Hoggett & Ors v O'Rourke & Anor [2000] QSC 387

[3] More particularly, the first part of the statement of claim pleads a resolution on 20 November 1998 by the members of Chieron to issue the 85,714,286 shares in Chieron to Cruison; the entering on 30 March 1999 of a share sale agreement giving effect to that resolution; the issue of the 85,714,286 shares by Chieron on 27 February 1999; and the resulting registration of Cruison in the Chieron share register. Then, it is alleged, there was a restriction agreement by which Cruison agreed not to dispose of the shares, and a meeting of Chieron which ratified the execution of that agreement. Various forms of acknowledgment of the transaction - a letter from Chieron's solicitor, Chieron's 1999 annual report and annual general meeting, and a Computer Registry Services Monthly Share Registry Report showing Cruison as the holder of the Chieron shares - are pleaded. It is said that the first, second and third applicants relied on those matters in taking control of Chieron and pursuing funding arrangements on the basis that Chieron as a public company would be borrower; in passing resolutions for the disposal by Chieron of various interests; and in agreeing to provide funds in respect of Chieron's operating expenses. Finally, in respect of this part of the pleading, it is said that these matters were known to the first and second respondents and to Chieron; that they are estopped from asserting that Chieron is entitled to cancel the shares issued to Cruison or that the share sale agreement was not completed; and that by a solicitor's letter the first respondent had made such assertions.

[4] The next part of the pleading deals with steps taken by Chieron to reverse the transaction which was the subject of the share sale agreement. Firstly, it is said that a meeting of Cruison on 9 December 1999 at which resolutions were passed to advise Chieron that Cruison was unable to complete the share sale agreement, and to the effect that the first and second applicants, were prepared to resign from the board of Chieron, was not valid, either as a general meeting, or as a formal meeting of directors. In similar vein, it is said that a second meeting on 10 December 1999, at which it was resolved to accept a letter written by Chieron's secretary requesting arrangement of the resignations and the execution of a transfer of shares by Cruison, and to sign the requested share transfer document, was not a valid meeting. The pleading goes on to assert that a share transfer document which was signed in December 1999 by two directors of Cruison with Cruison's company seal affixed to it by one of them, was signed and sealed without authority and was therefore invalid. It is further pleaded that the respondents and Chieron are not entitled to rely upon or deal with the share transfer document which, it is said, is within the possession, power or control of the first respondent, Mr O'Rourke, who has, despite demand, refused to deliver it up.

[5] Next, the statement of claim deals with a meeting in respect of the company Woodsands which resolved to cancel a number of resolutions passed in February 1999 and to invite Lawrence Watts, one of the secretaries of Chieron, to attend directors' meetings of associated companies. The pleading asserts that the meeting was not valid as a meeting of directors and that the resolutions were not regularly moved or passed. Finally, the statement of claim alleges a threat by the first respondent, Mr O'Rourke, to appoint a receiver to Woodsands unless a share transfer from Cruison to Chieron was executed, the first and second applicants resigned as directors of Chieron, and authorisation was given for funding negotiations by Mr Watts. Neither of the respondents, it is said, had an entitlement to seek the appointment of a receiver.

[6] By way of relief, the applicants claim declarations that the share sale agreement was completed by the parties to it, and that Cruison remains the holder of the 85,714,286 shares in Chieron Holdings Limited; an order that the first respondent deliver up a share transfer document; injunctions restraining the first respondent from completing the share transfer document or doing anything to effect a transfer of the relevant shares or taking any steps towards the cancellation of the shares in Chieron held by Cruison; declarations that the first and second applicants remain directors of Chieron; and an injunction restraining the first and second respondents from taking any steps towards appointing a receiver to Woodsands.

The respondents' submissions on the effect of non-stamping

[7] Notwithstanding that the applicants seek a declaration as to the completion of the share sale agreement, the agreement itself has not been stamped. By a letter of 25 September 2000, the applicants' solicitors advised the respondents' solicitors that whether the agreement was stampable depended on the outcome of the trial in the matter, since the respondents were disputing its validity.

