Sliteris v Ljubic

Judgment Introduction 1By Summons filed on 14 April 2014, the Plaintiff, Mr Viktoras Sliteris, seeks a declaration that a meeting of the directors of IONA Developments Pty Ltd ("Company") held on 4 April 2014 ("4 April Meeting") was a nullity and the purported appointment of Messrs Ljubic and Davis ("Administrators") as administrators of the Company at that meeting was invalid (Summons [1]-[2]). Second, Mr Sliteris seeks orders that the Administrators be denied their costs of the administration from the date of their proposed appointment to the date of the Court's final orders or alternatively that the Third Defendant, Mr Nicholas Harrow, be ordered to pay those costs (Summons [5]-[6]). Mr Sliteris seeks an order for the costs of the proceedings (Summons [9]) and there is also a question of the costs of a motion heard before Pembroke J on 14 April 2014, which his Honour reserved to the trial judge hearing these proceedings. 2Mr Sliteris relied on his affidavits dated 14 April 2014 and 27 June 2014 and on the affidavits of another director of the Company, Mr Stephens, dated 14 April 2014 and 26 June 2014. Mr Somerville, who appeared for Mr Harrow, criticised the credit of Mr Sliteris, or at least the reliability of his evidence in circumstances that he accepted in cross-examination that he at least had difficulty in recalling the relevant events. It does not seem to me necessary to reach any finding as to those matters, since it is possible to determine these proceedings on other grounds. Mr Somerville also submitted that an adverse credit finding should be reached in respect of the evidence of Mr Stephens, and pointed to inconsistency between Mr Stephens' affidavit evidence and his evidence in cross-examination. Mr Stephens' affidavit evidence was at least incomplete, so far as it did not refer to an earlier meeting between him and Mr Harrow on 2 April 2014 or to the fact that he had been given email notice of a directors' meeting which was to take place on 4 April 2014. However, again it does not seem to me to be necessary to reach credit findings in that regard, where it is possible to determine these proceedings on other grounds. 3The First and Second Defendants are the Administrators. The large part of the claim against them was abandoned in circumstances to which I will refer below. The Third Defendant, Mr Nicholas Harrow, had been Mr Sliteris' personal accountant for many years and he, Mr Sliteris and Mr Stephens were directors of and creditors of the Company. Mr Harrow relied on his affidavit dated 13 June 2014 and the affidavit of his son, Mr Peter Harrow, dated 13 June 2014. Claims against the Fourth Defendant, Mrs Angela Harrow, and the Fifth Defendant, a company associated with Mr and Mrs Harrow, were not pressed and were dismissed by consent. 4The Plaintiff's initial written submissions opened with the propositions that: "This matter is really all about costs and whether they should be awarded in relation to various aspects of the dispute and whether or not the [Administrators] ought to receive their fees for acting as administrators when the plaintiff's case is that the advice they gave to Mr Harrow to have them appointed administrators was wrong advice, bad advice which should not have been given or acted upon by Mr Harrow. Accordingly, the incurring of costs in relation to work as administrator should not be rewarded by being paid. The work was performed unnecessarily between 4 and 14 April 2014." Several matters should be noted about those propositions. First, the proposition that the Administrators gave inappropriate advice to Mr Harrow that they should be appointed as administrators was not established by evidence and was abandoned by Mr Sliteris in closing submissions. Second, shortly after the proceedings were commenced, in April 2014, Pembroke J made orders, by consent, that the Company be wound up and that the Administrators be appointed as liquidators of the Company. Mr Peadon, who appears for the Administrators, pointed out in closing submissions that the amount of costs which the Administrators had incurred between the date of their appointment, 4 April 2014, and the date of the orders made by Pembroke J, 14 April 2014, was in the order of $12,000. It appears the primary and possibly the only practical significance of the proceedings, so far as Mr Sliteris and Mr Harrow was concerned, was that they would determine who should pay that amount. In the result, the parties conducted proceedings which extended over two days, involving three Counsel and three firms of solicitors, over an amount of approximately $12,000. There can be no doubt that the costs of the proceedings will have exceeded, by a substantial margin, the amount in issue in them. However, I accept that the Administrators were justified in their participation in the proceedings, which, as I noted above, commenced with serious allegations made against them, although those allegations were substantially abandoned in closing submissions. 5A further unfortunate feature of the proceedings is that, notwithstanding that I ordered statements of facts and matters in issue in order to seek to clarify the matters which were truly in dispute between the parties, the matters in issue, and particularly Mr Sliteris' case, have throughout had a somewhat elusive character, with a range of allegations appearing, disappearing or changing character in successive submissions. Relevant facts 6I will now outline the relevant facts, many of which are not disputed or emerge from documents. I have been particularly assisted by the careful submissions as to those facts made by Mr Peadon on the Administrators' behalf and I have drawn on that outline below. The Company was incorporated in 2003 and its directors were Mr Sliteris, Mr Nicholas Harrow and Mr Neil Stephens (who is not a party to the proceeding but gave evidence in Mr Sliteris' case). The Company undertook a development of units at Bluett Drive, Smeaton Grange (near Camden) in New South Wales (Sliteris 13.4.14 [2]). The sale of the final two units in the development was completed in August 2012. By that time, it appeared that, following discharge of the Company's liabilities to parties not associated with the directors, its assets would comprise approximately $191,000 cash at bank and its liabilities to the directors and entities associated with them would significantly exceed that amount (Sliteris 13.4.14 [3]). There were discussions between the directors as to the distribution of those funds but no agreement was reached between them (T61-62). 7On 27 March 2014, Mr Sliteris' solicitors served a creditor's statutory demand (Ex P1, 67-71) on the Company for payment of $365,000. The covering letter stated that: "Dear Sir / Madam RE: VIKTORAS SLITERIS v IONA DEVELOPMENTS (ACN: 104 538 632) We act for Viktoras Sliteris. An examination of the company accounts indicates it to be insolvent. ... We enclose a Creditor's Statutory Demand for Payment of Debt Form 509H Corporations Act 2001 and supporting affidavit of Viktoras Sliteris affirmed 27 March 2014. The Demand is with respect to one only of the loans made by Mr Sliteris to the company, and is made without prejudice to the other loans made by him ... If there is to be a directors meeting, it should be convened without delay. Otherwise, we may be instructed to make application to the Supreme Court of NSW for a winding up order. That would be unfortunate, as it would reduce the distribution ultimately available to creditors." 8Mr Sliteris delivered a copy of that letter to Mr Harrow's office on 27 March 2014 and, when the receptionist asked him whether he wished to speak to Mr Harrow, he responded that he did not want to talk to Mr Harrow or anyone else (Nicholas Harrow 13.6.14 [14], T36). By that time, Mr Sliteris had been advised by his solicitor not to speak to Mr Nicholas Harrow (Sliteris 13.4.14 [19]-[22], Sliteris 27.6.14 [6]) and Mr Stephens and Mr Sliteris had also fallen out (Stephens 23.6.14 [5]). 