Demetriou v Gusdote Pty Ltd

Judgment - ex tempore

1. HIS HONOUR: By Originating Process filed on 6 November 2017 the Plaintiffs, ABI Australia Holding Pty Ltd ("ABI") and others seek, first, an order under s 1322(4)(b) of the Corporations Act 2001 (Cth) directing the Australian Securities and Investments Commission ("ASIC") to rectify the register it keeps in respect of ABI to show that, on 12 October 2016, the initial number of shares issued to the Second Plaintiff, ABI Southern Holding Ltd (formerly known as UK 16 Ltd) ("UK 16") on registration of ABI was 732,784,067 ordinary shares. The evidence indicates that, some 11 months or so later, those shares were transferred from UK 16 to the Third Plaintiff, Anheuser-Busch Europe Ltd, although nothing turns upon that matter for the purposes of the present application.
2. The Plaintiffs also seek an order under s 1322(4)(a) of the Corporations Act that the registration of ABI on 12 October 2016 was not invalid by reason of any contravention of s 117(5) of the Corporations Act so far as ABI may not have held the requisite consent of the proposed member, that is UK 16, required by s 117(2)(k) of the Corporations Act. That section relevantly provides that an application for registration of a company lodged with ASIC must state, for a company limited by shares, the number and class of shares each member agrees in writing to take up. It is, of course, implicit in that section that it requires not only a statement of that matter, but that that matter be the fact.

Factual background

1. This application arises from a relatively complex transaction, which is described in an affidavit of Ms Naude dated 28 April 2017. In 2016, Anheuser-Busch InBev NV completed a substantial takeover of SAB Miller PLC ("SAB"). As part of the implementation of the transaction in Australia, ABI was to be incorporated, as a holding and financing company within the AB InBev group. The information presently held by ASIC in respect of ABI records its issued capital as 2,114,092,718 fully paid ordinary shares, held and beneficially owned by UK 16. Ms Naude's evidence is that that number is higher than it should be, and the correct number of shares should be 732,784,067.
2. This difficulty appears to have arisen because the transaction contemplated that the number of shares in ABI to be taken up by UK 16 would equal the aggregate US dollar value of two promissory notes to be issued by UK 16 to ABI, in consideration payable for the issue of fully paid ordinary shares in ABI. The principal amount payable under the promissory notes was in turn to equal the value of SAB's Australian business, which was to be calculated following the merger and as part of the relevant reorganisation consequent on the merger. As at 11 October 2016, correspondence between the UK solicitors acting in the transaction and directors of UK 16 confirmed UK 16's consent to becoming a member of ABI, on the basis that it was then understood that ABI's capital would be USD $2,114,092,718. ABI was incorporated by electronic lodgement of a Form 201 with ASIC on 12 October 2016, which recorded that number of shares. There is a subtle question, which it is not necessary to determine for the purpose of this application, whether that was, subjectively, an error. It did not reflect the larger structure of the transaction, which contemplated that the number of shares to be issued would equal the aggregate US dollar value of the two promissory notes, because the two promissory notes were ultimately not issued in that amount. On a narrower view, the number of shares recorded in that form was the number of shares which ABI then intended to have recorded in that form, erroneously understanding that it would reflect the larger transaction. Nothing turns upon that for the present application.
3. In any event, by the time the board of ABI met to resolve to issue the relevant shares, the valuation of SAB's Australian business, as prepared by external accountants, and AB InBEV, had been revised to USD $732,784,067. The meeting of the directors of ABI held on 12 October 2016 noted that UK 16 had consented to act as a member of ABI, noted the terms of the two promissory notes to be issued by UK 16, and resolved that, subject to execution of the promissory notes, 732,784,067 ordinary fully paid shares of USD $1 each in the issued share capital of ABI be issued to UK 16. That is the correct capital of ABI, as authorised by the meeting of the board of directors, and recorded in its share register.
4. In subsequent correspondence between ABI's legal representatives and ASIC, ASIC has taken the view, consistent with the authorities, that any correction of this error requires an application to the Court of this kind. ASIC has been joined as Defendant to the proceedings but does not seek to be heard in them and neither consents to nor opposes the relief sought.