[8] Mr Lilley for the respondents relied on s 4A(1) of the Stamp Act 1894 for the proposition that the share sale agreement was a nullity incapable of founding a cause of action. Section 4A(1) is in the following terms:

"An instrument chargeable with stamp duty (whether under this Act or under any prior Act) shall not, except in criminal proceedings, be given in evidence, or be available for any purpose whatever, unless it is duly stamped."

[9] He referred to the following passage in Dent v Moore[1]:

"But here, acting impersonally on the bargain finally embodied in an `instrument', and therefore contained nowhere else, it strikes that instrument with sterility (to borrow an expression from another branch of the law) unless and until the public requirement of taxation has been complied with. Until that has happened, the instrument (except in criminal proceedings) is not `available' and not `effectual' - that is, it has no effect - for any purpose whatsoever at law or in equity: in other words, it cannot be considered as an instrument giving title, or as one which could be made the means of compelling anyone to give title. It is in the eye of the law a nullity, except for criminal proceedings and, of course, for the purpose of being stamped."

[10] Significantly, in the context of the present case, the court went on in Dent v Moore to explore the effect of an admission of entry of a transaction, the instrument recording which was unstamped. An admission of the written agreement would, it was said, include both the presumption of its existence and of its being duly stamped. The latter was capable of being shown to be wrong; and once it was shown that the document was unstamped, the admission could not be received, because to do so would equate to admitting the instrument itself.

[11] Mr Lilley referred also to Ash Street Properties Pty Ltd v Pollnow[2] and Acclaim Holdings Pty Ltd v Vlado Pty Ltd[3]. In both of those cases, Dent v Moore was followed as establishing that an unstamped instrument could have no effect. In Ash Street Properties, the court went further, concluding that the underlying transaction was also without legal effect[4]. Moreover, Mahoney J reasoned, acts done and moneys paid in consequence of the transaction or to give it effect could not be regarded as separate from the transaction itself[5].

[12] For the applicants, Mr Morris QC did not offer any undertaking to pay the duty. Indeed the inference from the first applicant's affidavit is that the litigation has brought funding arrangements for the project to a halt, so that the applicants are unlikely to be in a position to meet the stamp duty. However, Mr Morris said that it is not necessary for the applicants to tender the share sale agreement, because of admissions by respondents that the share sale agreement was entered in the terms relied on by the applicants. In any event, he submitted, the paragraphs of the statement of claim which pleaded the entering of the agreement and its provisions, and the first declaration sought as to the completion of the share sale agreement, were unnecessary to the action, which was essentially concerned with the prevention of removal of Cruison from the register of Chieron shareholders. For that purpose it was not necessary, he said, to prove or enforce the share sale agreement; Cruison was registered as the owner of the Chieron shares and was entitled to resist any attempt to remove it.

[13] Finally, Mr Morris submitted, there was no precedent for striking out or dismissing an action prior to trial because of reliance of an unstamped document. It was open to the applicants at any time up to trial to stamp the document or to give an undertaking of the kind contemplated by s 4A(2) of the Stamp Act.

[14] Dent v Moore concerned a provision of the Stamp Duties Act 1898 (NSW) which said of an unstamped instrument that it was "not to be available or effectual for any purpose whatsoever at law or in equity". Section 4A makes no reference to effectuality. However, s 29(1) of the later New South Wales legislation, the Stamp Duties Act 1920, like the Queensland provision, also omitted any such reference, instead providing that an unstamped instrument could not be "admitted to be good, useful or available in law or equity for any purpose whatsoever". Notwithstanding, in Ash Street Properties v Pollnow[6], the New South Wales Court of Appeal considered that the Dent v Moore observations remained relevant and applicable, Mahoney J noting that the High Court in Shepherd v Felt and Textiles of Australia Ltd[7] had made no distinction between the earlier and current New South Wales provisions. Hill J in Davis v FCT[8] took a similar view as to the absence of significant distinction between the relevant provisions of the two Acts.

[15] Section 4A(1) does not contain any prohibition of the pleading of an unstamped instrument, unlike cognate provisions in New South Wales (s 29(2) Stamp Duties Act (1920), South Australia (s 22 Stamp Duties Act 1923), Victoria (s 30 Stamps Act 1958) and Western Australia (s 27 Stamp Act 1921). However, I do not think the difference is material. The breadth of s 4A(1) effected by the expression "available for any purpose whatever" is such in my view as to prevent reliance on the instrument in any form.[9] In the present case, the written share sale agreement constitutes both the relevant transaction and the unstamped document. In neither sense may the applicants rely on it as founding their cause of action.