9On 2 April 2014, Mr Nicholas Harrow, Mr Stephens, and Mr Peter Harrow (who was not a director of the Company) met at Mr Nicholas Harrow's offices and Mr Stephens read a copy of the letter sent by Mr Sliteris' solicitors on 27 March 2014 and the creditor's statutory demand and supporting affidavit. Mr Nicholas Harrow and Mr Stephens discussed the solvency of the company and the potential consequences of non-compliance with the creditor's statutory demand and agreed that a meeting of directors needed to be called urgently; Mr Harrow suggested that meeting should be called in two days' time, on Friday, 4 April 2014, and Mr Stephens agreed; Mr Harrow expressed the view, which may not have been fully supported by Mr Sliteris' earlier position, that he was not "allowed" to speak to Mr Sliteris and suggested that Mr Stephens "call him to tell him about the meeting", and Mr Stephens declined to do so on the basis that he and Mr Sliteris "have had a falling out" (Nicholas Harrow 13.6.14 [15]). Mr Stephens requested that Mr Nicholas Harrow send him written notice of the meeting to be held on 4 April by email and suggested that Mr Nicholas Harrow also send written notice of the meeting to Mr Sliteris (T58). 10Mr Nicholas Harrow sent notice of the proposed directors' meeting to Mr Stephens by email (Nicholas Harrow 13.6.14 [16] Annexure C) and to Mr Sliteris by facsimile at 3.54pm on 2 April 2014 (Ex P1, 74). That notice of meeting, which was unsigned, read as follows: "IONA Developments Pty Ltd ABN: 63 104 538 632 2 April 2014 To The Directors MEETING OF BOARD OF DIRECTORS This letter is notice of a meeting of the board of directors of Iona Developments Pty Ltd to be held on Friday, the 4th of April 2014 at 11a.m. at the registered office, Suite 78, Level 2, 1-55 West Parade, West Ryde NSW. The intended purpose of this meeting will be to discuss the following: - The solvency of the Company - The appointment of an external administrator Hoping to see you all in attendance at the above time and place. For and on behalf of, IONA DEVELOPMENTS PTY LTD" Mr Sliteris' evidence, consistent with contemporaneous correspondence from his solicitor, is that he did not in fact see that notice of the meeting until after the relevant meeting had been held. 11At or before the 4 April meeting, Mr Stephens asked whether Mr Sliteris had received notice of the meeting and Mr Peter Harrow informed him, accurately, that notice of the meeting had been sent by facsimile to Mr Sliteris at about the same time that notice was given to Mr Stephens by email (Stephen 13.4.13 [10], Peter Harrow 13.6.14 [8]). Messrs Stephens and Nicholas Harrow resolved to appoint voluntary administrators to the Company at that meeting and executed an instrument of appointment (Ex P1 81-82). 12On 5 April 2014, Mr Sliteris' solicitors sent a facsimile to the Company, care of Mr Harrow, contending that the notice of the directors' meeting at which the administrators had been appointed was "not in accordance with the [Company's] constitution and otherwise invalid" (Ex P1, 73-75). It appears that neither Mr Sliteris nor his solicitors had a copy of, or had consulted, the Company's constitution before taking that position. In further correspondence between 5 and 11 April 2014, Mr Sliteris' solicitor contended that the 4 April meeting was improperly convened because the notice of that meeting was unsigned and did not identify the director who had issued it and that Mr Stephens may have been misled or not given sufficient information to make an informed decision at that meeting, sought to require that the Administrators resign and foreshadowed proceedings for damages against the Administrators. 13On 9 April 2014, Mr Sliteris, by his solicitors, called a further directors' meeting of the Company, giving two days' notice of that meeting by facsimile (Ljubic 14.4.14 Annexure G) as follows: Dear Sir, RE: IONA DEVELOPMENTS P/L (ACN 104 538 632) We act for Viktoras Sliteris. We enclose Notice of Meeting of Directors fixed for Friday, 11 April 2014 at 3 pm at this office. We also enclose a proxy form and explanatory notes. Yours faithfully..." The notice of meeting in turn stated that: "TAKE NOTICE that a meeting of directors is to take place at the office of Penhall & Co Lawyers, [address] at 3 pm Friday 11 April 2014 to consider and if thought fit, to pass the following resolutions ...". The relevant resolutions sought to revoke the appointment of the Administrators. A resolution was purportedly passed at that meeting of directors revoking the appointment of the Administrators (Ex P1, 108-109). That course was also not permitted by Part 5.3A of the Corporations Act 2001 (Cth). 14On 7 April 2014, the Administrators gave notice to each of the creditors, being the Company's directors, that the first creditors' meeting would be convened on 15 April 2014 and, in their first report to creditors, the Administrators also expressed the view that the Company was insolvent (Ljubic 14.4.14 [11], Annexure B). 15On 14 April 2014, Mr Sliteris applied to have the Company wound up and a liquidator appointed; the parties agreed to orders to that effect and, after a contest as to who should be appointed as liquidator, Pembroke J appointed the Administrators as liquidators. Whether reasonable notice was not given of the directors' meeting by reason of the manner in which notice of that meeting was given 16Mr Sliteris contends, first, that the Administrators were not validly appointed on 4 April 2014 under s 436A(1) of the Corporations Act, because reasonable notice was not given of the 4 April meeting. Mr Sliteris summarises the issues as to the notice of the meeting, in his statement of the matters in issue, as follows: "The question of effective notice of meeting including whether there was ever agreement to short notice and in addition to service of short notice on the plaintiff by way of facsimile and the failure (deliberate or otherwise) to contact one of the directors (Mr Sliteris) but not the other such as to ensure that the proposed direct[ors] meeting was fixed for a convenient time and place for each director and that each director had received the notice of the proposed meeting. A particular issue will be whether there was ever reasonable notice giving and assent giving to the purported notice, assume without accepting, that the directors had ever agreed to notice by facsimile. [Mr Sliteris] will be submitting that the meeting failed in limine." 17I have referred to the giving of notice of the relevant directors' meeting in my outline of the relevant facts above. As I noted above, notice of that meeting was given to Mr Sliteris by a facsimile sent on the afternoon of 2 April 2014 calling a meeting for 11am on 4 April 2014. Mr Sliteris' evidence is that he did not read the relevant facsimile until after the meeting was over (Sliteris 13.4.14 [23]-[34]). He accepted in cross-examination that he maintained a home office which contained a working facsimile machine from which he had, at least prior to this retirement, attended to his business interests including activities as a director of several companies, although his evidence was that he accessed it less frequently since his retirement (Sliteris 13.4.14 [24], T27-29, 38). Mr Sliteris had provided the fax number to Mr Nicholas Harrow years prior to the relevant events and Mr Harrow had previously communicated with Mr Sliteris by facsimile (Sliteris 13.4.14 [34], T38). Mr Sliteris' evidence was that the directors of the Company had not consented at any time to use technology as a means of notice for calling a meeting, although he accepted that they may have "by implication agreed to the use of a telephone to call a meeting" (Sliteris 13.4.14 [29]). That evidence does not rise beyond the level of assertion. Mr Harrow's evidence, under cross-examination by the Administrators, was that he communicated regularly with Mr Sliteris by facsimile and in relation to the Company. Mr Stephens' evidence was also initially that he could not recall receiving a facsimile notice or written notice of a directors' meeting (Stephens 13.4.14 [16]). However, Mr Stephens accepted, in cross-examination, that he was incorrect in the evidence in his initial affidavit that he did not receive a written notice of the meeting by facsimile or otherwise, and that he had in fact received email notification of that meeting as he had requested (T59). 