Applicable legal principles

1. I should refer briefly to the applicable legal principles. Section 1322(4)(b) of the Corporations Act provides that the Court may, on the application of an interested person, make an order directing the rectification of any register kept by ASIC under the Corporations Act. The authorities indicate that the power of rectification of a register under that section extends to permit the rectification of the register maintained by ASIC under s 1274 of the Corporations Act, which requires ASIC to keep such registers as it considers necessary in such form as it thinks fit, and also to those registers that are prescribed under reg 9.1.01 of the Corporations Regulations 2001 (Cth). In Re MIG Property Services Pty Ltd (No 2) [2012] VSC 606; (2012) 92 ACSR 234 at [64], Robson J was prepared to infer that a database maintained by ASIC under s 1274A of the Corporations Act, which allows information to be obtained from certain registers, was an extract of a register of companies prescribed under reg 9.1.01 of the Corporations Regulations, and I would draw the same inference in respect of ASIC's database containing information as to the shareholdings in ABI, consistent with the view which I have previously taken in Re DJG Equities Pty Ltd [2014] NSWSC 194 at [5] and Re Centura Global Holdings Pty Ltd [2016] NSWSC 62; (2016) 111 ACSR 185.
2. Although there have been differences of view in the case law historically, recent case law indicates that the Court has power to order rectification of such a register under s 1322(4)(b) of the Corporations Act, so as to correct incorrect information that was included in a notification required to be given to ASIC: Demetriou v Gusdote Pty Ltd [2010] FCA 581; (2010) 78 ACSR 566 at [33]; Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38; (2008) 71 NSWLR 262; 65 ACSR 545 at [45]ff; Re MIG Property Services Pty Ltd (No 2) above; Re Botanical Water Holdings Pty Ltd; Agao Nominees Pty Ltd v AJ Phoenix Pty Ltd [2013] VSC 96; Re Centura Global Holdings Pty Ltd above at [57]. Mr O'Brien, who appears for ABI, also points out that this case is, on its facts, closely analogous to the facts considered by Brereton J in Macquarie Americas Holdings Pty Ltd [2015] NSWSC 2073, where his Honour was prepared to order the correction of the register maintained by ASIC, where he was satisfied that the number of shares recorded in an application for registration of that company in Form 201 lodged with ASIC was incorrectly inserted, in that case recording the number 34 million rather than 12 million shares.

Determination

1. I am satisfied that, in this case, the information held on ASIC's record is incorrect. That information is incorrect because, whether or not the Form 201 lodged with ASIC when ABI was incorporated correctly reflected ABI's then intention - which depends upon whether that intention is judged at the larger transaction level, or by reference to the number of shares that it then understood would reflect that transaction - the transaction was ultimately implemented in a manner that involved the issue of a smaller number of shares. The form did not in fact reflect the number of shares that were issued, and ASIC's register now does not record the number of shares on issue in ABI, as established by the company's share register. I am satisfied that that is a proper basis to order the rectification of the register maintained by ASIC, since otherwise a person accessing that register would be misinformed as to the number of shares in fact on issue in ABI, as established by the share register maintained by ABI, and the facts of the transaction as implemented.
2. The further relief sought by ABI under s 1322(4)(a) of the Corporations Act relates to the consent of UK 16 to take up shares in ABI required by s 117(2)(k) of the Corporations Act. Section 1322(4)(a) of the Corporations Act provides that the Court may make an order declaring that any act, matter or thing purporting to have been done under the Act or in relation to a corporation is not invalid by reason of, relevantly, any contravention of a provision of the Act. The Court may not make an order under that section unless it is satisfied that several conditions are satisfied, including, relevantly, that it is just and equitable that the order be made and that no substantial injustice has been or is likely to be caused to any person. The position here is also analogous to that considered by Brereton J in Macquarie Americas Holdings Pty Ltd above, where his Honour made such an order where he was satisfied that Macquarie Bank did in fact consent to become a member and to taking up the relevant number of shares.
3. In this case, there can be no real doubt that UK 16 intended to take up and consented to taking up the number of shares that would implement the transaction in which it participated. The correct number of shares was ultimately 732,784,067, and I can be comfortably satisfied that UK 16 intended to take up those shares, not only because of the structure of the transaction, but because its representative was present at the board meeting at which those shares were issued to it. In these circumstances, it seems to me that it is just and equitable to make the order that is sought, and there can be no question that any substantial injustice has been or would be caused to any person, where the order simply has the consequence that UK 16 obtains certainty that the transaction that it entered is valid. There may have been little real doubt as to that matter in any event.
4. For these reasons, I make the following orders:
5. Pursuant to s 1322(4)(b) of the Corporations Act, direct the Australian Securities and Investments Commission (ASIC) to rectify the register kept by ASIC in respect of the First Plaintiff, ABI Australia Holding Pty Ltd, to show that, on 12 October 2016, the initial number of ordinary shares issued to the Second Plaintiff, ABI Southern Holding Pty Ltd (formerly known as UK 16 Ltd), on registration of ABI Australia Holding Pty Ltd was 732,784,067 ordinary shares.
6. Order pursuant to s 1322(4)(a) of the Corporations Act that the registration of the First Plaintiff on 12 October 2016 is not invalid by reason of any contravention of s 117(5) of the Corporations Act.

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