Wright v Mansell

REASONS FOR JUDGMENT 1 Mr Wright asks that his name be removed from the list of contributories settled by Mr Mansell, purportedly as liquidator of ACN 004 271 452 Pty Ltd (in liq) which, before its liquidation, was known as J Wright & Sons Pty Ltd. Mr Wright was allotted 750,000 executive preference shares in the capital of the company. The shares were partly paid to one cent per share. Later, a further fifteen cents was paid on each share. The liquidator says that there is uncalled capital of $1.84 per share which Mr Wright ought to pay. Mr Wright disputes this. He argues many points, the principal among them being that according to the articles of association of the company there is no liability on the holders of executive preference shares to pay calls, even if there was that liability the company has no debts or liabilities for which a call can be made, and, in any event, the company is not in liquidation so Mr Mansell has no authority to settle a list of contributories. 2 Mr Wright brings this application as an appeal against his inclusion in the list of contributories. To determine whether the appeal should succeed we must examine the facts as well as the constitution of the company. It will simplify matters to take the constitution first. 3 This company was incorporated under the Companies Act 1938 (Vic) as a company limited by shares. These companies are formed on the principle that the liability of its members is limited to the amount (if any) unpaid on those shares. Now here I should state that although the incorporation of the company took place under the 1938 Act, the language of the provisions to which I am about to refer, although differing slightly from the corresponding provisions in later Companies Acts, are not materially different (except in one or two respects) to the legislation currently in force. 4 By s 5 (4) of the 1938 Act the memorandum of a company limited by shares was required to "state the amount of share capital with which the company proposes to be registered and the division [of that capital] into shares of a fixed amount." The liabilities that were imposed in a winding up upon each individual shareholder were contained in s 158 and, in the case of a company limited by shares, that liability was to contribute to an amount sufficient for the payment of the company's debts and liabilities but no contribution was required "exceeding the amount (if any) unpaid on the shares in respect of which he is liable". 5 The effect of these provisions was that each member who took shares from the company was required to pay, or was liable to contribute to, their full nominal value. The payment might be in money or, with the agreement of the company, in money's worth. The amount to be paid was not to be less than the nominal amount or "par value" of the share. This was the rule whether the shares were fully paid or partly paid in the first instance. 6 From these provisions, which can be traced back to the 1844 Limited Liability Act (18 & 19 Vict c 133), there developed the fundamental policy of company law that a company must maintain its capital. In Trevor v Whitworth (1887) 12 App Cas 409 the House of Lords held that a company incorporated under the Companies Act 1862 (UK) had no power to purchase its own shares. The reason was explained by Lord Watson (at 423-424): "One of the main objects contemplated by the legislature, in restricting the power of limited companies to reduce the amount of their capital as set forth in the memorandum, is to protect the interests of the outside public who may become their creditors. In my opinion the effect of these statutory restrictions is to prohibit every transaction between a company and a shareholder, by means of which the money already paid to the company in respect of his shares is returned to him, unless the Court has sanctioned the transaction. Paid-up capital may be diminished or lost in the course of the company's trading; that is a result that no legislation can prevent; but persons who deal with, and give credit to a limited company, naturally rely upon the fact that the company is trading with a certain amount of capital already paid, as well as upon the responsibility of its members for the capital remaining at call; and they are entitled to assume that no part of the capital which has been paid into the coffers of the company has been subsequently paid out, except in the legitimate course of its business." 7 The principle was affirmed in Ooregum Gold Mining Co of India Ltd v Roper [1892] AC 125 where the House of Lords decided that a company could not issue shares as fully paid up for a money consideration that was less than the nominal value. Lord Halsbury LC said (at 133) that the requirements of the 1862 Act that capital of a company be divided into shares of a certain fixed amount: "renders it impossible for the company to depart from that requirement, and by any expedient to arrange with their shareholders that they shall not be liable for the amount unpaid on the shares" In the same case, Lord McNaughton said (at 145): "I cannot, I think, do better than adopt the language Mr. Buckley has used in speaking of the limited liability acts. 