Correa v Whittingham

Judgment

1. [1]

   BARRETT JA: I have had the advantage of reading in draft the comprehensive judgment prepared by Gleeson JA. I agree, for the reasons his Honour gives, that leave to file the notice of contention should be granted, the appeal should be allowed and the other orders he proposes should be made.

2. [2]

   I wish to add some brief comments about the operation of s 447A of the Corporations Act 2001 (Cth) the very broad scope of which was, as Gleeson JA notes, confirmed by the High Court in Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270.

3. [3]

   In Honest Remark Pty Ltd v Allstate Explorations NL [2006] NSWSC 735; (2006) 201 FLR 456, Brereton J said at [66], in reliance on Re New Tel Ltd [2004] FCA 1154; (2004) 210 ALR 270 at [7], that "an order under s 447A must have a nexus with how Part 5.3A is to operate in relation to a particular company". That led Campbell JA to say (with the concurrence of McColl JA) in BE Australia WD Pty Ltd v Sutton [2011] NSWCA 414; (2011) 82 NSWLR 336 (at [194]): "However, whether it is as part of the process of applying the 'nexus' test, or whether it is simply as a limitation that arises as a matter of construction on the scope of the power under s 447A, or whether it is part of the court's obligation to exercise the power under s 447A in a judicial manner, that power cannot properly be used in a way that is foreign to the purpose for which it is inserted in the Corporations Act."

4. [4]

   That observation recognises that the power vested in a court by s 447A is a statutory power which may be exercised only for the purpose for which it was granted: The Queen v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170. The "nexus" with the operation of Part 5.3A to which reference is made in the decided cases must be understood accordingly. The relevant purpose is to be ascertained by reference to the language of the statute, its subject matter and objects and the consequences of a decision that the power has been exceeded: Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355. The principal source of constraint and limitation upon the power is therefore the statement of the object of Part 5.3A in s 435A, coupled with the nature, incidents and aims of the particular form of external administration as gathered from the provisions of Part 5.3A as a whole.

5. [5]

   The proper purpose limitation upon s 447A is not exceeded in the frequently encountered case of an order repairing or validating the appointment (or purported appointment) of an administrator which is defective because some element required by Part 5.3A itself is lacking. In circumstances of that kind, the s 447A order causes Part 5.3A to operate even though its own terms are not fully satisfied. An example is found in National Australia Bank Ltd v Horne [2011] VSCA 280; (2011) 253 FLR 205 where the appointor, although a chargee of the company's property, did not, as envisaged by s 436C(1), hold a charge "on the whole, or substantially the whole, of a company's property". Almond AJA (with the concurrence of Buchanan and Mandie JJA) said (at [33]): "In my opinion it is clear from the decision of the High Court in Australasian Memory that the Court has power to alter how Part 5.3A, specifically how s 436C in Part 5.3A, is to operate in relation to the Company and could exercise that power by ordering that Part 5.3A is to operate as though the purported appointment of the administrators by the chargee on 18 October 2010 was valid."

6. [6]

   The proper purpose limitation does not mean that s 447A is confined to modifying what would otherwise be the operation of a provision within Part 5.3A itself. In Re Octaviar Ltd (No 8) [2010] QCA 45; (2010) 237 FLR 315, the section was held to allow an order making inoperative in relation to the particular company not only a provision within Part 5.3A but also a related and complementing provision of the Corporations Regulations 2001 (Cth) (see also Re Priceright Construction Pty Limited [2006] NSWSC 324; (2006) 57 ACSR 206 at [8] - [11]). In cases of that kind, the s 447A order facilitates the operation of Part 5.3A within the whole of the context envisaged by the Act of which it forms part.

7. [7]

   In the present case, it would be possible, as a matter of drafting, to fashion an order to the effect that Part 5.3A is to operate in relation to the Club as if there were inserted into it a provision that a person deemed by s 41 of the Registered Clubs Act 1976 (NSW) to be incapable of being appointed as administrator of the Club and of acting as such administrator is, by force of the provision so inserted (and notwithstanding the contrary provision of State law), taken always to have been capable of being so appointed and of so acting.

8. [8]

   Such an order would, however, exceed the proper purpose limitation. It would do nothing to promote any object for which Part 5.3A exists or to facilitate or assist the form of external administration for which it provides. The purpose of the order would be to seek to neutralise the State law provision. Nor, despite its form, would the postulated order be an order about how Part 5.3A was to operate in relation to the Club. It would be an order about how the State law was to operate in relation to the Club. For those two reasons, the order would not be authorised by s 447A.

9. [9]

   GLEESON JA: This appeal primarily concerns a challenge to the validity of the purported appointment of an administrator under s 436A of the Corporations Act 2001 (Cth) on various grounds, including contravention of the constitution of a company, contravention of various provisions of Pt 5.3A of the Corporations Act and contravention of s 41 of the Registered Clubs Act 1976 (NSW).

10. [10]

    In addition, this appeal is concerned with a related challenge to the exercise of discretion by the primary judge when making curative orders under s 447A and s 1322 of the Corporations Act against the contingency that he was wrong, insofar as he rejected the challenges to the validity of the administrator's purported appointment, which relied upon contravention of the constitution of the company and contraventions of the Corporations Act.

11. [11]

    Subject to the Court permitting the respondent to file the notice of contention referred to below (which leave I would grant), this appeal also concerns the Court's power to make curative orders under s 447A of the Corporations Act in respect of invalidity of an administrator's appointment arising under s 41 of the Registered Clubs Act, if the challenge to the appointment on this ground is upheld on appeal.

The parties

1. [12]

   The first appellant (Ms Correa) is a member of the second appellant (the Club). The respondent (Mr Whittingham) was purportedly appointed administrator of the Club sometime between 14 November 2008 and 17 November 2008 by a purported resolution of directors of the Club under s 436A of the Corporations Act.

2. [13]

   On 27 February 2009, a meeting of creditors of the Club pursuant to s 439A of the Corporations Act, resolved that the Club execute a proposed deed of company arrangement (DoCA). On 16 March 2009, Mr Whittingham executed the DoCA on behalf of the Club and himself as deed administrator.

3. [14]

   The terms of the DoCA were varied on two occasions in the circumstances referred to further below. Ultimately on 3 June 2010, Mr Whittingham handed back control of trading of the Club to the new board in accordance with the terms of the varied DoCA.

4. [15]

   When these proceedings were first commenced by Ms Correa, the Club was joined as a defendant. Subsequently, on 29 February 2012, the board of directors of the Club resolved to apply to the Court to remove the Club as a defendant and join the Club as a plaintiff, and further resolved that all steps taken by Ms Correa in the proceedings be treated as if they were steps taken by the Club in the proceedings.

5. [16]

   On 13 March 2012, being the first day of the hearing below, the primary judge made orders as sought by Ms Correa, that the Club be removed as first defendant and joined as second plaintiff in the proceedings (see [2012] NSWSC 794).

1. [17]

   On the issue of the validity of the administrator's appointment, the primary judge found (see [2012] NSWSC 526) that:

   1. (1)

      the board of the Club did not comply with the requirements as to the minimum number of directors specified in its constitution at the time of the purported appointment of Mr Whittingham as administrator. However, Mr Whittingham was entitled to rely on the statutory assumptions under s 128 and s 129 of the Corporations Act with the consequence that the appellants could not rely on any failure to comply with the requirements of its constitution in respect of the minimum number of directors or the quorum requirements for directors' meetings to invalidate Mr Whittingham's appointment as administrator;

   2. (2)

      Mr Whittingham gave his written consent as required by s 448A of the Corporations Act prior to his purported appointment as administrator;

   3. (3)

      the appellants had not established that there was no proper resolution of insolvency by the directors of the Club as required by s 436A(1)(a) of the Corporations Act;

   4. (4)

      in any event, orders should be made under s 447A and s 1322 of the Corporations Act validating Mr Whittingham's appointment, to the extent necessary, as administrator of the Club on 17 November 2008;

   5. (5)

      further, the absence of an approval to act as administrator of the Club under s 41 of the Registered Clubs Act until 11 days after Mr Whittingham's appointment, did not invalidate the appointment under Pt 5.3A of the Corporations Act where such approval was in fact subsequently given by the relevant authority referred to in s 41.

2. [18]

   On the issue of the conduct of the administration of the Club, the primary judge held that the numerous criticisms of Mr Whittingham's conduct (most of which are not pressed on appeal) were not established. Accordingly, he rejected the appellants' claim under s 447E of the Corporations Act that Mr Whittingham should be deprived of his remuneration on the basis that he had managed the Club's affairs in a manner prejudicial to members.

3. [19]

   On the issue of Mr Whittingham's remuneration, the primary judge held that he was entitled to pursue a claim for remuneration under s 449E of the Corporations Act. That claim had been made by Mr Whittingham in separate proceedings. The primary judge did not consider it necessary to determine Mr Whittingham's alternate quantum meruit claim, which was advanced in the proceedings below, if the Court found that his appointment was invalid but did not make curative orders.

Basic background facts

1. [20]

   The basic background facts concerning the purported appointment of Mr Whittingham as administrator of the Club are not in dispute and may be summarised as follows.

2. [21]

   The Club is a company limited by guarantee and a registered club under the Registered Clubs Act. The constitution of the Club required a minimum of seven directors to constitute a board, with four directors needed for a quorum.

Appointment of administrator

1. [22]

   On 12 November 2008, Mr Whittingham attended a meeting with Ms Yolanda Sanchez, a director of the Club. Prior to this meeting, Mr Whittingham knew nothing about the Club or its affairs. The financial records of the Club were not provided to Mr Whittingham during the course of this initial meeting, however he discussed with Ms Yolanda Sanchez the Club's two properties, 86 and 88 Liverpool Street, Sydney; the level of its debt to its secured lender; the fact that there were issues between members; that two proceedings had been brought against the Club in the Land and Environment Court for fire ordinance issues; that the proceedings had also been brought against the Club by a member, Mr Martin, in relation to its failure to prepare accounts and conduct annual general meetings; and that claims of creditors of the Club were unpaid, and they were demanding payment. At the conclusion of the meeting Mr Whittingham recommended that a voluntary administrator be appointed.

2. [23]

   On the same day, Mr Whittingham obtained an Australian Securities and Investment Commission (ASIC) search of the Club. The ASIC search showed that the Club had four directors: Faustino Garcia, Daniel Garcia, Maria Sanchez and Yolanda Sanchez. In his notes of the meeting on 12 November 2008, Mr Whittingham wrote "Board 7/4".

3. [24]

   Between 12 and 14 November 2008, Mr Whittingham gave or sent Ms Yolanda Sanchez draft minutes of a directors' meeting and a draft instrument appointing him as administrator. The draft minutes were partially completed; it named the four directors listed in the ASIC search as being "Present" and it contemplated that Faustino Garcia would be the "Chairperson" of the directors' meeting at which the resolution to appoint Mr Whittingham as administrator would be considered.

4. [25]

   On 14 November 2008 at 4.52pm, Ms Yolanda Sanchez emailed two documents to Mr Whittingham. The first document entitled "Resolution of Directors of the Spanish Club Limited" was signed by Yolanda Sanchez as "Chairperson". The second document entitled "Instrument of Appointment of Administrator" was signed by both Yolanda Sanchez and Maria Sanchez as directors. The documents were different from the drafts provided by Mr Whittingham. The first document did not state the names of those in attendance, nor the date, time or location of the board meeting. Nor did it record the passing of a resolution appointing Yolanda Sanchez as the "Chairperson" of the meeting, or that the Chairperson had declared that a quorum was present. However, it recorded a resolution that - the opinion of the directors the company was insolvent or likely to become insolvent at some future time and a resolution that the company appoint Mr Whittingham as administrator pursuant to s 436A of the Corporations Act.

5. [26]

   Mr Whittingham could not recall when precisely he read the documents which had been emailed to him on Friday 14 November 2008. However at 9.26am on Monday 17 November 2008, he faxed a letter to the Office of Liquor Gaming and Racing (the OLGR) advising that he had been "appointed Administrator of the [Spanish Club] on 17 November 2008," and to ask the OLGR to note his "interest on the liquor and gaming licence". On the same day he faxed a letter in similar terms to the Casino Liquor and Gaming Control Authority (the Authority).

6. [27]

   On 17 November 2008, Mr Whittingham raised a question as to the form of the minutes of the directors' resolution with Ms Yolanda Sanchez and asked her to advise who was present at the directors meeting. Ms Yolanda Sanchez responded "I phoned the other two directors and they indicated that they were in agreement with the appointment". Based on this response, Mr Whittingham made the following assumptions:

7. [28]

   Mr Whittingham acknowledged in cross-examination that he did nothing to ascertain the correctness of the above assumptions. Nor did Mr Whittingham ascertain if the "other two directors" held the opinion, and had resolved to the effect that they held the opinion, that the Club was insolvent or was likely to become insolvent. Mr Whittingham's evidence was that, after his conversation with Ms Yolanda Sanchez, he inserted the date "17 November 2008" into the signed directors' resolution and instrument of appointment. He then gave a signed consent to act as administrator to Ms Yolanda Sanchez.

8. [29]

   Later on 17 November 2008, Mr Whittingham had a telephone conversation with Mr Transfield of the OLGR concerning his appointment as administrator of the Club. There was a conflict in the evidence of Mr Whittingham and Mr Transfield as to the content of the conversation. The primary judge found (at [21]) that Mr Whittingham was mistaken in his evidence that Mr Transfield gave him express oral approval for him to be appointed as administrator. He considered there was a degree of reconstruction in Mr Whittingham's recollection of events but did not accept the appellants' submission that Mr Whittingham was untruthful and dishonest in that evidence.

9. [30]

   In the afternoon of 17 November 2008, Mr Whittingham telephoned his lawyer, Chris Cruikshank, "to check to make sure that [he] was validly appointed". Mr Whittingham sought that advice because of the form of the minute and the instrument of appointment which he had received from Ms Sanchez, and because a former director of the Club, Mr Martin, had brought proceedings against the Club in respect of matters such as its failure to hold annual general meetings and prepare accounts, and because he had arranged a meeting with Mr Martin and his legal advisors on the following day. Mr Whittingham disclosed to his solicitor the relevant matters concerning his conversation with Ms Yolanda Sanchez. Mr Cruikshank expressed a preliminary view that Mr Whittingham had been validly appointed. Mr Cruikshank later reviewed the Club's constitution and considered the issue of the validity of Mr Whittingham's appointment. On 18 or 19 November 2008, Mr Cruikshank advised Mr Whittingham: "Ken, you have been validly appointed".

10. [31]

    Also on 17 November 2008, Mr Whittingham sent letters to Mr Faustino Garcia and Mr Daniel Garcia, the two directors of the Club whose signatures did not appear on the instrument of appointment, to advise them of his appointment and that they were not entitled to exercise any of their functions and powers as officers of the Club without his approval. On the same date, the ASIC wrote to each of Mr Faustino Garcia and Mr Daniel Garcia advising them of Mr Whittingham's appointment as administrator.

11. [32]

    On 26 November 2008, Mr Whittingham applied for the approval of the Authority to act as administrator of the Club under s 41 of the Registered Clubs Act. On 28 November 2008, the Authority gave that approval.

Meetings of creditors of the Club and the DoCA

1. [33]

   On 27 November 2008, the first meeting of creditors of the Club was held. On 11 December 2008, notice was sent to creditors of the Club convening the second meeting of creditors for 22 December 2008. On that date, the creditors resolved to adjourn the second meeting to 27 February 2009.

2. [34]

   On 17 February 2009, notice of the adjourned second meeting of creditors of the Club was sent, together with a supplementary report, convening a meeting for 27 February 2009. At the adjourned second meeting of creditors, it was resolved that the Club execute a proposed DoCA. The DoCA was executed on 16 March 2009.

3. [35]

   The terms of the DocA are referred to in detail below under Issue 7. Relevantly for present purposes, they provided for the sale of the Club's "core" property, being 88 Liverpool Street, subject to the approval of members as required by the Registered Clubs Act or the Club's constitution. The sale of the Club's "non-core" property, which included 86 Liverpool Street, was not subject to the approval of members under the Registered Clubs Act. However, prior to sale the deed administrator was obliged to seek member approval to the sale but was not bound by the failure of that resolution or even a resolution to the contrary.

4. [36]

   On 15 September 2009, a meeting of creditors of the Club resolved to vary the terms of the DoCA. This included varying the termination provisions to effectively provide for control of the Club to be handed back to the new board of directors sooner than under the original DoCA, upon sufficient assets being realised to enable Mr Whittingham to pay all of the debts owing to creditors.

Sale of the Club's "core" property

1. [37]

   On 1 July 2009, Mr Whittingham entered into a contract to sell two properties (the properties) of the Club (86 and 88 Liverpool Street in one line) for $9,200,000 (plus GST) to G&J Drivas Pty Ltd (Drivas). The terms of this contract, and the subsequent dispute which arose between Ms Correa and Mr Whittingham as to whether the approval of members of the Club was required to the sale, is referred to in detail below under Issue 7. It is sufficient to record at this stage that a meeting of members of the Club held on 31 July 2009 resolved overwhelmingly not to approve the sale. Mr Whittingham subsequently received advice from the Director-General of Communities New South Wales that s 41J of the Registered Clubs Act had no application to the disposal of core property of the Club by the administrator.

