Validity of administrator's appointment under the Corporations Act

The New South Wales Supreme Court has delivered an important decision which dealt with the validity of the appointment of an administrator where the composition of a club's board was inconsistent with the club's Articles of Association.

Black J, in Dolores Correa and The Spanish Club Limited (subject to Deed of Company Arrangement) v Kenneth Michael Whittingham (No 3) [2012] NSWSC 526, held that although the Board lacked the minimum number of directors required under its Articles, the administrator could rely upon ss 128-129 of the Corporations Act 2001 in relation to the club's actions to appoint him, as the administrator did not suspect or know that the appointment did not comply with the club's articles. The Judge also considered that the appointment was valid from when consent was given by the administrator, even though this was after the date when the instrument of appointment was executed.

The Judge was of the view that given the factors that may have indicated to the administrator that he had not been validly appointed, it may have been prudent for the administrator to undertake further enquiries to determine that the Board was properly constituted and that his appointment was valid. However, those factors and the administrator's failure to undertake further enquiries did not restrict the administrator from relying on ss 128-129 of the Corporations Act. The case is also an example of a court finding that it is acceptable to provide consent to an appointment after the appointment instrument is executed.