Australia: Challenge denied: administrator appointments held to be valid, ASIC register plays key role

Last Updated: 19 October 2017
Article by Robert Bianchini
Services: Restructuring & Insolvency
Industry Focus: Financial Services

What you need to know

  • The sole shareholder of two companies has failed in attempting to challenge the validity of the appointment of administrators to those companies.
  • The three key issues canvassed in the case were whether the evidence supported the claim of an invalid appointment, whether the appointment was effective based on assumptions made about the accuracy of the ASIC register, and whether validating orders should be made to uphold the appointment even if it was found to be invalid.
  • Company directors and administrators alike should take notice of the guidance emerging from this decision.

An administrator's appointment may be challenged for a variety of reasons, such as in circumstances where:

  • the directors of a distressed company are said to have appointed an administrator by improper purposes outside the ambit of the voluntary administration scheme (such as to manipulate relation back periods, or to stay potential litigation against a director)
  • those who have appointed the administrator are said to not have the requisite power to make such an appointment.

These challenges often lead to court proceedings that detract time, resources and attention away from what a company's directors may be trying to achieve, and from the work the administrators believe they have been engaged to do. It is therefore in all parties' interests (including creditors) for any challenge to an administrator's appointment to be resolved as quickly and cost-effectively as possible.

With the new safe harbour reforms now in force, we may well see a decline in the number of companies entering administration as directors seek to rely on the protection afforded to them under the safe harbour regime. But administration will still remain a real possibility for some companies, whether in the shorter or longer term after safe harbour restructuring efforts may have failed.

For those who do seek to challenge an administrator's appointment, and for administrators defending a challenge, a case considered this year by the NSW Supreme Court[1] is a useful reminder that:

  • a challenge to the validity of an administrator's appointment must be supported by appropriate and well-prepared evidence, and will always be considered in the context of the court's broad powers to make orders validating an otherwise invalid appointment
  • administrators are 'persons' entitled to rely on the assumptions set out in sections 128 and 129 of the Corporations Act 2001 (Cth) (Corporations Act), which include assumptions relating to the accuracy of information on the ASIC register.

Background to the challenge

Robb J of the NSW Supreme Court considered a challenge to the appointment of Mr Hogan and Mr Sprowles (the Administrators) to two companies – Sydney Project Group Pty Ltd and S.E.T. Services Pty Ltd.

The Administrators had sought declarations confirming that on 16 June 2017, they had been validly appointed as administrators of both companies by their sole director, Mr Lee.

The Administrators' appointment was challenged by the sole shareholder of the companies, the well-known property developer and ex-deputy mayor of Auburn, Mr Mehajer, together with his sister Ms Mehajer (the Respondents). They argued that the appointment was invalid in light of a purported resolution by Mr Mehajer as sole shareholder of the companies, resolving to remove Mr Lee as director and replace him with Ms Mehajer. This resolution was said to have been passed early on the morning of 16 June 2017, before Mr Lee's resolution.

Key issues

Central to the Administrators' case was their reliance on ASIC searches they had obtained on 14 June 2017 which confirmed that Mr Lee was the sole director and secretary of both companies. This position was confirmed again by further searches obtained on 17 June 2017 following the Administrators' appointment. It was not until 19 June 2017 that the Administrators were provided with ASIC searches showing the purported removal of Mr Lee as director of the companies.

Robb J identified three key issues in the case.

  1. Was the resolution purportedly passed by Mr Mehajer, removing Mr Lee as director, passed before Mr Lee's appointment of the Administrators?

In addressing this issue, Robb J closely considered the evidence produced by the Respondents.

The solicitor acting for Mr Mehajer had witnessed his client's signature on a copy of meeting minutes adduced in support of the purported resolution. Despite this, the Respondents did not require the solicitor to provide an affidavit confirming he was present when Mr Mehajer signed the minutes, and they did not seek leave from the Court to permit the solicitor to give evidence orally on that subject.

Accordingly, the Court had in evidence the minutes apparently signed by the solicitor as a witness, however he gave no evidence to authenticate his signature or verify the time when the documents were signed.

On this point, the Court found that it had been deprived of crucial evidence that may have been determinative on the issue of when the minutes were signed by Mr Mehajer and that "the position is so extreme that it appears that an understanding of the very purpose of having the execution of documents witnessed by disinterested parties has been lost".2

Inconsistent answers during Mr Mehajer's cross-examination, and evidence that Mr Mehajer held the belief that Mr Lee was the director of the companies well after the passage of the purported resolution removing him as director, led the Court to find that the Respondents had not met the civil standard of proof that the minutes were prepared before the appointment of the Administrators. The Respondents therefore failed on this first basis.

  1. Was the appointment of the Administrators effective by operation of sections 128 and 129 of the Corporations Act?

Sections 128 and 129 of the Corporations Act provide that amongst other things, 'a person' is entitled to assume that directors who appear in information provided to the public by ASIC (namely via a search of the ASIC register) have been duly appointed and have authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary.

Robb J referred to extensive case law supporting the principle established in Correa v Whittingham3 that persons who are appointed as administrators of a company are persons for the purpose of sections 128 and 129 of the Corporations Act, and may rely upon the assumptions referred to in those sections.

His Honour found that, irrespective of the finding that ought to be made as to whether or not Mr Lee was removed as the director before the appointment of the Administrators, the Administrators were entitled to assume that Mr Lee remained the director up until the time of their appointment as this was the position reflected in the ASIC register at that time. This assumption could not be challenged by the companies or any other relevant person.

The Respondents therefore also failed on this second basis.

  1. Even if the appointment of the Administrators was found to be invalid, should orders under either section 447A or 1322(4) of the Corporations Act be made validating their appointment?

It was unnecessary for Robb J to decide the third question in light of the failure by the Respondents on the first and second issues. However, his Honour did note that, if it had become necessary to decide that question, there was abundant evidence that the companies were "hopelessly insolvent", most notably in the form of statutory demands against the company which had not been set aside.

Accordingly, while further evidence would need to have been provided to the Court before a final decision could be reached on this issue, the likely outcome would have been that orders validating the appointment of the Administrators would have been made in any case.

Takeaways for administrators and company directors

In this case, there were serious questions about the strength of the Respondents' legal arguments and the evidence they put forward. It was therefore not surprising to read reports that the appeal against Robb J's decision was dismissed within a matter of minutes.4

So what can be taken away from this decision?

  • For parties wishing to challenge the validity of an administrator's appointment, it is critical to carefully consider their evidentiary position, as the weight of case law sits firmly in favour of the administrator. This is particularly the case in circumstances where the company is in a dire financial position, as sections 447A and 1322(4) of the Corporations Act give the courts sweeping powers to cure any deficiencies in an appointment unless the court is of the opinion that the irregularity has caused, or may cause, substantial injustice.
  • For administrators defending a challenge to their appointment, it is important to remain vigilant before and immediately following their appointment to ensure the directors resolving to appoint them are so entitled. Robb J's decision has confirmed that there is strength in the assumption that the information in the ASIC register is correct, and that where an appointment is challenged on the basis that a director lacks the necessary authority to appoint an administrator, but that appointment is supported by the information contained in the ASIC register (regardless of whether the register itself is incorrect), such a challenge will likely be unsuccessful. This is a powerful argument in favour of administrators who find their appointments challenged on the grounds of an invalid resolution.


1 In the matter of Sydney Project Group Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) and S.E.T. Services Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] NSWSC 881.
2 Ibid, 47.
3 [2013] NSWCA 263.
4 See Sydney Morning Herald article 'What are we doing here?': Court throws out Salim Mehajer's appeal in minutes at

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.