Injunction proceedings

1. [38]

   On 30 September 2009, Ms Correa instituted proceedings for an injunction to restrain the sale of the properties to Drivas, and for an order that Mr Whittingham be removed as deed administrator of the Club. Significantly, Ms Correa did not at that time seek declarations that Mr Whittingham was not validly appointed as administrator and deed administrator. An injunction restraining the sale to Drivas was made by Brereton J (see [2009] NSWSC 1225).

2. [39]

   On 13 November 2009, the annual general meeting of the Club was held and a new board of directors comprising Ms Correa and six other members were appointed as directors.

Applications for directions and other relief

1. [40]

   On 27 November 2009, Mr Whittingham filed an application for directions regarding the holding of a meeting of creditors to vary the terms of the DoCA to enable the completion of the sale of the properties to Drivas, or alternatively to place the Club into liquidation.

2. [41]

   On 3 December 2009, Brereton J declined to give the direction sought by Mr Whittingham (see [2009] NSWSC 1426).

3. [42]

   On 15 February 2010, Mr Whittingham filed an application seeking an order under s 447A of the Corporations Act deleting cl 5.1 and cl 5.2 of the DoCA, and in the alternative seeking an order under s 445D terminating the DoCA and an order under s 447A appointing Mr Whittingham as liquidator of the Club.

4. [43]

   On 17 March 2010, Ms Correa's solicitors sent a draft further amended originating process (in the injunction proceedings referred to at [38] above) to Mr Whittingham's solicitors which, for the first time, sought declarations that Mr Whittingham was not validly appointed as administrator or deed administrator, and an order that the administration and the DocA were nullities. On the same date, Mr Whittingham's solicitors sent a draft originating process to Ms Correa's solicitors seeking an order under s 447C that Mr Whittingham was validly appointed, and an order under s 447A that Mr Whittingham was validly appointed.

5. [44]

   On 18 March 2010, Mr Whittingham's originating process filed on 15 February 2010 came before Palmer J. The underlying dispute between Ms Correa and Mr Whittingham was whether Mr Whittingham ought be permitted to sell the properties without the consent of members. Counsel for Ms Correa sought leave to file a further amended originating process in the injunction proceedings. This sought declarations that Mr Whittingham was not validly appointed as administrator or deed administrator, and an order that the administration and the DoCA are nullities. In response, Counsel for Mr Whittingham informed the Court that if such leave was granted to Ms Correa, then Mr Whittingham sought leave to file an amended originating process seeking curative orders. Palmer J declined to grant leave to Ms Correa to file the further amended originating process. Mr Whittingham did not pursue his foreshadowed application under s 447C and s 447A. The proceedings were stood over to 22 March 2010. On that date, the secured creditor of the Club filed an application seeking an order under s 447A varying the DoCA so that it no longer be bound by the DoCA or, alternatively, an order under s 447D terminating the DoCA.

6. [45]

   On 28 March 2010, Mr Whittingham ceased trading the Club because of continuing significant costs being incurred by the Club, the cost of completing the annual fire statement on 31 March 2010, and the inability to obtain insurance cover past 30 April 2010, without certain work being carried out.

7. [46]

   On 15 April 2010, the secured debt owed by the Club was paid out by Trantin Pty Ltd (Trantin), which took a transfer of the secured creditor's mortgage.

8. [47]

   On 6 May 2010, Palmer J made orders by consent (which included the consent of Ms Correa) dismissing the interlocutory process filed by the Club's former secured creditor, and further amending the terms of the DoCA pursuant to s 447A of the Corporations Act, to the following effect:

9. [48]

   On 20 May 2010, Trantin, as mortgagee, entered into a contract for the sale of the "non-core" property (86 Liverpool Street) to Drivas for $3,500,000. This contract was completed on 3 June 2010. Mr Whittingham agreed to accept $3,200,000 from the proceeds of sale of 86 Liverpool Street, to permit the balance to be paid by Trantin to the Club to enable it to recommence trading. This was on the condition that he be entitled to a lien over 88 Liverpool Street and any GST refund payable to the Club.

10. [49]

    On 3 June 2010, Mr Whittingham handed back control of trading of the Club to the board of directors in accordance with the terms of the varied DoCA.

11. [50]

    On and after 4 June 2010, Mr Whittingham paid post-administration creditors amounts totalling approximately $2,240,000 plus interest at the rate of 9 per cent per annum from 21 April 2010 to the date of payment.

12. [51]

    On and after 12 August 2010, Mr Whittingham paid dividends to pre-administration unsecured creditors totalling $500,128.67 plus interest of $18,082.74 to the date of payment.

1. [52]

   On 27 October 2010, Mr Whittingham filed an application in separate proceedings for approval of his remuneration under s 449E of the Corporations Act for the period 22 July 2009 to 22 August 2010.

Amended claim by Ms Correa challenging validity of Mr Whittingham's appointment

1. [53]

   On 28 February 2011, Ms Correa filed an amended originating process and points of claim in the proceedings below seeking a declaration that Mr Whittingham was not validly appointed as administrator or deed administrator, and deleting her previous claim that Mr Whittingham be removed as deed administrator.

2. [54]

   On 19 July 2011, Mr Whittingham filed an interlocutory process in the proceedings below seeking an order under s 447C of the Corporations Act that he was validly appointed as administrator of the Club on 17 November 2008. Alternatively he sought curative relief under s 447A and s 1322(4)(a) of the Corporations Act and further and alternatively to that relief, an order that he was entitled to be paid out of the assets of the Club his reasonable remuneration and costs and expenses.

Issues on appeal

1. [55]

   The appellants' amended notice of appeal contained 27 grounds of appeal. It is unnecessary to set out all these grounds. They may be grouped together under the issues raised by the appeal as follows:

   1. (1)

      Whether, by way of answer to the appellants' contention that the steps taken in appointing him were not in compliance with the Club's constitution, Mr Whittingham is entitled to assert reliance upon s 128 and s 129 of the Corporations Act, having regard to the absence of an explicit reference to those provisions in his points of defence (Ground 1A(a)).

   2. (2)

      If the answer to (1) is yes, whether, having regard to the statutory assumption set out in s 129(1) of the Corporations Act, it is open to the appellants to rely on any failure by the Club's directors to comply with the requirements of its constitution for the purpose of contending against the validity of Mr Whittingham's appointment (Grounds 1A(b)-(d), 1B, 1C, 1D and 1E).

   3. (3)

      Having regard to the answers to (1) and (2) above, whether Mr Whittingham's appointment was preceded by a resolution of the Club's directors capable of engaging s 436A of the Corporations Act (Ground 8).

   4. (4)

      Whether the circumstance that Mr Whittingham did not consent to his appointment as required by s 448A of the Corporations Act until 17 November 2008 had the effect of rendering that appointment invalid (Grounds 9, 9A, 11, 12, 12A and 12B).

   5. (5)

      Whether if Mr Whittingham was validly appointed as voluntary administrator, it was by an instrument of appointment executed pursuant to a resolution of the directors which was passed no later than 14 November 2008 and, consequently, Mr Whittingham was required to convene a meeting of creditors in accordance with s 439A(5) of the Corporations Act by 19 December 2008, but failed to do so with the consequences that on that date the administration came to an end and Mr Whittingham ceased to be administrator pursuant to s 435C(3)(b)(i) of the Corporations Act (Ground 13).

   6. (6)

      Whether, in the exercise of the discretion conferred by s 447A and s 1322 of the Corporations Act to make curative orders, the primary judge erred by applying the wrong principle, or by taking irrelevant considerations into account, or by failing to consider relevant matters when making curative orders. Further, whether the primary judge erred in declaring that Mr Whittingham was entitled to be reimbursed and indemnified out of the assets of the Club in respect of his remuneration, legal costs and disbursements as administrator (Grounds 16-20, 26-28).

   7. (7)

      Related to (6) above, whether Mr Whittingham's conduct of the administration of the Club in attempting to sell the Club's core property (88 Liverpool Street) without member approval was prejudicial to the interests of its members and, if so, whether this was a factor that was sufficiently taken into account by the primary judge in the course of exercising his discretion under s 447A and s 1322 (Grounds 21-25).

   8. (8)

      Irrespective of the answers to (1) to (7) above, whether the circumstance that the Authority referred to in s 41 of the Registered Clubs Act did not approve Mr Whittingham to act as administrator of the Club until 28 November 2008 had the effect rendering his appointment invalid (Grounds 10 and 10A).

   9. (9)

      Whether the primary judge should have ordered Mr Whittingham to pay the appellants' costs regardless of the making of curative orders, on the basis that he was seeking an indulgence and ought therefore pay these costs (Grounds 28 and 29).

2. [56]

   No submissions were made by the appellants in support of Grounds 14 and 15. Ground 14 contended that the primary judge erred in not holding that Mr Cruikshank's advice that Mr Whittingham was validly appointed was wrong, and should have found that Mr Whittingham's remedy was an action against his solicitor for professional negligence, not an action to validate his appointment so as to render the Club liable for his fees and expenses of an (otherwise) invalid administration. Ground 15 contended that the primary judge erred in refusing leave to amend the appellants' points of claim to plead that the directors of the Club all ceased to hold office after 31 December 2007.

3. [57]

   There is no appeal in relation to the primary judge's rejection of the appellants' claim under s 447E of the Corporations Act alleging conduct by the administrator prejudicial to the interests of members. However, one aspect of this claim, being Mr Whittingham's conduct in attempting to sell the Club's core asset, is relied upon by the appellants as militating against the making of curative orders below (see [55](7) above).

Notice of contention

1. [58]

   During the hearing of the appeal, the respondent sought leave to file a notice of contention asserting that if his appointment as administrator of the Club is invalid by reason of the failure to comply with s 41 of the Registered Clubs Act, the primary judge should have made an order, pursuant to s 447A of the Corporations Act, curing this contravention. The order sought was "that Pt 5.3A of the Act is to operate in relation to the Club as if the delegate of the Authority had approved the respondent to act in the capacity of administrator of the Club prior to the appointment of the respondent to act in that capacity".

2. [59]

   The filing of the notice of contention was opposed by the appellants on the ground that it was a new issue not raised by the respondent below. Indeed the contention was contrary to the parties' common position below, which the primary judge accepted (at [102]), that there is no power under s 447A of the Corporations Act to validate the invalidity of an administrator's appointment arising from s 41 of the Registered Clubs Act.

3. [60]

   A party is bound by the conduct of their case and except in the most exceptional circumstances, should not be permitted to raise a new argument which, whether deliberately or by inadvertence, they failed to put during the hearing when they had an opportunity to do so: see Metwally v University of Wollongong [1985] HCA 28; (1985) 60 ALR 68 at 71. Counsel for Mr Whittingham frankly acknowledged that the argument was not raised below because a view was taken, albeit with some diffidence, that s 447A of the Corporations Act gave way to s 41 of the Registered Clubs Act having regard to s 5E(2)(e)(ii) of the Corporations Act.

4. [61]

   In my view, the respondent should be granted leave to file the notice of contention for the following reasons. First, it raises a pure question of law which is relevant to the orders which should be made by this Court if the appeal is upheld in relation to invalidity based on s 41 of the Registered Clubs Act, and the related issue of whether the curative orders made below in respect of contraventions of the constitution of the Club and the Corporations Act should be set aside. Secondly, the appellants did not point to any prejudice occasioned by this late contention.

1. [62]

   It is convenient to first deal with the challenge to Mr Whittingham's appointment based on s 41 of the Registered Clubs Act (Issue 8). This issue is in a different category to the other challenges, because it is beyond the curative reach of s 447A of the Corporations Act, unless the respondent's notice of contention is upheld.

Issue 8: Section 41 of the Registered Clubs Act 1976

1. [63]

   Section 41 of the Registered Clubs Act is contained in Pt 4 of that Act headed "Management of registered clubs", and provides: "A person is not capable of being appointed to act in the capacity of the administrator ... of a registered club that is a company within the meaning of the Corporations Act ... or of acting in any such capacity unless the person has been: (a) appointed to act in that capacity by the Supreme Court, or (b) approved to act in that capacity by the Authority."

2. [64]

   The "Authority" referred to in s 41 is the Casino Liquor and Gaming Control Authority, although it appears that relevant functions are carried out by the OLGR.

3. [65]

   Section 41A of the Registered Clubs Act authorises the Authority to appoint a person to administer the affairs of a registered club until an appointment is made under s 41, or the Authority orders otherwise (whichever occurs first), but only if the Authority is of the opinion that the governing body of the Club has ceased to be an effective governing body.

4. [66]

   In this case, the Authority granted approval under s 41 of the Registered Clubs Act for Mr Whittingham to act as administrator of the Club by an Instrument of Approval dated 28 November 2008. That is, the approval was granted after the purported appointment of Mr Whittingham as administrator of the Club.

Primary judge's reasoning

1. [67]

   The primary judge correctly observed (at [105]) that the question of whether s 41 of the Registered Clubs Act invalidates an appointment of an administrator which occurs prior to the giving of the relevant approval is to be determined by reference to the principles identified by the High Court in Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 390-391, where the plurality observed that (citations omitted): "... [a] court, determining the validity of an act done in breach of a statutory provision, may easily focus on the wrong factors if it asks itself whether compliance with the provision is mandatory or directory and, if directory, whether there has been substantial compliance with the provision. A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid. This has been the preferred approach of the courts in this country in recent years, particularly in New South Wales. In determining the question of purpose, regard must be had to 'the language of the relevant provision and the scope and object of the whole statute'."

2. [68]

   The primary judge expressed the view (at [106]) that the purpose of s 41 of the Registered Clubs Act requires that an administrator's appointment be treated as invalid in circumstances where no approval was "ever" given for that appointment. (It may be immediately observed that the word "ever" is a significant gloss on the language used in s 41.)

3. [69]

   The primary judge acknowledged (at [107]) that the language "a person is not capable of being appointed" in s 41 of the Registered Clubs Act, speaks as at the date of the administrator's appointment, but held that the section does not in terms require a prior application for such approval. Rather, the question of whether a person was capable of being appointed as at the date of his or her appointment may be determined by reference to subsequent events, including a grant of approval made after his or her appointment. The primary judge's reasoning (at [107]-[109]) to this conclusion was as follows:

   1. (1)

      An appointment can be treated as if in a state of "suspended validity" pending the relevant approval, such that it will be valid if approval is later granted, and invalid if such approval is either not sought or sought but not later granted.

   2. (2)

      This approach to s 41 was consistent with that contemplated by Glass JA in National Mutual Fire Insurance Co Ltd v Commonwealth of Australia [1981] 1 NSWLR 400 at 408, and the similar approach adopted by the Court in granting leave, with retrospective effect, for the appointment of an administrator under s 448C of the Corporations Act.

   3. (3)

      It was also consistent with the statutory purpose of s 41 because if the Authority was unable to give immediate approval to an administrator's appointment, but ultimately considered that the circumstances warranted giving such approval, it would frustrate and not promote the objectives of the Registered Clubs Act and the objects of Pt 5.3A of the Corporations Act to treat that appointment as invalid when the Authority in fact approved it "with the intent that it have effect".

   4. (4)

      The contrary approach to s 41 would have the result that, if the Authority could not (or considered that it should not without some further inquiry) immediately approve the appointment of an administrator, then an administrator could not immediately be appointed in circumstances of a registered club's insolvency, notwithstanding that the Corporations Act contemplates that such an appointment can be made in accordance with the objects of Pt 5.3A in that situation, and such an appointment is a means of directors avoiding continuing liability for insolvent trading. Although directors of such a registered club could apply to the Court for the appointment of a provisional liquidator, they would be denied the benefit of utilising the administration procedure under Pt 5.3 of the Corporations Act.

4. [70]

   The primary judge held alternatively (at [110]) that even if s 41 of the Registered Clubs Act had any invalidating effect in the present case, it ceased to have that effect when the Authority provided formal approval for Mr Whittingham's appointment 11 days after the appointment. The reasons given for this conclusion were that any lack of approval for those 11 days did not cause any practical prejudice to any party. This was in circumstances where Mr Whittingham had advised OLGR and the Authority in writing, and Mr Transfield of OLGR orally, of his appointment on the day it occurred, and none of them had taken any objection to that appointment.

Submissions

1. [71]

   The appellants submitted that: (a) ordinary principles of construction required that effect be given to the clear words of the prohibition in s 41 of the Registered Clubs Act, which are directed to the suitability of a named person to be appointed administrator of a registered club; (b) the primary judge's reasoning based on the "suspended validity" of an appointment pending the relevant approval by the Authority, or that a subsequent approval by the Authority could take effect nunc pro tunc, was inconsistent with the clear language of the statute; (c) the construction adopted by the primary judge would produce great uncertainty as to the timing and validity of an administrator's purported appointment as it would depend on later circumstances whether an approval was "ever" given by the Authority; and (d) the absence of remedies in s 41 of the Registered Clubs Act was indicative of an intention that non-compliance with s 41 will result in invalidity, in contradiction with s 34 which provided that a person who acts as secretary of a club without being approved by the Authority is guilty of an offence.

2. [72]

   The respondent contended that s 41 should be construed against the background that the appointment of an administrator to a registered club may occur in circumstances of no less urgency than it might in relation to any other form of company. However, because (for the purposes of the respondent's argument, assuming his notice of contention is rejected) a failure to comply with s 41 of the Registered Clubs Act is beyond the curative reach of s 447A of the Corporations Act, the legislative intention of the New South Wales Parliament could not have been to impose, in relation to registered clubs, a further requirement of approval by the Authority for the appointment of an administrator, a breach of which would be incapable of subsequent cure, notwithstanding that such a purported appointment might be attended by urgency.