18Section 248C of the Corporations Act, which is a replaceable rule for the purposes of s 135 of the Corporations Act and is adopted by article 14 of the Company's Constitution, provides that a directors' meeting may be called by a director giving reasonable notice individually to every other director. Section 248D of the Corporations Act, which is also a replaceable rule but is not adopted by the Company's Constitution, provides that a directors' meeting may be, relevantly, called using any technology consented to by all the directors. The Administrators submit that written notice of that meeting communicated by facsimile to a facsimile machine located in Mr Sliteris' home office was effective by reason that consent to notice by facsimile communication, for the purposes of the replaceable rule in s 248D of the Corporations Act, is to be inferred from the course of conduct between the parties over time. That submission does not seem to me to assist them where, by article 2 of the Company's Constitution, it adopted the replaceable rules only to the extent indicated in the Constitution, which did not adopt that rule. On the other hand, Mr Raphael, who appears for Mr Sliteris, submits, and I accept, that article 20 of the Company's constitution - which adopts the replaceable rule in s 249J(4) of the Corporations Act - provides for notice of shareholder meetings by facsimile or other electronic notice but does not so provide for directors' meetings. However, it seems to me that little turns on this matter since it would in any event be open to the directors to consent to giving notice of such meetings by facsimile, where the Company's constitution was silent as to how such notice could be given. 19Mr Peadon in turn submits that such consent to the giving of notice of directors' meetings by facsimile may be inferred from the history of facsimile communications between Mr Nicholas Harrow and Mr Sliteris; Mr Sliteris' expressed wish not to speak with Mr Harrow; Mr Stephens' evidence of a request for written notification of the meeting; and the conduct of Mr Sliteris' solicitors in themselves giving notice of a directors' meeting by facsimile on 9 April 2014. It seems to me that those matters, and the facts that Mr Harrow gave such notice to Mr Sliteris by facsimile (albeit notice to Mr Stephens was given in a different manner), that Mr Stephens took no objection to that course and that Mr Sliteris, by his solicitors, in turn gave notice of a further directors' meeting to Mr Harrow by facsimile, are sufficient basis for a finding that the directors had impliedly consented to the giving notice of such meetings by facsimile. 20Mr Raphael also submits that notice of the meeting by facsimile to Mr Sliteris was not valid because Mr Nicholas Harrow should have telephoned him to ask whether he would attend the meeting. Mr Sliteris refers, in his evidence, to Mr Harrow's practice of previously telephoning him in respect of accounting matters, including matters concerning companies of which he was a director and shareholder (Sliteris 13.4.14 [23]). I accept that such a practice existed when Mr Sliteris and Mr Harrow were on better terms; however, Mr Sliteris' evidence does not seem to me to address the difficulty that he had communicated to Mr Harrow's staff, or at least Mr Harrow appears to have understood him as communicating, a preference not to speak to Mr Harrow. It seems to me that, to the extent that the absence of telephone contact was consistent with that position, there is less weight in Mr Sliteris' criticism of it as unreasonable. Mr Harrow had also requested Mr Stephens to make such contact with Mr Sliteris, but Mr Stephens had also not been prepared to do so because of difficulties between them. It seems to me that a submission that notice of the meeting had to be given, or followed up, by telephone, also has the difficulty that the meeting could not then have been called promptly or possibly at all if Mr Sliteris did not accept calls from Mr Harrow, consistent with his solicitor's advice that he should not speak to Mr Harrow. 21In oral submissions, Mr Raphael also suggested that it was unreasonable for Mr Nicholas Harrow not to have raised the question of the directors' meeting with Mr Sliteris' wife, who had answered the telephone number to which the facsimile was to be sent, prior to it being sent. It was no doubt discourteous of Mr Peter Harrow, and Mr Nicholas Harrow who was involved, then to hang up the telephone without identifying themselves, but it does not seem to me that Mr Harrow was under any obligation to discuss these matters with Mr Sliteris' wife, or that the giving of notice can be said to be unreasonable because the matter was not raised with Mr Sliteris' wife. Indeed, it seems to me that Mr Harrow might well have been exposed to criticism had he sought to speak to Mr Sliteris' wife in matters which were personal to Mr Sliteris in his capacity as a director of the Company, particularly after the indication that Mr Sliteris did not want to speak to him. 22Mr Sliteris also submits that reasonable notice was not given to him of the meeting, by reason that Mr Nicholas Harrow did not attempt to contact his solicitor to advise of that meeting. Mr Nicholas Harrow's evidence was that he would have preferred that the relevant dealings take place between the directors, rather than between himself and Mr Sliteris' legal adviser, and there seems to me to be nothing unreasonable in that preference. Mr Raphael also submitted that two days' notice without any follow-up to ascertain whether or not Mr Sliteris was intending to come to the meeting was an inadequate period of time for so important a meeting, which was to determine whether or not an administrator ought to be appointed. It does not seem to me that the concept of "reasonable notice" requires individual follow-up of Mr Sliteris, particularly where Mr Nicholas Harrow had taken the step of seeking to confirm that the number to which the facsimile was sent was operating, and was not, so far as the evidence goes, on notice of the fact that Mr Sliteris did not take steps to check for facsimiles on a regular basis. It also does not seem to me that it can be suggested that notice, when given by a director in respect of a directors' meeting, is unreasonable because it is not given to another director's legal adviser as well as the director. 23I am not satisfied that reasonable notice of the meeting was not given by reason of these matters. Whether reasonable notice of the meeting was not given because of the period or form of notice 24Mr Sliteris also contends that a reasonable period of notice of the meeting was not given. The Administrators point out that what is a reasonable time in the context of giving reasonable notice of a directors' meeting is a question of fact and depends upon the circumstances and that a shorter period of notice will be reasonable where the circumstances require a decision be made promptly: Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537 at 567-568; Hickey v Aselford [2003] NSWSC 185 at [26]. The latter case held that notice of a meeting to consider a resolution to appoint a voluntary administrator which was given one afternoon in respect of a meeting to be called for the following morning was reasonable notice. In McMaster v Eznut [2006] WASC 109; (2006) 58 ACSR 199 at [169], [178], a shorter period of notice was similarly held to be reasonable where there was urgency in appointing an administrator and, in Ashrafinia v Ashrafinia [2012] NSWSC 500, a short notice period was held to be reasonable where there was an urgent need to retain solicitors in respect of litigation. 25Several matters support the view that two days' notice of the directors' meeting was reasonable in the relevant circumstances. It would, in my view, often be the case that a short period of notice would be sufficient for a meeting to consider whether to appoint voluntary administrators, where a company is either insolvent or likely to become insolvent, given the significant risk to directors of that position. In the present case, that view is reinforced by the facts that the Company was facing an imminent threat of liquidation where Mr Sliteris had issued a creditor's statutory demand; that it is common ground that the Company was insolvent; that at least once Mr Sliteris called for repayment of his debt; that Mr Sliteris had himself previously invited the other directors to convene a meeting "without delay" on the basis that he would otherwise apply to the Court to wind up the Company; and that Mr Sliteris, by his solicitors, subsequently took steps to convene a further meeting of directors on a similarly short notice period. 