Circular Resolutions of Committees of Inspection Produce No Legally Effective Result

In a decision of Justice Barrett of the Supreme Court of New South Wales in the long continuing One.Tel saga handed down on 7 May 2010 (Onefone Australia Pty Ltd v One.Tel Limited NSWSC 401 (7 May 2010)), his Honour made it clear that a Committee of Inspection can only act through a meeting held in accordance with the Corporations Regulations. 

Specifically, Barrett J held that the Regulations and Act, whilst allowing a meeting to be held by telephone, do not sanction decisions made by a series of separate but parallel actions of Committee members orchestrated remotely by a Liquidator which is effectively what occurs when a Liquidator circulates a resolution to the members of the Committee of Inspection.  A series of contacts between the Liquidator and each member of the Committee produces “no legally effective result”.

The practical effect of the decision is that if Liquidators require the approval of a Committee of Inspection to a specific course of action or alternatively, wish to have their remuneration fixed, it is essential  that the Committee meet in person or by telephone.  It is not permissible to simply circulate a resolution to all members of the Committee requesting that they sign and return it.  As Barrett J noted, what the Corporations Act requires under section 549(3) is that the Committee of Inspection only act through a meeting so that there is contact and interaction amongst the Committee members.

Should you require any further clarification please contact Kemp Strang Partner, Alex Linden.