[16] Mr Morris' argument that the applicants can, notwithstanding, rely on the respondents' admissions as to the entering of the share sale agreement and its terms find some support in dicta of Kaye J in Mornan Nominees Pty Ltd v Comptroller of Stamps (Vic)[10]:

"I pause to observe, however, that an unstamped instrument pleaded by a party could be relied upon in the event of the opposite party admitting the pleading of it and thereby not necessitating its production at the trial."

These remarks were, however, obiter, and are difficult to reconcile with the clear statement in Dent v Moore that an admission as to the contents of an unstamped document cannot be received. Nor does it seem to me consistent with the purpose of s 4A that its effect as a sanction on failure to stamp should be capable of avoidance by a party's admission. I do not consider, therefore, that the respondents' admissions can remedy any deficit caused by the unavailability of the unstamped share sale agreement.

[17] My view, despite the more sanguine approach of Mr Morris, is that the entirety of the section headed "B. The share sale agreement" in the statement of claim (that is paragraphs 8 to 26), together with the relief sought at paragraph (a) (a declaration that the share sale agreement has been completed) relies on the unstamped agreement and its effectiveness as a transaction. Those paragraphs not dealing directly with the share sale agreement depend for their meaning on it. By virtue of s 4A(1), both the physical document and the transaction underlying it are unavailable to found a pleading. Accordingly, my conclusion must be that those parts of the statement of claim are incapable, while the share sale agreement remains unstamped, of disclosing any reasonable cause of action

[18] The remaining parts of the statement of claim, relying as they do on allegations of invalid meetings leading to the execution of the share transfer document and the separate issue of the alleged threatened appointment of a receiver to Woodsands, can stand alone, although it is difficult to conceive how, in practical terms, that part of the application will proceed in the absence of evidence of the share sale agreement. I had indicated my concern in argument about the width of the relief sought at paragraph (e). However, it is open to the applicants to argue that the balance of the relief, other than paragraph (a), is supported by what remains of the statement of claim.

[19] The question arises then as to what steps should be taken in relation to the action and the applicants' claim. I do not think that an undertaking to pay stamp duty, at whatever stage offered, would resolve the applicants' difficulties. s4A(2) enables the admission in evidence of an unstamped document on such an undertaking, but it does not overcome the fundamental problem that such a document may not be relied on as founding a cause of action. If, of course, stamp duty were paid, the agreement would be available for that purpose.

[20] In St Andrew Property v Gull Petroleum[11] Master Bredmeyer, on a chamber application in the Supreme Court of Western Australia, struck out a statement of claim as disclosing no reasonable cause of action in that the contracts of sale upon which the plaintiffs relied were not stamped. He gave leave to file a new statement of claim within a certain period, in default of which the action was to be dismissed. In my view, a striking out order is similarly warranted in respect of the parts of the statement of claim I have identified as disclosing no reasonable cause of action.

[21] Accordingly, I order that paragraphs 8 to 26 inclusive of the statement of claim together with the relief sought at paragraph (a) be struck out. I will hear the parties as to directions in respect of the counterclaim, and as to costs.

[1] (1919) 26 CLR 316 at p 324

[2] (1987) 9 NSWLR 80

[4] (1987) 9 NSWLR 80 at pp 83, 100-101

[8] (1989) 86 ALR 195 at 209

[9] For the distinction in effect between this expression and that used in s27(1) of the Western Australian Stamp Act (good, useful, or available in law or in equity") see the judgment of McPherson JA in Rothwells v Connell (1993) 119 ALR 538 at pp 550-551 and the judgments of the majority in Re Dehy Fodders (Australia) Pty Ltd; Winter v Bank of Adelaide (1973) 4 SASR 538 and Barwick CJ in Commercial Banking Co of Sydney v Love [1975] HCA 48; (1975) 133 CLR 459 referred to therein.

[11] [1991] 6 WAR 325