Postnet Australia Pty Ltd  NSWSC 1260, in which Emerson Lewis Lawyers acted for the Plaintiff, concerned the validity of the appointment of a voluntary administrator in circumstances where the sole director was, unbeknown to the administrator, an undischarged bankrupt in another country at the time of appointment. Until now, this unusual situation had never been the subject of a reported decision.
Mr Ward was appointed as the voluntary administrator of Postnet Australia Pty Ltd (Postnet) by its sole director in June 2019. It emerged after Mr Ward’s appointment that the director was an undischarged bankrupt in Singapore.
Under section 206B(3) of the Corporations Act (the Act) a person is disqualified from managing a corporation if the person is an undischarged bankrupt, not only under the laws of Australia but also the laws of another country. Accordingly, the director of Postnet was not empowered to appoint an administrator and the administrator had to take steps to validate his appointment.
His Honour noted that Mr Ward rightly recognised that the validity of his appointment may be affected by s 206B(3) of the Corporations Act. Black J was satisfied that the preferable course of action was to validate Mr Ward’s appointment and allow the administration to proceed to completion in the manner it would have if the director’s overseas bankruptcy had not come to light. Black J relied upon s 447A of the Act which provides that the court has the power to make orders that will promote the operation of the Act having regard to the interests of person/s affected by the administration.
Interestingly, Black J did remark by way of obiter dictum that it might have been possible for Mr Ward to rely on the assumptions under section 128 and 129 of the Act in relation to a person’s dealings with a company, in this case an assumption that the director was not an undischarged bankrupt of another jurisdiction. Be that as it may, this would not have cured the defective appointment.
The Court also made an order that the costs of the application be paid out of the assets Postnet given that this was a proper application in order to clarify an issue which arose in the administration, which was not of the administrator’s making.
This case highlights the courts plenary power to make orders as it thinks is appropriate about how the Act is to operate in relation to a particular company and is a reminder to insolvency practitioners of the effects of a director’s bankruptcy (local or foreign).