Federal Court of Australia

Millynn, in the matter of Sagerland Pty Ltd v Sagerland Pty Ltd [2025] FCA 391

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth), Sagerland Pty Ltd (ACN 158 718 337) be wound up.

2.    Pursuant to s 472(1) of the Corporations Act 2001 (Cth), James Stuart McPherson be appointed as liquidator of Sagerland Pty Ltd (ACN 158 718 337).

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

REASONS FOR JUDGMENT

Delivered ex tempore, revised from transcript

MCDONALD J:

Introduction

1    In October 2022, Richard Sager, who was a nutritionist and dietitian, was killed in a road accident. At the time of his death, he was the sole director and shareholder of the defendant in these proceedings, Sagerland Pty Ltd (Sagerland). Through that company, he carried on a business providing personal services in the nutrition and diet industry. At the time of Mr Sager’s death, Sagerland owed a significant debt to the Commissioner of Taxation and had various liabilities to other creditors.

2    The plaintiff, Janet Millynn, is Mr Sager’s mother. She is the administrator of his deceased estate and, in that capacity, is now the sole shareholder of Sagerland. She is reluctant to become a director of Sagerland, and the only reason for her to do so would be to take the steps necessary to voluntarily wind up the company. Ms Millynn has applied to the Court for an order that Sagerland be wound up pursuant to s 233 of the Corporations Act 2001 (Cth) “on the just and equitable grounds”.

Relevant legislation and legal principles

3    Section 201A of the Corporations Act provides that a company must have at least one director. In cases where a sole director wishes to resign, s 203AB(1) ensures that they are replaced immediately by at least one other director, by providing that the resignation of a director does not take effect if, at the end of the day that the resignation is to take effect, the company does not have at least one director. Section 203CA(1) makes similar provision in circumstances where the members of a proprietary company resolve to remove a sole director.

4    However, the death of a sole company director cannot be deemed ineffective or void, and the Corporations Act makes no specific provision to ensure that a director who dies is immediately replaced by another director. Since Mr Sager’s death, Sagerland has not been in compliance with the general requirement of s 201A that it have at least one director.

5    The death of the sole director of a company does not result in the administrator of the deceased director’s estate automatically becoming a director. Rather, s 201F of the Corporations Act relevantly provides:

201F Special rules for the appointment of directors for single director/single shareholder proprietary companies

…

Appointment of new director on death, mental incapacity or bankruptcy

(2)     If a person who is the only director and the only shareholder of a proprietary company:

(a)     dies; or

(b)     cannot manage the company because of the person's mental incapacity;

and a personal representative or trustee is appointed to administer the person’s estate or property, the personal representative or trustee may appoint a person as the director of the company.

…

(4)     A person who has a power of appointment under subsection (2) or (3) may appoint themselves as director.

(5)     A person appointed as a director of a company under subsection (2), (3) or (4) holds office as if they had been appointed in the usual way.

6    Ms Millynn, having been appointed to administer Mr Sager’s estate, thus has the capacity to appoint herself (or another person) as a director of Sagerland.

7    Section 233(1)(a) of the Corporations Act empowers the Court to order that a company be wound up on the application of a member or of a person to whom a share in the company has been transmitted by will or by operation of law: see s 234(a) and (d). Ms Millynn is such a person. However, the Court may only make an order under s 233(1)(a) if one of the conditions in s 232 is met. Section 232 provides:

232 Grounds for Court order

The Court may make an order under section 233 if:

(a)    the conduct of a company’s affairs; or

(b)    an actual or proposed act or omission by or on behalf of a company; or

(c)    a resolution, or a proposed resolution, of members or a class of members of a company;

is either:

(d)    contrary to the interests of the members as a whole; or

(e)    oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.

(Notes omitted.)

8    Additionally, s 461(1)(k) of the Corporations Act provides that “[t]he Court may order the winding up of a company if … the Court is of opinion that it is just and equitable that the company be wound up”. The persons with standing to apply for an order under s 461(1) are identified in s 462(2). They include “a contributory”, which is defined in s 9 of the Corporations Act to include, relevantly, “for a company with share capital—a holder of fully paid shares in the company”. Ms Millynn, in her capacity as the administrator of Mr Sager’s estate, is such a person.

Sagerland should be wound up on the ground that it is just and equitable to do so

9    The evidence before the Court suggests that the accountants for Sagerland have adopted a “policy” or practice of always backdating the appointment of new directors to the date of the resignation or death of the previous director, in instances where a company had had only one director. This is said to be due to the accountants’ understanding that a company should never be without a director. The practice of backdating the appointment of a director to a date other than the date on which they were actually appointed would appear to be unlawful: Corporations Act, s 1308. Only clear statutory language would be construed as requiring or authorising such a practice. Section 201A of the Corporations Act does not authorise it, let alone require it.