3. [73]

   In oral submissions, the respondent raised various arguments to the effect that treating the appointment as in a state of "suspended validity" pending the Authority's approval could be justified on the grounds of flexibility, practicality and convenience.

Consideration

1. [74]

   Non-compliance with a statutory requirement or pre-condition - including a requirement or pre-condition to obtain an approval to act in a particular capacity - does not necessarily result in invalidity of an appointment to act in that capacity. Whether or not the failure to comply with the statutory requirement or pre-condition exposes the appointment to invalidity is ultimately a matter of statutory construction.

2. [75]

   The proper approach is not determined by whether the statutory requirement is characterised as directory or mandatory. Rather, it is necessary to ask whether it was a purpose of the legislation that an act performed in breach of the provision should be invalid. In determining the question of purpose, regard must be had not only to the language of the relevant provision but also to the scope and object of the whole statute: see Project Blue Sky at 390-391; Master Education Services Pty Ltd v Ketchell [2008] HCA 38; (2008) 236 CLR 101 at 112 [26].

3. [76]

   The process of construction begins with a consideration of the ordinary and grammatical meaning of the words of the provision having regard to their context and legislative purpose. Further, in construing a statute it is not for a court to construct its own idea of desirable policy, impute it to the legislature, and then characterise it as a statutory purpose: see Australian Education Union v Department of Education and Children's Services [2012] HCA 3; 285 ALR 27 at 35 [28].

4. [77]

   I have reached the view that the legislative purpose of s 41 of the Registered Clubs Act requires that non-compliance with the statutory requirement to obtain approval from the Authority to act in the capacity of administrator prior to such appointment by a registered club, renders such person incapable of appointment and hence results in invalidity of the appointment. My reasons have regard to first, the language of s 41, secondly, the scope and object of the Registered Clubs Act, thirdly, the consequences for the affected company, its creditors and other interested persons and fourthly, other relevant considerations.

Language of s 41

1. [78]

   Section 41 is directed to the capacity of a person to be appointed, or to act, relevantly as an administrator of a registered club. The language of the prohibition in s 41 speaks both as at the date of the administrator's appointment ("a person is not capable of being appointed") and thereafter ("a person is not capable ... of acting in any such capacity").

2. [79]

   It will be observed that two means of lifting the prohibition in s 41 are given: either an appointment to act in that capacity by the Supreme Court or an approval to act in the capacity given by the Authority. The Authority approves people to act in the relevant capacity, it does not approve appointments. The temporal implication in the language used to lift the prohibition ("unless the person has been: appointed to act ... or approved to act ...") read with the opening statement in s 41 ("a person is not capable of being appointed to act"), emphasises that the approval by the Authority must be given before a person is capable of being appointed and acting as administrator.

3. [80]

   Contrary to Mr Whittingham's submissions, the language of s 41 does not permit a suspensory effect to be given to the approval requirement so as to allow an administrator's appointment to be treated as if it is in a state of "suspended validity" which will come to an end if the required approval is not obtained within an unspecified time. Nor do the comments of Glass JA in National Mutual Fire Insurance Co Ltd v Commonwealth of Australia at 408F-G, support the application of such reasoning to s 41.

4. [81]

   In National Mutual, the question was whether the failure to obtain leave of the Court in advance under s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 to commence an action to enforce a statutory charge under s 6(1) against an insurer, invalidates any action taken and renders it incapable of being revived by leave given retrospectively. This Court held that failure to obtain leave invalidated the action, and leave could not be given retrospectively. The reasoning of Glass JA (with whom Moffitt P and Samuels JA agreed) was as follows:

   1. (1)

      The inquiry properly to be made did not turn on classification of mandatory and directory requirements. Rather the question posed was a matter of construction as to whether there was a legislative intention that a failure to obtain leave should nullify the act in question. This was to be determined having regard to the nature of the pre-condition, its place in the legislative scheme and the extent of the failure to observe the requirement. This was the approach mandated in earlier decisions including Tasker v Fullwood [1978] 1 NSWLR 20 at 23 and 24 and, I would add, subsequently confirmed by the High Court in Project Blue Sky.

   2. (2)

      The requirement of leave under s 6(4) did not involve any question of strict or substantial compliance. The action was either commenced with leave or was not.

   3. (3)

      Three possibilities arose if a proceeding was commenced without leave: the proceeding was either a complete nullity, or else it remained valid irrespective of whether or not leave was subsequently granted, or else it continued in a state of suspended validity, which would come to an end if leave was not obtained within an unspecified time.

   4. (4)

      Nothing in the language of s 6(4) supported the attribution of a legislative intention of the last two kinds; thus a failure to obtain leave of the Court under s 6(4) in advance invalidated the action and rendered it incapable of being revived by leave retrospectively given.

5. [82]

   Likewise in the present case, nothing in the language of s 41 supports the attribution of a legislative intention that the appointment of an administrator of a registered club without the prior approval of the Authority to act in that capacity, continues in a state of suspended validity which will come to an end if approval is not granted by the Authority within an unspecified time.

6. [83]

   Further, and again contrary to Mr Whittingham's submissions, there is no proper analogy in terms of either context or subject matter, between a subsequent approval given by the Authority under s 41, and the Court's power to grant leave, with retrospective effect, for the appointment of an administrator under s 448C of the Corporations Act. The former involves the giving of an approval by an administrative body, which lifts the prohibition contained in s 41 on the capacity of a person to act as an administrator of a registered club. The Authority is not given any power of dispensation in the case of non-compliance with s 41. The latter involves the exercise of a discretionary power conferred on a court to permit certain categories of persons who would otherwise be disqualified from seeking or consenting to act as administrators because they have a prescribed connection with the subject company, to give the necessary consent to so act.

Scope and object of Registered Clubs Act

1. [84]

   The scheme of the Registered Clubs Act as a whole and in particular, the function of Pt 4 (Management of registered clubs) in which s 41 is contained, makes clear the scope and purpose of the statutory requirement in s 41. First, the Authority has an important role in approving the persons who are to have responsibility for management of registered clubs. This is apparent from the other provisions in Pt 4 relating to:

   1. (1)

      the requirement of the registered club to have a secretary who is to be the chief executive officer of the club (s 32(1)), and the role of the Authority in granting or refusing approval for persons to act as the secretary of a registered club (s 33);

   2. (2)

      the prohibition on unapproved persons acting as secretary of a registered club (s 34); and

   3. (3)

      the power of the Authority to appoint a person to administer the affairs of a registered club, where the governing body of the club has, in the opinion of the Authority, ceased to be effective as a governing body (s 41A).

2. [85]

   Secondly, the statutory requirement in s 41 is to be understood in the context of the far ranging effects which the appointment of an administrator has on the management of a registered club. Under Pt 5.3A of the Corporations Act, the administrator takes control of the club's business, property and affairs, may carry on that business and manage that property and those affairs, may terminate or dispose of all or part of that business and may dispose of any of that property and may perform any function, and exercise any power, that the registered club or any of its officers could perform or exercise if the registered club was not under administration (s 437A, Corporations Act). Further, while a club is under administration, a person (other than the administrator) cannot perform or exercise, and must not purport to perform or exercise, a function or power relevantly as an officer of the company, except with the administrator's written approval (s 437C, Corporations Act).

3. [86]

   Thirdly, the prohibition in s 41 is directed to securing compliance by the proposed appointee with the requirement to obtain approval of the Authority before such person takes control of the management of the affairs of the registered club.

4. [87]

   The evident purpose of s 41 is to require that a change in the control of a registered club's business, property and affairs, brought about upon the appointment of an administrator under Pt 5.3A of the Corporations Act, only occurs where the identity and qualities of the person to occupy such position (in place of the secretary of the registered club previously approved by the Authority), has been approved by the Authority. The Authority's functions include deciding which persons are fit and proper to be given responsibility for management of registered clubs.

5. [88]

   Insofar as the primary judge had regard to the objects of separate legislation, being Pt 5.3A of the Corporations Act, or perceived inconvenience or frustration of the purposes of that separate statutory regime in the case of urgent appointments if approval was required prior to the administrator's appointment, he was in error. First, it is necessary to focus solely on the objects of the statutory provision under consideration. Secondly, as noted above, s 41 is not directed to approval by the Authority of an appointment of an administrator by a registered club. Rather it is directed to approval of a person to act in the capacity of an administrator of a registered club. Nothing in s 41 suggests that the urgency of an appointment of an administrator by a registered club somehow removes the incapacity of a person to so act in the absence of such approval having first been given by the Authority.

6. [89]

   I also respectfully disagree with the alternative construction given to s 41 by the primary judge (at [110]), that any invalidating effect on Mr Whittingham's capacity to act as administrator of the Club, ceased to have that effect when the Authority subsequently provided its approval to Mr Whittingham's appointment.

7. [90]

   Like the provision considered in National Mutual, the terms of s 41 do not involve any question of strict or substantial compliance. The purported appointment of administrator is either made with the approval of the Authority or not. The absence of any practical prejudice to any party, or any objection having been taken by the Authority to the purported appointment is not to the point. There is no warrant, in my view, for giving s 41 an interpretation that late compliance is sufficient.

Consequences of non-compliance

1. [91]

   Prima facie, a statutory requirement that a party not act in a particular capacity unless given approval to so act by a specified body, must be construed as having some legal effect. If contravention of the requirement is not an offence, and if there be no other penalty for contravening the requirement, the only legal effect which can be attributed to the prohibition on acting without the required approval is that the contravention should invalidate any appointment to so act (compare the statement of Brennan and Dawson JJ in ABC Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454 at 463, who were in dissent on the question of construction in that case).

2. [92]

   However, s 41 does not provide any offence for non-compliance. This is in marked contrast to s 34 of the Registered Clubs Act (which is also contained within the same Pt 4 of the Act), which provides that a person who acts as secretary of a club without being approved by the Authority, is guilty of an offence. The fact that contravention of s 41 is not stated to be an offence, and otherwise attracts no remedy, supports the construction that non-compliance results in the invalid appointment of a person as administrator of a registered Club.

Other considerations

1. [93]

   There are a number of other relevant considerations which highlight the difficulties with the approach of the primary judge in construing the statutory requirement in s 41 as only having "suspensory effect". First, this approach disregards the significance of the time periods imposed by Pt 5.3A for the taking of various steps in relation to an administration including the convening of creditors meetings to make decisions as to the fate of the company's affairs and the giving of relevant notices by the administrator. These include the following:

   1. (1)

      the first meeting of creditors must be held eight days after the administration begins (s 436E(2));

   2. (2)

      the second meeting of creditors must be held within five business days before, or after, the end of the convening period (s 439A(2)), which is generally 20 business days beginning on the day after the administration begins (s 439A(5));

   3. (3)

      in each case, notice of such meetings must be given at least five business days before the meeting (s 436E(3) and s 439A(3));

   4. (4)

      the rights of secured creditors, owners and lessors under Div 7 of Pt 5.3A; and

   5. (5)

      the power of administrators to give notice to an owner or lessor of property used or occupied by the company within five days after the beginning of the administration, stating that the company does not propose to exercise rights in relation to the property (s 443B(3)).

2. [94]

   On the primary judge's preferred construction, because s 41 does not specify the time in which an approval by the Authority must be given after an appointment, the administrator, creditors and members, as well as owners and lessors would be left in a state of not knowing whether the administrator's appointment might be subsequently rendered invalid because either an approval had not been sought, or if sought, had not been granted. A construction productive of such great uncertainty is to be avoided.

3. [95]

   Secondly, the nature of the statutory requirement in s 41 is not such that circumstances may arise where compliance will not be possible (compare Tasker v Fullwood at [24], where the relevant requirement for approval of transfer of a liquor licence included that the applicant produce to the Licensing Court an agreement between any person interested in the business or the profits of the business and the applicant. If the party interested declined to execute an agreement, there would be no way in which such party could be compelled to do so). By contrast, s 41 simply requires the giving of an approval by the Authority to the proposed appointee acting in the capacity as administrator of a registered club. The statutory requirement in s 41 does not involve the need to procure any act or consent of a third party which may or may not be forthcoming.

4. [96]

   For the above reasons, Grounds 10 and 10A of the amended notice of appeal must be upheld.

Notice of contention - ambit of s 447A

1. [97]

   In support of the notice of contention, the respondent submitted that the Court could make an order under s 447A of the Corporations Act to the effect that Pt 5.3A is to operate in relation to the Club as if the approval given under s 41 of the Registered Clubs Act had been given prior to the date of the purported appointment of Mr Whittingham.

2. [98]

   The respondent accepted that s 447A of the Corporations Act and s 41 of the Registered Clubs Act operate concurrently having regard to the terms of s 5E(2)(e)(ii) of the Corporations Act. However, the respondent submitted that s 447A enables the Court in relation to matters concerning the effectiveness of the appointment of an administrator to create an artificial effect by its order.

3. [99]

   The appellants' response to the notice of contention highlighted the limit of operation of s 447A(1), being to make orders about how "this Part", that is, Pt 5.3A is to operate in relation to a particular company: see Australasian Memory Pty Ltd v Brien [2000] HCA 30; 200 CLR 270 at 279 [18]. It was submitted that s 447A of the Corporations Act was incapable of curing non-compliance with s 41 of the Registered Clubs Act because no provision of Pt 5.3A concerns the subject matter of non-compliance with s 41 of the Registered Clubs Act.

4. [100]

   The appellants also noted that the Corporations Act expressly provides that it is not intended to exclude or limit the concurrent operation of a law of a State or Territory which, amongst other things, prevents a person from being involved in the management or control of a company (s 5E(2)(e)(ii)). They submitted that s 41 of the Registered Clubs Act is such a law and hence has concurrent operation with s 447A of the Corporations Act.

5. [101]

   The respondent did not suggest that the concurrent operation of s 41 of the Registered Clubs Act was not preserved by s 5E of the Corporations Act. Nor did the respondent submit that there was any direct inconsistency between s 447A of the Corporations Act and s 41 of the Registered Clubs Act: see s 5E(4) of the Corporations Act.

6. [102]

   The respondent's notice of contention should be rejected, essentially for the reasons advanced by the appellants.

7. [103]

   First, whilst the powers under s 447A are wide, they are not entirely without limit. In particular, s 447A is not a general power standing apart from the scheme found in Pt 5.3A of the Corporations Act: see Australasian Memory Pty Ltd v Brien at 280 [20] and 281 [24].

8. [104]

   Secondly, s 447A(1) speaks of orders about how "this Part" is to operate in relation to a particular company. The reference "this Part" is to be understood as a reference to each of the provisions in it: see Australasian Memory Pty Ltd v Brien at 279 [18]. Clearly, s 41 of the Registered Clubs Act is not a provision contained in Pt 5.3A. Thus, there is no power under s 447A of the Corporations Act to validate the invalidity of an administrator's appointment arising under s 41 since the former section is directed to how Pt 5.3A of the Corporations Act operates in relation to a company, not the operation of separate State or Territory legislation.

9. [105]

   The conclusion that there is no power under s 447A to validate an invalidity under s 41 of the Registered Clubs Act means that the appeal must be allowed, the declaration and orders of the primary judge be set aside and the proceedings remitted to the Court below to determine the respondent's quantum meruit claim in relation to his remuneration and expenses, which was not dealt with by the primary judge.

10. [106]

    The appellants' remaining challenges to the validity of Mr Whittingham's appointment only require determination if the above conclusions are wrong and insofar as they are relevant to the question of costs at first instance and on appeal.

Issues 1 and 2: Reliance upon statutory assumptions

1. [107]

   Issues 1 and 2 may be considered together. First, the pleading point by the appellants raises the issue of whether the primary judge erred in permitting Mr Whittingham to assert reliance upon s 128 and s 129 of the Corporations Act, in the absence of an explicit reference to those provisions in his points of defence filed 10 May 2012 (Issue 1).

2. [108]

   Secondly, if the pleading point is not upheld, the issue arises as to whether the statutory assumptions set out in s 129(1) of the Corporations Act precluded the Club from challenging the validity of Mr Whittingham's purported appointment as administrator on the ground that the Club did not comply with the requirements as to the minimum number of directors or quorum requirements specified in its constitution at the time of the purported appointment (Issue 2). This in turn raises three main sub-issues:

   1. (1)

      Whether Mr Whittingham was on notice of the possible invalidity of his appointment and breached his duty to inquire as to the validity of his appointment so that s 128 and s 129 of the Corporations Act had no application.

   2. (2)

      Whether the statutory assumptions under s 128 and s 129 of the Corporations Act can be relied upon at all by a person who owes an independent or fiduciary duty to the company and is alleged to have breached that duty.

   3. (3)

      Alternatively, whether the Club had established the exception under s 128(4) of the Corporations Act that Mr Whittingham had either actual knowledge or suspected that the relevant assumption in s 129(1) was incorrect, and accordingly was disqualified from relying upon it.

Issue 1: The pleading point

1. [109]

   The primary judge noted (at [39]) that the appellants first raised the pleading point in their supplementary closing submissions, which were served after the conclusion of oral closing submissions. No objection had been raised by the appellants prior to that time. Indeed, counsel for the appellants had made submissions during his oral closing concerning the application of s 128 of the Corporations Act (Black 517I-518M).

