VAs forced to validate after ex-wife appoints

The interplay between Family and Corporations law brings endless joy, at least to those who benefit when these bulk carriers of frequently conflicting legislation collide.

“The effect of the orders of 9 July 2024 of the FCFCOA (Division 2) judge was to permit the wife to stand in the shoes of the board of directors and to appoint administrators to the companies pursuant to s 436A of the Corporations Act” Justice Angus Stewart.

Earlier this week, Federal Court judge Angus Stewart had to mop up the spill after a Family Court judge in July made orders authorising an ex-wife to act on behalf of four companies, of which her ex-husband is sole director and sole shareholder. (See: Walker (Administrator), in the matter of Childcare Development Opportunities Pty Ltd [2024] FCA 1133).

Three of the four companies operate childcare businesses and in the wake of the July 9 orders the ex-wife on August 20 passed resolutions appointing the WLP Restructuring’s Alan Walker and Glenn Livingstone as administrators of each of the companies.

Walker and Livingstone have been trading on the businesses in the hope that at least two of the operations can be sold as going concerns.

They’ve also formed the view that several of the companies had probably been insolvent for some time but a more pressing concern related to the validity of their appointments.

With the second meeting of creditors scheduled to be held yesterday, they urgently applied for the necessary relief under s 447A(1) of the Corporations Act.

“The effect of the orders of 9 July 2024 of the FCFCOA (Division 2) judge was to permit the wife to stand in the shoes of the board of directors and to appoint administrators to the companies pursuant to s 436A of the Corporations Act,” Justice Stewart said.

“Such orders were presumably made under s 79 and/or s 80 of the Family Law Act and s 447A(1) of the Corporations Act. However, an issue now arises as to whether the judge had the jurisdiction in the sense of the power to make such orders under the Corporations Act.

“Section 337C(1) of the Corporations Act confers a corporations law jurisdiction on the FCFCOA (Division 1) but not on the FCFCOA (Division 2).

“It may be that a judge sitting in Division 2 has power to make orders such as those made on 9 July as a matter “associated” with a matter in respect of which the FCFCOA (Division 2) had jurisdiction. Such “associated” jurisdiction is provided for by s 134 of the Federal Circuit and Family Court of Australia Act 2021 (Cth). There is, however, some uncertainty as to that,” he said.

What’s clear is that the courts are prepared to validate appointments which may have been erroneously made where the consequences of not maintaining an administration will clearly lead to a worse outcome creditors.

Justice Stewart granted the relief sought so as to enable Walker and Livingstone to hold the second meeting without fear that any resolutions passed might later be challenged on the grounds of their validity.

That however didn’t stop creditors yesterday from voting to wind up the companies and appointing the pair as liquidators.