'The dominant and cardinal principle of these acts', he says, 'is that the investor shall purchase immunity from liability beyond a certain limit, on the terms that there shall be and remain a liability up to that limit'." 8 It followed from these cases that, subject to statutory qualification, a company could not issue shares at less than their par value even where its memorandum gave it power to issue shares at a discount. In Klenck v East India Company for Exploration and Mining Ltd (1888) 16 Rettie 271 the articles of association of a company expressly provided for the issue of shares at a discount. The Court of Session found that an issue of shares in accordance with these articles would be void. Lord President Inglis said (at 277) that by the articles: "the company has given a discharge to those who took the shares at a discount of a considerable portion of that which ex facie of the share they are bound to pay. That seems to me to be exactly the same thing in principle as the company buying its own shares. It is just a diminution of the apparent capital of the company. In the one case - the case of purchasing its own shares, and holding them without re-issue - the company just returns to the shareholder the whole or a portion of the capital which he has paid; and in the other, instead of returning a portion of the capital which he has paid, they fail to lay him under an obligation to pay up the unpaid portion of the shares, or rather they grant him a discharge of it, without consideration, to a certain amount. In short, both cases violate the principle of the statute exactly in the same way." 9 We can see that requiring a company to set and abide by a par value for its shares was a great protection to creditors who knew of the company's permanent or issued capital. It also had a subsidiary benefit. It ensured that all shareholders were treated equally by requiring them to make an equal contribution for their shares. 10 Now things have changed. For many years there was criticism of the fixed par value principle. Companies wished to issue shares at whatever price the market would bear, often because they found that their authorised but unissued shares were unmarketable at the stated par value. Sometimes companies wanted to charge promoters less for their shares than later investors. They disliked the dividend restrictions imposed by the stated capital requirements. 11 No par shares were first introduced by the New York Stock Corporation Law in 1912. With few exceptions nearly every state in the United States followed suit, changing its corporations law to either authorise the issue of shares without par value or simply eliminate the concept of par value: see generally Fletcher "Cyclopedia of the Law of Private Corporations" (1995) vol 11, para 5080.40. Similar changes were introduced in Australia following amendments to the Corporations Law by the Company Law Review Act 1998 (Cth). Now shares of a company have no par value: s 254C. The abolition of par value applies to shares issued before the commencement of the Review Act: s 1444. However, the liability of a shareholder for calls in respect of money unpaid on shares issued before the Review Act is not affected by the shares ceasing to have a par value: s 1448. Accordingly this case will be decided on the old law. 12 The evidence does not identify the original capital of the company. We do know that in 1989 the members resolved to increase the authorised capital and to create a special class of shares, to be called executive preference shares, for issue to employees, including directors. They also resolved to amend the articles of association to provide for the rights and liabilities that were to attach to the executive preference shares. 13 In due course the original capital clause in the memorandum of association was deleted and substituted by the following: "The capital of the Company is ONE HUNDRED MILLION DOLLARS ($100,000,000.00) divided into FORTY FIVE MILLION (45,000,000) ordinary shares of TWO DOLLARS ($2.00) each and FIVE MILLION (5,000,000) Executive Preference shares of TWO DOLLARS ($2.00) each carrying the rights and privileges and be subject to the conditions specified in the Articles, with power to increase or reduce such capital and to divide the capital for the time being into several classes and to issue any part or parts of the capital or increase capital for the time being with such deferred qualified or special rights privileges or conditions with reference to preferential guaranteed fixed fluctuating redeemable or dividend or interest and with such priority in the distribution of assets or otherwise as shall from time to time be determined by the Company." 