26Mr Sliteris also contends that reasonable notice of the meeting was not given by reason of the form of the notice of the directors' meeting. The Administrators respond, and I accept that, absent a stipulation in the Company's constitution, there is no obligation to give notice of the directors' meeting in a particular form (including whether signed or unsigned), other than to provide sufficient particulars of the meeting; there is also no requirement to give notice of the business to be transacted at the meeting or of the specific form of the resolutions to be passed: Mitropoulos v The Greek Orthodox Church and Community of Marrickville and District Ltd (1993) 10 ACSR 134 at 137; Dhami v Martin [2010] NSWSC 770; (2010) 241 FLR 165 at [47]. It seems to me the form of notice given by Mr Harrow provided adequate particulars of the time and place of the meeting and of the issues to be addressed at that meeting. Indeed, the notice provided a clear indication of the subject of the meeting, specifically identifying the Company's solvency and the appointment of an external administrator as matters to be discussed. I am also not satisfied that reasonable notice of the meeting was not given by reason of these matters. Assumptions that could be made by the Administrators in respect of the steps relating to their appointment 27The Administrators also submit that they were entitled to assume that valid and effective notice of the directors' meeting at which they were appointed had been given in accordance with the Company's constitution, by reason of s 129(1) of the Corporations Act and that Mr Sliteris is not entitled to assert in this proceeding that the assumption is incorrect by reason of s 128(2) of the Corporations Act. Section 128(1) of the Corporations Act relevantly provides that a person is entitled to make the assumptions specified in s 129 of the Corporations Act in relation to dealings with a company and the company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect. Section 129(1) of the Corporations Act provides that a person may assume that the company's constitution (if any) and any provision of the Corporations Act that applies to the company as replaceable rules has been complied with. 28In Correa v Whittingham (No 3) [2012] NSWSC 526; (2012) 267 FLR 120 at [42], I observed, with reference to authority, that the steps involved in a person's appointment as administrator of a company were a dealing with the company for the purposes of ss 128 and 129 of the Corporations Act and that the assumptions available under s 129(1) reflected the indoor management rule, by which persons dealing with a company may assume that acts within its constitution are duly and properly performed and are not bound to inquire whether acts of internal management have been regular. I treated such an assumption that was available to the administrators, in dealing with the company, as also being available to them in an application made by a privy of the company who challenged the validity of that dealing with the company. That approach was not questioned on the appeal to the Court of Appeal ([2013] NSWCA 263 at [118]ff). As Mr Peadon put it in submissions, there could not be a "bifurcation" of the validity of the Administrators' appointment, such that a different result was reached as between an attack on that appointment brought in the name of the Company and an attack on it brought, in reliance on dealings between the Company and the Administrators, by Mr Sliteris as a director or shareholder of the Company. 29There is no suggestion that the Administrators, in this case, knew or suspected that the assumption that the Company's constitution had been complied with, in calling the meeting at which they were appointed, was incorrect for the purposes of s 128(4) of the Corporations Act, so as to deprive them of the assumption specified in s 129(1) of the Corporations Act. That assumption would be sufficient to sustain the validity of the Administrators' appointment, although it is not necessary for the Administrators to rely on that assumption where the invalidity of their appointment has not otherwise been established. Whether the appointment of voluntary administrators was inappropriate 30Mr Sliteris also contended that Mr Harrow's actions in calling a meeting for the appointment of administrators, as opposed to seeking the appointment of a liquidator, was not undertaken in good faith in the best interests of the Company and its creditors and Mr Sliteris relied on a director's duty to act in good faith and in the Company's best interests under s 181(1)(a) of the Corporations Act in that regard. Mr Raphael contended that s 181 of the Corporations Act required a director to act with "full propriety" in that situation. The statutory duty to act in good faith and for proper purposes under that section is, of course, owed by a company director to the company and not to individual shareholders, although it may be relevant to the content of any other duties owed by directors to shareholders at general law. 31Mr Sliteris contends that the appointment of voluntary administrators was illogical, or inappropriate, because there was no prospect of advantageous exploitation of the Company's assets. Mr Raphael indicated, in the course of closing submissions, that the appropriate course would have been for at least Mr Harrow, or the directors generally, to allow a presumption of insolvency to arise by not responding to the creditor's statutory demand served by Mr Sliteris (T151). That submission seems to me to have the difficulty that that would have required Mr Sliteris, at the expiry of the 21 day period specified in that demand, then to bring proceedings for a winding up of the Company and to prepare evidence in support of the winding up application and, even if that application were uncontested, to incur the costs of that court application. Mr Sliteris also submits that there is "no satisfactory explanation" for the decision that the Company be put into voluntary administration. That submission assumes, without establishing, that administration was a less viable option than a court-ordered winding up, where a creditors' voluntary winding up could not, as I will note below, be achieved without Mr Sliteris' cooperation. 32In their opening submissions, the Administrators pointed out, with substantial force, that the relevant circumstances were that Mr Sliteris had caused a creditor's statutory demand to be issued and had threatened an application for a winding up order; that the Company was clearly insolvent; it was far from certain that Mr Sliteris would agree to a creditors' voluntary winding up unless the other directors or shareholders were prepared to treat a loan made to the Company which he had previously forgiven as remaining in place; and that any steps taken by the Company to respond to a creditor's statutory demand may have caused it to incur debts, at a time at which it was insolvent, for which directors could be subject to personal liability under s 588G of the Corporations Act. 33Turning now to the relevant evidence, Mr Ljubic's evidence is that he had advised Mr Harrow that a creditors' voluntary winding up was less costly than a voluntary administration but, if there was a dispute between the directors and shareholders, a resolution for a creditors' voluntary winding up might not be passed, and the alternative was the voluntary administration process. Mr Harrow was concerned that Mr Sliteris would not cooperate with a creditors' voluntary winding up unless the other directors recognised interest on a loan made to the Company which was the subject of dispute. The issue in respect of that loan relates to Mr Sliteris' purported forgiveness of the interest on that loan, well before the question of appointment of a voluntary administrator arose, at a time that Mr Sliteris was seeking to qualify for the aged pension. Mr Sliteris' evidence was that he relied on Mr Harrow's advice that he would receive nothing back for his investment in the Company in agreeing, in 2012, to forgive unpaid loan interest payable by the Company. There is a dispute as to whether Mr Harrow gave such advice. It does not seem to me to be necessary to resolve that dispute. First, whether Mr Sliteris is now able to claim that interest seems to me to have little relevance to whether the appointment of a liquidator or a voluntary administrator was the preferable course in April 2014, since the extent of Mr Sliteris' entitlements from the Company is not relevant to an assessment of those alternatives. Second, Mr Sliteris' evidence does not go so far as that, if he had been advised that, for example, he would potentially receive some amount from the Company on a winding up, he would have elected to forego the aged pension which he obtained, by reason of his forgiveness of the interest on that loan which the Company was unable then to pay. It seems that Mr Sliteris preferred position was, and is, that he