Federal Court of Australia

Windsor Family Assets Pty Ltd v Green Day Energy Pty Ltd (Administrators Appointed) [2023] FCA 1651

ORDERS

THE COURT DECLARES THAT:

1.    The resolution that was purportedly made by the third defendant on 14 June 2023 to remove the second plaintiff as a director of the first defendant was and is invalid and of no effect.

2.    Pursuant to s 447C of the Corporations Act 2001 (Cth), the purported appointment of the second defendants as the joint and several administrators of the first defendant was and is invalid, void and of no effect.

3.    The resolution that was purportedly made at the meeting of the director of the first defendant on or about 26 June 2023 relating to the raising of capital via a share issuance was and is invalid and of no effect.

THE COURT ORDERS THAT:

4.    The administration purportedly commenced by a resolution of the third defendant on 5 September 2023, appointing the second defendants as administrators of the first defendant, be terminated forthwith.

5.    The register kept by the Australian Securities and Investments Commission (ASIC) be rectified pursuant to s 1322(4)(b) of the Corporations Act 2001 (Cth) to reflect the position that the second plaintiff did not cease to be a director of Green Day Energy Pty Ltd ACN 656 231 766 on 14 June 2023 or at all, contrary to the information contained in the Form 484 lodged with ASIC on 14 June 2023.

6.    The register kept by ASIC be rectified pursuant to s 1322(4)(b) of the Corporations Act 2001 (Cth) to reflect that:

(a)    Vincent Joseph Pirina and Andrew James McEvoy were not appointed as joint and several voluntary administrators of Green Day Energy Pty Ltd ACN 656 231 766 on 5 September 2023; and

(b)    Green Day Energy Pty Ltd ACN 656 231 766 was not under external administration on and from 5 September 2023.

7.    Within 21 business days from the date hereof, the plaintiffs are to file and serve on the defendants:

(a)    any affidavit on which they intend to rely on the question of costs; and

(b)    written submissions on the question of costs, limited to five pages.

8.    Within 28 business days from the date hereof, the defendants are to file and serve on the plaintiffs:

(a)    any affidavit on which they intend to rely on the question of costs; and

(b)    written submissions on the question of costs, limited to five pages.

9.    There will be an oral hearing on the question of costs on a date to be advised.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    The plaintiffs in this matter, Mr Bradley Carswell and his family company, Windsor Family Assets Pty Ltd (WFA), seek relief in relation to the purported removal of Mr Carswell as a director of the first defendant, Green Day Energy Pty Ltd (Green Day Energy). In general terms, it is claimed that his removal was invalid because the shareholder who purported to remove him lacked any power to do so. The plaintiffs also seek orders bringing to an end the administration of Green Day Energy on the basis that the process by which the company was put into voluntary administration did not comply with the requirements of the Corporations Act 2001 (Cth) (Corporations Act) or because the administration was brought about for an improper purpose. Other associated relief is sought.

2    For reasons that will become apparent, the circumstances of this matter necessitated that it be determined with some haste. Green Day Energy is purportedly in administration, though the convening period for the holding of the second creditors’ meeting has been extended. More importantly, it has rights under an agreement with the Commonwealth Government, pursuant to which it is to receive a grant of some $5 million (the majority of which has already been paid to it) for research and development in relation to the production of low-emissions energy from the combustion of petrified biomass derived from Prickly Acacia, an invasive weed species that is prevalent in Queensland. Any further constraints on the company’s operations are likely to imperil its entitlements under that grant agreement.

3    The protagonists in the matter were Mr Carswell and WFA on the side and, on the other side, Mr David Hutchinson and his company, Firewheel Trading Pty Ltd (Firewheel Trading). Mr Hutchinson was named as the third defendant in this proceeding. Both Mr Carswell and Mr Hutchinson gave evidence at the hearing, and to some extent the result of the matter turns upon their respective credibilities. For the reasons articulated below, it was not possible to accept the evidence of Mr Hutchinson in crucial respects. This was a substantial impediment to his attempts to defend against the plaintiffs’ claims. It otherwise became apparent that, while acting as the representative of Firewheel Trading, as a shareholder of Green Day Energy, he had no power to remove Mr Carswell as a director of the company, as he purported to do. As a consequence, he had no power as a director thereafter to appoint administrators to the company. That purported appointment was also invalid. To the extent that a discretion is reposed in the Court as to whether or not it ought to terminate or validate the administration, it may be observed at the outset that all relevant factors have weighed in favour of the former option.

4    It should be recorded that the submissions made on behalf of Mr Hutchinson focused almost exclusively on the exercise of the Court’s discretion to terminate or validate the administration. Only faint submissions were made on his behalf in relation to the issues as to whether the purported removal of Mr Carswell as a director was in accordance with Green Day Energy’s constitution, and whether the purported appointment of the administrators was in accordance with the provisions of the Corporations Act. As it transpires, the choice to make limited submissions of this nature was quite proper. That having been said, Mr Hutchison made no concessions on these issues.

Background

5    Green Day Energy was incorporated in December 2021. The circumstances surrounding its incorporation are not entirely clear, but it seems that it was established to pursue research and development in relation to the production of energy from the burning of biomass produced from Prickly Acacia through a process known as torrefaction. For convenience, this research and development project will be referred to simply as “the Biomass Project”.

6    The evidence suggests that Mr Carswell and another person, Mr John Winter, had been investigating the use of biomass from Prickly Acacia for many years prior to 2021 — long before the involvement of Mr Hutchinson or Green Day Energy.

7    From 24 January 2022, Green Day Energy had three shareholders. WFA, as the holder of 55 ordinary shares, Firewheel Trading (which was controlled by Mr Hutchinson and his brother), as the holder of 35 shares, and Round Hill Investments Pty Ltd (Round Hill Investments) (a company controlled by Mr Winter), as the holder of the remaining 10 shares.

8    From that same date, Green Day Energy had two directors: Mr Carswell and Mr Hutchinson.

Payment for the shares in Green Day Energy

9    A question of some importance that arose in this matter was whether the shares in Green Day Energy were issued as fully paid-up shares and, if not, whether or when payment was made by the shareholders for their shareholding. Therefore, some consideration needs to be given to the circumstances surrounding this topic.

10    The allocation of shares occurred at a meeting of the two directors of Green Day Energy on 24 January 2022. The company records reveal that it received applications for shares from each of the three companies that are now shareholders. The accompanying documentation indicates clearly that the amount payable for the shares was included with the three applications. That seems to have been accepted by the board, which proceeded to issue the shares as fully paid-up shares. The resolution authorising the allotment of the shares read:

Allotment Applications and Application monies being received it was resolved to approve and register the following allotment of Ordinary shares in the company: …

11    Thereafter, the three allotments were recorded, including the 55 shares allotted to WFA.

12    The minutes of the meeting recording the directors’ resolution was signed by Mr Hutchinson as a “true record”.

13    Subsequently, Mr Hutchinson lodged a Form 484 “change to company details” dated 24 January 2022 with the Australian Securities and Investments Commission (ASIC), which identified that the number of shares issued was 99 (there already being one share in the company prior to that date), that the amount paid per share was $1.00, and that the amount unpaid per share was $0.00.

14    By that document, Mr Hutchinson also asserted that 34 fully paid-up shares were allocated to Firewheel Trading, 55 fully paid-up shares were allocated to WFA, and 10 fully paid-up shares were allocated to Round Hill Investments.

15    It is relevant to note that, on the Form 484 lodged by Mr Hutchinson as a director of Green Day Energy, he certified that the information in the form was “true and complete”.

16    Also on 24 January 2022, Mr Hutchinson issued certificates of shareholding on behalf of the company. The certificates issued to Round Hill Investments and to WFA indicated that they held specifically numbered shares out of the 100 total shares on issue. Importantly, both certificates included the assertion that “[t]he sum of $0.00 is unpaid in respect of each share”. The certificates were sent by Mr Hutchinson to each of the shareholders for them to sign, which they did. It is apparent that Mr Hutchinson maintained copies of those signed certificates as part of the records of Green Day Energy.

17    Green Day Energy also maintained a register of shareholders. A screenshot of that register was provided by Mr Hutchinson to the plaintiffs’ solicitors on 31 August 2023, in the course of events detailed below. It identified that the shares of Round Hill Investments and of WFA were “fully paid” and that, of the 100 shares in Green Day Energy on issue, 100 were paid and 0 were unpaid.

18    In his submissions in this proceeding, Mr Hutchinson alleged that the shares held by WFA and Round Hill Investments were not, in fact, fully paid-up. He claimed that no money was received by Green Day Energy in respect of the allotments to those companies. He said that the only shares that had been paid for (at least prior to 14 September 2023, as explained further below) were those allotted to his company, Firewheel Trading. He admitted that he was aware that the documents referred to above indicated that all of the shares in Green Day Energy were fully paid-up, though he was unable to explain why that was the case.

19    On 23 February 2023, Mr Hutchinson signed off on the Green Day Energy financial statements for the financial year ending 30 June 2022 and issued a “Directors’ Declaration” indicating that they gave a “true and fair view” of the financial position of the company. Those accounts identify in several places that the paid-up equity in the company was $100. In his evidence, Mr Hutchinson claimed that the accounts were in error in this respect. However, again, he was unable to explain how the error had occurred.

20    The material before the Court included some further accounts for the financial year ended 30 June 2022, which were prepared by an external accountant and provided to the administrators (now the second defendants in this proceeding). Those further accounts, contrary to the accounts referred to above, showed that the paid-up equity in the company was only $35. It is unclear on what date the further accounts were prepared. No evidence was presented showing the instructions according to which they were prepared, and the Court was not taken to them. Therefore, they do not carry any weight.

21    It was not in dispute that, whilst the abovementioned company documents recorded that the shares allotted to the three shareholders were fully paid-up from 24 January 2022, no payments were actually received on that date into Green Day Energy’s only bank account.

22    In these circumstances, it is pellucid that, as between Green Day Energy and its shareholders, the former treated the latter as having fully paid the subscription price for their shares when they were issued. As the shares were taken to be fully paid-up, no calls could be made upon them. Consistent with that fact, since its incorporation and the meeting of 24 January 2022, no calls have been made.

