NSW Supreme Court upholds administrators’ appointment despite defective process

Section 447A of the Act confers a broad discretionary power on the court to make orders about the operation of part 5.3A of the Act to cure the technical non-compliance. 

What happened

The administrators were appointed as joint and several administrators of Ulan Quarry Products Pty Limited on 23 March 2026. Ulan Quarry operates a quarry mine on Crown land in Ulan, New South Wales.

In October 2023, two of the three directors of Ulan Quarry were appointed in accordance with the terms of an executed heads of agreement. The heads of agreement also included arrangements for the repayment of substantial loan funding advanced by B61 Pty Ltd.

From early 2024, Ulan Quarry began to default on interest payments related to a loan agreement between B61 and Ulan Quarry, prompting growing concerns by the incoming directors about Ulan Quarry’s financial position.

The administrators’ appointment took place at a directors’ meeting held on 23 March 2026, attended only by the incoming directors. The third director subsequently challenged the validity of the appointment, arguing the meeting was not convened in accordance with the company’s constitution - which required that each director be given at least one business days’ notice of the meeting.

The administrators commenced proceedings in the NSW Supreme Court, seeking either a declaration under s447C(2) of the Act that their appointment was valid, or alternatively, curative relief under s447A(1) of the Act.

Section 447C and declaratory relief

The court considered the nature and application of s447C of the Act, which provides that where there is doubt whether a purported appointment of an administrator of a company is valid, that person may apply to the court for an order declaring whether or not the appointment was valid.

Relief under s447C is merely declaratory, not curative - meaning the court does not have the power under this section to cure any defects that may have occurred in the appointment process. Instead, it must undertake a fact-finding process and be satisfied on the evidence that the appointment of the administrators was valid.

In this case, notice was given to the existing director of the directors meeting on the afternoon of Friday, 20 March 2026. The meeting was conducted on the morning of Monday, 23 March 2026.

The court held this did not provide the necessary one business days’ notice, which was required under clause 22 of Ulan Quarry’s constitution. This defined ‘business day’ to mean “a day on which banks are open for general banking in the capital city of the state where the contract or act is being performed.”

As banks are not open for general banking on the weekends, the court found that the appointment was not conducted in accordance with the notice provisions of the constitution and was therefore not a valid meeting of directors.

Declaratory relief under s447C was subsequently denied.

The court then turned to the availability of relief under s447A(1) of the Act. In determining whether to exercise that discretion to make orders, it had regard to the totality of the circumstances of the case, including whether the purposes of part 5.3A would be best served by the making of an order.

The court conveniently listed the relevant considerations it must take into account, including whether validating an otherwise invalid appointment would occasion substantial injustice to any person; and undertaking an assessment of the company’s position at the time of the application, viewed prospectively about what is in the company’s best interests.

The court considered the strong evidence that Ulan Quarry was likely insolvent at the time of appointment as well as the incomplete financial records reflecting apparent mismanagement by the existing director. This left the court without confidence that the company’s affairs were in good order.

Alongside this, the existing director’s failure to provide any evidence demonstrating that Ulan Quarry was solvent or otherwise did not require administration left the evidence of insolvency entirely unchallenged. There was also no prejudice to the existing director or to Ulan Quary’s sole shareholder occasioned by the administrators’ appointment which could not be addressed by their removal, which was another relevant consideration. It was open to the existing director to have the administrators removed.

Weighing in favour of exercising its discretion under s447A of the Act, the court expressed concerns that if control were to be handed back to the directors, it would be unclear exactly to who control would be handed back. That resulted from an ongoing dispute as to board membership that was left unresolved by the court.

The court did acknowledge the seriousness of the notice defect by the directors that had occurred, but this was ultimately outweighed by the substantive considerations weighing in favour of the granting of relief under s477A of the Act: that the company would be overall better served by the appointment of administrators.

This case is one example of the way in which s447A of the Act can be deployed in a voluntary administration setting. The scope of s447A of the Act should not be ‘read down’ or confined to curing defects.

Other examples of the wide range of relief granted by the court in relation to the section include:

• indemnifying an administrator;
• terminating an administration for the purpose of ordering a compulsory winding up;
• limiting the personal liability of voluntary administrators in relation to a number of agreements that the administrators had caused companies to enter into during the administrations;
• dispensing with the first creditors’ meeting;
• extending the convening period;
• authorising deed administrators to transfer shares;
• ·varying a DOCA; and
• altering the relation-back day.

Limitations of Section 447A

S447A of the Act is not without its limitations.

For instance, there must be a sufficient nexus between the proposed orders under s447A and the operation of part 5.3A of the Act. How this limitation operates in practice is ultimately determined on a case-by-case basis – however, some key examples have included:

• S447A does not authorise the court to validate the appointment of an administrator which is invalid by reason of contravention of provisions of legislation outside of part 5.3A; and
• S447A is not available to assist a non-creditor to improve its position vis-à-vis other creditors by treating that person as a creditor.

The decision in Ulan Quarry reinforces the breadth and practical importance of the court’s powers under s447A of the act.

While strict compliance with procedural requirements during the administration appointment process remains critical, this case confirms that such defects may not necessarily be fatal where they undermine the substantive objectives of voluntary administration.

For directors of companies and insolvency practitioners, the decision serves as both a caution and a reassurance. Procedural rigor in appointments is essential but, where defects arise, timely recourse to the court may preserve the integrity and utility of the administration process.