should both receive a pension on the basis that the relevant debt did not exist and at the same time share in a distribution on the winding up on the inconsistent basis that it did exist, and that he may well have required that other directors accept that the position as a condition of any support for a creditors' voluntary winding up. 34Mr Harrow's evidence of his concern that Mr Sliteris would not support a voluntary winding up is corroborated, to some extent, by the fact that he had informed Mr Ljubic of that concern. The validity of that concern is supported by Mr Sliteris' evidence in cross-examination that he did not know whether he would have agreed to a voluntary winding up unless the Company had agreed to pay him the amount that he claimed on the basis that his forgiveness of interest payable on the loan to it was reversed (T49). In the course of oral evidence, Mr Harrow pointed to another reason for the appointment of an administrator, namely, that he considered it preferable than a partner of a firm that was advising Mr Sliteris to be appointed as liquidator. That view also does not appear to have been unreasonable, given that the nature of the advice provided by that partner to Mr Sliteris might have caused difficulties for that firm's independence, and Pembroke J took a similar view in determining that the Administrators rather than the partner of that firm that had advised Mr Sliteris should be appointed as liquidator in the application subsequently brought before him in April 2014. 35It seems to me that the appointment of a voluntary administrator could properly be understood by the Company's directors to be an appropriate step in the relevant circumstances. A voluntary administrator could be appointed quickly, without the costs of a court application, in circumstances that the Company had received a creditor's statutory demand from Mr Sliteris and was in fact (as is now accepted by all parties) insolvent, and the voluntary administration regime would allow the options contemplated by the Corporations Act, including the possibility of a deed of company arrangement if any creditor sought to propose it, or the company passing into a creditors' voluntary winding up if no other option emerged. The appointment of a voluntary administrator in this case was not inconsistent with the objects of Pt 5.3A of the Corporations Act, so far as it may have left open the possibility of a better return for creditors (for example, under a deed of company arrangement) than would result from an immediate winding up, where it was unlikely that the business could continue. The requirements for the appointment of voluntary administrators under s 436A of the Corporations Act were also satisfied, where the board had resolved that the Company was insolvent or likely to become insolvent at some future time, and it appears to be common ground that that was the case. While the opinion referred to in that section must be formed in good faith (Kazar v Duus (1998) 88 FCR 218 at 231; 29 ACSR 321), there is no basis for a finding in the present case that it was not. The case law also establishes that the appointment of a voluntary administrator, in the face of the receipt of a creditor's statutory demand, may represent a reasonable and responsible response, and does not in itself involve any element of impropriety: St Leonards Property Pty Ltd v Ambridge Investments Pty Ltd [2004] NSWSC 851; (2004) 50 ACSR 443 at 446; McDonald v Deputy Commissioner of Taxation [2005] NSWSC 2 (2005) 187 FLR 461 at [47]. 36In opening submissions, Mr Sliteris also submitted that there was a "clear attempt" by Mr Harrow, at the expense of Mr Sliteris, to ensure that there were appointed administrators or liquidators who would not be "hostile to him and his associated lenders". That proposition was not established by the evidence, where there is no suggestion that the Administrators appointed were not independent, and it seems to me to have been further undermined by the abandonment of any complaint as to the Administrators' role in the course of Mr Sliteris' closing submissions. It has not been shown that Mr Harrow stood to gain from the appointment of an administrator, as distinct from a liquidator, by any change in his entitlements, or that a voluntary administration was in fact a worse option than a court-appointed liquidation, in circumstances that a creditors' voluntary winding up was not possible without Mr Sliteris' cooperation. 37I am therefore not satisfied that the appointment of voluntary administrators was illogical, or inappropriate, or involved any breach of duty or improper purpose on Mr Harrow's part. Criticisms of Mr Harrow's failure to give advice or make other disclosures 38Several overlapping submissions were put in respect of this issue. Mr Raphael submitted that Mr Harrow failed to tender advice prior to the appointment of a voluntary administrator, in circumstances where he was not only a shareholder and creditor of the Company but also the Company's accountant. Mr Raphael also submitted that, as the Company's accountant, Mr Harrow had a duty to the Company and its creditors (including Mr Stephens and Mr Sliteris) to advise the most efficacious and cheapest method - implicitly, as between liquidation and voluntary administration - in the best interests of both the Company and the creditors. Mr Raphael also submitted that Mr Harrow, as the Company's accountant, stood in a fiduciary position both to the Company and its shareholders, Mr Sliteris and Mr Stephens, and failed to discharge a duty to explain to Mr Stephens that he was not tendering advice as the Company's accountant but solely looking to his own interests and those of his privies as a creditor in respect of the appointment of a voluntary administrator. These issues were formulated in Mr Raphael's statement of matters in issue as whether Mr Harrow had: "A duty to his fellow directors to explain to them the rationale for a his [sic] preference for the appointment of administrators over appointment of liquidators especially when the expense of the former over the latter would affect vitally the quantum of the return of each creditor, ie reduce the same." 39Mr Somerville responded, on Mr Harrow' behalf, that he played no advisory role in respect of the appointment of an administrator. Mr Somerville submitted that the scope of any fiduciary duty could not extend to any question as to the appointment of an administrator when there is no suggestion that Mr Harrow was engaged to provide advice as to that appointment. Mr Somerville also submitted that there is no evidence that Mr Harrow's interests and those of the Company diverged, or that Mr Harrow preferred his interests to the Company's interests, in calling a meeting of directors and appointing a voluntary administrator or that he stood to benefit personally from that appointment. Mr Somerville also pointed out that, to the extent that Mr Harrow and Mr Stephens passed the resolution appointing a voluntary administrator, both of them and not only Mr Harrow were responsible for that appointment, and that there is no evidence that the Company suffered a loss by reason of the appointment of a voluntary administrator as opposed to a liquidator; that there is no evidence that the costs incurred by the voluntary administrator between 4 April and 14 April 2014 were wasted; and he also points to the observation of Pembroke J, in his Honour's judgment on 14 April 2014, that the steps taken by the Administrators would assist them in their capacity as liquidators in the Company's liquidation. 40Mr Sliteris' evidence supporting the alleged fiduciary duty was that: "For decades, my Accountant has been the third defendant Nicholas Harrow trading as Nicholas Harrow & Co. Accordingly, I am advised that in his professional capacity as an accountant, Mr Harrow is in a fiduciary relationship with me and any corporate entity with which I am involved." (Sliteris 13.4.14 [5]) This evidence is in conclusory form and, in referring to advice given to Mr Sliteris, the source of which is unidentified and may or may not be his solicitor, it does not identify the factual matters that were assumed to support such advice and it casts no light on the scope of the suggested fiduciary relationship. By a further affidavit sworn 30 September 2014, Mr Harrow's evidence (which I accept) is that his engagement for the Company was limited to compliance and accounting work on its behalf, such as preparation of financial statements, tax returns and documents lodged with the Australian Taxation Office such as business activity statements, and he was not engaged by the Company to provide advice, other than in relation to matters concerning GST and income tax. His evidence was that he did not have substantial experience of insolvency matters, did not have the practice of providing insolvency advice to his clients, and that he was not engaged by the Company, Mr Stephens or Mr Sliteris to provide advice in relation to insolvency issues including the most appropriate type of external administration and that he initially spoke to Mr Ljubic because he wished to speak to someone with appropriate insolvency experience. 