23    In this proceeding, Mr Hutchinson was confronted with the proposition that, on 14 June 2023, he had improperly purported to convene a meeting of the members of Green Day Energy without notifying shareholders other than Firewheel Trading. He sought to justify his actions on the basis that, as at that date, Firewheel Trading was the only paid-up member of the company. In an affidavit of 24 November 2023, he deposed that, on 24 January 2022, he had paid the subscription price for Firewheel Trading’s shares by causing $35 in cash to be stapled to its share application. He further deposed that he had stored this document, with the cash stapled to it, at his residential premises. He annexed to his affidavit a photograph of the share application with some banknotes totalling $35 stapled to it. The photograph has some time stamp markings indicating that it was taken on 31 May 2023.

Funding agreement with the Commonwealth

24    On 24 February 2022, Green Day Energy submitted an application to the Commonwealth Department of Industry, Science, Energy and Resources (the Department) for funding to assist with the commercialisation of the Biomass Project. Obviously, the application had been prepared well before that date.

25    In around June 2022, Green Day Energy received a Commonwealth grant to the value of $5 million to assist it with pursuing the Biomass Project. The grant was provided pursuant to a written agreement, described as the “Commonwealth Standard Grant Agreement”, between the Department and Green Day Energy (the Grant Agreement). The Grant Agreement was subsequently varied by a further written agreement in order to extend its end date from 31 March 2024 to 7 September 2024.

26    For the purpose of carrying out research and development for the Biomass Project, Green Day Energy has leased premises in Queensland, at which it has commissioned the construction of a pilot torrefaction plant. It is also party to a landholder agreement with the Richmond Shire Council, which authorises it to clear and harvest Prickly Acacia from the land known as “20 Mile Reserve and Town Common” in Richmond.

Suspicious transactions

27    In about May 2023, Mr Carswell became concerned about certain large transactions apparently entered into by Green Day Energy, as evidenced by withdrawals from the company’s bank account with National Australia Bank (NAB). In particular, he was troubled by the transfer on 26 September 2022 of $500,000 from the bank account into a mortgage offset account controlled by Mr Stephen Hutchinson and his wife. Mr Stephen Hutchinson is the brother of Mr David Hutchinson. The transaction was recorded in an expenditure report submitted to the Department, which had been compiled from the company’s accounts as maintained on the Xero platform, as being money paid to “Round Hill Engineering Pty Ltd” (a company controlled by Mr Winter, which is actually called Roundhill Engineering Pty Ltd) for “plant and equipment”. That entry was false. The money was not paid to Roundhill Engineering Pty Ltd, and it was not transferred for, or spent on, the acquisition of plant and equipment.

28    Mr Carswell also became concerned about the acquisition of two motor vehicles from the funds of Green Day Energy. One of those vehicles, a Nissan Navara, was purchased by Mr Hutchinson purportedly for Green Day Energy, but was registered in his own name and not that of the company. The other vehicle, a Ford Ranger, was purchased by Mr Hutchinson approximately three weeks prior — without Mr Carswell’s knowledge. It seemed that the latter vehicle was used by Mr Stephen Hutchinson exclusively for his own purposes, and stored at his private residence.

29    These dealings are addressed in more detail later in these reasons.

30    After Mr Carswell raised with Mr Hutchinson his concerns about these transactions (amongst others) and the company’s financial management more generally, the relationship between the two directors deteriorated.

31    It was around this time, in May 2023, that Mr Hutchinson took the photograph of the $35 in banknotes stapled to Firewheel Trading’s application for an allotment of shares in Green Day Energy.

32    In early June 2023, Green Day Energy’s bank account with NAB was frozen. Mr Hutchinson initially informed Mr Carswell that this had occurred after he had reported to NAB alleged fraudulent attempts to reset his banking credentials. However, Mr Carswell was subsequently informed by NAB that Mr Hutchinson had alleged that it was Mr Carswell who had been fraudulently withdrawing money.

14 June 2023 members’ meeting and resolution

33    A document was produced by Mr Hutchinson, in response to the request from the plaintiffs’ solicitors in August 2023, which purported to be the minutes of a meeting of the members of Green Day Energy on 14 June 2023. It shows that Mr Hutchinson, as the representative of Firewheel Trading, was the only person in attendance. It also records the passing of a resolution that Mr Carswell “be removed as a Director of the Company effective immediately”.

34    In cross-examination, Mr Hutchinson claimed that no such meeting was held as his understanding was that “a meeting wasn’t required”. Rather, according to his evidence, the document purporting to be minutes of a meeting on 14 June 2023 was created merely to document the resolution within it, which recorded the exercise by Firewheel Trading of the power in cl 3.3(b) of Green Day Energy’s constitution. That clause provides as follows:

3.3     Meetings of Members and Resolutions

…

(b)     Where the Company has more than one Member but has only one Member entitled to receive notice of and vote at a meeting:

(i)     any provision of these Rules or the Act which requires a meeting of Members, is deemed not to require a meeting of Members;

(ii)     any provisions of these Rules or the Act which requires a resolution to be passed, is deemed to require only that the Member entitled to receive notice of and vote at a meeting signs a resolution to that effect.

35    It was common ground that neither WFA nor Round Hill Investments was given notice of any meeting of members to be held on 14 June 2023. Nor was notice of the meeting given to Mr Carswell as a director. It was also common ground that WFA, Round Hill Investments and Mr Carswell were not given notice of the proposed exercise of the power in cl 3.3(b).

36    On 14 June 2023, Mr Hutchinson sent a Form 484 to ASIC, which had the effect of causing Mr Carswell to be removed as a director of Green Day Energy on ASIC’s records.

37    Although Mr Hutchinson lodged that form with ASIC on 14 June 2023, he waited 12 days to inform Mr Carswell that he had been removed as a director.

38    On or about 26 June 2023, Mr Hutchinson called a “meeting of the director” of Green Day Energy at which he alone purported to pass a resolution to raise capital for the company by the issuing of 500 ordinary shares at $1,000 each. The “offer” was said to be open for two days. Mr Hutchinson did not inform Mr Carswell or any of the shareholders about the meeting or the resolution that he had passed to raise capital by the issuing of shares. Ultimately, there was no new placement of shares, nor were any new shares issued.

39    Unsurprisingly, the relationship between Mr Carswell and Mr Hutchinson thereafter continued to deteriorate.

The placing of Green Day Energy into administration

40    Around August 2023, Mr Hutchinson sought advice about the future of Green Day Energy. In this context, he came into contact with a Mr Jakob Gray, who provided assistance to him in relation to his disagreements with Mr Carswell.

41    On 11 August 2023, Mr Gray sent an email to a Mr Vincent Pirina of Aston Chace Group, an insolvency and restructuring advisory business, in relation to the dispute ongoing within Green Day Energy. Mr Hutchinson and his brother, Mr Stephen Hutchinson, were also recipients of the email. Mr Gray’s email purported to set out the background and history of the dispute. In doing so, it asserted that the shares in Green Day Energy held by WFA had not been paid for and that the money “remains at call” — notwithstanding the fact that even a cursory review of the company’s documents at that point would have shown that the shares had not previously been characterised in this way. Subsequently, the email asserted that Mr Hutchinson and “the chemical engineer” (who, in context, seemed to be Mr Winter) wished “to explore a way to continue the project while decoupling or significantly reducing [Mr Carswell’s] shareholding to a level that makes his behaviour manageable”. Mr Gray indicated that he had advised Mr Hutchinson and Mr Winter to contact Mr Pirina “to understand the potential turnaround management options to them to continue the project, whether this process be through a VA or liquidation”.

42    On 24 August 2023, WFA, by its solicitors, called a meeting of members of Green Day Energy to be held on 15 September 2023. The purpose of the meeting was to allow the members to vote on resolutions confirming Mr Carswell’s status as a director, removing Mr Hutchinson as a director, and appointing two additional individuals as independent directors.

43    On 5 September 2023, Mr Hutchinson purported to pass resolutions as the sole director of Green Day Energy to the effect that:

(a)    in his opinion, the company was insolvent or was likely to become insolvent at some future time and that voluntary administrators of the company should be appointed; and

(b)    the second defendants to this proceeding, Mr Vincent Pirina and Mr Andrew McEvoy, were to be appointed as the voluntary administrators of the company in accordance with s 436A of the Corporations Act.

44    Again, it is uncontroversial that Mr Hutchinson gave no notice to Mr Carswell of these resolutions, or the convening of any meeting. Nor did he inform Mr Carswell, WFA or Round Hill Investments of the fact that he had sought and received advice about putting Green Day Energy into voluntary administration, or that he had decided to call a directors’ meeting for that purpose.

45    It appears that WFA’s intention to hold a meeting of members on 15 September 2023, which had been communicated several days prior, was not passed on by Mr Hutchinson to the administrators. WFA’s solicitors wrote to them on 7 September 2023, advising them of that meeting (amongst other things).

46    It was only around the time that these events took place that Mr Hutchinson informed Mr Carswell of the basis for his contention that WFA was not entitled to vote at a shareholders’ meeting; namely, that it had not paid the subscription price for its shares. Shortly thereafter, on about 13 September 2023, WFA paid $55 into Green Day Energy’s NAB account.

The validity of Mr Carswell’s removal

47    Much of this matter turns on the validity of the removal of Mr Carswell as a director. That issue, itself, turns on the entitlement of WFA to be notified of the meeting at which he was purportedly removed from that office, as well as its entitlement to vote at that meeting.

48    Mr Hutchinson’s position was, originally, that neither WFA nor Round Hill Investments was entitled to be notified of that meeting because Firewheel Trading was, under Green Day Energy’s constitution, the only shareholder that was entitled to be notified and to vote. He made this allegation on the basis that Firewheel Trading was the only shareholder that had paid the subscription price for its shares. As explained above, however, he subsequently asserted that no meeting of members was in fact called. Rather, he claimed that Firewheel Trading had exercised its right under cl 3.3(b) of the constitution to pass a resolution to remove Mr Carswell. Nevertheless, in accordance with the terms of cl 3.3(b), the power would not have been available to Mr Hutchinson if WFA was entitled to receive notice of and vote at a meeting.

WFA was entitled under the constitution to receive notice of and vote at meetings

49    Despite Mr Hutchinson’s claims, WFA was entitled under Green Day Energy’s constitution to receive notice of meetings and to vote at them. That conclusion has the consequence that it was not open for Mr Hutchinson, on behalf of Firewheel Trading, to exercise the power under cl 3.3(b) of the constitution. The purported resolution of 14 June 2023 was invalid and a nullity. That, in turn, means that the purported meeting of directors on 5 September 2023 was not validly called and the appointment of the administrators was also invalid. The reasons that follow establish why that is so.

The terms of the constitution

50    It is appropriate to set out the terms of Green Day Energy’s constitution to the extent that they were relied upon by the parties.