2. [110]

   The appellants contended below that Mr Whittingham's points of defence made no reference to anything which would make s 128 applicable, for example, that in any specific dealing with the Club he made certain specific assumptions. The appellants' submissions below continued as follows: "Consistently with his points of defence, nowhere in his evidence did Whittingham depose that he made any relevant s 129 assumption. In this regard, by definition, any reliance by Whittingham upon any assumption would depend upon evidence that he made the asserted assumption and had the issue been raised, further evidence might have been led to challenge or refute it. Thus any application by Whittingham to amend his points of defence after the evidence has closed must be rejected [citations omitted]." (2 Black 821-822).

3. [111]

   The primary judge held (at [40]) that Mr Whittingham was entitled to rely upon the statutory assumptions in s 128 and s 129 of the Corporations Act because: (a) his points of defence pleaded that he formed the view that he was validly appointed, he gave evidence of his understanding to this effect and was cross-examined at length as to the basis for that understanding; (b) reliance on s 128 and s 129 of the Corporations Act was identified in Mr Whittingham's opening written outline and the appellants did not then suggest that they were in any way disadvantaged by that matter or were deprived of the opportunity to lead relevant evidence; (c) the case was thereafter conducted on the basis that this matter was in issue; (d) the appellants did not identify any specific evidence that could or would have been led in order to meet Mr Whittingham's reliance on the statutory assumptions; (e) further, once the Club successfully applied, on the first day of the hearing (13 March 2012) to be joined as second plaintiff in the proceedings, Mr Whittingham was entitled to the opportunity to raise such defences as might be available to the Club's claim.

4. [112]

   The appellants submitted on appeal that in addition to there being no reference in the points of defence to s 128 and s 129 of the Corporations Act, there was no such reference in the respondent's statement of real issues for determination filed the day before the hearing commenced. This may be accepted. However, s 128 and s 129 of the Corporations Act were referred to in the respondent's opening written submissions dated 12 March 2012, apparently served on the same day as the respondent's statement of real issues for determination.

5. [113]

   The appellants further submitted that they were prejudiced by the late notice of the respondent's opening submission the day before the hearing. The respondent's submission asserted that "Mr Whittingham believed that he had been validly appointed, and that he was entitled to make the assumptions allowed by s 128 and s 129 of the Corporations Act" (2 Black 572E-H).

6. [114]

   In my view, no error has been demonstrated in the primary judge's rejection of the appellants' pleading point. First, the reasons given by the primary judge were sufficient to dispose of the appellants' late objection to Mr Whittingham relying upon the statutory assumptions.

7. [115]

   Secondly, insofar as the appellants suggested that this issue involved consideration of whether Mr Whittingham actually made any of the relevant assumptions, this contention is misconceived. The correct position is that there is no need for the person in question to actually make any of the assumptions in s 129. This is made clear by the second sentence of s 128(1) which provides that the company (in this case the Club) is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect: see Soyfer v Earlmaze Pty Ltd [2000] NSWSC 1068 at [78] per Hodgson CJ in Eq; Oris Funds Management Ltd v National Australia Bank Ltd [2003] VSC 315 at [112]; Eden Energy Ltd v Drivetrain USA Inc [2012] WASC 192; (2012) 90 ACSR 191 at 211 [83](a).

8. [116]

   Thirdly, the appellants did not contest on appeal the accuracy of the primary judge's observation (at [40]), when addressing the question of prejudice, that they did not upon receiving Mr Whittingham's opening outline on the day prior to the commencement of the hearing, "suggest that they were in any way disadvantaged by that matter or ... deprived of the opportunity to lead relevant evidence".

9. [117]

   For these reasons, Ground 1A(a) of the amended notice of appeal is not made out.

(a) Notice of possible invalidity

1. [118]

   The appellants first submitted that Mr Whittingham was not entitled to make the assumptions in s 129(1) of the Corporations Act because: (a) he was on notice of possible invalidity and was therefore required by law to carry out whatever reasonable inquiries were necessary to satisfy himself that his appointment was validly made; (b) he failed to do so; and (c) he could have, but did not, either promptly on his appointment or at any time thereafter apply to the Court seeking a declaration as to whether or not his purported appointment was valid.

2. [119]

   The appellants contended that Mr Whittingham was on notice of invalidity arising from the defective minute containing the appointing resolution; his (and his solicitor's review) of the constitution of the Club which provided that the board was to consist of seven directors; and the reconstitution of the board of the Club in October 2009 with seven directors which was expressed to be in accordance with Article 34(c) of the constitution (Ground 1A(b), (c) and (d)).

3. [120]

   This ground of appeal essentially repeated the appellants' submission below that an administrator has an obligation to remove uncertainty about the validity of his appointment (1 Black 456L-N) and that failure to do so had the consequence that an administrator could not rely on the statutory assumptions. The primary judge considered and rejected this submission (at [42]-[60]) for three main reasons. First, that being put "on inquiry" of possible invalidity is not sufficient to prevent Mr Whittingham relying on the statutory assumptions (see s 128(4)).

4. [121]

   Secondly, that matters occurring after the time of the relevant dealings between Mr Whittingham and the Club, such as his subsequent review of the Club's constitution on 6 February 2009, were not relevant to the availability of the statutory assumptions in relation to his purported appointment as administrator between 14 and 17 November 2008.

5. [122]

   Thirdly, there was no evidence of how the other directors of the Club would have responded to an inquiry by Mr Whittingham. Hence, the appellants failed to establish that had Mr Whittingham made further inquiry of any director of the Club other than Ms Yolanda Sanchez, he would have learned of what the appellants described were "the serious defects in his purported appointment". There was no challenge to this finding on appeal.

6. [123]

   In my view, the primary judge did not err in rejecting the appellants' first submission on s 128 of the Corporations Act, which itself contained a number of errors. First, the appellants conflated the circumstances which might put Mr Whittingham "on inquiry" as to possible invalidity of his appointment leading to an alleged failure to satisfy himself as to whether he was validly appointed, with the different circumstances of actual knowledge or suspicion as required by the s 128(4) exemption to disqualify him from relying on the statutory assumptions.

7. [124]

   Secondly, the appellants sought to rely upon two matters occurring after the relevant dealing between Mr Whittingham and the Club as disqualifying him from relying upon the statutory assumptions in s 129(1) in relation to his purported appointment as administrator. The first was a subsequent review of the Club's constitution by Mr Whittingham on 6 February 2009. The second was Mr Whittingham's efforts to reconstitute the board of the Club in November 2009 with seven directors.

8. [125]

   The primary judge referred to the first matter (at [49]) and held it was not relevant, because it could not establish that Mr Whittingham knew or suspected that his appointment did not comply with the Club's constitution at the time it was made. This raises the question of principle next considered as to the material time for the purposes of applying s 128(4). In any event, the appellants' submission below was framed as a criticism of Mr Whittingham's evidence that he never turned his mind in February 2009 to the question of the validity of his appointment. This was said to involve a departure from good practice by an administrator (1 Black 456V-X). In my view, this characterisation of Mr Whittingham's conduct did not advance the appellants' contention that s 128 and s 129 of the Corporations Act had no application.

9. [126]

   The second matter referred to in the appellants' written submissions concerned Mr Whittingham's knowledge of the reconstitution of the board of the Club in November 2009. However, in addition to the question of principle next considered, Mr Whittingham was not cross-examined on this matter as constituting actual knowledge or suspicion of possible invalidity of his appointment, nor was it the subject of any submission by the appellants before the primary judge. It may be properly ignored.

Material time for s 128(4)

1. [127]

   As to the question of principle, the language of s 128(4) has a temporal element. To be disqualified from making the assumptions in s 129 the person must know or suspect "at the time of the dealings" that the assumption was incorrect. Thus, the material time for the purpose of applying s 128(4) is "at the time of the dealings". Whilst the notion of "dealings" has been given a broad meaning, relevantly in the present case the reference to a dealing between Mr Whittingham and the Club is to be taken as the source transaction. That is, the instrument purportedly appointing the administrator, not a step taken under it. Knowledge or suspicion acquired later does not deprive the party dealing with the company of the protection afforded by s 128: see Barclays Finance Holdings Ltd v Sturgess (1985) 3 ACLC 662 at 667 per Wood J, a decision on the former provision in s 68D of the Companies (NSW) Code; Eden Energy at [83](e), an interlocutory decision concerning s 128(4) of the Corporations Act.

2. [128]

   This is not to deny that an administrator may have a duty of inquiry during the course of the administration, if later put on notice of possible invalidity of his or her appointment: see Deputy Commissioner of Taxation v Portinex Pty Ltd (No 2) [2000] NSWSC 557; (2000) 34 ACSR 422 at 424 [8] per Austin J. However, the circumstances giving rise to such a duty of inquiry and the consequences of any failure to make reasonable inquiries if later put on notice of possible invalidity, do not disqualify the administrator from relying upon the statutory assumptions in relation to his appointment.

3. [129]

   In my view, Ground 1A(b), (c) and (d) of the amended notice of appeal are not made out.

(b) Breach of fiduciary duty

1. [130]

   The appellants next submitted that the statutory assumptions in s 128 and s 129 of the Corporations Act had no application because: (a) Mr Whittingham had a duty to satisfy himself that his appointment was validly made; (b) he breached this duty of inquiry; (c) this failure constituted a breach of fiduciary duty; and (d) the statutory assumptions are not available to a person dealing with a company who owes an independent or fiduciary duty to the company and breaches that duty in their dealings with the company.

2. [131]

   In support of the last step of this submission, the appellants referred to the decision of Rolfe J in Beach Petroleum NL v Abbott Tout Russell Kennedy (1997) 26 ACSR 114, upheld on appeal in Beach Petroleum NL v Abbott Tout Russell Kennedy [1999] NSWCA 908; (1999) 33 ACSR 1 at 91. They complained on appeal that the primary judge did not consider these authorities. This criticism is unfair, as these cases were not drawn to his Honour's attention, nor was this submission made below.

3. [132]

   The first and fourth steps of the appellants' submission may be generally accepted, subject to some further elaboration. The second step was not the subject of an express finding by the primary judge. This reflected the way in which the appellants put their case below, that the asserted failure of Mr Whittingham to make reasonable inquiries disqualified him from relying upon the statutory assumptions. The third step is, in my view, incorrect. It mischaracterises the recognised duty of administrators to satisfy themselves that they have been properly appointed, as a fiduciary duty.

4. [133]

   It is convenient to address the steps in the appellants' submission in reverse order.

Beach Petroleum

1. [134]

   As to the fourth step of the appellants' submission, it is necessary to pay careful attention to the facts and circumstances considered in Beach Petroleum. In that case, a firm of solicitors, Abbott Tout, were retained to give advice to the Independent Resource Limited Group (IRL Group), which included Beach Petroleum. The advice related to the restructuring and refinancing of the IRL Group and was confined to the consideration of several proposals. In providing advice on these proposals, Abbott Tout was required to look at the relationship of the companies in the IRL Group, including to some extent, consideration of their financial position. At first instance, Rolfe J did not consider that this led to a "real sensible possibility of conflict" (at 273). In the three transactions under consideration, his Honour held (at 293) that Abbott Tout did not owe a fiduciary duty to Beach Petroleum or, alternatively, had not breached its fiduciary duty.

2. [135]

   The issue of reliance upon the statutory assumptions was raised by Abbott Tout by way of defence to allegations that it had breached a fiduciary duty owed to Beach Petroleum, or had knowingly assisted certain directors of Beach Petroleum in their breaches of trust and fiduciary duty with regard to various transactions. Abbott Tout contended that they were entitled to rely upon s 68A of the Companies Code to assume that the directors of Beach Petroleum were acting conformably with the company's constituent documents; that they had authority to exercise the powers and perform the duties customarily exercised or performed by them; and that they had properly performed those duties. Section 68A of the Companies Code was a predecessor to s 128 and s 129 of the Corporations Act, albeit the disqualifying provision in s 68A(4) involved a put "on inquiry" test rather than the actual suspicion test now contained in s 128(4) of the Corporations Act.

3. [136]

   In determining whether Abbott Tout were entitled to rely upon the statutory assumptions in s 68A of the Companies Code, Rolfe J assumed (at 229) the existence of a fiduciary duty owed by those solicitors to Beach Petroleum. The Court of Appeal dealt with the s 68A defence on the same assumption (at 91). Thus, the statements in Beach Petroleum are strictly obiter.

4. [137]

   At first instance in Beach Petroleum, Rolfe J expressed the following view (at 300): "... the person dealing with the company, who is entitled to make those assumptions, cannot be a person who has an independent duty to it, by virtue for example of the fiduciary relationship created by the retainer as a solicitor. Unless this was so a solicitor would be able to avoid the consequences of the fiduciary duty in circumstances where this would be contrary to its very assumption. Therefore, the solicitor/client retainer, relevantly for present purposes, creates the dealing and the connection or relationship."

5. [138]

   His Honour held that the defence based on s 68A failed on the hypothesis that Abbott Tout were acting for Beach Petroleum. This was because it was not open to those solicitors to assert that by virtue of the fiduciary relationship thereby created they ought not to have been aware of the relevant facts concerning the breaches of trust and fiduciary duty by the directors of Beach Petroleum.

6. [139]

   Abbott Tout cross-appealed, contending that Rolfe J was in error in rejecting the defence under s 68A of the Companies Code. This Court (Spigelman CJ, Sheller and Stein JJA) dismissed this aspect of the cross-appeal by Abbott Tout (at 91) and held at [458]: "At first blush it may seem that his Honour was excluding a solicitor acting for a company from ever being able to rely on the assumptions in s 68A. However, we do not think that his Honour so intended. Rather, Rolfe J was saying that assuming a fiduciary relationship, and its breach, as it seems one must for the purposes of the argument, then the section cannot be relied on. This was because to do so would override the fiduciary duty."

7. [140]

   The factual controversy at the heart of the s 68A issue raised by Abbott Tout's cross-appeal was whether those solicitors needed to check the status of certain deposits by companies within the IRL Group with a Swiss Bank (R&B). Amounts of these deposits had been on-lent by R&B to IRL on terms that until the amounts were repaid by IRL, the deposits were not available to the other companies in the IRL Group and were described as "blocked". At [460] of the judgment of this Court, it was noted that although Rolfe J did not specify the extent of the assumed fiduciary duty of Abbott Tout to Beach Petroleum in his analysis of the s 68A defence, the defence must assume that the duty included the need to inquire about the R&B deposits, as well as Abbott Tout's breach by their failure to do so. It was on this basis that this Court held that the conclusion of Rolfe J was correct in rejecting the s 68A defence.

8. [141]

   Two propositions emerge from Beach Petroleum. First, it is not the case that a person in the position of a fiduciary, such as a solicitor, can never rely upon the statutory assumptions set out in s 129 of the Corporations Act. Secondly, assuming a fiduciary relationship, and its breach, the statutory assumptions in s 129 of the Corporations Act cannot be relied upon where the content of the assumed duty obliged the fiduciary to investigate or satisfy themselves as to any of the matters set out in s 129 of the Corporations Act.

9. [142]

   Thus, the statutory assumptions in s 129 of the Corporations Act cannot be relied upon by a fiduciary who has dealings with a company, to defeat a breach of fiduciary duty owed to the company in circumstances where that duty required the fiduciary to investigate or satisfy themselves as to any of the matters in s 129.

Administrator's duty of inquiry

1. [143]

   As to the first step of the appellants' submission, the nature, scope and content of the administrator's duty of inquiry has been variously expressed in the authorities. The earliest case appears to be Deputy Commissioner of Taxation v Portinex Pty Ltd (No 2) at 423-424. In Portinex at [3], Austin J referred to the duty of care of a voluntary administrator which had been recognised in the cases. These authorities expressed the view that the discharge of that duty of care requires the voluntary administrator to satisfy himself or herself, immediately after appointment, that the resolution of directors under s 436A authorising the appointment appears on the face of the minute which records it to be a valid resolution, and that the instrument of appointment, extended pursuant to the resolution of the board, also appears on its face to be valid.

2. [144]

   The nature of the "duty of care" to which Austin J had regard to in Portinex was not in any sense a fiduciary duty. Rather, his Honour's express reference to "the duty of care ... recognised in the authorities", may be taken to be a reference to the duty at law in the tort of negligence, or under statute, being the duty of care and diligence under s 180 of the Corporations Act, which applies to an administrator as an officer of the corporation.

3. [145]

   The definition of the term "officer" in s 9 of the Corporations Act includes a purported administrator or deed administrator acting in that capacity, because the definition includes a person who makes or participates in making a decision that affect the whole, or a substantial part. of the business of the corporation. This language is wide enough to encompass an invalidly appointed administrator or deed administrator.

4. [146]

   In Wilson v Manna Hill Mining Co Pty Ltd [2004] FCA 1663; (2004) 51 ACSR 404 at 412, Lander J agreed with the view of Austin J in Portinex, that an administrator should satisfy himself or herself that he or she has been regularly appointed. However, his Honour emphasised that this did not mean that an administrator must undertake a comprehensive analysis of the historical records of a company. His Honour described the scope and content of the administrator's "duty to inquire" in the following terms at [63]: "However, where the minute containing the appointing resolution, the appointing resolution or the circumstances surrounding the passing of the resolution or any other circumstances particular to the company involved contain some feature which ought to put an administrator on notice, the duty to inquire will oblige the administrator to carry out whatever reasonable enquiries are necessary to satisfy the administrator that the appointment has been validly and regularly made. What is reasonable will depend upon the facts and circumstances of each individual case."

5. [147]

   The description of the administrator's duty in terms of a "duty of care" (Portinex at 423 [3]), and a duty to carry out "whatever reasonable inquiries are necessary" (Wilson at 412), is not consonant with the third step in the appellants' submission, namely, that a failure by an administrator to satisfy himself that he has been properly appointed is a breach of fiduciary duty.

