George Hudson Holdings Ltd v Rudder [1973] HCA 10;

George Hudson Holdings Ltd v Rudder [1973] HCA 10; - HCA 1973 case summary — Zoe

[28]

10. As I have said, each respondent purported to rescind the contract which had been made : French on 24th January 1972, and Rudder on 1st February 1972. The ninety days for payment had, in each case, expired but each notice was given after the appointment of a provisional liquidator and receiver of the appellant company. The ground of termination was in each case non-payment of the purchase price as stipulated showing an intention on the part of the company not to be bound by the contract. The appellant's answer is that according to the contract the purchasing company was entitled to effect registration of the shares covered by these certificates and transfers received by it and to do so without payment for the shares so that non-payment has no significance beyond giving the vendors a right to payment of the purchase price stipulated. My construction of the offer and the transfer is that it is only after payment that the company was authorized to use the certificates and transfers to obtain registration of the respondents' shares. Both the offer in cl. 3 and the letter accompanying it state that the consideration for each share is ten dollars payable in cash. Clause 6 of the offer provides that, within ninety days of the receipt of the completed form of acceptance and transfer with the share documents, George Hudson Holdings Ltd. would dispatch by mail "... a cheque for the amount of cash payable pursuant to cl. 3 of this offer". The form of acceptance and transfer is expressed to be "... in consideration of the payment to me of cash shown as my entitlement as above in accordance with and pursuant to the terms and conditions of the said offer of the 27th August 1971". His Honour held that the transaction was a sale for cash. With this I agree. I consider that it was the obligation of the purchaser to pay for the shares before using the transfers to effect registration in its name. In his argument to the contrary, Mr. Bainton relied upon cl. 4 (2) of the offer but I do not regard its provisions as inconsistent with regarding the offer as one to pay cash before transfer. (at p397)

[39]

5. The appellants are not precluded, by their failure to make out the proposition to which I have just referred, from contending that although the actual payment of the price was intended to be the consideration for the transfers yet the agreements had the effect that the plaintiffs were to hand over the transfers and the share certificates upon terms that the appellant company was to be at liberty to obtain registration in advance of the fulfilment by it of its obligation to pay the price. It would have been open to the parties to make agreements of that kind, under which the obligation of the company to pay the price was not one which must necessarily be fulfilled before the completion by it of its title to the shares by registration of the transfers. The question is whether the agreements were of that kind, giving a right to obtain registration which was independent of the performance of the obligation to pay the price, or were agreements under which the right which the appellant company obtained was a right upon payment of the price to seek and obtain registration. This is a question which is not to be determined, in my opinion, by reference to any general rule relating to contracts of sale or relating to contracts for the sale of shares. It is not to be resolved, in my opinion, by saying that under a contract for the sale of land the purchaser obtains, when a contract has been signed of which specific performance would be granted, an equitable estate in the land and that the purchaser of shares should be regarded, in like manner, as obtaining an equitable interest, superior to a mere contractual right. The question is to be determined by a consideration of the particular contracts with which these cases are concerned. The relevant terms of these contracts, to which reference is made in the judgment of Menzies J., are such that I am of opinion, in agreement with his Honour, that the appellant company was not authorized to use the certificates and the transfers to obtain registration except after payment of the stipulated price. (at p400)

[42]

8. One final matter remains to be mentioned. In the Supreme Court Street J. made a declaration in Rudder's case that so long as the contract between the plaintiff as vendor and the defendant George Hudson Holdings Ltd. as purchaser relating to the shares remained on foot, and so long as the purchase price thereunder remained unpaid by the defendant George Hudson Holdings Ltd. to the plaintiff, the plaintiff was entitled to an equitable lien over the shares (1972) 1 NSWLR 529 . Having regard to the conclusions that I have reached as to the effect of the contract and of the events that occurred, it does not seem appropriate that there should be a declaration in those terms. The appellant company did not obtain a legal title to the shares and it is now restrained by injunction from obtaining that legal title, so that the question does not arise whether, if it had obtained the legal title, it would have held it subject to an equitable lien in favour of the plaintiffs. But upon my view of the matter, the appellant company did not have vested in it an equitable interest in the shares. I think that the beneficial ownership of them, as well as the legal title, remained in the plaintiffs. This means that there was no property in the appellant company which could be held by it subject to an equitable lien in favour of the plaintiffs, nor did they need the protection of such a lien. The Supreme Court did not have before it for its decision any competing claim by a third party of an equitable interest superior to the rights of the plaintiffs, and no declaration was needed, it appears to me, that the plaintiff had a lien so long as the contract remained on foot. However having considered the submissions made to this Court on behalf of the appellants, I think that the arguments against the declaration of the lien proceeded upon the assumption that the appellants were successful in their main argument, namely, that they had obtained and retained a right to registration without payment of the price. If they should be held to fail on that issue, they were not concerned, as I understood the argument, to raise any objection to the declaration of a lien, which would be in that event regarded by them as academic. Since the matter has been dealt with in that way by the appellants, I think that there is no need to vary the decretal order in Rudder's case by deleting or revising the declaration as to a lien. (at p402)

At a glance

Court

Decision date

Before

Source

Judgment (47 paragraphs)

George Hudson Holdings Ltd v Rudder [1973] HCA 10; (1973) 128 CLR 387 (3 May 1973)

Parties

Cases Cited (3)