51    In cl 1.1, the following definitions appear:

1.     DEFINITIONS AND INTERPRETATION

1.1     Definitions

…

Unpaid Amount means in relation to a share in the Company:

(a)    any amount due and unpaid in respect of the share;

(b)    any amount which remains outstanding under loans made by the Company to enable a person to acquire the share under an employee incentive scheme, to the extent permitted by the Act;

(c)    all amounts that the Company has paid in respect of the share and that have not been repaid by the relevant Member;

(d)    all interest and expenses due and payable to the Company in respect of any unpaid amounts; and

(e)    all money presently payable by the relevant Member to the Company.

…

1.7     Effect of the Constitution

This Constitution has effect as a contract:

(a)     between the Company and each Member; and

(b)     between the Company and each Director and Secretary; and

(c)     between each Member and each other Member,

pursuant to which the Company and each of those persons agrees to observe and perform the Rules so far as they apply to that person.

52     Clause 3.3 (part of which has been set out earlier in these reasons) provides that:

3.3    Meetings of Members and Resolutions

(a)    Where the Company has a sole Member (even if the Member holds different classes of shares):

(i)    any provision of these Rules or the Act which requires a meeting of Members, is deemed not to require a meeting of Members;

(ii)     any provisions of these Rules or the Act which requires a resolution to be passed, is deemed to require only that the sole Member signs a resolution to that effect.

(b)    Where the Company has more than one Member but has only one Member entitled to receive notice of and vote at a meeting:

(i)    any provision of these Rules or the Act which requires a meeting of Members, is deemed not to require a meeting of Members;

(ii)     any provisions of these Rules or the Act which requires a resolution to be passed, is deemed to require only that the Member entitled to receive notice of and vote at a meeting signs a resolution to that effect.

53    Clause 7 concerns the rights of members, and relevantly provides:

7.     SHARE RIGHTS

7.1    Ordinary shares and A Class/B Class shares

Holders of Ordinary shares and A Class and B Class shares have:

(a)    the right to vote at all meetings of the Company;

(b)     the right to participate in any dividend payable on the class of shares held; and

(c)     the right to participate in any division or distribution of any surplus assets or profits of the Company equally with all other Members having similar rights.

…

7.6    I Class/J Class/K Class shares

(a)    Holders of I Class, J Class and K Class shares have no Rights unless the Directors declare that a holder of one or more of those classes have Rights. The Directors’ declaration may relate only to a Right to receive dividends payable on the class of shares held. For the avoidance of doubt, in relation to holders of I Class, J Class and K Class shares the Directors may:

(i)     not declare that holders of I Class, J Class and/or K Class shares have a Right to vote at any meeting of the Company;

(ii)     declare that holders of I Class, J Class and/or K Class shares have a Right to receive any dividends payable on the class of shares held; and

(iii)     not declare that holders of I Class, J Class and/or K Class shares have a Right to participate in the division of any surplus assets or profits of the Company.

54    Clause 8 deals specifically with voting rights:

8.    VOTING RIGHTS

Unless otherwise stated in these Rules or on the issue of any shares, but subject to any agreement between the Members:

(a)    if a Member holds a share or shares having voting Rights (whether in one or more classes), at a meeting of Members the Member may cast:

(i)    on a show of hands, 1 vote;

(ii)    on a ballot, 1 vote for each share held by the Member.

(b)    the holders of each class of shares issued with voting Rights have the Right to receive notice of each meeting of Members;

(c)    the holders of each class of shares issued with voting Rights have the Right to attend each meeting of Members; and

(d)    at meetings of Members or classes of Members, each Member entitled to vote may vote in person, by proxy, by attorney or by representative (if a body corporate).

55    Clause 14.1(a) provides for the directors to make calls on members to pay any unpaid amount in respect of their shares:

14.     CALLS ON SHARES

14.1 Calls by the Company

(a)    Any Member may be called by the Directors to pay any Unpaid Amount at any time, subject to any conditions to the contrary to which the shares are subject at the time of their issue.

56    Clause 22.2 provides for the giving of notice of meetings:

22.2 Notice

A notice of a meeting may be given by telephone or other electronic means of communication and must:

(a)    specify the date and time for the proposed meeting;

(b)     specify the medium or media for conducting the meeting, the day and time of the meeting and, in the case of a meeting in person, the place of the meeting; and

(c)    specify the business to be transacted at the meeting.

57    Clause 23, which specifically concerns meetings of members, relevantly provides:

23. MEETINGS OF MEMBERS

23.1 Director may convene

Any Director may convene a meeting of Members whenever that Director decides and may cancel any meeting convened by that Director prior to the commencement of the meeting.

23.2 Member’s request

(a)    The Directors must call and arrange to hold a meeting of Members on the request of any Member or Members holding at least 5% of the votes that may be cast at a meeting of Members. The request from the Members must:

(i)    state any resolution to be proposed at the meeting;

(ii)     be signed by the Members making the request; and

(iii)     be given to the Directors.

(b)    The Directors may refuse to convene the meeting if the voting on the proposed resolution is not within the power of the Members.

23.3 Members may convene

Two or more Members holding at least 5% of the votes that may be cast at a meeting of Members, may call and arrange to hold a meeting of Members. The Members calling the meeting must pay the expenses of calling and holding the meeting.

23.4 Notice of meeting

(a)    A meeting of Members can only be called by giving the Members notice of the meeting.

(b)     A notice of meeting of Members does not need to be given to Members who are not entitled to notice of meetings or to vote.

…

23.5     Quorum

(a)    Subject to Rule 3, a quorum will be two Members who are entitled to receive notice of and vote at the meeting.

(b)     A quorum of Members must be present throughout each meeting of Members. If a quorum is not present at any time the meeting is not then validly convened, but without affecting the validity of any business conducted before the absence of a quorum occurs.

…

23.13 Voting

(a)    A resolution must not be put to a vote at a meeting of Members if a quorum of Members is not present at the time the resolution is put to a vote.

(b)     Any vote taken at a meeting of Members is decided on a show of hands unless a ballot is demanded:

(i)    by the chairperson;

(ii)     by a Member or Members present and holding at least 10% of the votes that may be cast on the resolution; or

(iii)     by a Member or Members holding voting shares on which an aggregate sum has been paid up equal to at least 10% of the total sum paid up on all the voting shares.

…

23.19 Members fully paid

A Member is only entitled to vote at a meeting of Members if all calls and other amounts presently payable by the Member in respect of shares held by the Member have been paid.

23.20 Objection to qualification

Any objection to the qualification of a person to vote must be made at the same meeting at which that person’s vote is tendered. Any objection must be referred to the chairperson of the meeting whose decision is final and:

(a)    any vote approved will be valid for all purposes; or

(b)     any vote disallowed will be invalid and must be disregarded.

58    Clause 25.2 provides:

25.2 Removal of a Director by Members

The Members may remove any Director. The removal must be effected by:

(a)        ordinary resolution of Members; or

(b)     where a meeting to consider the removal has been adjourned for a lack of a quorum, a resolution signed by a Member or Members holding in excess of 50% of the issued shares carrying voting Rights and who are entitled to vote.

59    Clause 27.3 concerns the conduct of meetings of directors and provides:

27.3 Quorum

(a)     Subject to Rule 3, a quorum at a meeting of Directors will be:

(i)     at least 2 Directors; or

(ii)     that number of Directors specified by a resolution of the Directors.

(b)     A quorum of Directors must be present throughout each meeting of Directors. If a quorum is not present at any time the meeting is not then validly convened, but without affecting the validity of any business conducted before the absence of a quorum occurs.

The entitlement of WFA to receive notice of and vote at a meeting

60    The power under cl 3.3(b) was open to be exercised if Firewheel Trading was the only member that was “entitled to receive notice of and vote at a meeting”, as at 14 June 2023. If it was not, then the power was not enlivened and its purported exercise was a nullity.

61    On behalf of Mr Hutchinson, it was submitted that, as no other shareholder had paid the subscription amount for the shares issued to them by 14 June 2023, they were not entitled to receive notice of and to vote at a meeting of members at that time. This submission was made in reliance on the operation of cl 23.19, which, so it was said, prevented WFA and Round Hill Investments from voting at meetings until they had paid for the shares allotted to them. It was contended that Firewheel Trading was the only shareholder that had paid all calls and other amounts payable in respect of its shares, such that only it was entitled to receive notice and vote, thereby entitling it to exercise the power under cl 3.3(b).

62    For present purposes, it will be assumed that cl 3.3(b) is capable of applying to the circumstances of this case — that is, where there are several members whose shares have attached voting rights, but all but one of the members are disentitled from voting by reason of cl 23.19. It should not be accepted conclusively, however, that cl 3.3(b) operates in that way. It is at least reasonably arguable that the provision applies instead to the circumstance where the rights attached to the company’s shares are such that only one member holds the dual entitlement to receive notice and to vote.

63    Nevertheless, on the assumption that cl 3.3(b) is capable of application, and assuming also that WFA had been issued ordinary shares for which it had not paid the subscription price as at 14 June 2023, the key question is whether it was entitled to receive notice of and to vote at a meeting of members.

64    It is not doubted that WFA was, prima facie, entitled to receive notice of a meeting of members. That is apparent from cl 23.4(a) of the constitution, which provides that a meeting can only be called by giving members notice of it. WFA was a member of Green Day Energy, having been allocated ordinary shares in the company. It was thereby entitled to receive notice. That having been said, cl 23.4(b) might be taken to suggest that a member whose right to vote is incapable of being exercised by reason of cl 23.19 is not entitled to receive notice of meetings.

65    On the above basis, it must be asked whether WFA’s failure to pay for its shares had the consequence that it was not entitled to vote at a members’ meeting by reason of cl 23.19. The answer to that question can only be determined by ascertaining, first, what is meant by the expression in that clause, “all calls and other amounts presently payable by the Member”.

66    In the present case, there were no outstanding calls on the shares, and it was not suggested otherwise. Clause 14.1(a) of the constitution permits directors to make calls on members to pay any “Unpaid Amount” (as defined in cl 1.1) in respect of their shares. There is nothing to indicate that the directors had sought to exercise that power in this case. Importantly, the fact that calls may be made on shareholders in respect of such Unpaid Amounts indicates that the constitution does contemplate the scenario in which members’ shares are partly paid. In that case, if a call is made and the amount in question remains unpaid, then the relevant member’s right to vote at a meeting is effectively suspended, pursuant to cl 23.19, until the amount is paid. However, the part of cl 23.19 that refers to “all calls” would be rendered redundant if a member who held shares that were not fully paid-up was not entitled to vote regardless of whether or not any call had actually been made. If that were the case, the clause could have been drafted simply to say, in effect, that “a member is only entitled to vote if their shares are fully paid-up”. Mr Hutchinson’s submissions seek to give such an effect to a clause that is, in reality, worded quite differently. That outcome should be avoided.