14 According to the new articles (articles 39A, 39B and 137) the holders of executive preference shares were entitled to receive out of the profits of the company as a first charge a cumulative preference dividend at a specified rate (15%) and until each executive preference share was fully paid up each preferential dividend was to be applied by the company on behalf of the shareholder towards payment of the unpaid portion of that share: article 39B(a)(i). Whenever the profits of the company were more than sufficient to pay the preferential dividend and also a dividend on the ordinary shares, the holders of the executive preference shares were entitled to participate in the surplus pari passu with the holders of ordinary shares: article 39B(a)(ii). In the event of the winding up of the company the holders of the executive preference shares were entitled to have the surplus assets applied first in paying off the capital paid up on the executive preference shares and secondly in paying off the arrears, if any, of the preferential dividend: article 39B(a)(iii). 15 Article 137 contained the rules upon which the executive preference shares would be issued. Those rules provided (by article 137(3)) that executive preference shares could be issued as partly paid shares or as fully paid shares. Restrictions were imposed on dealings with the shares. The shares were not freely transferable: article 137(4)(a). If the holder of an executive share ceased to be an employee of the company, other than in the case of a voluntary retirement, the company could direct the holder to sell his shares to a person nominated by the company (article 137(4)(d)(iii)(A)) or give written notice to the holder to convert the executive shares to ordinary shares (article 134(4)(d)(iii)(B)). Article 137(4)(d)(iii)(B) specified two bases for conversion namely: "(i) on the basis of one fully paid ordinary share for each Executive share if the Participant agrees to pay the unpaid amount required to make the Executive share a fully paid share within the period for payment to be specified by the Directors; or (ii) on the basis of converting the Executive shares into such number of fully paid ordinary shares at par as represents dollar for dollar the amount which has to that date been paid up on the Executive shares held by that Participant without an obligation for that Participant to pay any further amount on those shares, subject to any agreement with the directors of the Company to the contrary;" 16 Article 137(4) also gave to the holder of executive preference shares who retired from employment on or after the age of 65 the right to require the company to convert his shares into ordinary shares on the same basis. A retiring employee who wished to exercise that right was required to give the company written notice of his election to convert his shares within twelve months of the date of his retirement. Article 137(4) then ended with the following sentence: "In the event that no such election notice is received within the said period of twelve (12) months or if full payment is not made by the [retiring employee] by the due date for payment, the Company shall exercise its rights under either paragraph (A) or (B) above." 17 Mr Wright became a director of the company in 1959, and was put in charge of its automotive division. When the executive preference shares were created, Mr Wright was allotted with 750,000 shares which, as I have said, were partly paid as to one cent. A subsequent dividend that was paid on those shares took the paid up amount to sixteen cents. 18 Mr Wright retired from the company on 31 May 1994. Notwithstanding his retirement, the company did not exercise its right to compel Mr Wright to convert his executive preference shares to ordinary shares. Nor did Mr Wright elect to convert his shares. 19 The company got into serious financial difficulties in late 1998. By April 1999 the directors were of opinion that the company was insolvent, or likely to become insolvent. Accordingly, they appointed Mr Mansell as administrator of the company under s 436A of the Corporations Law. Mr Mansell was also appointed administrator of a number of related companies. 20 On 5 August 1999 the company executed a deed of company arrangement under s 444B of the Corporations Law. Mr Mansell was the administrator of the deed: s 444A(2). The deed provided for a compromise between the company and its creditors with a view to avoiding liquidation. Mr Mansell was required to determine who would be admitted as creditors under the deed and the amount for which these creditors would be admitted. In the deed these creditors are called "Admitted Creditors" and their claims are described as "Admitted Claims". All of the assets of the company were to be converted to cash, and the proceeds paid to Admitted Creditors, after payment of certain debts which were given priority. The deed provided that if an Admitted Creditor "receives its Entitlement in respect of [its] Admitted Claim, that creditor releases and discharges the company from the Admitted Claim." The Admitted Creditor's "Entitlement" was its Admitted Claim, which was to be paid pro rata among the Admitted Creditors. If no property was available to "pay any part of all other Admitted Claims, the Entitlement of each Admitted Creditor [would] be $1.00." 