6. [148]

   It may be readily accepted that as the company's agent, the administrator owed fiduciary duties to the company (see s 437B Corporations Act). However, the obligations which equity imposes on a fiduciary are generally considered to be proscriptive rather than prescriptive in nature: first, a duty not to obtain any unauthorised benefit from the relationship; and secondly, a duty not to be in a position of conflict: see Breen v Williams (1996) 186 CLR 71 at 135; Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at 198. As observed by P D Finn, "The Fiduciary Principle" in T G Youdan (ed), Equity, Fiduciaries and Trust (1989), Casswell at 27, two themes are embodied in these overlapping proscriptions: one concerns itself with misuse of fiduciary position and the other with conflicts of duty and interest or conflicts of duty and duty arising in or in virtue of that position, citing Deane J in Chan v Zacharia (1984) 154 CLR 178 at 198. These themes reflect the fiduciary principle which insists on loyalty of the fiduciary in the service of the principal.

7. [149]

   Further, a relationship may be fiduciary as to some, but not all, of its aspects: see Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 15 per Bryson J; Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41 at 73 and 102. This is particularly so where there the relationship is based in contract, or includes a duty of care at law or under statute.

8. [150]

   The appellants submitted at the trial that the administrator had a duty to remove uncertainty. This was obviously not a fiduciary duty. The appellants reformulated this submission on appeal, by casting the administrator's fiduciary duties as including a duty to "be careful". This was said to be analogous to a trustee's duty of care in the administration of trust property. There are two answers to the appellants' contention.

9. [151]

   First, there is no proper analogy between the nature, scope and content of the duty of administrators to satisfy themselves that they have been properly appointed, including to make reasonable inquiries if put on notice of possible invalidity, and a trustee's duty to exercise care when making investments with trust property. As to the latter duty see: Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 at 473; Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 at 500 [38].

10. [152]

    Secondly, the appellants' contention conflates the circumstances giving rise to a duty of inquiry by an administrator, with the very different circumstances involving the manner of exercise of fiduciary powers being an area in which "the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed": Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 97; John Alexander's Clubs Pty Ltd v White City Tennis Club Limited [2010] HCA 19; (2010) 241 CLR 1 at 34 [87]. Acting in the interests of the principal means not acting in a way that prefers the fiduciary's own interest or duty to a third person. The former concerns a duty relating to the creation of the agency; the latter concerns a duty arising in the carrying out or performance of the agency. The appellants' contention, if accepted, would have the consequence of characterising what is, at most, negligent conduct, as a breach of fiduciary duty. This proposition is to be rejected. As observed by Finn in "The Fiduciary Principle" at page 28: "Loyalty is thus exacted, often in a draconian way. But save in one very distinctive class of case involving "fiduciary powers," no more than loyalty is exacted. This warrants emphasis. It is not the case that the pure negligence of a lawyer, an agent's excess of authority, a partner's breach of the partnership contract or a trustee's improvident investment is, as such, a breach of fiduciary duty, no matter how harmful to the interests of the client, the principal, etc. If no issue of disloyalty is involved, such matters will be actionable through those primary bodies of law which constitute or govern the ordinary incidents of the relationship in question - negligence, breach of contract or breach of trust. What is being rejected here is the proposition that the fiduciary principle is a prescriptive one in what it exacts." [citations omitted].

11. [153]

    The appellants were not able to identify any authority supporting their submission. They referred to an extrajudicial article written by Mr R P Austin (when a judge of the Supreme Court), who expressed the view that an administrator owes a fiduciary duty to the company represented (where it is insolvent) by the creditors as a whole, and accordingly must be independent and impartial ( see "The Legal Standard of Loyalty and Professional Guidelines", a paper by Justice R P Austin, Supreme Court of New South Wales, IPAA National Conference 12-13 October 2006). So much may be readily accepted. However, broad statements to the effect that an administrator must be independent and impartial reflect no more than that within the scope of the fiduciary relationship, the fiduciary must give their undivided loyalty to the person to whom the obligation is owed.

12. [154]

    As noted above, it is the requirement of loyalty which underpins the "no profit rule" and the "no conflict rule" attaching to fiduciaries. It does not, however, justify the leap which the appellants ask the Court to make in the present case. The appellants' submission should be rejected. It is unsupported by authority, and is not justified by any legitimate process of reasoning.

13. [155]

    In view of the above conclusion, it is unnecessary to consider the debate in the authorities and by learned authors, as to whether it is inappropriate to apply the expression "fiduciary" to the obligation of a trustee or other fiduciary to use proper care and skill in the discharge of his or her duties: see Bristol & West Building Society v Mothew [1998] Ch 1 at 16; Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187 at 237; (1994) ACSR 109 at 158; compare Meagher, Gummow and Lehane's Equity Doctrines and Remedies 4th ed, (2002) Lexis Nexis at [5-295]-[5-330]; Young, Croft, Smith, On Equity (2009) Thomson Reuters at [7.460]-[7.490].

14. [156]

    It is also unnecessary to consider in this context, the second step of the appellants' submission. This issue is considered below in the context of the appellants' reliance on s 128(4).

15. [157]

    In my view, Ground 1B of the amended notice of appeal is not made out.

(c) Section 128(4) exception

1. [158]

   Section 128(4) of the Corporations Act provides: "A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect."

2. [159]

   The reference to "knew or suspected" is a reference to actual knowledge or actual suspicion: see Soyfer v Earlmaze at [70]-[71]; Eden Energy at [83](c).

3. [160]

   The word "suspect" has been taken to mean more than a mere idle wondering whether something exists or not. It is a positive feeling of actual apprehension or mistrust; of having an apprehension or mistrust amounting to a slight opinion but without sufficient evidence. Thus, a reason to suspect that a fact exists is more than a reason to consider or look into the possibility of its existence: see Queensland Bacon Pty Ltd v Rees [1966] HCA 21; (1966) 115 CLR 266 at 303 per Kitto J, in relation to the meaning of "suspect" in the phrase "reason to suspect" in s 95(4) of the Bankruptcy Act 1924 (Cth).

4. [161]

   The statement of Kitto J in Queensland Bacon may be taken to provide the most useful guidance to the meaning of the word "suspicion" in s 129(4) of the Corporations Act: see Oris Funds Management at [118]; Silver v Dome Resources NL [2007] NSWSC 455; (2007) 62 ACSR 539 at 557 [77]; Eden Energy at [83](d).

5. [162]

   The primary judge (at [44]) correctly observed that a company seeking to avoid the application of the statutory assumptions bears the burden of persuasion that a person claiming to make an assumption knew or suspected that the assumption was incorrect, referring to Ford's Principles of Corporations Law at [13.300].

6. [163]

   The primary judge held (at [51]) that being put "on inquiry" is not sufficient to prevent a person such as Mr Whittingham relying on the statutory assumptions under s 128 and s 129 of the Corporations Act. This is undoubtedly correct.

Actual knowledge

1. [164]

   As to actual knowledge, the appellants pointed to Mr Whittingham's notes of his meeting with Ms Yolanda Sanchez on 12 November 2008 which contained a reference to "Board 7/4", as suggesting actual knowledge that the constitution required a minimum of seven directors and a quorum of four. However, Mr Whittingham was not cross-examined on this note. An inference cannot be drawn, solely based on this note, that Mr Whittingham had actual knowledge (or indeed suspicion) at the time of his appointment that the Club did not comply with the requirements in its constitution as to the minimum number of directors or quorum requirements.

Actual suspicion

1. [165]

   As to the actual suspicion, the appellants complained that the primary judge's finding that Mr Whittingham had no suspicion of invalidity at the time of his appointment was contrary to the best or preferred inference available on the evidence. The appellants referred to the fact that Mr Whittingham had asked Ms Yolanda Sanchez to confirm who was present at the directors meeting and had also asked his solicitor to confirm whether he was validly appointed, as amounting to a "suspicion" that he had not been properly appointed.

2. [166]

   The primary judge considered these matters (at [55]-[59]) as part of the factors which led him to conclude that Mr Whittingham did not in fact know or suspect that his appointment did not comply with the Club's constitution at the time it was made. The appellants complained that the weight of the evidence underlying these factors should have led the primary judge to a the opposite conclusion.

3. [167]

   In my view, no error has been demonstrated in the primary judge's conclusion. The appellants' submissions equated the circumstances which prompted Mr Whittingham to make inquiries of Ms Yolanda Sanchez as to who was present at the directors meeting and to ask his solicitor to confirm whether he was validly appointed, with Mr Whittingham holding a positive opinion, amounting to a suspicion, that he may not have been properly appointed. However, not every case of being put on inquiry amounts to suspicion.

4. [168]

   The primary judge was correct, in my view, to reject the appellants' submission that it should be inferred that Mr Whittingham formed a positive opinion amounting to a suspicion, that there was something irregular about his appointment. It is sufficient to note the following matters:

   1. (1)

      there was no challenge to the finding of the primary judge that Mr Whittingham's decision to seek legal advice as to the validity of his appointment was motivated by a concern as to the history of litigation that attended the previous management of the Club and the form of the documents provided by Ms Yolanda Sanchez. Such concerns were consistent with an abundance of caution on his part;

   2. (2)

      there was no challenge to the primary judge's finding (at [56]), that Mr Whittingham was entitled to rely on oral advice given by an experienced firm of solicitors and that it was not unreasonable for him (in not asking for written confirmation of the legal advice) to be very conscious of expending money at that time;

   3. (3)

      the appellants referred to the observations of Hedigan J in Sixty-Fourth Throne Pty Ltd v Macquarie Bank (1996) 130 FLR 411 concerning the unattractive consequences of permitting "liability to be avoided on the ground of solicitor/agent's error", but this case is distinguishable. It involved s 68A of the Companies (Victoria) Code which, unlike s 128(4) of the Corporations Act, involved a "put on inquiry" test;

   4. (4)

      contrary to the appellants' submissions, the knowledge of Mr Cruikshank (Mr Whittingham's solicitor) of the terms of the Club's constitution should not be imputed to Mr Whittingham, because s 128(4) requires actual knowledge or actual suspicion that the relevant assumption is incorrect, not imputed knowledge;

   5. (5)

      the suggested inadequacy of Ms Yolanda Sanchez's responses to Mr Whittingham's questions on 17 November 2008 concerning who was present at the meeting on the previous Friday, did not rise any higher than a "put on inquiry" circumstance, which is insufficient for the s 128(4) exemption. The appellants did not establish that Mr Whittingham harboured any pre-existing suspicions as to the validity of his appointment, which Ms Sanchez's responses failed to assuage;

   6. (6)

      the fact that there was a number of possible explanations for why Mr Whittingham may have refrained from bringing an application for a validation order in respect of his appointment, does not establish error in the primary judge's observation (at [59]) that it is inherently unlikely, given the absence of an application shortly after 14 November 2008, that Mr Whittingham knew of, or suspected, a failure to comply with the Club's constitution. The appellants' submission that Mr Whittingham may have refrained from bringing such an application because, for example, he feared losing his appointment, or was concerned about an adverse personal costs orders, is mere conjecture. It does not assist their contention that Mr Whittingham was disqualified from relying upon the statutory assumptions in s 129(1).

5. [169]

   In my view, Grounds 1C, 1D and 1E of the amended notice of appeal have not been made out.

Issue 3: No resolution of insolvency - s 436A

1. [170]

   The appellants submitted that there was no proper resolution of insolvency as required by s 436A(1)(a) of the Corporations Act, and that such a resolution was an indispensable requirement for a valid appointment of an administrator. Hence the appointment of Mr Whittingham was said to be invalid.

2. [171]

   The appellants' contention that there was no proper resolution of insolvency involved two propositions: first, that there was a failure to comply with the constitutional requirements for an effective resolution of the Club's board, such that s 436A of the Act was not engaged; and secondly, that a majority of the directors did not hold the opinion, required by that provision, that the Club was insolvent or likely to become insolvent at some future point.

3. [172]

   As to the first contention, the primary judge accepted (at [25]) that the number of directors at the relevant time was less than the number specified in the Club's constitution. He also accepted (at [26]) that the acts of the board will not be valid in that situation, because the Club's constitution did not expressly or impliedly authorise directors to act where the required minimum number of directors is not satisfied; see In Re Sly, Spink and Co [1911] 2 Ch 430; Gosford Christian School Ltd v Totonjian [2006] NSWSC 725; (2006) 201 FLR 424 at [54]; Singh v Singh [2008] NSWSC 386 at [95].

4. [173]

   However, Mr Whittingham's entitlement to rely upon s 128 and s 129 of the Corporations Act as found by the primary judge, was a sufficient answer to the Club's failure to comply with its constitutional requirements for an effective resolution of the Club's board. The appellants were precluded by the combined operation of s 128(1) and s 129(1) from asserting that the provisions of the Club's constitution had not been complied with.

5. [174]

   As to the second contention, the primary judge (at [30]) did not accept that the appellants had established that the meeting at which the resolution to appoint Mr Whittingham was purportedly passed was attended only by Ms Yolanda Sanchez and Ms Maria Sanchez. Further, the primary judge held (at [33]), that the appellants had not established that the meeting took place by Ms Sanchez separately and successfully telephoning the other two directors.

6. [175]

   The primary judge accepted (at [37]) that the formation of the insolvency opinion under s 436A of the Corporations Act is a precondition to the valid exercise of the power to appoint an administrator: see Kazaar v Duss [1998] FCA 1378; (1998) 29 ACSR 321. However, the primary judge (at [38]) rejected the appellants' contention that the Club's board had failed to form a genuine opinion as to the Club's insolvency. So far as the appellants' contention was based on Mr Faustino Garcia and Mr Daniel Garcia not holding that view or not participating in the relevant meeting, the primary judge rejected that contention (at [38]) for the reasons noted at [33] of the reasons for judgment. The primary judge was otherwise satisfied that the information which was available to the Club's directors at the time provided a strong basis for a view that the Club was in fact insolvent at the relevant time.

7. [176]

   The appellants submitted that the respondent had failed to prove that four directors were in attendance at the meeting on 14 November 2008 either personally or by telephone at the one time. This submission proceeds upon an erroneous reversal of the onus of proof. It was for the appellants to establish this assertion. The primary judge held that they had failed to do so, and his reasoning has not been shown to be erroneous.

8. [177]

   The appellants further submitted that a majority of the Club's directors did not hold the requisite opinion of insolvency because the directors' minute did not state who, if anyone, was present at the purported board meeting on 14 November 2008. This submission should also be rejected for the reasons given by the primary judge. The appellants bore the onus of proof and failed to establish this allegation in circumstances where no director had given evidence.

9. [178]

   It follows that Ground 8 of the amended notice of appeal is not made out.

1. [179]

   It is common ground between the parties that a written consent to act as required by s 448A of the Corporations Act was only signed by Mr Whittingham and handed to Ms Yolanda Sanchez on 17 November 2008. It is also clear that the purported board meeting of the directors of the Club occurred no later than 14 November 2008 at 4.52pm, being the time the signed (but undated) board minutes and instrument of appointment were both emailed to Mr Whittingham.

2. [180]

   The appellants submitted below and on appeal that the written consent was given after the time that Mr Whittingham had commenced to act as administrator of the Club, which was at least from 9.26am on 17 November 2008 (when he sent a facsimile to the OLGR advising of his appointment). It followed on the appellants' submission, that Mr Whittingham was invalidly appointed as an administrator because s 448A of the Corporations Act provides relevantly: "A person cannot be appointed as administrator of a company or of a deed of company arrangement unless: (a) the person has consented in writing to the appointment; and (b) as at the time of the appointment, the person has not withdrawn the consent."

3. [181]

   The primary judge held (at [64]) that it was clear that the instrument of Mr Whittingham's appointment was signed before he consented to that appointment. The primary judge acknowledged that it was at least arguable that an administrator's appointment is invalid if he or she had not consented to the appointment at the time he or she was appointed: see Gould v Companies Auditors & Liquidators Disciplinary Board [2009] FCA 475; (2009) 71 ACSR 648 and Calabretta v Redpen Developments Pty Ltd (in liq) [2010] FCA 81; (2010) 183 FCR 47.

4. [182]

   However, the primary judge considered that the question of invalidity under s 448A of the Corporations Act depended on whether the instrument of appointment is construed as appointing Mr Whittingham only with immediate effect (in which event the appointment would arguably be invalid) or as remaining, in effect, in suspended operation so that it took effect when and if he consented to the appointment.

5. [183]

   The primary judge held (at [65]) that it is the written instrument rather than the directors' resolution which amounts to the appointment of an administrator under s 436A of the Corporations Act. He concluded that the terms of the instrument of appointment, and s 436A and s 448A of the Corporations Act, had the effect that Mr Whittingham's appointment took effect from the point at which he consented to the appointment, on 17 November 2008.

6. [184]

   This conclusion was reached by the primary judge (at [67]) by the following reasoning: (a) the minute of the resolution passed at the directors' meeting of the Club held on 14 November 2008 authorised the execution of the instrument of appointment of administrator, but did not specify a time at which the instrument would take effect; (b) having regard to the language used in the undated instrument of appointment ("the company hereby appoints"), the intended operation of the instrument of appointment was that it remain in a state of suspended effect until Mr Whittingham's consent was given; and (c) the instrument did take effect when that consent was given on 17 November 2008.

7. [185]

   The respondent submitted that the primary judge's reasoning was correct and the result was consistent with the reasoning in Gould v Companies Auditors & Liquidators Disciplinary Board, which the primary judge had referred to in his reasons.