67    A preferable interpretation is open, whereby cl 23.19 does not suspend the voting rights of a shareholder whose shares are not fully paid-up if there is no outstanding call on the Unpaid Amount and no amount that is otherwise “presently payable”. That interpretation gives effect to all of the component parts of the provision without straining the language in which it is drafted.

68    It was suggested in connection with the application of cl 23.19 to this case that WFA’s entitlement to vote was suspended because there were other “amounts presently payable” in respect of its shares. However, as a matter of construction, the clause cannot properly be understood to operate in that way. If the phrase “amounts presently payable” permitted cl 23.19 to capture partly paid shares (or shares in respect of which any amount whatsoever remained to be paid), such that voting rights attached to the shares could not be exercised, then the first limb of the clause concerning “all calls” would again be rendered redundant. One might also ask what purpose the word “presently” would serve in the second limb and, again, why the clause was not simply drafted to say that “a member is only entitled to vote if their shares are fully paid-up”. The better view is that the second limb of the clause relates to other amounts that might become payable in respect of a member’s shares — for instance, a premium. It therefore has no operation in the present case.

69    Ultimately, there were no amounts that could be said to be “presently payable” in respect of WFA’s shares. Even if the unpaid subscription price could be said in a loose sense to be “payable”, there was nothing to suggest that it was “presently payable” within the meaning of cl 23.19. In the first place, the word “payable” suggests an existing obligation to make payment; although, it must be recognised that it is a word with a somewhat chameleon-like quality which, to a certain extent, takes its meaning from the context in which it is used. There is also a distinction that is often drawn between an amount that is “payable” in the sense that it represents an amount that is to be paid in accordance with an existing obligation and an amount that is “payable” in the sense that it is “due” but no present obligation exists to pay it: see Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1. However, in this case, any ambiguity is removed because the word “payable” is preceded by the word “presently”, which emphasises the fact that the obligation to make the payment is then existing.

70    Whilst the amount of the subscription price was not paid by WFA as at 14 June 2023, there is nothing in the circumstances of this case to suggest that the amount was “presently payable” in the sense required by cl 23.19. There was no submission on Mr Hutchinson’s behalf to the contrary, save that it was said that no part of the subscription price had been paid. On one view, it might be thought that, as the shares were issued as fully paid-up shares rather than unpaid shares, the subscription price always remained outstanding. However, that would attribute more significant consequences to the fact that the shares were identified as fully paid-up upon their being issued than the present circumstances permit. There was no evidence that the arrangement between Green Day Energy and its shareholders was that the subscription price was always due and owing until paid. Indeed, such a suggestion is at odds with the events that actually transpired — in particular, the fact that the company at no time made any demand for payment. It is open to speculate that Green Day Energy was prepared to loan the subscription price to the members, or had reached some other arrangement with them. In the absence of any evidence as to the members’ obligations to pay the subscription price for their shares, there is nothing from which it can be taken that the price of the shares was “presently payable” as at 14 June 2023.

71    As a matter of fact, the evidence suggests that, from the time that the shares were issued, neither the members nor the company considered that there was an obligation for any member to pay the subscription price. It is more than coincidence that none of the members actually paid the price at or around the time the shares were issued (notwithstanding Mr Hutchinson’s evidence to the contrary, concerning his stapling $35 cash to the application made by Firewheel Trading). Until Mr Hutchinson’s machinations commenced in about May 2023, there was no evidence that anyone considered that they were liable to the company in respect of any subscription price.

72    It follows that, even if this limb of cl 23.19 was open to be applied in the circumstances of this case, no amounts were “presently payable” in respect of the shares held by WFA. Accordingly, it was not prevented from voting at a meeting of members. It was not precluded from receiving notice, pursuant to cl 23.4. Therefore, the purported exercise of the power in cl 3.3(b) by Firewheel Trading on 14 June 2023 was invalid, as was the resolution purportedly passed on that date by Mr Hutchinson.

Estoppel by convention

73    Even if the construction and application of the provisions of Green Day Energy’s constitution set out above is incorrect, then the circumstances are such that neither Green Day Energy nor Firewheel Trading is entitled to assert that WFA’s shares were not fully paid-up.

74    The circumstances of this case give rise squarely to an estoppel by convention: see, generally, Patrick Keane, Estoppel by Conduct and Election (Sweet & Maxwell, 3rd ed, 2023) Ch 8. It is apparent that, as between the shareholders and Green Day Energy, and as between the shareholders inter se, it was universally accepted that the foundation of the parties’ relationships with one another was the fact that the shares allotted on 24 January 2022 were fully paid-up. That is abundantly clear from the resolution of the company authorising the allotment of shares (as recorded in the minutes signed by Mr Hutchinson), the certificates of shareholding, the Form 484 documents lodged with ASIC, and the register of shareholders maintained by the company — which has some evidential effect pursuant to s 176 of the Corporations Act. The same conclusion can be drawn from the statements made or authorised by Mr Hutchinson in the 2022 financial accounts of Green Day Energy, which publicly identified that the 100 shares on issue were fully paid-up.

75    Whilst it can be accepted, as a general proposition, that the status of shares might mistakenly be recorded from time to time in one company document or another, mere error cannot suffice to explain the attribution of a particular status to the shares in Green Day Energy in all of the aforementioned documents. The consistent description of the shares, over a sustained period, as being fully paid-up renders it impossible to escape the conclusion that this description represented that which the members and the company, as between themselves, accepted was the conventional basis of their relationship and their activities. The simple fact that the members had made applications for shares on documents that indicated that the purchase price was enclosed, that the company by resolution indicated that it had received the purchase price, and that the shares were subsequently issued as fully paid-up, would likely suffice to establish as much. The plethora of other documents merely reinforces the conclusion, which is also supported by the fact that no calls were ever made on the shares. In that latter respect, it might be noted that, in the ordinary course, an amount of money is paid upon shares being issued or paid shortly thereafter when called for. Here, the absence of any requirement for payment or any call solidified the factual and legal basis upon which the parties proceeded: that is, that all shares were fully paid-up.

76    Mr Hutchinson provided no adequate explanation as to why every relevant company document recorded that the shares issued on 24 January 2022 were fully paid-up. He merely asserted that this was not intended. It is relevant to observe that it was not until well after the dispute between him and Mr Carswell had started that he made the allegation that Firewheel Trading was the only paid-up member. He was unable to give any adequate explanation as to why he did not mention to the other members that their shares were not paid-up, such that (in his view) they would be unable to vote at a members’ meeting. His failure to do so is particularly noteworthy in circumstances where he set about making changes to the company’s management in reliance on the fact that Firewheel Trading was a paid-up member.

77    In an affidavit filed only a few days prior to the hearing, Mr Hutchinson asserted that Firewheel Trading had paid for its shares on 24 January 2022, when the shares were issued to it. That claim had to overcome the evidence that had already been filed in the proceeding by that point, which established that no money from the allotment of shares had been paid into the NAB account maintained by Green Day Energy. In an apparent attempt to circumvent this obstacle, Mr Hutchinson made the somewhat unusual assertion (already addressed to some extent above) that:

9.    On or about 24 January 2022, in my position as director of Firewheel, I caused the sum of $35.00 to be stapled to the Share Application and stored at my residential premises.

10.     On or about 31 May 2023, I took photos of the Share Application with the money stapled thereto. Annexed hereto and marked DH-3 is a true copy of photographs taken by me on 31 May 2023 confirming that the sum of $35.00 was paid so that Firewheel (in its capacity as trustee on behalf of Camp Mountain Road Trust), was a paid-up member of GDE.

78    The exhibit referred to in this passage was a photograph of the share application form in a green lever-arch file with banknotes to the value of $35 stapled to its top right-hand corner.

79    Putting to one side for a moment the bizarre nature of Mr Hutchinson’s claimed conduct, it might be remarked that, as the director seemingly responsible for the issuing of the shares, it is unusual that he would cause Firewheel Trading to pay the subscription price but not mention any requirement of payment to the other members. Ultimately, he provided no explanation as to why he did not ask for, or require, any payment for the shares issued to WFA and Round Hill Investments. Nor did he provide any explanation as to why he did not bank the $35 into Green Day Energy’s NAB account. The absence of such explanations tends to suggest that he did not make any payment on behalf of Firewheel Trading by stapling banknotes to the application form on 24 January 2022, as he claimed.

80    It is possible to determine the present matter without making any credit findings in relation to this particular issue. However, if that were required, I would have found it very difficult to believe Mr Hutchinson’s evidence in any respect. He was generally evasive when questioned and, when faced specifically with material that contradicted his evidence, he tended to avoid responding directly to the question put to him — preferring to dissemble by purporting to answer some other question. His evidence otherwise strained credulity in many respects. The suggestion that he stapled currency to an application form in January 2022, waited over a year, and then photographed it on 31 May 2023 was but one example.

81    Mr Carswell gave evidence to the effect that he saw the certificate for the shares issued to WFA and, after seeing it, did not believe that WFA had any obligation to make any payment. He also gave evidence that, had he been informed that Green Day Energy or Mr Hutchinson regarded WFA as not being a paid-up member, without an entitlement to receive notice of meetings or to vote at them, he would immediately have caused $55 to be paid to Green Day Energy in full satisfaction of the purchase price. He was not cross-examined on that evidence, and it should be accepted. There is no apparent reason why, if Mr Carswell thought for a moment that WFA would be deprived of its rights as a shareholder by reason of the shares remaining unpaid, he would hesitate to cause the paltry sum of $55 to be paid. Even if there was some disagreement about whether the purchase price for the shares was payable, on no basis could it be thought that disputing the position would be preferable to making payment of that nominal amount.

82    It is, therefore, easily concluded that WFA acted to its detriment in reliance on the relationship that was assumed to exist between the shareholders and Green Day Energy, and which had become the conventional basis upon which they engaged. For that reason, Green Day Energy, Firewheel Trading and Mr Hutchinson are estopped from denying that WFA was entitled to receive notice of members’ meetings and to vote at them. That being so, even if cl 23.19 applies in this case, the defendants are estopped from relying on it.