21 The deed of company arrangement did not get off the ground. Although Mr Mansell received in excess of $500,000 to pay to creditors, he did not settle the list of Admitted Creditors, and did not determine the Admitted Claims. It is common ground that Mr Mansell made no payment to any creditor before the termination of the arrangement which, according to the deed, occurred on 31 July 2000. 22 The directors of the company appointed Mr Mansell as administrator for a second time on 9 October 2000. The validity of this appointment is challenged for reasons which I will explain in a moment. At their second meeting, convened as required by s 439A, the creditors resolved that the company be wound up as they thought they were entitled to do under s 439C. The validity of this resolution is also challenged. It seems to be accepted, however, that if Mr Mansell's second appointment as administrator is valid, then he is now the liquidator of the company. 23 This brief recitation of the facts now brings me to the grounds of appeal. Mr Wright's first argument (that according to the articles of association he is not liable for any call), depends upon the effect of the articles. Mr Wright's argument goes something like this. The liquidator's power to make a call is limited to the "extent of [the shareholders'] liability". On their proper construction, the articles of association impose no liability on the holder of executive preference shares to pay any call; that is, there is no reserve capital. When the case began, the reason it was claimed that no call could be made was the absence of a provision permitting the directors to make calls on the holders of executive preference shares. Initially article 13 permitted directors to make calls for uncalled capital on all shareholders when there were only ordinary shares on issue. With the introduction of executive preference shares, article 13 was amended to confine its operation to ordinary shares. So, Mr Wright's case is that in the absence of power in the directors to call uncalled capital, the liquidator does not have the requisite power. 24 The argument cannot be accepted, if only for the construction that must be placed on the articles. I will assume, without deciding, that in respect of partly paid shares it is lawful for articles of association not to confer authority to make a call for capital. It could not be suggested that this absence of authority could impair the power of a liquidator. Any argument that it does, would be met with the answer that the power of, say, the directors to make a call would be contractual (as to which see s 20 of the 1938 Act), whereas the power of the liquidator to make a call is statutory. 25 Then the argument moved to assert that the particular rights and obligations which attached to these executive preference shares have never included the obligation to pay a call. Acceptance of this submission would produce the startling result that the executive preference shares have a "floating" par value; that is the par value would be whatever amount is paid up from time to time. Let me say at once that there are two very straightforward reasons why this argument must be rejected. The first, and most obvious, is that a floating par value is inconsistent with the statutory requirements that govern this company. The second reason is that these shares do have a fixed value, as is required by statute. The memorandum describes the relevant shares as "Executive Preference shares of TWO DOLLARS ($2.00) each". They were allotted to Mr Wright as "partly paid" shares. Being partly paid shares, they could not be fully paid until some further amount was paid to the company. That amount is the difference between the par value, namely $2.00, and the amount paid up on the share. 26 There is, of course, a more fundamental reason to reject Mr Wright's construction of the articles. What he suggests is unlawful. To reduce the liability of a shareholder in respect of uncalled or unpaid capital is a reduction of capital. For example when shares are $2.00 each with $1.00 paid up, reducing them to fully paid up shares, thus relieving the shareholders from liability of the uncalled amount, reduces the capital of a company. It is not effective unless and until the relevant statute has been complied with. Until quite recently the legislation required the reduction to be confirmed by the court: (see Corporations Law, s 195 as in force before 1 July 1998). Now that is no longer required, but the conditions for a reduction will not be satisfied in the case of an insolvent company: (see now Corporations Act, s 256B). In Re Doloswella Rubber and Tea Estates Ltd [1917] 1 Ch 213 the company wished to reduce capital by dividing each issued share of Ł500 (of which Ł185 had been called up) into five shares of Ł100 each and apportioning the Ł185 called up equally between three of the resulting Ł100 shares, leaving a liability of Ł38.68 on each of the three Ł100 shares and surrendering for reissue the remaining wholly unpaid two shares of Ł100 each resulting from such subdivision. It sought and obtained court approval. The construction which Mr Wright places on the articles of association will also have the effect of reducing the capital of the company in a manner which is not permitted. 