs which it incurred to the point where Mrs Lye put clearly in issue the date at which here directorship stopped. Unfortunately, Mrs Lye was not prepared to do that. In the course of the hearing, counsel for Mr and Mrs Lye belatedly informed the Court that she was prepared to pay up to $30,000 towards One Tree's costs. Whilst that sum may have covered all of the relevant costs, it was not clear that it would do so, and there would be a real risk that One Tree would be out of pocket were the Court to proceed on that basis. No attempt was made to establish the amount expended by One Tree on the litigation, with the result being that the appropriateness of Mrs Lye's offer was not capable of assessment.
2. Had Mrs Lye offered to indemnify One Tree in relation to all of its wasted costs, the position would have been different as any detriment to One Tree would have been relieved. In any event, that was not the case.

Potential detriment to the defendants

1. Mrs Lye relied on the fact that, if the date of her resignation is not fixed at 1 July 2021, she will be exposed to a substantial liability to One Tree if it is successful in its action. The claim against her is for approximately $550,000 and, so it was said, if she is required to pay that she will have to sell the family home. Clearly, that would be a devastating consequence for her and her family, and it is hard not to sympathise with that position. However, the fact that she may be required to resort to liquidating the family home is of no relevance here. On the other hand, it is relevant that she will possibly become liable at the suit of One Tree in circumstances where, on the assumption made, she was not in fact a director who could be made liable. There is no doubt that this would be significant and, if she were otherwise wholly blameless in relation to that which the ASIC register revealed, it might be sufficient on its own to tip the balance in her favour. That, however, was not the case.
2. To a not insubstantial degree, Mrs Lye's evidence appeared to be that she was merely a "sleeping director" and the business of A&B was conducted by Mr Lye without reference to her. The days in which that might have provided some excuse have long passed. As at April 2022, she had been A&B's director for an overwhelming amount of the time. She was its director from inception and remained so, save for a period from June 2016 to April 2017. Whilst she asserts that she did not know anything about the company or its operations, that is bereft of any relevance in the circumstances and, given the length of her directorship, it is also difficult to believe. In any event, during her directorship, she was required to ensure that A&B's internal administration was properly managed and that the requirements of the Corporations Act, including those in relation to ensuring that proper documents are lodged with ASIC, were complied with. Her claimed disinterest in such matters does not lessen her obligations.
3. In the result, even if Mrs Lye had established the matters in s 203AA(2), she did not discharge the onus of showing that it would be just and equitable to fix 1 July 2021 as the date of her resignation.
4. The application must fail for this reason also.

Extension of time for making the application

1. No attention was given to the operation of s 203AA(5), which required the Court to be satisfied that it was appropriate to extend the time within which Mrs Lye could bring an application under s 203AA(2). By s 203AA(5)(b)(i), Mrs Lye could have made the application as of right at any time within twelve months after the day she stopped being a director. On her case, that would be until 2 July 2022. No submission was advanced that sought to explain or justify Mrs Lye's failure to bring the application within that time, nor any explanation why no application was made until February 2024.
2. In these circumstances, had it been necessary to decide, it would not have been appropriate to extend time under s 203AA(5)(b)(ii) to make the application.

The result of Mrs Lye's application

1. In the result, Mrs Lye's application must be dismissed and there is no reason why she should not pay One Tree's costs in relation to it.

Mr Lye's application

1. The fate of Mr Lye's application was dependent upon that of Mrs Lye's.
2. He sought orders relieving him from civil liability in respect of his failure to lodge notice of Mrs Lye's resignation within 28 days of her ceasing to be a director, and he asserted that she so ceased on 1 July 2021. For the reasons been referred to above, on the materials before the Court Mrs Lye did not resign as a director on 1 July 2021, and the foundation of Mr Lye's application was not established.
3. In the result, his application must also be dismissed, and he too must pay One Tree's costs. I certify that the preceding one hundred and fourteen (114) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Derrington.