Conclusion as to WFA’s entitlement to receive notice of and to vote at meetings

83    Given the foregoing, the circumstances on which the power in cl 3.3(b) is conditioned did not exist. Firewheel Trading was not the only member of Green Day Energy entitled to receive notice of and to vote at a members’ meeting. The power was not enlivened, with the result that its purported exercise by Firewheel Trading was ineffective and the resolution purportedly passed by Mr Hutchinson on 14 June 2023 was invalid. It follows that, at all relevant times, Mr Carswell remained a director of Green Day Energy.

Other matters raised

84    Given the above conclusion, it is not strictly necessary to consider whether s 1322 of the Corporations Act precluded any procedural irregularity from invalidating Mr Carswell’s purported removal. However, as this topic was addressed in some detail in the parties’ submissions, it is appropriate to devote a degree of attention to it.

85    The document relied upon by Mr Hutchinson as evidencing Mr Carswell’s removal as a director purported to be minutes of a meeting of the members of Green Day Energy. For that reason, the plaintiffs apprehended that a meeting of members had occurred, and that WFA had not received notice of it. It was the omission to provide that notice on which the plaintiffs relied for seeking to establish the invalidity of the resolution. Had there been a meeting, a question would have arisen as to whether s 1322 applied, such that the irregularity of the failure to give notice to WFA could be prevented from invalidating the resolution unless it was regarded by the Court to have caused substantial injustice. Relevantly, s 1322 provides as follows:

(1)        In this section …

(a)     a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and

(b)     a reference to a procedural irregularity includes a reference to:

(i)    the absence of a quorum at a meeting of a corporation, …; and

(ii)     a defect, irregularity or deficiency of notice or time.

(2)     A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.

86    Whilst the holding of a meeting can be considered a “proceeding” for the purposes of s 1322, it is difficult to accept that, in the circumstances of this case, the omission to give the majority shareholder notice of the meeting constituted a mere “procedural irregularity”. The omission to give notice, with the concomitant failure to accord WFA an opportunity to exercise its right to address the meeting and to vote at it, went well beyond an irregularity. In this respect, reliance was placed by the plaintiffs on the observations of Lindsay J in Re Ryde Ex-Services Memorial & Community Club Limited (Administrator appointed) [2015] NSWSC 226 at [115] – [116], as follows:

115    … [T]here was no “procedural irregularity” because the chairman’s voting procedure denied members their right (a substantive entitlement) to have a vote taken in the manner prescribed by the Club’s Constitution: Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; 55 ACSR 185 at [94]–[97] and [103]–[107].

116    Experience teaches that a right to vote is such a precious thing (so easily denied, and rendered nugatory, by manipulative departures from a course chartered for orderly, informed decision making) that the law must lean towards characterisation of it as a thing of substance, not merely adjectival, not merely a matter of procedure.

87    The rights of shareholders in Green Day Energy to receive notice of members’ meetings and to vote at them are substantive. Failures of process that render those rights nugatory cannot be described as mere procedural irregularities.

88    The consequence is that, even if the holding of the meeting could be characterised as procedural in nature, the omission to given notice of it to WFA was not an irregularity of the type that s 1322 might be relied upon to cure.

89    Further, even if it were assumed that the omission to give notice to WFA of the meeting (or, perhaps, the intended use of cl 3.3(b)) was a procedural irregularity, it would not have been possible to conclude that the irregularity did not cause substantial injustice, or that any injustice could be remedied by any order of the Court. The considerations that the Court is required to have regard to when addressing this issue were assayed by Flanagan J in Career Employment Australia Ltd v Shepley (2021) 166 ACSR 54 at 76 – 78 [100] – [107], and may be summarised as follows:

(a)    The onus is on the person opposing resolutions to show substantial injustice which cannot be remedied by any order of the Court and that the resolutions would not have been passed if there had been no irregularities: [103], quoting Markopoulos v Wedlock (2008) 26 ACLC 129, 134 [56].

(b)    The word ‘injustice’ requires the Court to consider real, and not merely insubstantial or theoretical prejudice. A degree of prejudice to a person or persons may be outweighed if the overwhelming weight of justice is in favour of making the order: [100], quoting Elderslie Finance Corporation Ltd v Australian Securities Commission (1993) 11 ACSR 157, 160.

(c)    The principled approach to identifying substantial injustice is to weigh the prejudice that would be suffered if the order is made against the prejudice that would be suffered if an order was not made: [101], quoting QBiotics Limited, in the matter of QBiotics Limited [2016] FCA 873 [46].

(d)    A common feature of cases in which a substantial injustice has been found to arise is that members or directors have been denied an opportunity to attend a meeting or to make representations to members: [107], citing Chalet Nominees (1999) Pty Ltd v Murray [2012] WASC 147 [32].

(e)    Where the irregularity results in a decision adverse to the interests of those complaining of the irregularity and the irregularity also constitutes a denial of the opportunity to speak against the decision, the Court is likely to make a declaration of invalidity no matter how unlikely it is that the complainant will be able to persuade a future meeting to vote against the same decision: [106], quoting BI Constructions Pty Ltd v Shad [2010] NSWSC 484 [37].

90    On the assumptions made in this case, the irregularity deprived WFA of its right to attend a meeting of members of a company of which it was the majority shareholder. It further denied its entitlement to vote on an important resolution, which would not have been passed had it been able to attend. On any view, the existence of substantial injustice is clear. Apart from that, the failure to give WFA notice resulted in Firewheel Trading removing Mr Carswell as a director, and that permitted Mr Hutchinson to appoint administrators. No relevant order of the Court could remediate the damage so caused.

91    To the above can be added the observation that there is no injustice to be suffered if the Court is now to declare that the resolution made by Mr Hutchinson on 14 June 2023 was invalid and, therefore, a nullity.

92    In such circumstances, had I not concluded that the resolution passed in reliance upon cl 3.3(b) was of no effect, and held that there had been a procedural irregularity in the calling of the meeting, it would not have been appropriate to make an order under s 1322 of the Corporations Act in order to cure that irregularity.

93    The plaintiffs also relied upon there being a lack of a quorum at the 14 June 2023 meeting as invalidating the resolution made. Again, there is no need to consider that issue because the question does not arise. However, if there was a valid meeting, then the absence of a quorum could be said to have caused substantial injustice for the reasons identified above.

Conclusions as to the validity of the purported removal of Mr Carswell as a director

94    Necessarily, it follows that Mr Hutchinson’s attempt on 14 June 2023 to remove Mr Carswell as a director of Green Day Energy was ineffective. Mr Carswell remained a director at all relevant times. The plaintiffs are entitled to a declaration accordingly.

The validity of the appointment of the administrators

95    As identified above, on 5 September 2023, Mr Hutchinson purported to convene a meeting of the directors of Green Day Energy, which he attended alone as the putative sole director. At that meeting, he purported to appoint administrators to the company under s 436A of the Corporations Act. That section provides:

436A     Company may appoint administrator if board thinks it is or will become insolvent

(1)     A company may, by writing, appoint an administrator of the company if the board has resolved to the effect that:

(a)     in the opinion of the directors voting for the resolution, the company is insolvent, or is likely to become insolvent at some future time; and

(b)     an administrator of the company should be appointed.

96    The power of Green Day Energy under that section to appoint an administrator is enlivened if, and only if, its board has made resolutions to the effect described in paragraphs (a) and (b).

97    Here, cl 27.1(b) of the constitution required that written notice of a meeting of directors be sent to each director within seven days after a request had been made to the company secretary to convene such a meeting. In the known circumstances, that request must have been made by Mr Hutchinson. However, acting on the assumption that he was the only director, he did not send notice of the meeting to Mr Carswell. Nevertheless, as the resolution to remove Mr Carswell was ineffectual, he remained a director as at 5 September 2023 and was entitled to notice of the meeting. The failure to give him notice rendered invalid the directors’ meeting and the resolutions purportedly passed at it. Additionally, if the meeting took place as alleged in the documentary evidence, then it was invalidly constituted and did not have the quorum required by cl 27.3(a)(i) of the constitution. It follows that, by the express operation of cl 27.3(b), the meeting was not validly convened, and the business purportedly transacted there was invalid.

98    The failure to give notice to Mr Carswell was not a mere procedural irregularity. It was a substantive matter that impacted upon the directorial control of the company. Even if it were to be characterised as a procedural irregularity, it could not be cured by the operation of s 1322(2) of the Corporations Act because on no view could it be said that the failure to give Mr Carswell notice has caused an injustice that is capable of being remedied by any order of the Court. The appointment of administrators adversely affected his entitlement to control the company and undermined the rights of the company’s shareholders, including WFA as the majority shareholder.

99    Quite properly, it was not submitted on behalf of the defendants that, if Mr Carswell had not been removed, and remained a director as at 5 September 2023, then the appointment of the administrators was still valid. Nor was it contended that any irregularity in the process of appointment could be saved by s 1322. In the result, on any view, the purported appointment of the administrators was invalid.

100    On the material before the Court, it appears that what, in fact, occurred was that Mr Hutchinson purported to exercise the power of a sole director in cl 3.2 of the constitution in order to (inter alia) sign a resolution to the effect described in s 436A. However, as Mr Hutchinson was actually not the sole director of Green Day Energy, the power to make resolutions in that manner did not exist. His purported exercise of the power was a nullity.

101    On any of the above grounds, the plaintiffs are entitled to a declaration that the purported appointment of the administrators was invalid and ineffective. That declaration may be made by the Court pursuant to s 447C of the Corporations Act.