41This is not a case that requires an extended analysis of the circumstances in which a fiduciary duty may arise and the parties did not address detailed submissions as to that issue. I should however make several brief observations. In Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 96-97, Mason J (as his Honour then was) referred to the circumstances in which a fiduciary relationship may arise, in terms that have been frequently cited in subsequent case law, as follows: "The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v. Boardman [1967] 2 AC 46, at 127), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of', and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal. It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed ...." In John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 at [88], the High Court in turn noted that Mason J's references to "for and on behalf of" and "in the interests of" must be understood in a reasonably strict sense, since the criterion they formulate might otherwise become circular. In Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296 at [177], Finn, Stone and Perram JJ in turn noted that: "A person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest." In Streetscape Projects (Australia) Pty Ltd v City of Sydney [2013] NSWCA 2; (2013) 295 ALR 760 at [121], Barrett JA (with whom Meagher JA and Ward JA agreed) in turn observed that "a fact-based fiduciary duty cannot arise unless one party undertakes, expressly or impliedly, to act in the particular factual context solely in the interests of the other". 42The nature and extent of any fiduciary duty will also depend on the scope of the relevant relationship and the circumstances, so that "the actual function or responsibility assumed determines '[t]he subject matter over which the fiduciary obligations extend'": Birtchnell v Equity Trustees Executors & Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384 at 408; Hospital Products above at 102; Streeter v Western Areas Exploration Pty Ltd (No 2) [2011] WASCA 17; (2011) 278 ALR 291 at [70]; Grimaldi v Chameleon Mining NL above at [179]. 43Plainly, a fiduciary relationship can arise between an accountant and his or her client, as it may arise in other professional relationships. In S Walmsley, A Abadee & B Zipser, Professional Liability in Australia, (2nd ed 2007, Lawbook Co) at [5.280], the authors observe that: "... an accountant may owe fiduciary duties in respect to some, but not necessarily all, aspects of services he or she provides. Whether such duties arise depend upon the particular facts and circumstances of the relationship between accountant and client: Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40 at [126]. ... Where a fiduciary relationship is found to exist between client and accountant ..., the customary duties of a fiduciary, such as duties not to disclose confidences or use its position to obtain a secret profit or commission, will arise." 44In Pavan v Ratnam (1996) 23 ACSR 214, the Court of Appeal held that a tax accountant did not owe a fiduciary relationship to his client, in giving advice to invest in a property which the accountant proposed to develop so as to reduce the client's tax liability, and Beazley JA (as her Honour then was) (with whom Meagher JA agreed) observed (at 224-225) that: "The cases establish that a number of factors may characterise a relationship as being of a fiduciary nature. They include: vulnerability, reliance and the presence of loyalty, trust and confidence. The notion of vulnerability, as used in this context, is not to be understood in the sense of any "weaker party" concept. Rather, it refers to the circumstance where another party agrees (not necessarily contractually) "to act on behalf of or in the interests of another and, as such, is in a position to affect the interests of that other person in a legal or practical sense. As such, fiduciary relationships are marked by vulnerability in that the fiduciary can abuse the power or discretion given him or her to the detriment of the beneficiary": see Hodgkinson per La Forest at 168. Reference is also usefully made to Professor Finn's (now Justice Finn of the Federal Court of Australia) description in "The Fiduciary Principle" at 50-1: "...fiduciary responsibilities will be exacted where the function the advisor represents himself as performing, and for which he is consulted, is that of counselling an advised party as to how his interests will or might best be served in a matter considered to be of importance to his personal or financial well-being, and in which the adviser would be expected both to be disinterested, save for his remuneration, and to be free of adverse responsibilities unless the contrary is disclosed at the outset."" 45In Townsend v Roussety Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321 Buss JA (with whom Wheeler and McLure JJA agreed) referred (at [124]) to Mason J's observations in Hospital Products Ltd v United States Surgical Corporation above and upheld the finding of the trial judge that, where an accountant acted for the appellants in applying for loans, but not in relation to their negotiation of an investment in the proposed business, he did not owe any fiduciary duties to them in respect of the acquisition of that business. 46I do not accept the submission that Mr Harrow owed a fiduciary duty to Mr Sliteris extending to advising in respect of the appointment of a voluntary administrator to the Company. The relationship between a company and its accountant is not a traditional fiduciary relationship. Mr Harrow's evidence indicates that the scope of the relevant relationship was narrow and, so far as any fiduciary duty arose from the circumstances, it would therefore be in narrow scope. Even if it had been established that Mr Harrow owed a fiduciary duty to the Company, as its accountant, it did not follow that he owed a fiduciary duty to its shareholders or directors, particularly in circumstances that his duties to the Company might well be in conflict with any duties to those shareholders or directors, whose interests might well diverge from those of the Company in respect of, for example, the accounting treatment of particular matters. A further difficulty with Mr Sliteris' claim is that it appears to contemplate a positive fiduciary duty of disclosure, or to provide advice, owed by Mr Harrow, of a kind that is plainly not accepted in Australian law, rather than disclosure in order to obtain ratification or consent to a conflict of interest which would otherwise arise: compare Breen v Williams [1996] HCA 57; (1996) 186 CLR 71; Fitzwood Pty Ltd v Unique Gold Pty Ltd (in liq) [2001] FCA 1628; (2001) 188 ALR 566 at 576; P & V Industries v Porto [2006] VSC 131; (2006) 14 VR 1 at [24]; Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1 at [108]. It does not seem to me that such a duty, whether as a fiduciary duty or at general law is established, where the scope of Mr Harrow's engagement as an accountant did not extend to matters involving insolvency and it is not established that he was either qualified to advise in that field or had assumed any obligation to do so. 47Mr Sliteris' complaint of a failure to advise made against Mr Harrow in turn seemed to have several elements. I have referred above to the circumstances of Mr Sliteris' forgiveness of interest on a loan by the Company to qualify for the aged pension. Mr Sliteris also suggested that he had been misled by information, or advice, previously provided by Mr Harrow to Mr Sliteris or Mr Stephens that they would receive nothing or very little from the Company in the circumstances. It is by no means clear that any advice provided by Mr Harrow as to Mr Sliteris' entitlements from the Company in fact indicated that he would receive nothing from the Company. A letter dated 31 August 