Consideration

1. [186]

   In my view, the purported appointment of Mr Whittingham pursuant to the instrument of appointment signed no later than 14 November 2008, was intended to be immediately effective. To the extent that it is necessary to have regard to the language of the instrument, the words "the company hereby appoints" are clear in their meaning. They speak to the time at which the instrument is signed. Furthermore nothing in the language of the directors' resolution, nor in the instrument of appointment itself, supports the construction adopted by the primary judge that the instrument was intended to remain in a state of suspended effect or operation until Mr Whittingham's consent was given.

2. [187]

   Mr Whittingham referred to Gould v Companies Auditors & Liquidators Disciplinary Board but it does not assist his case, because it is distinguishable. In Gould, the language used in the instrument of appointment was "be appointed". This expression was viewed by Lindgren J as "open-ended". That is, it did not identify the point in time at which an appointment was intended to take effect. By contrast, Lindgren J considered that an appointment under an instrument containing the expression "is hereby appointed" would take effect immediately the instrument of appointment was signed (see Gould at [354]).

3. [188]

   In the present case, the instrument of appointment provided that "the [Spanish Club] hereby appoints [Mr Whittingham] to be the company's administrator". I agree with the appellants' submission that this instrument was not an open-ended appointment, but rather a purported appointment "then and there" which was made on 14 November 2008 without Mr Whittingham's written consent.

4. [189]

   The appellants also complained that the primary judge failed to have regard or sufficient regard to the "wrongful conduct" of Mr Whittingham in dating the directors' resolution and the instrument of appointment 17 November 2008, when the documents had been emailed to him on 14 November 2008 and ought to have found that the documents could not be altered other than by further resolution (Ground 11).

5. [190]

   The primary judge (at [63]) rejected the appellants' contention that Mr Whittingham's conduct in this regard was "deliberately misleading". He considered such conduct to be "inappropriate". There is no challenge to this finding by the appellants. The primary judge's view as to the time when the instrument of appointment took effect did not depend on its date, but the language used, and the time when Mr Whittingham gave his written consent to act under s 448A of the Corporations Act. A fair reading of the reasons for judgment does not bear out the appellants' complaint that the primary judge failed to have regard or sufficient regard to Mr Whittingham's conduct in dating these documents.

6. [191]

   In my view, Mr Whittingham's purported appointment was in contravention of s 448A of the Corporations Act and Grounds 9, 9A(a) and (c)(i), 12, 12A and 12B of the amended notice of appeal should be upheld. The balance of Grounds 9A and 11 are not made out.

7. [192]

   However, this is not the end of this issue. Against the contingency that an appellate court may take a different view on this issue, the primary judge held (at [69]) that the appointment could be validated under s 447A and s 1322 of the Corporations Act. The curative orders made by the primary judge covered the invalidity of Mr Whittingham's appointment on this specific ground. Those curative orders were made upon the hypothesis that there had been no contravention of s 41 of the Registered Clubs Act. The effect of upholding the ground of appeal in respect of the contravention arising under s 41 is that no curative orders ought to have been made below, not because it was inappropriate to cure the contravention of s 448A of the Corporations Act, but there would have been no purpose served in doing so. This is because the contravention of s 41 of the Registered Clubs Act and the consequent invalidity in Mr Whittingham's appointment was beyond the reach of s 447A of the Corporations Act.

8. [193]

   Thus, no error has been shown in the exercise of discretion by the primary judge to make curative orders in relation to the contravention of s 448A of the Corporations Act in the circumstances as they existed below. The position is different on appeal only because the hypothesis upon which the curative orders were made below, being no contravention of s 41 of the Registered Clubs Act, is no longer applicable.

Issue 5: The administration ended on 19 December 2008

1. [194]

   The appellants submitted that if Mr Whittingham was validly appointed, his appointment at the latest occurred on 14 November 2008 when the (undated) instrument of appointment was signed by two directors of the Club and emailed to him. On this assumption, it was contended that: (a) the convening period, as fixed by s 439A(5) of the Corporations Act, would have ended on 12 December 2008, meaning that a meeting of the Club's creditors had to be convened by 19 December 2008; (b) the meeting was not in fact convened until 22 December 2008; (c) thus the administration of the Club came to an end and Mr Whittingham ceased to be the administrator pursuant to s 435C(3) of the Act; and (d) consequently, the resolution passed by creditors (on 22 December 2008) that the Club execute a DoCA was of no legal effect and the DoCA was not a deed of company arrangement under Pt 5.3A of the Act (Ground 13).

2. [195]

   The appellants acknowledged in oral submissions that this ground of appeal was only a subsidiary argument as it assumed the validity of Mr Whittingham's appointment on 14 November 2008, being the very matter which the appellants contended against by their primary submissions on invalidity.

3. [196]

   The appellants' essential complaint is that the primary judge rendered this issue moot by making curative orders which treated Mr Whittingham's appointment as taking effect from 17 November 2008. The appellants submitted that before making curative orders the primary judge should have determined this issue since a finding that the administration came to an end on 19 December 2008, coupled with the reasons for it, may have affected the manner in which the primary judge then exercised his discretion when making curative orders.

4. [197]

   In my view, there is no substance to the appellants' complaint. First, it is tolerably clear that the primary judge (at [101]) was alive to the temporal significance of the appellants' contention that if Mr Whittingham's appointment became effective, if at all, this occurred on 14 November 2008 rather than 17 November 2008, with the consequence that Mr Whittingham would have ceased to be administrator on 19 December 2008 on the reasoning process set out at [194] above.

5. [198]

   Secondly, the appellants' complaint proceeds upon an incorrect premise, namely that Mr Whittingham was validly appointed on 14 November 2008. Whatever view is taken in relation to whether the instrument of appointment purportedly took effect, if at all, on or before 14 November 2008, it is common ground that Mr Whittingham did not provide his written consent to act under s 448A of the Corporations Act until 17 November 2008.

6. [199]

   Thirdly, there was no error in the primary judge making curative orders in relation to the contravention of s 448A of the Corporations Act, with effect from 17 November 2008, being the date Mr Whittingham gave his written consent to such appointment as required by that provision. Again, as with Issue 4 above, the position is different on appeal only because the hypothesis upon which the curative orders were made below, being that there was no contravention of s 41 of the Registered Clubs Act, is no longer applicable.

7. [200]

   In my view, Ground 13 of the amended notice of appeal is not made out.

Issue 6: Exercise of discretion

1. [201]

   The appellants submitted that the primary judge erred in making discretionary orders validating Mr Whittingham's appointment under s 447A and s 1322 of the Corporations Act. First, it was contended that the discretion was vitiated by errors of law because the primary judge should have found that Mr Whittingham was not validly appointed administrator of the Club (Ground 16).

2. [202]

   Secondly, the appellants contended that the primary judge acted upon wrong principles, took into account irrelevant considerations, did not take into account material considerations and that his decision to make curative orders was plainly wrong (Grounds 17, 18, 19 and 20).

3. [203]

   The appellants accepted that the principles in House v The King (1936) 55 CLR 499 apply to the review by this Court of the primary judge's discretionary decision.

Multiple grounds of invalidity

1. [204]

   The appellants submitted that if this Court upheld their contention that Mr Whittingham's appointment was invalid because it contravened s 41 of the Registered Clubs Act then that is the end of the matter. This is because the primary judge accepted at [102] that there was no power under s 447A of the Corporations Act to validate an invalidity arising from s 41 of the Registered Clubs Act. This contention has been considered and accepted above under Issue 8. It provides a sufficient basis to set aside the curative orders made by the primary judge under s 447A and s 1322 of the Corporations Act.

2. [205]

   The appellants also relied upon other grounds of asserted invalidity of Mr Whittingham's appointment as militating against the primary judge's discretionary orders under s 447A and s 1322 of the Corporations Act. In view of my conclusions above in relation to those other grounds, this submission should be rejected. In summary:

   1. (1)

      the challenge to the primary judge's conclusion that Mr Whittingham could rely on the statutory assumptions in s 128 and s 129 of the Corporations Act has failed (see Issue 8 above);

   2. (2)

      although the contravention of s 448A of the Corporations Act (absence of administrator's written consent prior to appointment) has been established on appeal (see Issue 4 above), no error has been shown in the primary judge's conclusion (at [80]) that this contravention ought to be the subject of curative orders where Mr Whittingham had consented to the appointment within a short time after the appointment occurred. The position is different on appeal only because the hypothesis upon which the primary judge proceeded, being that there was no contravention of s 41 of the Registered Clubs Act, is no longer applicable;

   3. (3)

      the challenge to the primary judge's conclusion that the appellants failed to establish that the directors of the Club did not form the requisite opinion under s 436A of the Corporations Act as a pre-condition to the valid exercise of the power to appoint an administrator has failed (see Issue 3 above), and hence this alleged contravention was not relevant to the making of curative orders by the primary judge;

   4. (4)

      the challenge to the primary judge's rejection (at [100]-[101]) of the appellants' contention that the administration came to an end on 19 December 2008 has failed (see Issue 5 above) because the curative orders which the primary judge made, treating Mr Whittingham's appointment as taking effect on 17 November 2008, meant that the creditors meeting held on 22 December 2008 was held in compliance with s 439A of the Corporations Act. It is unnecessary to address this issue further since it simply does not arise once this Court upholds the invalidity of the administrator's appointment arising under s 41 of the Registered Clubs Act.

Wrong principles

1. [206]

   The appellants submitted that the Court's focus when making a discretionary order under s 447A is on the position of the company at the time of the making of the order and what is best for the company in the future: see Re Australian Art Investment Pty Ltd (Admin Apptd) [2012] VSC 18 at [6], citing Xie v Crisp [2011] VSC 154; (2011) 248 FLR 265 at [222]. It was submitted that the primary judge erred in focusing on matters (such as the solvency of the Club), not as they currently existed, but as they existed at the time of Mr Whittingham's appointment, and also erred by considering factors relating to an earlier stage of the administration.

2. [207]

   The appellants further submitted that the primary judge should have concluded that there was no good reason for making a curative order "beyond enabling the purported administrator to collect something on account of his fees, which is not one of the statutory objectives ..." under s 435A of the Corporations Act, citing Care Matters Partnership Ltd [2011] EWHC 2543 (Ch).

3. [208]

   In my view, the appellants' submissions should be rejected.

4. [209]

   First, the appellants' submission based on Xie v Crisp at [222] ignores the full statement of Ferguson J which was as follows: "... Although the events that led to the appointment of the administrator and the intentions of the various interested parties are not irrelevant, the Court's focus when making an order under s 447A (such as that which is sought) is the position of the company at the time of making the order and what is best for the company in the future."

5. [210]

   Thus, as a matter of principle the Court does not focus solely on the position of the company at the time of making the curative orders to the exclusion of matters preceding that time. The factors relevant to the exercise of a court's discretion may vary from case to case. Relevant considerations include the stage that the administration has reached, the financial position of the company, whether the business could continue if returned to the control of the directors, whether the continued administration would be in the interest of creditors, the purpose of Pt 5.3A and whether that purpose will be served by the making of orders sought, and whether there are any better options available to deal with the company's future (Xie v Crisp at [225]).

6. [211]

   Further, as recognised in Xie v Crisp (at [226]), the length of the administration before a validation order was sought and the work that was undertaken may be so significant as to militate for the continuation of the administration. This was not in fact the case in Xie v Crisp, where the administrator was purportedly appointed on 12 March 2010 and the challenge to the administrator's appointment was made on 9 April 2010, but the Court was otherwise satisfied that the discretion under s 447A should be exercised to enable the company to continue in administration.

7. [212]

   The position may be different if the administration has concluded and been superseded by a voluntary liquidation so that there is no apparent ongoing role for Pt 5.3A and therefore some difficulty in seeing what a s 447A order would specify as the way in which Pt 5.3A "is to operate": see Re Continental Pacific Insurance Co (Aust) Ltd [2002] NSWSC 789 per Barrett J at [19]. However, even in such a case, curative orders may be available under s 1322(4) of the Corporations Act.

8. [213]

   Accordingly, in my view the primary judge did not err in having regard to the circumstances existing at the time of Mr Whittingham's purported appointment. In determining whether to validate the appointment, it is undoubtedly a relevant consideration whether the circumstances pertaining to the company's financial position and affairs justified the appointment of an administrator, albeit a defect in the appointment has been subsequently identified.

9. [214]

   In the present case, the circumstances relating to the Club which the primary judge was entitled to have regard to included: (a) the lack of a sufficient number of directors on the date of Mr Whittingham's appointment as administrator; and (b) the insolvency of the Club in November 2008. Further, when considering the significance of the various defects in Mr Whittingham's purported appointed, the primary judge did not err in having regard to: (a) the fact that Mr Whittingham indicated his consent to act as administrator shortly after the execution of the instrument of appointment; and (b) Mr Whittingham's reliance upon legal advice relating to validity of his appointment.

10. [215]

    Secondly, no error has been shown in the primary judge's approach (at [76]) that matters which would be considered in an application for validation early in the administration will still be relevant in such an application brought late in the administration. This is in circumstances where the question is whether the Court should exercise its power of validation so that the apparent position, that an administrator has been appointed and a DoCA adopted, is given legal effect.

11. [216]

    Thirdly, the misconception underlying the appellants' submission was highlighted by the inconsistency of the appellants' contention that matters of history are irrelevant to the exercise of the discretion conferred by s 447A and their complaint that the primary judge erred in failing to consider or give sufficient weight to other aspects of Mr Whittingham's conduct during the administration, which were said to militate against the making of curative orders.

12. [217]

    The primary judge considered the appellants' contentions relating to Mr Whittingham's conduct of the administration when exercising his discretion to make curative orders. No valid complaint can be made that the primary judge also took into account other matters of history relating to the administration.

13. [218]

    Fourthly, contrary to the appellants' submission, the primary judge did not fail to consider the present circumstances of the Club when making his curative orders.

14. [219]

    Fifthly, the primary judge did not err (at [90]) in taking into account as relevant circumstances: (a) the fact that third parties had dealt with Mr Whittingham on the basis that he was acting as the Club's agent, but had not been joined as parties in the proceedings below, notwithstanding the potential impact of a declaration of invalidity upon their rights; and (b) the failure of the appellants to agitate their complaints in a timely manner had allowed the administration conducted by Mr Whittingham to be brought to completion. These matters were clearly relevant to whether curative orders should be made.

15. [220]

    Sixthly, the appellants' submission that it is not a useful purpose to validate a fiction misses the point. It ignores the very nature of curative orders, including the power to make orders to overcome a defect in compliance with the appointment procedure under s 436A: see Shirlaw v Graham [2001] NSWSC 612 at [14] per Young CJ in Eq.

16. [221]

    Seventhly, the appellants' reliance (see [207] above) on the statement of Norris J in Care Matters Partnership at [13] is misplaced. That case concerned an application to make an administration order with retrospective effect, under paragraph 11 of Schedule B1 of the United Kingdom Insolvency Act 1986. This was in circumstances where the directors had purportedly previously appointed administrators to a company. One question raised by that application was whether an administration order should be made at all, and this required the satisfaction of certain conditions set out in paragraph 11 of Schedule B1, and a decision by the Court that it was appropriate to make an order as at the time when the order is made.

17. [222]

    In the context of this question, Norris J expressed the view that whilst the company remained insolvent and unable to pay its debts, he was not satisfied on the evidence before him: (a) what the objective of administration would now be (beyond enabling the purported administrator to collect something on account of his fees, which is not one of the statutory objectives); or (b) that the purpose of the administration was reasonably likely to be achieved. The context was that the administrator had sold the business of the company and realised book debts for amounts which totalled substantially less than the administrator's own costs of the administration. Thus, at the time the Court was considering whether to make an administration order with retrospective effect, there was no apparent purpose of doing so having regard to the circumstances prevailing at that time.

18. [223]

    The English Court was not being asked to exercise a curative power like s 447A or s 1322(4) of the Corporations Act in relation to a defective appointment. Rather it was being asked to exercise the powers of the Court conferred under the United Kingdom Insolvency Act to make an administration order itself. The jurisdiction which the English Court was asked to exercise in Care Matters Partnership was quite different to the curative powers which the primary judge exercised in the present case.

Irrelevant considerations

1. [224]

   The primary judge (at [78]-[88]) set out some of the considerations he regarded as relevant to the exercise of a discretion to validate Mr Whittingham's appointment. The appellants complain in relation to five such considerations. In my view, there is no substance to those complaints.

2. [225]

   First, insofar as complaint is made in relation to two matters of history (lack of sufficient number of directors of the Club when Mr Whittingham was appointed, and the insolvency of the Club in November 2008), these have been dealt with above. Such matters were relevant to whether the circumstances of the Club in November 2008 justified the appointment of an administrator. The primary judge found (at [25]) that in November 2008 the number of directors was less than the number specified in the Club's constitution, and (at [83]) that there was compelling evidence that the Club was, or was very likely to become, insolvent when Mr Whittingham was appointed. These findings are not challenged on appeal.

3. [226]

   Further, there is no challenge to the primary judge's finding (at [85]) that the evidence supported a conclusion that the administration was necessary, given the Club's insolvency or likely insolvency. The insolvency of the company at the time of the appointment is a relevant consideration when making curative orders under s 447A of the Corporations Act: see Panasystems Pty Ltd v Voodoo Tech Pty Ltd [2003] FCA 428; (2003) 21 ACLC 842 at [19]; Re Australian Property Custodian Holdings Ltd (Admins Apptd) (Recs and Mgrs Apptd) [2010] VSC 492.