27 This also disposes of Mr Wright's second contention for denying responsibility to pay the call. He says that the company was required to cancel his shares under either para A or para B of article 137(4)(d)(iii) because of the last sentence of article 137(4). Although the company did not cancel the shares as required, Mr Wright says that it ought to be treated as having acted under para B(ii), perhaps on the basis of the equitable principle of "regarding that as done which ought to be done". I do not accept the construction Mr Wright places on the last sentence of article 137(4). Even if I did, that would not permit the company to effect an unlawful reduction of its capital. 28 I should mention another point, lest it be thought that I have overlooked it. If, contrary to my view, the construction placed upon the articles by Mr Wright were to be accepted, with the conclusion that the articles are illegal, perhaps Mr Wright should be regarded as never having become a shareholder: see In re Plaskynaston Tube Company (1883) 23 Ch D 542; In re Ince Hall Rolling Mills Company Ltd (1882) 23 Ch D 545n; but compare In re New Chile Gold Mining Co (1888) 38 Ch D 475. However, on the authority of Woodgers & Calthorpe Ltd (in liq) v Bowring (1935) 35 SR (NSW) 483 I would hold that once Mr Wright accepted the executive preference shares by becoming a member, he could not be relieved of his liability to pay calls. See also Federal Commissioner of Taxation v Coppleson (1981) 39 ALR 30 at 34. 29 Now I can come to the next of Mr Wright's points, which is that the company has no outstanding debts and there is therefore no reason for Mr Wright to be placed on the list of contributories. Mr Wright correctly says that the liquidator is only entitled to call uncalled capital when the money is required to pay the company's debts and liabilities: see s 158 of the 1938 Act; see now s 515 of the Corporations Act. So much is not in dispute. What is in dispute, however, is Mr Wright's contention that one effect of the deed of company arrangement is to discharge the company's debts and liabilities. 30 It is not clear how Mr Wright puts this argument. The best I can do is paraphrase from his written submissions. If the deed administrator was not in a position to make any payment under the deed of company arrangement to the Admitted Creditors, then their "Entitlement" was nothing. And having received nothing, their claims were extinguished. 31 I think that this argument has no merit. When the provisions of the deed are examined even cursorily, it is apparent that until there has been some payment to the Admitted Creditors, the minimum being $1.00, they have not released the company's debts. The precise words of the releasing provision should now be stated in full: "This Arrangement releases and forever discharges the Company from an Admitted Claim if, and to the extent that, the relevant Admitted Creditor receives its Entitlement in respect of that Admitted Claim." For this provision to come into operation at least two conditions must be satisfied. The first is that Mr Mansell must establish who are the Admitted Creditors, for only the claims of those creditors are released. The deed administrator did not make that determination. The second condition is that the releasing creditor has received his "Entitlement", namely the amount which is payable to the creditor in accordance with the deed. The deed administrator did not make any payment to creditors. 32 Now we come to Mr Wright's final argument. He contends that the company is not in liquidation, that Mr Mansell is not its liquidator and, not being the liquidator, that Mr Mansell does not have power to settle a list of contributories. If these arguments were accepted, I suppose the appeal would succeed. To appreciate how the argument is put, it is necessary to make further reference to the legislation. An administrator of a company may be appointed by its directors (s 436A), by its liquidator or provisional liquidator (s 436B) or by the holder of a charge over its assets (s 436C). In each case the administration will begin "when an administrator of the company is appointed": s 435C(1)(a). 