2012, which appears to have been prepared to be available to third parties such as Centrelink, made clear that Mr Sliteris would receive an amount in excess of $15,000 from the Company, but then pointed to other obligations allegedly owed by Mr Sliteris and an associated company to Mr Harrow and his associates as exceeding that amount. It also does not seem to me that there can be any suggestion that Mr Sliteris, or Mr Stephens, relied on such advice, at least in any manner relevant to the appointment of the voluntary administrator, where Mr Sliteris had later obtained advice from another firm suggesting that he had larger entitlements - after reversing the forgiveness of the interest on the loan to the Company, notwithstanding that he had claimed a pension on the basis of that forgiveness - and Mr Stephens had been provided a copy of that advice, although there is a dispute, which I do not consider it necessary to resolve, as to whether he had read it. In any event, as I noted above, it does not seem to me that the question of the extent of Mr Sliteris' entitlements from the Company had any relevance to a decision whether to appoint voluntary administrators, or leave the Company to be wound up. 48Mr Sliteris also submits that Mr Harrow should have advised that, on an administration or a winding up, he would participate to a greater extent in a distribution of the Company's assets because Mr Sliteris had previously forgiven a debt owed to the Company in order to seek to qualify for a pension. It seems to me that such advice was also not relevant to a decision whether to appoint voluntary administrators or a liquidator to a company that was insolvent, since the choice between those two alternatives would not affect the parties' entitlements on an ultimate liquidation. 49There was also a suggestion that Mr Sliteris contends that the appointment of the administrators was "invalid" because Mr Stephens was not fully informed as to the options available to the Company or their likely return. It seems to me that the difficulties with that proposition are, first, that Mr Stephens had an obligation as a director of the Company to inform himself as to those matters, in exercising his duty of care and diligence under s 180 of the Corporations Act, and was not entitled to assume that Mr Harrow would bear the responsibility of obtaining all necessary information and informing him of it. Second, Mr Stephens' evidence is that he was shown the letter from Mr Sliteris' solicitors which attached the creditor's statutory demand, and referred to the possibility of a creditors' voluntary winding up, and he had the opportunity to make any inquiries which he wished to make in that regard. 50Mr Raphael also contended, in written and oral submissions, that Mr Harrow did not explain to Mr Stephens at that meeting of directors that there would be greater costs in appointing voluntary administrators than in a liquidation. I do not accept that submission, which Mr Raphael abandoned, in substance, in his oral closing submissions. The only options available to the Company, its directors, and shareholders at that point were the appointment of a voluntary administrator, which could be achieved by resolution of the directors within a short time or an application by the Company to the Court for the appointment of a provisional liquidator or liquidator. As I have noted above, it was uncertain whether Mr Sliteris would cooperate to allow a creditors' voluntary winding up unless the parties were prepared to reinstate the debt which he had previously forgiven. The time period for the relevant meetings for a creditors' voluntary winding up would also not have addressed the immediate urgency created by Mr Sliteris' issue of a creditor's statutory demand in any event. Mr Raphael also properly accepted, in closing submissions, that any costs savings arising from the marginally lesser costs of a winding up, as estimated by the Administrators, would be eroded by the costs associated with an application to the Court for a winding up. Since the factual premise of this allegation is not established, no question arises as to whether Mr Harrow was obliged to tender advice about it. I should add, however, that it is not apparent to me that he had any such obligation, in circumstances that he did not practise in the area of insolvency and had not been retained to advise the Company in respect of it. Claims made by Mr Sliteris against the Administrators 51As I noted above, serious allegations were made by Mr Sliteris against the Administrators in opening submissions and belatedly abandoned. Mr Raphael opened Mr Sliteris' case on that basis that the Administrators should be denied their fees because "the advice they gave to Mr Harrow to have them appointed administrators was wrong advice, bad advice which should not have been given", was "ludicrous" advice, "was bad advice, negligent advice or provided in mala fides"; contended that the Administrators had the "ignoble simple desire to receive company money by way of administrators' fees before coming to the inevitable conclusion that the company should be put into liquidation" and the desire "to create further fees by calling meetings at which there will be taken a solemn decision that the company is insolvent and that the company would have to be put into liquidation"; and that Mr Harrow sought to appoint administrators who were "friendly" to his interests and, implicitly, the Administrators were such persons. None of those submissions were established by the evidence and all were abandoned in closing submissions. In particular, in closing submissions, Mr Raphael made clear that no allegation of impropriety or collusion made against the Administrators was pursued and, to the extent that his opening submissions suggested the contrary, any such submission was withdrawn. The relief sought by the Administrators 52By notice of motion filed on 10 June 2014, the Administrators in turn seek orders under ss 447A, 447C and 1322(4) of the Corporations Act including a declaration under s 447C of the Corporations Act that they were duly appointed as administrators of the Company; an order under s 447A of the Corporations Act that a valid and effectual resolution of the Company's directors was made and a valid and effective instrument of appointment was executed on 4 April 2014, the date of their appointment, and a corresponding order under s 1322(4) of the Corporations Act. Alternatively, they seek an order that they be entitled to recover reasonable remuneration for work done pursuant to their purported appointment as Administrators on 4 April 2014 and all expenses including but not limited to legal fees in relation to the matters the subject of the proceedings. The Administrators in turn relied on the affidavits of Mr Ljubic dated 14 April 2014 and 10 June 2014 in support of their application. 53The Administrators submit that, if the Court determines that there was a defect in their appointment by reason of any of the matters referred to above, it is appropriate for the Court to make orders under ss 447A(1) or alternatively 1322(4) of the Corporations Act to the effect that there was a valid resolution for the purposes of s 436A of the Corporations Act and an effectual instrument of appointment: Re HPI Australia Pty Ltd [2008] NSWSC 1106 at [26]-[30]. The Administrators also submit that, if they were not validly appointed, this is an appropriate case for the Court to direct that they be paid reasonable fees for work done and receive reimbursement of expenses and that the appropriate course is for the costs of the administration to be borne by the Company in the ordinary course and that any adjustments for costs be made as between the creditors: McIntosh v CMX Technologies Pty Ltd (admin apptd) [2005] NSWSC 1282; (2005) 56 ACSR 283 at [40]-[45]. 54It is possible to deal with the Administrators' notice of motion relatively briefly, given the findings that I have reached above. The findings that I have reached above as to the validity of the 4 April Meeting mean that a declaration should be made under s 447C of the Corporations Act that the Administrators were validly appointed on and from 4 April 2014. Had I not reached that finding, I would have been satisfied, by reason of the urgency of the issues facing the Company, the lack of a viable alternative of a creditors' voluntary winding up without Mr Sliteris' cooperation, and the additional costs that would have been incurred in an application to the Court for a winding up, that an order should be made to regularise the Administrators' appointment under s 447A of the Corporations Act. In those circumstances, there would be no need to determine any claim in the nature of quantum meruit for their costs and expenses of the administration. Costs of the administration and of the proceedings 55Finally, it is necessary to address the question of the costs of the administration and the costs of these proceedings, including the costs reserved by Pembroke J on 14 April 2014. 