4. [227]

   Secondly, insofar as the primary judge's view that there was no contravention of s 448A of the Corporations Act was incorrect, there was no error in the primary judge (at [80]) taking into account the fact that Mr Whittingham indicated his consent to act as administrator shortly after the execution of the instrument of appointment by two directors of the Club. The relative delay in the administrator giving his written consent to act was quite short. It was undoubtedly a relevant consideration.

5. [228]

   Thirdly, contrary to the appellants' submissions, the primary judge (at [81]) did have regard to the view he had reached (at [51]) that Mr Whittingham "could and probably should have made further inquiries to confirm the validity of his appointment". There was no error in the primary judge balancing this consideration against the fact that Mr Whittingham obtained legal advice as to the validity of his appointment. The importance of legal advice in supporting a validation application is recognised in the authorities: see Re Colorbus Pty Ltd; Mentha v Colorbus Pty Ltd (in liq) [2004] VSC 486; (2004) 51 ACSR 677 at [23]. This must be so, notwithstanding that the legal advice may be later shown to be incorrect.

6. [229]

   Fourthly, the primary judge did not err in taking into account (at [86]) the history and circumstances relating to Ms Correa's challenge to the validity of Mr Whittingham's appointment. This challenge was first foreshadowed in March 2010 but not pursued by formal process filed in the proceedings until late February 2011, during which time the Court made consent orders and Mr Whittingham completed work on the premise that the DoCA was valid.

7. [230]

   In addition, the primary judge was correct to observe that on 29 February 2012 the directors of the Club resolved that all steps taken by Ms Correa in the proceedings should be treated as if they were steps taken by the Club. This must include Ms Correa's consent to court orders varying the terms of the DoCA, which implicitly assumed the validity of the administrator's appointment. The acquiescence of Ms Correa, who delayed her challenge to the validity of Mr Whittingham's appointment until he had in effect completed work under the DoCA, was correctly treated by the primary judge as a relevant factor: see Natarajan v ACIB Accumulus Pty Ltd [2006] VSC 22; (2006) 56 ACSR 356, where the acquiescence of the persons who challenged a DoCA was so treated.

Matters that should have been considered

1. [231]

   The appellants complained that the primary judge should have considered, but failed to do so, either adequately or at all, six factors relevant to his discretionary judgment. This submission should be rejected for the following reasons.

2. [232]

   First, contrary to the appellants' submissions, it is implicit from the primary judge's chronology of events (at [86]), 6th and 7th bullet points) that he had regard to the financial position of the Club, that Mr Whittingham had paid out its creditors and that the Club was under the control of its board at the time the curative orders were made.

3. [233]

   Secondly, contrary to the appellants' submissions, the primary judge did consider and have regard (at [81]) to his conclusion (at [51]-[53]) that Mr Whittingham "could and probably should have made further inquiries including potentially contacting the other three directors disclosed by the ASIC search".

4. [234]

   Thirdly, the primary judge (at [86]-[87]) did consider the issue of delay by Mr Whittingham in applying for a validation order. This was properly to be viewed in the context of the anterior delay by Ms Correa in challenging Mr Whittingham's appointment. No error has been shown in the primary judge's reasoning.

5. [235]

   Fourthly, the primary judge did consider (at [89]) the appellants' submission relating to conduct of Mr Whittingham of post-dating the directors' resolution and the instrument of appointment which the primary judge described (at [63]) as "inappropriate". The primary judge rejected the appellants' submission that Mr Whittingham's conduct was a deliberate breach of the law and also dishonest. The appellants did not challenge that finding on appeal or the lesser finding that Mr Whittingham's conduct was inappropriate.

6. [236]

   Fifthly, the primary judge had regard (at [89]-[90]) to the fact that the validation order would permit Mr Whittingham to recover his remuneration. In my view, he was correct to observe (at [77]) that the discretion under s 447A of the Corporations Act should not necessarily be exercised in a manner which will minimise any liability of the Club to pay remuneration and expenses of an administrator, so as to maximise the Club's financial position. This is in circumstances where Pt 5.3A of the Corporations Act assumes that administrators will be entitled to payment of their costs and expenses and provides a statutory means for the assessment of the administrator's proper remuneration.

7. [237]

   The primary judge found (at [89]) that the steps taken by Mr Whittingham were consistent with the Club maximising the prospect of selling its property so as to pay out its creditors at the earliest possible opportunity and, had he been successful in implementing those steps, his fees would have been minimised. There is no challenge to this finding.

8. [238]

   Sixthly, for the reasons appearing below under Issue 7, in my view the primary judge correctly rejected the appellants' contention that Mr Whittingham acted prejudicially to members by attempting to sell the Club's core property without member approval.

Whether the discretion miscarried

1. [239]

   The appellants complained that the primary judge's exercise of discretion miscarried by not holding that the Club's liability for nearly $5,000,000 in fees and expenses was not a "substantial injustice" militating against the granting of relief under s 447A. The appellants submitted that Mr Whittingham incurred fees in the unreasonable belief that he was validly appointed, that he breached his duty of inquiry and failed to seek validation orders earlier so that the only purpose of the validation was recovery of Mr Whittingham's remuneration of an invalid administration.

2. [240]

   In my view, the appellants' submissions should be rejected. First, whilst the Club's liability for Mr Whittingham's remuneration was a relevant consideration, the primary judge was correct in holding that it did not militate against the granting of relief under s 447A: see Calabretta v Redpen Developments Pty Ltd (in liq) at [41] where Yates J held that substantial injustice was not established by validating an administrator's appointment and thereby establishing his right to remuneration under the Act, where he had carried out work required of an administrator and that work had been of value (albeit in circumstances where the administrator's right of indemnity depended on the extent of recoveries by a liquidator).

3. [241]

   Secondly, the appellants did not establish below that Mr Whittingham's belief that he was validly appointed was unreasonable.

4. [242]

   Thirdly, Ms Correa did not formally challenge the validity of Mr Whittingham's appointment until 28 February 2011. Mr Whittingham's validation application was filed on 19 July 2011. The relative delay by Mr Whittingham following Ms Correa's formal challenge to the validity of his appointment was not significant.

5. [243]

   Fourthly, there is no challenge on appeal to the primary judge's finding (at [52]) that had Mr Whittingham made further inquiry of any other director of the Club other than Ms Yolanda Sanchez, he would not have learned of what the appellants described as "serious defects" in his purported appointment. In the light of that unchallenged finding, the factual premise of the appellants' complaint that Mr Whittingham failed to seek validation orders at an earlier time was not made out.

6. [244]

   Fifthly, the fact that a consequence of a validation order permits recovery of the administrator's remuneration under s 447E, rather than having to establish a quantum meruit claim, is not a relevant factor militating against a favourable exercise of discretion: see Calabretta v Redpen Developments at [41].

Section 1322(4)(a)

1. [245]

   The primary judge (at [94]-[99]) separately considered whether the circumstances justified the making of orders under s 1322(4)(a) of the Corporations Act.

2. [246]

   The appellants' submissions challenging the primary judge's exercise of discretion under s 1322 of the Corporations Act relied upon the same matters as the challenge to the s 447A order. These complaints have been addressed above and it is only necessary to deal with one additional matter.

3. [247]

   The appellants submitted in reply that the primary judge's conclusion that the appointment of Mr Whittingham as administrator could be validated by an order under s 1322(4)(a) of the Corporations Act, was contrary to Beck v L W Furniture Consolidated (Aust) Pty Ltd [2012] NSWCA 76.

4. [248]

   In Beck the majority of this Court (Young JA and Sackville AJA; Campbell JA dissenting) drew a distinction between applying s 1322(4)(a) to the purported acts of an invalidly appointed director and applying the provision to the purported acts of someone who was never validly appointed as a director and could not be so appointed. In the latter case, the majority in this Court held that the purported acts could not be described as invalid by reason of a "contravention" of the constitution of the company or of the Corporations Act, and s 1322 was not available.

5. [249]

   The appellants submitted, relying on Beck, that Mr Whittingham was never validly appointed as administrator and could not be so appointed because the number of directors on the board of the Club was less than the minimum required by the Club's constitution. The appellants further submitted that the primary judge erred in making curative orders under s 1322(4)(a) declaring Mr Whittingham's appointment - and the acts purporting to have been taken pursuant to the appointment - to be valid.

6. [250]

   However, as noted by counsel for the respondent, the High Court allowed an appeal in Beck on 1 May 2013: see Weinstock v Beck [2013] HCA 14; (2013) 87 ALJR 554; (2013) 93 ACSR 231.

7. [251]

   In Weinstock v Beck, Mr Weinstock had purported to appoint Mrs Weinstock as a director. That appointment was not made by a continuing director of the company for the purpose of increasing the number of directors to the number fixed as the quorum for a meeting of directors. It was, therefore not made in accordance with the requirements of a company's articles. Thus, it was made in contravention of the company's constitution. Mr Weinstock not only did not have the power, but could not have validly been given the power, to make the appointment. However, as noted at [54] of the judgment of Hayne, Crennan and Kiefel JJ, this did not affect the conclusion that Mrs Weinstock's appointment was not made in accordance with the company's constitution. The appointment was invalid and it was invalid by reason of a contravention of the company's constitution. Thus, s 1322(4) was available to validate the contravention.

8. [252]

   The judgment of the plurality in Weinstock v Beck rejected the construction adopted by the majority in this Court which implied some limitation on the curative power given by s 1322(4)(a) between invalid actions "able to be achieved under the Act or constitution" and actions which "it is not possible to attain under the Act or constitution". French CJ at [44] and Gageler J at [68] reached the same conclusion.

9. [253]

   It follows that the appellants' submission that there was no power to make curative orders under s 1322(4)(a) in respect of the contravention of the required minimum number of directors and quorum requirements of the Club's constitution, should be rejected.

10. [254]

    In summary, the sole ground on which the appellants have succeeded in demonstrating error in the primary judge's exercise of discretion to make curative orders is in respect of Issue 8 (invalidity arising under s 41 of the Registered Clubs Act). Otherwise, in my view, the challenge to the primary judge's exercise of discretion under Grounds 16-20 and 26-28 of the amended notice of appeal has not been made out.

1. [255]

   The appellants submitted that the primary judge erred in failing to find that Mr Whittingham's effort to sell the Club's core property, 88 Liverpool Street, without member approval was an act prejudicial to the Club's members, and that this matter weighed against a favourable exercise of discretion to make curative orders.

2. [256]

   The appellants acknowledged on the appeal that no complaint was pressed concerning the primary judge's refusal to make orders under s 447E of the Corporations Act denying Mr Whittingham's claim for remuneration. Hence, this issue is only relevant to the attack on the discretionary judgment of the primary judge to make curative orders under s 447A and s 1322 of the Corporations Act.

3. [257]

   The relevant factual context of this contention requires some elaboration.

Relevant provisions of DoCA

1. [258]

   Clause 1.1(7) of the DoCA identified 88 Liverpool Street as being "core" property, and 86 Liverpool Street as being "non-core" property. Clause 4.1 described the property available to pay creditors' claims under the DoCA as being the core property, the non-core property and property other than real property of the Club.

2. [259]

   Clause 5 of the DoCA regulated the sale of core property and non-core property as follows: "5.1 A sale of the Company's Core Property will be subject to the approval of members as required by the Registered Clubs Act 1976 (NSW) or the Company's Constitution. 5.2 A sale of the Company's Non-Core Property will not be subject to the approval of members under the Registered Clubs Act 1976 (NSW). However, prior to selling the Company's Non-Core Property, the Deed Administrator will seek member approval to sell the Company's Non-Core Property (but will not be bound by the failure of that resolution or even a resolution to the contrary). 5.3 The Deed Administrator will seek expressions of interest in relation to the sale of the Core Property and the Non-core Property. 5.4 Expressions of interest commenced on 16 February 2009 and will close on 2 April 2008 [sic]. 5.5 The company has the option to lease interim premises if feasible. For example, if the Core Property is sold, the Company has the option to lease the existing premises in the core property which it currently operates, from the new owners for a period until the refurbishment is completed or the new premises located or the new owners [require] possession. 5.6 The intention is that the Company be free of debt on completion of the property rationalisation."

3. [260]

   Clause 8 provided that the DoCA binds the secured creditor and that, until the DoCA terminates, the secured creditor (initially Perpetual Nominees) must not enforce, realise or otherwise deal with the secured creditor's security.

4. [261]

   Clause 13 of the DoCA provided for the deed administrator to convene a meeting of creditors and consider a resolution under s 445C(b) of the Corporations Act terminating the DoCA, if he considers it no longer practical or desirable to implement the administration of the deed. This included if the members of the company do not approve the sale of the company's core property and the deed administrator considers it essential to sell the property in order to implement the terms of the deed.

5. [262]

   It will be observed that cl 5.1 and cl 5.2, set out above, referred to provisions of the Registered Clubs Act. Relevantly, s 41J(3) of that Act provided that a registered club must not dispose of any "core property" of the Club unless three preconditions were satisfied: (a) that the property had been valued by a registered valuer within the meaning of the Valuers Act 2003; (b) the disposal has been approved at a general meeting of the ordinary members of the Club at which a majority of the votes cast supported the approval; and (c) any sale is by way of public auction or open tender conducted by an independent real estate agent or auctioneer.

6. [263]

   The expression "core property" is defined in s 41J(1) of the Registered Clubs Act as any real property owned or occupied by the Club that comprises the defined premised of the Club, or any facility provided by the Club for the use of its members and their guests, or any other property declared, by resolution passed by a majority of the members present at a general meeting of ordinary members of the Club, to be core property of the Club. However, it does not include any relevant property that is declared by such a resolution not to be core property of the Club.

7. [264]

   The expression "dispose" of property is defined in s 41J(1) to mean to sell, lease or licence the property or otherwise deal with the property in such manner as may be prescribed by the regulations.

8. [265]

   The Registered Clubs Regulation 2009 provided in reg 19(1)(h), that s 41J(3) of the Registered Clubs Act does not apply in relation to the disposal of any core property of a registered club in circumstances where the Director-General has, on application by the registered club, approved the disposal of the property otherwise than in accordance with s 41J(3) of the Act.

Sale of core property

1. [266]

   In this case, Mr Whittingham, as deed administrator, entered into a contract for sale of both 86 and 88 Liverpool Street to Drivas for the price of $9,250,000. On 31 July 2009, a meeting of members of the Club was convened for the purpose of obtaining members' approval of the contract. The meeting resolved overwhelmingly not to approve the sale.

2. [267]

   Subsequently, on 11 August 2009, the delegate of the Director-General of Communities New South Wales, being the Director-General referred to in reg 19, wrote to the solicitors for the deed administrator as follows: "It is my view, that where an administrator of a company that is a registered club is acting in that capacity, that the administrator is not required to comply with the requirements of section 41J of the Registered Clubs Act whilst the administrator is exercising a power of sale pursuant to the Corporations Act. Accordingly, neither the administrator nor the registered club is contravening the provisions of the Registered Clubs Act should a sale not comply with the requirements of section 41J. As I consider section 41J has no application to the disposal of land in this matter, there is no requirement to consider any exemption."

3. [268]

   The Director-General's opinion that s 41J had no application to the disposal of core property of a registered club by an administrator exercising a power of sale pursuant to the Corporations Act was apparently founded on the view that the administrator being given that power by the Corporations Act, prevailed over any restriction imposed by State legislation. Mr Whittingham did not contend on appeal that this view was correct, but submitted that it was reasonable for him to rely on the Director-General's opinion at the time.

Injunction proceedings

1. [269]

   As noted earlier, subsequently on 30 September 2009, Ms Correa sought and obtained an interlocutory injunction restraining Mr Whittingham, the Club and the purchaser from carrying into completion the contract for sale dated 1 July 2009 insofar as it related to the land situated at 86 Liverpool Street, being core property of the Club (see [2009] NSWSC 1225).

2. [270]

   In respect of Ms Correa's application, Brereton J concluded that it was at least seriously arguable that the sale of the core property, without the approval of the members of the Club as envisaged by cl 5.1 of the DoCA, would be an act prejudicial to the interests of some or all of the Club's members. This was on the basis that the terms of cl 5.1 provided members with a right of veto over a proposed sale of the core property. However, this was subject to the deed administrator's entitlement to form the view that this would make continuation of the deed impractical or undesirable and thus entitle him to convene a meeting to consider terminating the deed.

3. [271]

   That is, Brereton J expressed the view that the purpose of cl 5.1 did not merely reflect an assumption that s 41J applied so as to require compliance with it where applicable. On this view, any "dispensation" on the part of the Director-General under reg 19(1)(h) was beside the point.

Administrator's application for directions

1. [272]

   Mr Whittingham, as deed administrator, applied for directions pursuant to s 447D of the Corporations Act to the effect that he be permitted to hold a meeting of creditors of the Club to consider varying the DoCA, or alternatively terminating the DoCA and placing the Club into liquidation.

2. [273]

   The proposed resolution to vary the DoCA, in substance involved deleting the requirement for member approval for a sale of the core property, and permitting Mr Whittingham as deed administrator to cause the Club to enter into and complete a new contract of sale with Drivas on essentially the same terms as the existing contract, after consensual rescission of that contract. Ms Correa opposed the application for directions on the grounds that termination of the DoCA was not authorised in the circumstances and the proposed variation ought not properly be the subject of directions to the deed administrator.