Mr Hutchinson did not believe that Green Day Energy was insolvent

102    In the alternative, it should be concluded that Mr Hutchinson did not hold an opinion that Green Day Energy was insolvent or near insolvent at the time he purported to appoint the administrators. The holding of that opinion is essential to the existence of the power to appoint pursuant to s 436A. So much was made clear by Black J in Re Bean & Sprout Pty Ltd (admin apptd) [2018] NSWSC 351 at [46], where his Honour said:

Section 436A of the Corporations Act provides for the appointment of an administrator where the directors voting for the resolution resolve that, in their opinion, the company is insolvent or is likely to become insolvent at some time in the future. A resolution to appoint an administrator is invalid if the relevant directors’ opinion is not held or not held genuinely or in good faith: Kazar v Duus [1998] FCA 1378; (1998) 88 FCR 218 at 231. An inability to determine whether a company is insolvent cannot, without more, found an opinion that it is or is likely to become insolvent: Kazar v Duus above at 231; Wagner v International Health Promotions (1994) 15 ACSR 419 at 421. …

103    To similar effect are his Honour’s earlier observations in Re Lime Gourmet Pizza Bar (Charlestown) Pty Ltd (formerly under administration) [2015] NSWSC 244 at [22], where he said:

… if a director’s opinion as to insolvency is not held, or is not held genuinely or in good faith, a resolution passed by the directors to appoint an administrator under s 436A of the Corporations Act is invalid: Kazar v Duus above at 333 – 334; Londish v Sheahan – Re Valofo Pty Ltd [2010] NSWSC 337 at [27]. Mr Mandoh refers to the observation of Merkel J in Kazar v Duus above at 230 – 231 that it is implicit in the statutory requirement under s 436A of the Corporations Act that the relevant director’s opinion as to the insolvency, or likely insolvency, of the company that the opinion be bona fide and genuinely formed. Statements of the directors’ opinion are relevant to whether they have formed the requisite opinion but the court must approach that question objectively: Kazar v Duus above; Smolarek v McMaster as Administrator of Eznut Pty Ltd [2008] WASCA 234. Mr Mandoh also submits that it is not sufficient to support an administrator’s appointment that directors are merely uncertain as to a company’s solvency: Kazar v Duus above; Wagner v International Health Promotions (1994) 15 ACSR 419 at 421. Mr Mandoh also refers to the observation of Weinberg J in Downey v Crawford [2004] FCA 1264; (2004) 51 ACSR 182 at 218 that the question whether directors genuinely believed that a company was actually insolvent, or likely to become so at some future time, will depend largely upon whether they took adequate steps to satisfy themselves that the statutory requirements were met before resolving to appoint an administrator.

104    Here, Mr Hutchinson did not genuinely believe that Green Day Energy was insolvent or likely to become so at some future time. He knew that it had in excess of $1 million in its NAB account. Mr Carswell deposed in his first affidavit in this proceeding that he was informed on around 8 June 2023 by a NAB staff member that the bank account had been unfrozen. That assertion, however, was not elaborated upon or explained, and was inconsistent with the basis on which the parties proceeded — that is, that the account remained frozen. Whilst those funds were temporarily frozen, it was not beyond Mr Hutchinson’s ability to render those funds accessible, even if it meant that he had to deal with Mr Carswell in order to do so. It could not realistically be concluded that Green Day Energy was altogether prevented from accessing its own funds for an extended period, such that it was not in a position to pay its creditors. That sort of deadlock could only have been fabricated, quite artificially, against the interests of the company. Nevertheless, that may have been what Mr Hutchinson was seeking to achieve.

105    In any event, the company had very few creditors, and the total quantum of the creditors’ claims was small when compared to the amount of cash that it held. Moreover, the outstanding creditors were almost all related parties, and it can be inferred that they would be prepared to await the resolution of the internal conflict between the directors in order to be paid. Their preparedness to support the company financially, at least to some extent, would render any debts owed to them essentially irrelevant for the purposes of the solvency analysis. The only non-related party debts totalled $1,622.67, and it cannot reasonably be expected that this amount would not have been paid if required. Finally, Green Day Energy owned motor vehicles, a forklift, conveyors, compressors, a generator and the pilot torrefaction plant, and it was not suggested that it was unable to raise funds using these assets as security.

106    The plaintiffs adduced the expert evidence of Mr Anthony Connelly of McGrathNicol, who had prepared a solvency report in relation to Green Day Energy for the purposes of this proceeding. Mr Connelly, whose evidence was unchallenged, opined that the company was always solvent between June 2023 to 5 September 2023, and that was so regardless of whether the cash flow test or the balance sheet test was used. In reaching his conclusion, Mr Connelly rejected the defendants’ suggestion that Green Day Energy effectively owed a debt of $750,000 because it had a “contingent co-funding obligation” to contribute that amount of money to the enterprise in which it was involved as a condition of the Commonwealth grant that it had obtained. He also, sensibly, recognised that the funds in the NAB account were available to the company and could be accessed by the directors jointly asking the bank to release the account. In that way, it was within the powers of the directors, as the organ in control of the company, to access funds with which to pay its debts.

107    Mr Connelly’s opinion is well-founded. It is based on evidence that was always available to Mr Hutchinson. Importantly, Mr Hutchinson’s claimed belief that the company was indebted in an amount of $750,000 as a result of the “contingent co-funding obligation” arising under the Grant Agreement with the Commonwealth was misplaced. His view that this amount was a liability of the company was not one that could be described as reasonably held. No one could believe that a company’s obligation to raise funds for its own benefit would be seen as a liability.

108    Further, it was apparent that the company’s shareholders (and parties associated with them) had provided financial support to the company by meeting its due and payable debts. In that sense, as Mr Connelly recognised, the company had sources from which it was able to meet its financial commitments as and when they fell due. Mr Hutchinson’s failure to take this into account when considering whether the company was insolvent was also unreasonable.

109    In attempting to support his opinion that Green Day Energy was insolvent, Mr Hutchinson appeared to rely upon what he alleged was an obligation to repay to the Commonwealth certain funds that had been provided under the Grant Agreement. There was, in fact, no such obligation in existence. Though it is true that, under the Grant Agreement, it was possible for the recipient of funds to become obliged to repay money, there was no liability to do so unless certain events had occurred and a demand had been made. It was accepted at the hearing that no such demand had been made, with the consequence that there was no liability to make any repayment that could reasonably be relied upon for the purpose of assessing whether the company was insolvent. To the extent that Mr Hutchinson took into account the existence of this obligation when arriving at his opinion that Green Day Energy was insolvent, or might become so in the near future, he again acted unreasonably.

110    The steps taken by Mr Hutchinson to ascertain whether Green Day Energy was solvent were also far from reasonable. Apart from his evidence that he turned his mind to the issue, there is nothing to support the conclusion that he actually performed a proper assessment of the company’s financial position. Had he undertaken that exercise genuinely, it seems that there was no basis at all on which he might have drawn the conclusion that Green Day Energy was insolvent or even near to insolvency. If he did form that opinion, he did not do so bona fide. Therefore, it was not an opinion that would enliven the power in s 436A of the Corporations Act.

111    It follows that at no time did Mr Hutchinson hold a bona fide opinion that Green Day Energy was insolvent or likely to become so at some future time. His evidence to the contrary must be rejected. It was not credible. Even if he did have some belief that the company might be insolvent, the belief was not reasonably or rationally held. For that reason, as well, the power under s 436A of the Corporations Act was not enlivened and the purported resolution to appoint the administrators was invalid and ineffective.

112    Therefore, the power in s 436A was invalidly exercised with the consequence that the purported appointment of the administrators was invalid.

The exercise of s 436A for an improper purpose

113    Not only did Mr Hutchinson not hold the opinion that Green Day Energy was insolvent, it can be concluded on the available evidence that he purported to exercise the power under s 436A for the improper purpose of attempting to exclude Mr Carswell from the company’s management and to prevent WFA from removing him as a director. This was evident from the content of an email sent by Mr Gray, who was apparently acting on behalf of Mr Hutchinson (and perhaps also his brother, Mr Stephen Hutchinson). It is convenient to repeat the circumstances in which that email was sent.

114    On 11 August 2023, Mr Gray sent an email to Mr Pirina as part of the discussions leading to the appointment of the latter as an administrator. In it, Mr Gray purported to provide Mr Pirina with some background to the circumstances surrounding Green Day Energy. The statements in the email were unequivocal, but often wrong — though that may be the result of some inaccurate information having been provided to Mr Gray. In any event, Mr Pirina was informed by Mr Gray of the proposed solution to the issues that had arisen within Green Day Energy in the following terms:

With the current outstanding liability to the grant office, money owed to David [being Mr Hutchinson], unpaid share capital and money now potentially owed from Brad [being Mr Carswell], David and the chemical engineer [being Mr Winter] wish to explore a way to continue the project while decoupling or significantly reducing Brad’s shareholding to a level that makes his behaviour manageable.

115    Mr Hutchinson, who was copied in on that email, responded to it, stating that “[Mr Gray’s] recall of the dispute and its history is about spot on”. In that response, Mr Hutchinson did not take issue with the statement that he wished to explore methods of continuing the project whilst “decoupling” Mr Carswell’s shareholding. Nor did he give evidence in the context of this proceeding that he took issue with that statement, or that he informed Mr Pirina that it was incorrect. From this, it is sufficiently clear that Mr Hutchinson’s intended purpose in putting Green Day Energy into administration was to undermine WFA’s shareholding and, therefore, Mr Carswell’s influence, whilst permitting the company to continue pursuing the Biomass Project. That conclusion is supported by the previous finding that Mr Hutchinson held no opinion, or at least no bona fide opinion, that Green Day Energy was insolvent or near insolvent at the time that he purported to place it into administration. It is likely that Mr Hutchinson’s resolution to that effect did not reflect an honestly held opinion, and that it was instead made as a pretext for the exercise of the power in s 436A of the Corporations Act.

116    The timing of the purported appointment of the administrators is also relevant. By August 2023, Mr Carswell had made complaints about what he regarded as his unlawful removal as a director, and he was seeking information and explanations in relation to certain suspicious transactions involving the use of Green Day Energy’s funds by Mr Hutchinson and his brother. On 24 August 2023, Mr Carswell, via his solicitors, gave notice of a general meeting of the members of Green Day Energy to be held on 15 September 2023. Its stated purpose was to confirm Mr Carswell’s status as a director, remove Mr Hutchinson as a director, and appoint two independent directors. Shortly thereafter, on 29 August 2023, a meeting occurred between Mr Carswell, his solicitors, Mr Hutchinson and Mr Winter. According to Mr Hutchinson’s oral evidence, it was at that meeting that he pointed out for the first time that WFA’s shares were unpaid and effectively revealed that the reason that he had been able to remove Mr Carswell as a director was that Firewheel Trading was the only paid-up shareholder. The following day, on 30 August 2023, Mr Carswell’s lawyers sought copies of various documents from Green Day Energy, including copies of the constitution and minutes of meetings. At this point, it would no doubt have become apparent to Mr Hutchinson that Mr Carswell, with the assistance of his solicitors, would now be able to examine and assess the validity of his purported removal as a director. Mr Hutchinson would also have been aware that, given WFA’s majority shareholding, it would be able to, and very likely would, remove him as a director at the upcoming members’ meeting.

117    This timeline of events supports the conclusion that the purported resolution to place Green Day Energy into administration was motivated by Mr Hutchinson’s desire to prevent the members’ meeting from occurring (which would almost certainly have resulted in his removal from office) and to afford him an opportunity to restructure the company in a manner consistent with the statements of Mr Gray in his email of 11 August 2023.