56Initially, Mr Sliteris sought an order that the Administrators should be refused costs of the administration. The Administrators point out that they should only be deprived of their remuneration if they engage in misconduct that would have justified an order for their removal or replacement as administrators: Re S & D International Pty Ltd (in liq) [2005] VSC 496 at [216]. The Administrators also point out that there was no allegation that they had acted improperly so far as their conduct of the administration was concerned, over the 10 days or so in which the administration continued. As I noted above, any substantive allegation against them was abandoned by Mr Raphael in oral closing submissions and no basis for an order that deprived them of their costs has been established. 57Next, Mr Sliteris seeks an order that Mr Harrow be ordered to pay the Administrators' costs, implicitly, to the exclusion of any claim against the Company for those costs. The Administrators submit that such an order operates to their disadvantage, where it requires them to take a credit risk upon Mr Harrow, and submit that the appropriate course is for the costs of the administration to be borne by the Company in the ordinary course, and for any adjustments for costs to be made as between the creditors. It seems to me that this reason is sufficient, in itself, not to make the order sought by Mr Sliteris in this regard. However, for the reasons noted above, Mr Sliteris has also not established any breach of duty on the part of Mr Harrow that would warrant such an order. 58Next, Mr Sliteris sought his costs of the winding up application before Pembroke J as against the Company. Ultimately, that winding up order was made by consent, although there was a contest as to the identity of the liquidator to be appointed, following which Pembroke J appointed the Administrators rather than Mr Sliteris' nominee as liquidator. It seems to me that Mr Sliteris had a degree of success in that application which brought about the appointment of a liquidator, albeit other parties ultimately consented to that course, but there is no basis for the Company or its other creditors to bear the costs of his unsuccessful opposition to the appointment of the Administrators as liquidator, and nothing that has occurred in the hearing before me alters that position. For that reason, it seems to me that Mr Sliteris' costs of the winding up application, excluding the costs of and incidental to the argument as to the identity of the liquidator, should be costs in the winding up. It may be that the amount of those costs, after that issue is excluded, will not be substantial. 59In oral submissions, Mr Raphael made clear that Mr Sliteris did not press any submission that the Administrators, who he accepted had acted appropriately, should bear the costs of any other party of these proceedings. He submitted that Mr Harrow should bear the Administrators' and Mr Sliteris' costs of the proceedings on the basis that the "notice of the meeting has created all these problems". I do not accept that submission, since Mr Sliteris has not succeeded in his attack on the validity of the notice of the directors' meeting in respect of the Administrators' appointment. 60The Administrators initially submitted that their costs of the proceeding should be treated as costs of the administration and be met out of the Company's assets in the ordinary course. However, as events developed at the hearing, they advanced the further submission that, in light of the manner in which Mr Sliteris has conducted this proceeding, and in particular the withdrawal of serious allegations of misconduct on the second of the two hearing days, they should be entitled to their costs of the proceeding on the indemnity basis. 61The principles applicable to an order for indemnity costs are well-established. Section 98 of the Civil Procedure Act 2005 (NSW) relevantly provides that: "Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis." Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") provides that, if an order is made as to costs, the Court is to order that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. Rule 42.2 of the UCPR states the general rule that costs payable to a person under an order of the Court or these rules are to be assessed on the ordinary basis. 62The principles applicable to an order for indemnity costs were summarised by Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 at 232-234 where his Honour noted that the Court ought not usually make an order for the payment of costs other than the party and party basis, and that some special or unusual feature in the case is needed to justify the Court in departing from the ordinary practice. His Honour noted several circumstances recognised in the authorities in which indemnity costs may be ordered, including the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions and observed that, ultimately (at 234): "The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis." 63In Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20], the Full Court of the Federal Court noted that indemnity costs: "...serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs." The summary of principles in Colgate-Palmolive Co v Cussons Pty Ltd above was in turn applied in Lahoud v Lahoud [2006] NSWSC 126 at [11] and in Ng v Chong [2010] NSWSC 127 at [18]. In Liverpool City Council v Estephan [2009] NSWCA 161 at [100], Giles JA (with whom McColl JA agreed) observed that s 56 of the Civil Procedure Act adds emphasis to the occasion to depart from costs on an ordinary basis where a failure to properly conduct the proceedings has caused costs to be incurred unnecessarily, but does not override the need for a rational connection between the reason for that departure and the extent of that departure. 64It seems to me that the serious allegations of inadequate advice and lack of independence that were originally made by Mr Sliteris against the Administrators, and ultimately abandoned, required them to take an active role in these proceedings that it would otherwise not have been necessary for them to take. That course was particularly inappropriate where the amount at issue in the proceedings was relatively small and it was always very likely, and possibly inevitable, that the costs of continuance of the proceedings after Pembroke J had appointed a liquidator to the Company would be disproportionate to the amount that was in issue in them. These matters are such as to warrant an order for indemnity costs in favour of the Administrators against Mr Sliteris, on the basis that it was unreasonable for Mr Sliteris to have put the Administrators (and, indirectly, the Company and its creditors) to the expenditure of the costs they have incurred in their successful defence of the proceedings. 65Mr Sliteris has not succeeded in his claims against Mr Harrow and should be ordered to pay Mr Harrow's costs of the proceedings on the usual basis that costs follow the event. Orders 66Accordingly, I propose to make the following orders, subject to allowing the parties the opportunity to make submissions within 7 days as to whether any other orders are necessary or appropriate:

1. Declare, pursuant to s 447C of the Corporations Act 2001 (Cth), that the First and Second Defendants, Mr Dragan Ljubic and Mr Geoffrey Davis, were validly appointed as voluntary administrators of IONA Developments Pty Ltd on 4 April 2014.
2. The proceedings otherwise be dismissed.
3. The Plaintiff's costs of the winding up application, other than any dispute as to the identity of the liquidator to be appointed, be costs in the winding up.
4. The Plaintiff pay the First and Second Defendants' costs of the proceedings on an indemnity basis, as agreed or as assessed.
5. The Plaintiff pay the Third Defendant's costs of the proceeding on an ordinary basis, as agreed or as assessed.

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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: 20 November 2014