33 Not everyone can be appointed as administrator. Certain persons are disqualified from appointment without the leave of the court. In this connection s 448C(1) provides: "(1) Subject to this section, a person must not, except with the leave of the Court, seek or consent to be appointed as, or act as, administrator of a company or of a deed of company arrangement if: (a) the person, or a body corporate in which the person has a substantial holding, is indebted in an amount exceeding $5,000 to the company or to a body corporate related to the company; or (b) the person is, otherwise than in a capacity as administrator or liquidator of, or as administrator of a deed of company arrangement executed by, the company or a related body corporate, a creditor of the company or of a related body corporate in an amount exceeding $5,000; or (c) the person is an officer of the company (otherwise than because of being an administrator or liquidator of, or an administrator of a deed of company arrangement executed by, a body corporate related to the company); or (d) the person is an officer of a body corporate that is a mortgagee of property of the company; or (e) the person is an auditor of the company; or (f) the person is a partner or employee of an auditor of the company; or (g) the person is a partner, employer or employee of an officer of the company; or (h) the person is a partner or employee of an employee of an officer of the company." 34 Two other provisions must be noticed. The first is the definition of "officer" in s 9. The definition includes as an officer "(d) an administrator of the corporation" and "(e) an administrator of a deed of company arrangement executed by the corporation". The definition will apply "unless the contrary intention appears". The second provision is s 448C(3). It provides that a person is to be taken to be an officer, except where the Australian Securities and Investments Commission (ASIC) directs the paragraph not to apply, if the person has been an officer within the last two years. 35 If both the definition of officer and the deeming provision in s 448C(3) are applied, then, according to s 448C(1)(c), Mr Mansell was an officer of the company and thus disqualified from acting as administrator in the second administration without the leave of the court. It is for this reason that Mr Wright says there was never a second administration of the company. His argument is that the appointment of a disqualified person could not begin an administration under s 435C, and there being no second administration, there could be no valid resolution to wind up the company. 36 The first premise upon which Mr Wright's argument depends, namely that Mr Mansell was disqualified from acting as administrator, is not supported by the cases. In Cussen v Signature Resorts Pty Ltd (2000) 18 ACLC 341 Young J considered but rejected the same submission. He said (at 342): "However, it seems to me that the plaintiffs have also proceeded on another false basis. The perceived problem is that under section 448C(3)(b) a person who has been an administrator of a company within the last two years is disqualified from being reappointed an administrator, even though he would not have been disqualified under s 448C(1)(b) or (c). That just cannot be so. The whole purpose of subsection 3, as is made clear in paragraph 633 of the explanatory memorandum to the bill, was to "catch persons who, though not in a disqualified category at the time of the proposed appointment, had been within certain key categories within the previous two years". Thus, the proper construction of subsection 3 is that it only applies to a person who would be in a proscribed category under subsection 1. A person who has been an administrator or liquidator is not in that category, unless they are owed $5,000 or more by way of costs." This passages requires some elaboration. Young J does not explain how he was able to overcome the literal meaning of s 448C(1)(c). I think it is implicit that Young J was of opinion that one should not apply to s 448C so much of the definition of "officer" as is contained in paragraphs (d) and (e). That part of the definition may be excluded if a "contrary intention appears". The "contrary intention" may appear from what is said by Young J. 37 On this aspect of the case I think I should follow Cussen v Signature Resorts. According to the High Court in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492, I am bound to follow the decision unless convinced that the interpretation placed upon s 448C is plainly wrong. I am not of that opinion. 38 The second premise implicit in Mr Wright's argument, is that the appointment of a disqualified person to the position of administrator is a nullity. Here again the cases are against Mr Wright. The first of the cases is Re Chilia Properties Pty Ltd (administrator appointed) (1997) 73 FCR 171. In that case an administrator was appointed notwithstanding that he was a partner of an officer: see s 448C(1)(g). Lehane J considered whether s 448C should be "treated as mandatory", so that a failure to obtain leave would invalidate the appointment, or whether it was "directory only", so that the effect of a contravention could be cured by the grant of leave after the event. Lehane J adopted the later position. His decision was followed by Cussen v Signature Resorts where Young J said (18 ACLC at 342): "[t]he law clearly provides that failure to comply with s 448C does not invalidate the appointment of an administrator. It merely makes the persons who are involved in the regulatory conduct liable to a penalty". See also Aboriginal and Torres Strait Island Commission v Jurnkurakurr Aboriginal Resource Centre Aboriginal Corporation (in liquidation) (1992) 10 ACSR 121, a case involving the appointment of a disqualified person to the position of liquidator. 