3. [274]

   Mr Whittingham's application for directions came before Brereton J who decided that the conditions which would justify a resolution under s 445C(b) varying the DoCA were not satisfied, and hence convening a creditors meeting to consider such a resolution would not be justified. His Honour also held that because a variation to remove the members' right of veto under the DoCA would be amenable to challenge under s 445B and s 447E, the variation ought not be pre-empted by judicial advice given to the deed administrator. Rather it was, appropriately, the subject matter of ordinary adversarial litigation: see [2009] NSWSC 1426.

Primary judge's reasons

1. [275]

   The primary judge gave detailed and careful consideration (at [127]-[171]) to the appellants various complaints as to Mr Whittingham's conduct in respect of the sale of Club properties. He concluded (at [171]) that:

   1. (1)

      while the sale to Drivas was not consistent with the views of the majority of members who had not approved the sale, it had not been established that Mr Whittingham's conduct in that regard was in fact prejudicial to the interests of the Club's creditors or members for the purposes of s 447E of the Corporations Act;

   2. (2)

      in particular, the evidence did not establish any real prospect that a new sales campaign, conducted after 31 July 2009, could realistically have been funded by the Club or would have generated a significantly different (and more advantageous) offer which would have met with members' approval, given the circumstances of the rejection of the Drivas contract by members on 31 July 2009, or that such a prospect warranted the loss of the benefit to the Club of the existing binding sales contract with Drivas.

2. [276]

   The appellants do not challenge these findings.

3. [277]

   The primary judge went on to consider the alleged breach of cl 5.1 of the DoCA and held (at [174]) that this clause was directed to the possibility that member approval of the sale of the core property of the Club was required under the Registered Clubs Act, but should not be read as establishing an independent requirement for member approval which did not arise under the Registered Clubs Act and the Club's constitution. Had that been the intention of the clause, the primary judge considered that the words "as required by" and the references to the Registered Clubs Act and the Club's constitution in cl 5.1 would be wholly superfluous.

4. [278]

   The primary judge considered (at [175]), that cl 13 of the DoCA did not require the contrary result, and in this respect, differed from the view expressed by Brereton J (see [270]-[271] above). The primary judge reasoned that cl 13 would apply if the Registered Clubs Act required member approval for a sale. However, it did not require that cl 5.1 of the DoCA be treated as an independent requirement for approval of a sale of core property if the Registered Clubs Act did not require such approval. The primary judge also noted that reliance on cl 13 in construing cl 5.1 of the DoCA had the further difficulty that cl 13 implicitly assumed that creditors were free to terminate the DoCA in the situation where Mr Whittingham considered it no longer practicable to implement the DoCA if members did not approve a sale of the core property, whereas it later emerged in the application for directions before Brereton J that s 445CA of the Corporations Act would not permit creditors to do so in the absence of an unremedied breach of the DoCA.

5. [279]

   The primary judge concluded (at [178]) that the appellants had not established that the Club or its members were actually prejudiced by Mr Whittingham's efforts to sell the core property, or would have been in a better position had he acted differently after 31 July 2009. In doing so, his Honour applied the approach adopted to s 447E of the Corporations Act in Honest Remark Pty Ltd v Allstate Explorations NL [2006] NSWSC 735; (2006) 234 ALR 765 at [82].

Submissions

1. [280]

   The appellants submitted that the primary judge's construction of cl 5.1 of the DoCA was wrong, because it did not give sufficient attention to cl 5.2 or cl 13 of the DoCA and, further that the primary judge failed to appreciate that the delegate's letter of 11 August 2009 was not an approval for the purposes of reg 19(1)(h), which therefore meant that the property at 88 Liverpool Street could not be disposed of except in accordance with s 41J(3)(b), that is, with the approval of the members.

2. [281]

   Thus it was submitted that even on the primary judge's view that cl 5.1 of the DoCA only required member approval if required by the Registered Clubs Act, member approval was required here, because the exception to s 41J, being an approval under reg 19, did not apply.

3. [282]

   The appellants further submitted that the primary judge should have determined that Mr Whittingham's efforts to sell 88 Liverpool Street without member approval, his opposition to the application for an injunction and his further application to vary the terms of the DoCA to delete the requirement for member approval for the sale of core property, were all acts prejudicial to the interests of members and unnecessarily augmented the costs of an invalid administration. It was submitted that Mr Whittingham's prejudicial conduct ought to have weighed against a favourable exercise of discretion under s 447A and s 1322 of the Corporations Act.

4. [283]

   Mr Whittingham's submissions noted that the appellant's criticisms of his conduct of the administration had been advanced unsuccessfully below in the context of an application for an order under s 447E seeking to deprive Mr Whittingham of his remuneration. It was submitted that the test for prejudice for the purposes of s 447E in Honest Remark, should also apply when evaluating the alleged prejudicial conduct for the purposes of the exercise of discretion to make curative orders. On this basis, it was submitted that it was insufficient for the appellants to show that Mr Whittingham was involved in some breach of either cl 5.1 of the DoCA or s 41J of the Registered Clubs Act in his efforts to sell the core property. Rather, assuming a breach did occur, it was submitted that it was necessary for the appellants to demonstrate that the position of the Club's members would have been improved if Mr Whittingham had not proceeded with the sale of the Club's property without their approval.

5. [284]

   Mr Whittingham also submitted that there was no wilful breach of cl 5.1 of the DoCA. In this regard, he accepted that the delegate's letter of 11 August 2009 did not constitute, for the purposes of reg 19(1)(h) of the Registered Clubs Regulation, a grant of approval in respect of the proposed disposal of the Club's premises by him. Nevertheless, the letter was said to have provided him with a reasonable basis for thinking that the sale of the Club's premises without approval of the Club's members would not give rise to a contravention of s 41J of the Registered Clubs Act.

6. [285]

   Mr Whittingham also referred to the absence of any challenge by the appellants to a number of significant findings of the primary judge relating to the circumstances in which he conducted the sale process of the Club's properties. This included the absence of evidence of any real prospect, following the refusal of members on 31 July 2009 to approve the sale of 88 Liverpool Street, that a new sales campaign could realistically be funded by the Club or would have generated a significantly enhanced offer which would have met with members' approval or that such a prospect warranted the loss of the benefit to the Club of an existing binding sales contract with Drivas.

Consideration

1. [286]

   The appellants' primary complaint is based upon an alleged breach of either cl 5.1 of the DoCA or s 41J of the Registered Clubs Act. Whether or not some breach occurred by Mr Whittingham's conduct in entering into a contract of sale of the Club's core property, the appellants did not challenge the primary judge's finding that they failed to demonstrate that the position of the Club's members would have been improved if Mr Whittingham had not proceeded with the sale of the Club's property without their approval. Simply stated, the appellants did not establish that prejudice to the Club's members flowed from Mr Whittingham's actions (assuming a breach of either cl 5.1 or s 41J).

2. [287]

   If it were necessary to reach a view on the proper construction of cl 5.1 of the DoCA, I consider that the primary judge correctly concluded (at [174]) that the clause did not impose, in relation to the sale of the Club's core property, a requirement to obtain the approval of members, independent of any equivalent requirement to be found in the Registered Clubs Act. That is, cl 5.1 did no more than "pick up" provisions in the Registered Clubs Act such as s 41J. Were it otherwise, I agree with the primary judge that the reference to the Registered Clubs Act in cl 5.1 would be otiose.

3. [288]

   It is necessary to next consider s 41J of the Registered Clubs Act. On the construction of cl 5.1 of the DoCA accepted by the primary judge, member approval was still required for the sale of the Club's core property because an exemption under the Registered Clubs Act was never granted. The opinion expressed in the delegate's letter of 11 August 2009, that s 41J had no application to the sale of the Club's core asset, did not constitute an approval by the Director-General under reg 19(1)(h) of the Registered Clubs Regulation. Therefore the attempt by Mr Whittingham to sell the core property without the approval of members was contrary to s 41J(3), and consequently a breach of cl 5.1 of the DoCA.

4. [289]

   In my view, Grounds 23 and 24 of the amended notice of appeal should be upheld.

5. [290]

   However, Mr Whittingham's submission that there was no wilful breach of cl 5.1 of the DoCA or s 41J should be accepted. In my view, the delegate's letter of 11 August 2009 did provide Mr Whittingham with a reasonable basis at the time for thinking that the sale of the Club's core property without approval of members would not give rise to a contravention of s 41J of the Registered Clubs Act. There was no suggestion that Mr Whittingham acted unreasonably in accepting that opinion.

6. [291]

   In summary, no error has been shown in the primary judge's conclusion that Mr Whittingham's conduct was not prejudicial to the interests of the Club's members. In my view, Grounds 21, 22 and 25 of the amended notice of appeal have not been made out.

Issue 9: Costs

1. [292]

   The primary judge delivered a separate judgment dealing with questions of relief including costs and, relevantly, made an order that Ms Correa pay Mr Whittingham's costs incidental to the proceedings as agreed or assessed: see [2012] NSWSC 677.

2. [293]

   These orders were made upon the express basis of a notation to the orders that the appellants' consent to the orders was without prejudice to their rights to appeal from the decision of the primary judge. This was to the intent that if this Court reversed or set aside the judgment of the primary judge and made an order that Mr Whittingham is only entitled to his remuneration, legal costs and disbursements assessed on a quantum meruit or incontrovertible benefit basis, the appellants would be entitled to have Mr Whittingham's remuneration, legal costs and disbursements reassessed and to claim back any over-payment paid to Mr Whittingham pursuant to the orders below.

3. [294]

   The appellants submitted that the costs discretion of the primary judge miscarried because the usual rule that where an indulgence is sought, the party seeking the indulgence pays the costs, ought to have been followed. The appellants further submitted that regardless of the making of the curative orders, the primary judge should have ordered Mr Whittingham to pay the appellants' costs of the proceedings without recourse to the assets of the Club for the recovery of such costs.

4. [295]

   The respondent referred to the fact that Ms Correa was given an opportunity to resist an order for costs below on the basis that the primary judge had granted an indulgence to Mr Whittingham. However, Ms Correa proceeded on the basis that an appropriate order consequential upon the indulgence was that she pay Mr Whittingham's costs of and incidental to the proceedings below. Thus, the respondent submitted that it was not open to Ms Correa to now seek a different outcome as to costs, even if this Court were to affirm the substance of the primary judge's decision, particularly as to the making of curative orders.

5. [296]

   The respondent also submitted that the reservation of rights the subject of the notation to the orders made on 21 June 2012 did not extend to matters the subject of a consent which were not covered in the principal judgment of the primary judge, including the appropriate order for costs that should follow the making of curative orders.

6. [297]

   If the respondent had been successful on the appeal, I would not be minded to disturb the primary judge's cost discretion for the reasons advanced by the respondent. However, as the Court has not had submissions on costs taking into account the outcome on the appeal, it is appropriate to revisit the matter of costs at first instance and on appeal.

7. [298]

   It is appropriate that the appellants serve any short written submissions on costs outlining the costs orders sought and the reasons for those orders within 14 days of the date of these reasons, and Mr Whittingham within 14 days after receiving the appellants' submissions, with the appellants to have a further 7 days after receiving those submissions to reply. I would propose that any such application be dealt with on the papers.

Conclusions and orders

1. [299]

   The challenge to the primary judge's finding that Mr Whittingham was validly appointed administrator of the Club succeeds, but solely on the ground of contravention of s 41 of the Registered Clubs Act (Issue 8). The orders and declaration of the primary judge should be set aside and an appropriate declaration should be made concerning the respondent's incapacity to act as administrator of the Club.

2. [300]

   The respondent's notice of contention that curative orders may be made under s 447A of the Corporations Act, such that Pt 5.3A of the Act is to operate in relation to the Club as if the delegate of the Authority had approved Mr Whittingham to act in the capacity of administrator of the Club prior to his appointment to act in that capacity, should be rejected. There is no power under s 447A of the Corporations Act to validate an invalidity of an administrator's appointment arising from s 41 of the Registered Clubs Act.

3. [301]

   The other challenges by the appellants to the validity of Mr Whittingham's appointment as administrator of the Club may be now summarised:

   1. (1)

      The challenge based upon contravention of the requirements of the constitution of the Club in relation to the minimum number of directors and quorum, fails as Mr Whittingham is entitled to assert reliance upon s 128 and s 129(1) of the Corporations Act. That is, the pleading point taken by the appellants fails (Issue 1) and the substantive objection to reliance by Mr Whittingham upon on the statutory assumptions also fails (Issue 2).

   2. (2)

      The challenge to Mr Whittingham's appointment on the ground of absence of a resolution of the Club's directors capable of engaging s 436A of the Corporations Act fails (Issue 3).

   3. (3)

      The challenge to Mr Whittingham's appointment on the ground that he did not provide his written consent as required by s 448A of the Corporations Act prior to his appointment succeeds (Issue 4), but was properly the subject of curative orders made by the primary judge, albeit those orders should now be set aside on appeal having regard to the successful challenge to Mr Whittingham's appointment arising under s 41 of the Registered Clubs Act.

   4. (4)

      The appellants' alternative contention that Mr Whittingham ceased to be administrator pursuant to s 435C(3)(b)(i) of the Corporations Act because he failed to convene a meeting of creditors by 19 December 2008 also fails (Issue 5).

   5. (5)

      The challenge to the primary judge's exercise of discretion to make curative orders fails on all grounds raised by the appellants, other than the ground of invalidity on which they have succeeded on appeal based on the contravention of s 41 of the Registered Clubs Act (Issue 6).

   6. (6)

      The appellants' contention that Mr Whittingham's conduct of the administration of the Club in attempting to sell the Club's core property, 88 Liverpool Street, without member approval, was prejudicial to the interests of its members also fails (Issue 7).

   7. (7)

      It is appropriate that in light of the foregoing findings the matter of costs at first instance and on appeal be reserved and the parties be permitted to make short written submissions on the question of costs orders (Issue 9).

4. [302]

   The proceedings should be remitted to the Court below for the determination of Mr Whittingham's alternative quantum meruit claim advanced in the amended interlocutory process filed 20 February 2012, against the contingency that he was not validly appointed. This claim was not determined by the primary judge.

5. [303]

   I propose that the appeal be disposed of as follows:

   1. (1)

      Grant leave to the respondent to file the notice of contention dated 17 May 2013.

   2. (2)

      Appeal allowed.

   3. (3)

      Set aside the orders and declaration of Black J made on 21 June 2012.

   4. (4)

      In lieu thereof, declare that the respondent was, by reason of contravention of s 41 of the Registered Clubs Act 1976, not capable of being appointed as voluntary administrator of The Spanish Club Limited (the Club), by instrument of appointment dated 17 November 2008, or of acting as such voluntary administrator.

   5. (5)

      Direct that the proceedings be remitted to the primary judge to determine the respondent's claim in paragraphs 4, 5 and 6 of the amended interlocutory process filed 20 February 2012, that the respondent is entitled to be paid out of the assets of the Club his reasonable remuneration, costs and expenses, including legal expenses for work performed pursuant to his purported appointment as voluntary administrator and as deed administrator of the Club, on a quantum meruit basis.

   6. (6)

      Reserve questions of costs.

   7. (7)

      Grant leave to the appellants to file and serve short written submissions in relation to the costs of the appeal and at first instance within 14 days of the date of delivery of judgment. Any such written submissions are to set out both the orders sought and the reasons why those orders are sought.

   8. (8)

      Grant leave to the respondent to file and serve short written submissions in reply within 14 days after service on him of the appellants' written submissions contemplated by the previous order, with the appellants to have a further seven days after receiving those submissions to reply.

   9. (9)

      Note that the Court will determine the issue of costs on the papers.

6. [304]

   TOBIAS AJA: Like Barrett JA I have also had the advantage of reading in draft the thorough and comprehensive judgment of Gleeson JA. Subject to one reservation, I agree with the manner of disposal of the appeal proposed by his Honour at [303] of his reasons. I also agree with the additional remarks of Barrett JA on the operation of s 447A of the Corporations Act 2001 (Cth).

7. [305]

   My only reservation arises under Issue 2 and relates to the question of actual suspicion within the meaning of the s 128(4) exception dealt with by Gleeson JA at [165]-[168] of his reasons. Prima facie it seems to me that the evidence is capable of supporting the inference that Mr Whittingham did in fact suspect that the board of directors of the Club was invalidly constituted at the time of his purported appointment as administrator: see, for example, the evidence referred to at [23] of his Honour's reasons.

8. [306]

   However, there are two considerations which militate against that prima facie view. The first is that it cannot be said that it was not open to the primary judge to find (as he did at [55] of his reasons) that Mr Whittingham did not in fact know or suspect that his appointment did not comply with the Club's constitution in terms of the minimum number of directors required to form the board of the Club.

9. [307]

   The second is, I think, more fundamental. Mr Whittingham was cross-examined on certain aspects of the evidence as recorded by Gleeson JA at [27] and [28] of his reasons. But having re-read his cross-examination, it does not seem to me that Mr Whittingham was directly challenged with s 128(4) in mind except tangentially at Black 1/91-104. In those circumstances it would be unfair to Mr Whittingham to accept the submission now advanced by the appellants that he did actually suspect that his appointment was invalid because he knew that there were only four appointed directors of the Club rather than the seven required by its constitution. If that submission was to succeed, at the very least the matter had to be put to Mr Whittingham directly and it was not. 11 September 2013 - Changed date "17 November 2013" to "17 November 2008" Amended paragraphs: Coversheet and [303(4)]