118    That extraneous purpose for appointing the administrators necessarily vitiated the resolution, which was made other than in the interests of the company. The rationale for this conclusion was explained by Barrett AJA in Re Condor Blanco Mines Ltd [2016] NSWSC 1196 at [113] in the following terms:

The power of appointing an administrator is, by s 436A of the Corporations Act, confided to a company’s directors. Like all other powers of directors, the power may only be exercised in the interests of the company as a whole. If it is found that the directors are motivated by a purpose of self-interest, such as a desire to retain their control of the company or to defeat the legitimate exercise of shareholders’ powers inimical to their personal interests, their decision is one that is inconsistent with due performance of their duties. One need not look beyond the decision of the Privy Council in Howard Smith Ltd v Ampol Petroleum Ltd [1974] UKPC 4; [1974] AC 821 for authority on this. And if such an inconsistent purpose is causative, in the sense that, but for its presence, the power would not have been exercised, the tainted action is vitiated by the impermissible purpose and is rendered voidable as distinct from void: Whitehouse v Carlton Hotel Pty Ltd (above) at 294-5.

119    The circumstances of that case were relevantly similar to the present, in that the appointment was made for the purpose of preventing the removal of the existing directors, who were almost certainly facing replacement at an impending meeting of members called for that purpose.

120    Therefore, not only did Mr Hutchinson not have any bona fide opinion that Green Day Energy was insolvent, but his purpose in purporting to appoint administrators was an improper one —being, essentially, to wrest control of the company from Mr Carswell.

Was the appointment of administrators effective at all?

121    The parties proceeded on the basis that, even if Mr Hutchinson had no power to appoint the administrators, a court order was required to terminate the administration. That may be the position where the question is whether the appointment was for an improper purpose, but it is not self-evident that it is also the position in circumstances where the director who purported to make the appointment had no power to do so. Nevertheless, that was not a live point of dispute between the parties. Accordingly, it is appropriate to determine the matter on the basis that the case was argued; that is, by asking whether or not the Court should make an order terminating the administration.

Should the administration be terminated?

122    A substantial dispute arose between the parties as to whether the administration should be terminated pursuant to s 447A of the Corporations Act in the event that the Court found that the administrators were not legitimately appointed. Although not expressly stated, Mr Hutchinson’s submission was effectively that, if the administrators had been invalidly appointed, their appointment should, nevertheless, be validated by an order under s 447A.

123    Whilst it is true that the Court has power to terminate or validate an administration under that section, the circumstances of the present case that have given rise to the possible exercise of that power compel the conclusion that it should be used to bring the administration to an end. The evidence overwhelmingly supports the conclusion that Green Day Energy was solvent when the administrators were appointed and has remained so since then. There was no legitimate foundation for the purported appointment of administrators under s 436A. Indeed, their appointment was effectively an abuse of Pt 5.3A of the Corporations Act. It goes without saying that Pt 5.3A should not be used merely to quell shareholder or director disputes, or for the manipulation of members’ respective shareholdings. Any attempt to use it in such a way must be found to be without effect.

124    On behalf of Mr Hutchinson, it was submitted that the manner in which the company was operated prior to its administration suggested that it would be imprudent of the Court to return it to the hands of the directors. Even if that were correct, however, it is not entirely clear what the future of the company would be if the administrators remained in place. There is no suggestion that a deed of company arrangement is likely to be proposed, or any indication as to where it might come from or what it might hope to achieve.

125    On the other hand, if the administrators are removed, it is sufficiently clear that a general meeting of the members of the company will occur, at which the majority shareholder, WFA, will be able to exercise its voting rights to reconstitute the board of directors, should it wish to do so. The current intention, as expressed by Mr Carswell, would be to remove Mr Hutchinson and replace him with two independent directors. The evidence before the Court shows that Mr John Dunleavy is prepared to act as a director. Although he is known to Mr Carswell, he has extensive experience in securing Commonwealth and State grants and funding initiatives, as well as in assisting with ongoing compliance obligations. He also has experience in corporate advisory work in relation to capital raising, business planning, and developing expansion plans for businesses of varying sizes. A second proposed director is Mr Roger Emmerson, who has experience in corporate management and a long track record of success across several industries. He is also appropriately qualified to conduct Green Day Energy’s business. This evidence suggests that returning the company to the directors will likely result in it having more effective governance than it has had to date.

126    Section 447A of the Corporations Act is expressed in broad terms and allows the Court to “make such order as it thinks appropriate about how [Pt 5.3A] is to operate in relation to a particular company”. Nevertheless, the power must be exercised so as to achieve the objectives of Pt 5.3A, as expressed in s 435A. In the recent matter of Re Premier Energy Resources Pty Ltd [2023] NSWSC 1185, Williams J set out the established principles that guide the exercise of the Court’s power. Her Honour said (at [63] – [64]):

63    The power under s 447A has been applied in numerous cases to make orders validating the appointment of administrators that would otherwise be invalid, or dispelling uncertainty that would otherwise exist about the validity of the administrators’ appointment. These include cases in which there were doubts about whether instruments of appointment had been forged.

64        The factors relevant to the exercise of the discretion include:

(1)     whether the company is insolvent, or is likely to become insolvent;

(2)     whether the administrators made inquiries to confirm the validity of their appointments, including by seeking external legal advice;

(3)     the potential disruption that may be caused by a future challenge to the validity of the administrators’ appointment;

(4)     the conduct of the directors prior to the administrators’ appointment, and whether it would be wrong to give the imprimatur of the Court to that conduct by validating that appointment;

(5)     the work carried out by the administrators—and, in the present case, by the liquidators—on the assumption that their appointments were valid;

(6)     whether substantial injustice would be occasioned to any person by the validation of the appointment of the administrators and, in the present case, by the consequential effect of such validation on the validity of the appointment of the liquidators; and

(7)     whether the proposed orders under s 447A are otherwise consistent with the objectives of Part 5.3A of the Corporations Act.

(Footnotes omitted).

127    A significant factor in this case is that articulated at point (4) above. Applied to the present circumstances, it could be observed that to permit Green Day Energy now to remain in administration would, effectively, be to give the Court’s imprimatur to Mr Hutchinson’s improper use of the power of appointment in s 436A. As mentioned previously, there was simply no legitimate basis for the appointment of the administrators, which constituted an abuse of Pt 5.3A. There would be a considerable deal of incongruity in reaching that conclusion on the one hand while, on the other hand, declining to terminate the administration on discretionary grounds — particularly because this would allow Mr Hutchinson to retain the benefit of his misuse of the statutory scheme.

128    The parties referred to a number of other events that occurred in the management of Green Day Energy in an attempt to justify their respective positions as to the termination or validation of the administration. There is no need to describe them all in detail, but some of the more prominent examples do bear mentioning.

129    Though there was some debate as to the proper apportionment of blame for the freezing of Green Day Energy’s NAB account, it has remained difficult to ascertain exactly who was at fault, and to what extent, in relation to that matter. Ultimately, there is no need to draw any final conclusion on that point, given the other factors that effectively necessitate the termination of the administration.

130    There is no similar difficulty in apportioning blame in relation to the use of the $500,000 in Commonwealth grant money that was transferred out of Green Day Energy’s NAB account. In May 2023, Mr Carswell became concerned that this amount of money had been withdrawn. As it transpired, it had been transferred to a mortgage offset account belonging to Mr Stephen Hutchinson and his wife. Neither of those persons was an officer or an employee of the company, though it appears generally from the evidence in this proceeding that Mr Hutchinson did give his brother some measure of access to, or control over, the company’s bank account.

131    As explained above, the transfer of funds was described in the company’s records as a payment to a company controlled by Mr Winter for “plant and equipment”. That description was false. Although Mr Hutchinson was responsible for the accounts, he had no explanation as to why the recipient of the funds and the use to which they were being put were misleadingly represented in this way.

132    It seems that the effect of the transfer to the offset account was to reduce the amount of interest that Mr Stephen Hutchinson and his wife were required to pay on their loan. Despite Mr Hutchinson’s assertions to the contrary, there was no valid reason for Green Day Energy’s funds to have been used in that manner. In his affidavit of 16 October 2023, he said that the money was transferred at the suggestion of his brother, so that it could “earn income that could offset expenses when the project ultimately commenced”. While he acknowledged that the documentation surrounding this transaction “could have been more robust”, he claimed that there was an email outlining the terms of its use and that the interest that it earned was recorded as a separate savings account within the company’s accounts. The email to which he referred was sent to him from Mr Stephen Hutchinson on 24 September 2022. In full, it stated:

As discussed, will place 500k from the Green Day Energy account on call at a rate of 3.65% (~$50 a day). If rates continue to rise this could increase.

133    Plainly, this is not an adequate set of terms on which a director of a company might transfer to the personal offset account of his brother, who is neither a director nor employee of the company, $500,000 from the company’s funds, which had been received in the form of a Commonwealth grant (assuming that such a course could ever properly be taken, whether on terms or otherwise). To say that the documentation of the transaction “could have been more robust” is an understatement in the extreme. Most noteworthy is the omission from the email of any explanation of the purpose of the arrangement — leaving open the possibility that, in reality, it was contrived purely for the private benefit of Mr Stephen Hutchinson, to the detriment of Green Day Energy. One thing is for certain: the purpose of the arrangement to which Mr Hutchinson deposed in his affidavit evidence went unfulfilled, as the funds in the offset account did not earn interest at all. Taking a view of the circumstances that is especially generous to Mr Hutchinson, all things considered, it might be supposed that he simply failed to inquire whether his brother had proceeded to invest the funds in an interest-bearing account as he had suggested he would. At the same time, it so happens that the Court was not shown any evidence of a separate account in which the interest earned on the $500,000 sum was (or was to be) recorded, perhaps suggesting that Mr Hutchinson also failed to set that up. To complete the picture, Mr Hutchinson conceded in cross-examination that he had not informed Mr Carswell, or sought approval from the board of Green Day Energy, prior to transferring the money.

134    Mr Hutchinson subsequently asserted in his affidavit of 16 October 2023 that a calculation was to be made of the interest that the $500,000 in the offset account would have earned, and that amount would be paid to Green Day Energy. That evidence should not be accepted. There was a telling absence of any contemporaneous documentation evidencing the existence of such an arrangement, which was, with respect, very difficult to reconcile with the facts as they ultimately emerged.