10    There is no benefit to Ms Millynn, or anyone else whom she might consider appointing, in becoming a director of Sagerland. Ms Millynn has expressed a concern that, were she to appoint herself as a director, the appointment might be taken to have commenced on the date of Mr Sager’s death, because s 201A of the Corporations Act does not contemplate that a company may be without a director. Ms Millynn is concerned that, because more than 30 days have elapsed since Mr Sager’s death, she may become personally liable for director penalties as a result of Sagerland’s debts to the Commissioner of Taxation: see Taxation Administration Act 1953 (Cth), Schedule 1, Division 269. Further, even if becoming a director would not in fact expose her to such liability, she is concerned about the risk that an unsecured creditor of Sagerland may make a claim against her personally were she to become a director, and about the costs of defending such a claim. For these reasons, Ms Millynn is unwilling to become a director of Sagerland.

11    It is unnecessary in the circumstances of this case to determine whether any of Ms Millynn’s concerns are well-founded.

12    Ms Millynn’s originating process seeks an order that Sagerland be wound up pursuant to s 233 of the Corporations Act “on the just and equitable grounds”. This seems to me to conflate the power to order that a company be wound up under s 233(1) on the grounds identified in s 232 and the distinct power under s 461(1) to order that a company be wound up if the Court considers it just and equitable to do so. In written submissions filed in support of the application, Ms Millynn appears to seek an order under s 461(1)(k). I am not satisfied that either of the preconditions for the making of an order under s 233(1) of the Corporations Act is met. However, in my view, it is just and equitable that Sagerland be wound up and it is appropriate that I exercise my discretion to make an order to that effect pursuant to s 461(1)(k) of the Corporations Act.

13    Due to the death of Mr Sager, Sagerland is unable to trade as it previously did, or to achieve its objects. Ms Millynn has not carried on the business of Sagerland, and there is nothing to suggest that she has ever acted as if she were a director of Sagerland. She did not cause Sagerland to incur liabilities. She applied to the Court for an order to wind up the company after she received advice that it should not be without a director; that she, as the administrator of Mr Sager’s estate, could appoint a director; and that any such appointment might be understood as commencing on the date of Mr Sager’s death. The only reason for her to become a director would be to convene a meeting of members to resolve to wind up Sagerland.

14    There is no reason in the circumstances of this case why Ms Millynn should be required to become a director of Sagerland, or to appoint another person to become a director, when she does not wish to do so, and there is no evidence that anyone else is willing to be so appointed.

15    The circumstances are in some respects similar to those considered in Camphin Boston; Re Aether X Pty Ltd v Aether X Pty Ltd [2023] FCA 1087. In that case, Markovic J considered it appropriate to exercise the discretion to make an order for the winding up of a company on the just and equitable ground where the director had died and the executor of his estate did not intend to appoint a director to the company: see at [8], [12]-[13].

16    I accept Ms Millynn’s submission that no person would be adversely impacted by the winding up of Sagerland, and that, on the contrary, this will ensure that the company’s affairs are managed effectively and for the benefit of its creditors. In accordance with orders made on 3 March 2025, the Commissioner of Taxation (Sagerland’s principal creditor) and the Australian Securities and Investments Commission have been served with the proceedings, and are thus on notice of the nature of the orders which Ms Millynn seeks. Neither has filed a notice of appearance or otherwise indicated that they wish to appear or be heard on Ms Millynn’s application.

17    Further, although the application to the Court was formally made under s 233 of the Corporations Act, on 11 April 2025, I directed that Ms Millynn give notice of the application in accordance with s 465A(1) of the Corporations Act, regs 5.4.01A and 5.6.75 of the Corporations Regulations 2001 (Cth) and r 5.6(2) of the Federal Court (Corporations) Rules 2000 (Cth), as if the application had been made under s 462 of the Corporations Act. No other person has indicated that they wish to be heard in the proceedings in response to the publication of that notice. No person appeared at the hearing to oppose the winding up of Sagerland.

18    A registered liquidator, James McPherson of Meertens Chartered Accountants, has consented to being appointed by the Court and to act as liquidator of Sagerland. I am satisfied that it is appropriate that Mr McPherson be appointed as liquidator.

Conclusion

19    For these reasons, I will order that Sagerland be wound up pursuant to s 461(1)(k) of the Corporations Act and that Mr McPherson be appointed as liquidator of Sagerland.

Associate:

Dated:    23 April 2025