39 It is said that these cases have been done away with by Emanuele v Australian Securities Commission (1997) 188 CLR 114. In that case the High Court looked at whether the Australian Securities Commission's failure to obtain leave under s 459P(2) of the Corporations Law to apply for a winding up order could be cured by the grant of leave nunc pro tunc. The majority (Dawson, Toohey and Kirby JJ) held that leave could be given, even by an appellate court. The view taken was that the requirement to obtain leave was not a condition precedent to the jurisdiction of the court to make the winding up order. It was held, using the old language, that the section conferred a control of a directory character, the requirement for leave being for superintendence by the court. I find nothing in the decision of the majority that casts any doubt on the correctness of Re Chilia Properties and Cussen v Signature Resorts. I should say, however, that if the matter were res integra I might have come to a different view. But in this case the answer is provided by the authorities. 40 I also note that s 447A may be available to overcome the effect of an invalid appointment of an administrator. Section 447A(1) provides: "The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company." This provision was recently given detailed consideration in Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270. One point made by the High Court was that the section gives a broad power to make orders with respect to particular provisions of Part 5.3A, altering the operation of that provision. The court said (at 280) that "the orders contemplated are orders that alter how the Part is to operate in relation to a particular company, not how the Part does operate in relation to that company." (emphasis in original) In Deputy Commissioner of Taxation v Portinex Pty Ltd (2000) 34 ACSR 391 Austin J (at 399) took this to mean that: "The section looks to the future rather than the past, but the temporal requirement is satisfied if the orders have effect from the time of their making; it is permissible for the court to make an order with future effect in respect of past matters or events." Accordingly Austin J held that s 447A was available to permit the court to declare whether an administrator has been validly appointed and thereby overcome the consequences of a defective appointment. In Shirlaw v Graham [2001] NSWSC 612 Young CJ in Eq was of the same view. He said (at para 14): "In my view s 447A is a plenary power. In my view s 447A may be used as Austin J said in Portinex, to overcome a defect in compliance with the appointment procedure under s 436A which is within Pt 5.3A of the Corporations Law. In my view the court can make an order under s 447A which has some effect in the past in the same way as the court can make an order nunc pro tunc. I cannot see any reason why in the exercise of its discretion the court cannot in relation to a particular company deal with a technical defect in the resolution under s 447A. This should include cases such as the failure of a resolution to state the opinion the directors held or of the directors so to resolve. After all, the purpose of s 447 is fulfilled, namely to make Pt 5.3A work in the public interest so far as that company is concerned." 41 There will be some limit to how far the court can go under the section. It would be difficult, for example, to validate unlawful acts that have been taken between the date of the defective appointment and the rectifying order, save to the extent those acts have continuing effect. This is, however, a matter for another day. 42 If it were necessary to do so I would make an order granting leave under s 448C nunc pro tunc (Mr Mansell asks for such an order) or, if appropriate, an order under s 447A that Part 5.3A is to have effect in relation to the company as if Mr Mansell had been properly appointed as administrator. There was a suggestion that no such order should go in favour of Mr Mansell because of a perceived conflict. Some criticism was directed to Mr Mansell's failure to give effect to the deed of company arrangement, with the possibility that he might be liable in damages. These arguments are groundless on the current evidence. As it turns out no orders are necessary. 43 Before I finally dispose of this case there is one last matter that I should mention. It will be remembered that s 448C(3)(b) will have no application to an administrator if ASIC directs that it should not apply. ASIC has given that direction, but did so after the appointment. There is a nice question whether that is something that ASIC can do. That question need not be resolved. 44 The only orders that I need make in this case are that the appeal be dismissed with costs. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.