135    Mr Hutchinson further deposed that, on about 29 May 2023, approximately $20,810 was held in cash for the benefit of Green Day Energy, which had been paid by Mr Stephen Hutchinson “on account of interest referable to the money borrowed from [the company]”. It was claimed that this money was spent by or on behalf of the company, but the specifics of the transactions were recorded only in the Xero account maintained by the company. The records from the Xero account were not produced because, according to Mr Hutchinson, he did not currently “have access to review those records”. That is a surprising state of affairs, given that he had financial control of the company. In cross-examination, he gave the more equivocal explanation that he did not know whether or not he had access to the Xero account but, if he did have full access, he did not utilise it to review the company’s records. It is not unfair to say that this evidence was unsatisfactory.

136    Whilst Mr Hutchinson and his brother have returned the $500,000 to the account of Green Day Energy, and may have paid some interest on the sum, that cannot negate the obvious impropriety of the transaction that was undertaken. Indeed, it gives the appearance merely that they were trying to restore some of their credibility once they were caught in the process of, quite unmistakably, misusing the company’s funds.

137    Further evidence of Mr Hutchinson’s financial mismanagement can be seen in his acquisition of two motor vehicles.

138    On 22 July 2022, he withdrew the amount of $67,145.11 from Green Day Energy’s NAB account in the form of a bank cheque payable to a motor dealer, Metro Ford. In his affidavit of 16 October 2023, he said that this was for the purchase of a Ford Ranger, which was to be used in Richmond for the benefit of the company’s staff. However, the vehicle has never since been taken to Richmond and used there for the company’s business. Instead, it has been kept by Mr Stephen Hutchinson at his home for his exclusive, private use. As mentioned above, Mr Stephen Hutchinson is neither a director nor an employee of Green Day Energy. Mr Hutchinson provided no valid explanation for his brother’s possession and use of the vehicle. Downplaying the circumstances to quite a remarkable extent, he deposed in his 16 October 2023 affidavit in respect of the vehicle that “due to delays in the project that were outside of the control of [Green Day Energy] it is not yet required in Richmond, and the Ford Ranger is currently located in Brisbane”. Amplifying the cause for concern in relation to this transaction is the fact that Mr Hutchinson did not inform his co-director, Mr Carswell, of the purchase of this vehicle, or of the manner in which it was being used.

139    In August 2022, Mr Hutchinson transferred $36,000 of Green Day Energy’s funds to himself for the purchase of a Nissan Navara. This vehicle was purchased with the knowledge and involvement of Mr Carswell, and has been used for the Biomass Project in the Richmond area. However, all throughout, it has been registered in Mr Hutchinson’s name — not in the company’s name. In cross-examination, Mr Hutchinson could not recall whether or not he had told Mr Carswell that the vehicle would be registered in his own name in this way. He indicated that his intention was to transfer the registration, at some point, into the company’s name, but he said that he had simply forgotten to do so. He was prepared to accept the suggestion, squarely put to him, that there was no valid reason why he had registered the Navara in his own name. It might also be noted that, given that the Navara was purchased for use on the project at Richmond, and was so used, the asserted purpose behind the prior acquisition of the Ford Ranger seems to have been shown to be false.

140    These dealings by Mr Hutchinson reinforce the view that he has been prepared to misapply the company’s funds rather audaciously for his own benefit and for the benefit of his relatives. Such behaviour is offensive to ordinary understandings of sound financial management. It strengthens the conclusion that he should not remain in a position where he enjoys financial control over Green Day Energy.

141    Mr Hutchinson’s failure, as the putative financial administrator of Green Day Energy, to regulate access to the company’s funds, to ensure that the company entered into appropriate transactions, and to document the use of funds, renders it inappropriate for him to remain in any office that affords him a measure of control over the company. On its face, his permitting — if not actively facilitating — the misuse of company funds for his benefit and the benefit of his brother, involved a breach of his statutory duties as a director, as set out in ss 180, 181 and 182 of the Corporations Act, as well as a breach of the fiduciary duties that he owed. Those breaches were serious and were exacerbated by the misrepresentations in the company’s accounts. Additionally, it is a matter of great concern that, in the course of his cross-examination, he was seemingly unable to acknowledge that certain of the dealings with his brother were inappropriate.

142    The plaintiffs submit that these matters evidenced serious mismanagement of Green Day Energy’s finances by Mr Hutchinson. They say that such failures, of themselves, provide a substantial reason for terminating, or not validating, the administration. This will allow control of the company to vest, ultimately, in the hands of Mr Carswell and the two independent directors. These submissions should be accepted.

143    The termination of the administration in this case will also permit the company’s members to exercise their voting rights to arrange the company’s management in accordance with their entitlements afforded by the constitution. To the extent necessary, the shareholders can pursue any grievance in accordance with the dispute resolution clause in that document, failing which they may invoke one of the statutory remedies. In relation to the reorganisation of the board, the fact that WFA intends to appoint Mr Dunleavy and Mr Emmerson as independent directors, each of whom has experience in financial management and corporate governance, supports the conclusion that, if the administration is brought to an end, Green Day Energy will be able to proceed with the Biomass Project in accordance with the conditions upon which funding has been received from Commonwealth Government.

144    The restoration of the company to the control of validly elected directors through the application of the relevant voting procedures will also permit the removal of any restrictions on access to Green Day Energy’s NAB account. In turn, that will allow for the ready payment of the company’s creditors, as and when required.

145    There is nothing to suggest that any current creditor of the company will be disadvantaged by the termination of the administration. That is largely because the company is not insolvent and has the capacity to pay all of its debts.

146    There was some suggestion by Mr Hutchinson that Green Day Energy’s future is problematic because it has not yet raised and contributed to the business an amount of $750,000 in accordance with its “contingent co-funding obligation”. This, so it was said, would cause the Commonwealth to require the return of its grant funding. However, that is a matter of pure speculation, and it is far from certain that the Commonwealth would take such action. Moreover, Mr Dunleavy’s appointment to the board will likely mitigate difficulties with the administration of the grant, as he has particular expertise in such matters. In any event, the grant was provided as part of a program that had the objectives of, inter alia, supporting the research and development of innovative and locally sourced raw material supplies. The Biomass Project’s scope included the development and implementation of sustainable harvesting and collection methods, using Prickly Acacia as raw feedstock, and the commercialisation of research outcomes through the bringing of the low-emissions biomass fuel to market. In this respect, the grant was substantially focused on preliminary processes of research and development. Necessarily, that gives rise to an expectation that some leeway might be afforded in the project’s progression.

147    This latter point also disposes of the suggestion, made on Mr Hutchinson’s behalf, that the administration should not be terminated because the project is unviable in any event. By nature, the Biomass Project involves substantial research into an emerging product, with little to no certainty as to its commercial prospects. A commercial success is certainly hoped for, but is not necessarily anticipated or even imperative. It might also be pointed out that this is an unusual submission to be made on behalf of Mr Hutchinson in circumstances where neither he nor Firewheel Trading has previously raised the suggestion that the research and development exercise, and the Biomass Project more generally, will be fruitless. It is difficult not to perceive an element of spitefulness in this submission in the present circumstances — giving the appearance that Mr Hutchinson is attempting to bring the business down because it is likely that he will not enjoy a position of great influence in its future.

148    On behalf Mr Hutchinson, it was further submitted that it is likely that the members of Green Day Energy will end up in litigation in the future and that should be avoided. The foundation of that submission was not made entirely clear. Certainly, on the evidence that has emerged in this proceeding, there is a real possibility that Green Day Energy may seek to recover against Mr Hutchinson in relation to the performance of his director’s duties, albeit that it may face some difficulties proving the losses that it has suffered. It may be that Mr Hutchinson’s submission was hinting at an oppression action but, again, on the evidence presently before the Court, it is difficult to see who the targets of any such claim might be. There was nothing to suggest clearly that WFA had, to date, engaged in any conduct that might offend ss 232 and 233 of the Corporations Act. On the contrary, it has sought to ensure the proper management and administration of Green Day Energy, and it has not indicated any intention to pursue further proceedings. Although accusations of mismanagement were levelled against Mr Carswell and WFA, none of them were sustained. While Mr Carswell’s conduct may not have been at all times faultless, the mismanagement of the company has for the most part been the product of Mr Hutchinson’s cavalier, self-interested attitude to his duties as a director.

Conclusion as to the termination of the administration

149    All of the factors in this case weigh in favour of terminating the administration, or not validating it. There is nothing to suggest that it should continue. Mr Hutchinson’s wrongful misuse of the power to appoint administrators should be rectified, and his inevitable removal as a director can only be to the company’s benefit. It has been his disregard for his duties as a director, and his invalid attempts to remove Mr Carswell and appoint administrators, that has caused substantial dissonance and disfunction within the company. The evidence that he gave during the hearing established that he has little appreciation of the nature and extent of the duties that a director must fulfil. Allowing him to misuse the administration process to obtain control of Green Day Energy will potentially imperil the company’s continued existence.

The relief

150    In consequence of the above, the plaintiffs are entitled to the relief that they seek.

151    First, a declaration should be made that the resolution of 14 June 2023 to remove Mr Carswell as a director of Green Day Energy was invalid and of no effect.

152    Secondly, as Mr Hutchinson acted on the invalid resolution and altered the ASIC records to have Mr Carswell’s name removed from the public list of directors, the plaintiffs are entitled to an order that the register kept by ASIC be rectified pursuant to s 1322(4)(b) of the Corporations Act to record that Mr Carswell did not cease to be a director of Green Day Energy on 14 June 2023.

153    For the reasons set out above, a declaration should also be made to the effect that the purported appointment of the administrators was invalid and of no effect. As mentioned previously, that declaration can be made specifically pursuant to s 447C of the Corporations Act. As there is some doubt about whether the invalid appointment of the administrators has any effect, an order terminating the administration should also be made.

154    The plaintiffs seek the making of a consequential order to the effect that ASIC’s records be amended to reflect the fact that the administrators, Mr Pirina and Mr McEvoy, were not appointed as joint and several administrators of Green Day Energy and that the company was never under external administration. In circumstances where the fact of external administration is important to the continuation of the Commonwealth grant, such an order is appropriate.

155    Further, as Mr Hutchinson did not have authority to conduct the affairs of Green Day Energy by himself, it should be declared that the resolution that he made at the purported “meeting of the director” on 26 June 2023, relating to the raising of capital for Green Day Energy, was void and of no effect.

156    The parties will be heard on the question of costs.

Associate:    

Dated:    21 December 2023