[1964] HCA 69
Maertin v Klaus Maertin Pty Ltd [2006] NSWSC 588
233 ALR 358
34 ACLC 676
Source
Original judgment source is linked above.
Catchwords
[1964] HCA 69
Maertin v Klaus Maertin Pty Ltd [2006] NSWSC 588233 ALR 35834 ACLC 676
Judgment (2 paragraphs)
[1]
Judgment
HER HONOUR: This is an application by interlocutory process filed on 25 July 2018 by the applicant, Indoor Climate Technologies Pty Ltd, for summary dismissal of proceedings brought by the plaintiffs, Albert Daher and Paddington Daintrees Pty Limited. The proceedings, brought by Mr Daher and Paddington Daintrees Pty Limited by originating process filed 13 June 2018, seek an order under s 461 of the Corporations Act 2001 (Cth) for the winding up of the defendant company on all or any of the grounds there specified, which are the grounds in paragraphs 461(f), 461(g) and 461(k) of the Corporations Act.
The basis on which the defendant seeks an order for summary dismissal of the whole of the proceedings is that neither of the plaintiffs has standing to apply for an order to wind up the company on a ground provided for by s 461: this being argued by reference to s 462(2) which provides that - subject to that section - any one or more of the following entities or persons may apply for an order to wind up a company, and s 462(5)) which provides that, "[e]xcept as permitted by this section, a person is not entitled to apply for an order to wind up a company".
The two potential bases on which there would be standing under s 462(2) for the plaintiffs to make the application for a winding up order under s 461 are as "a creditor" or as "a contributory".
The first plaintiff does not, other than in a, perhaps imprecise, assertion in an email of 6 June 2018 (a copy of which is exhibit A in these proceedings) assert that he is a shareholder or member of the company; rather, in his affidavit filed in support of the originating process and affirmed 13 June 2018, Mr Daher deposes (at [7]) that he is a director of the defendant and a creditor "in the grand total of $3,232.62".
The second plaintiff's claim to have standing to bring and maintain these proceedings is on the basis of the evidence that there was a board resolution dated 30 May 2018 issuing the second plaintiff with shares in the company and there is reference in an affidavit affirmed today by Mr Daher that on 6 June 2018 Mr Richard Lu, who maintains the share register of the defendant, issued him with "a signed Form 484" and showed him on his computer screen the defendant's company share register which displayed that Mr Daher's entity, Paddington Daintrees Pty Limited, had been issued with a 2% share of the defendant. The signed Form 484 which is annexed to Mr Daher's earlier 13 June 2018 affidavit is a form that was signed by Mr Daher himself.
There is affidavit evidence from a director of the defendant who is responsible for the company's day to day management, Mr Habchi, in which Mr Habchi deposes that the debt claimed by Mr Daher is denied. He deposes (at [3]) that it was never agreed that the company would reimburse Mr Daher for the expenses claimed by Mr Daher the subject of the alleged debt (and he says that this was confirmed in writing, although the email tendered in that regard does not, in terms, say that - it simply notes that Mr Daher had not then sought reimbursement).
Relevantly, however, Mr Habchi's evidence is that, irrespective of the denial of the debt, he instructed the company's solicitor to tender a trust cheque in the sum of $3,232.62. There is annexed to Mr Habchi's affidavit sworn 26 July 2018 a copy of a letter with which a trust account cheque in that sum made payable to Mr Daher appears to have been forwarded to Mr Daher. There is also evidence on which the defendant relies from Mr Gregory Beaver, a manager, who has sworn an affidavit on 26 July 2018 deposing that, on the direction of the Company Secretary who I understand to be Mr Habchi, he is responsible for the maintenance of the share register of the defendant company. Mr Beaver deposes at [3] that neither Albert Daher nor Paddington Daintrees Pty Limited has ever been a shareholder of the company. He exhibits to his affidavit, and I have marked as Exhibit B, an extract from the company's share register that is undated, which does not disclose any registration by Paddington Daintrees as a shareholder of the company.
The last registration noted on the register is of a shareholding registered on 6 July 2018 which post-dates the date on which Mr Daher says that he was shown on a computer screen a copy of the company's share register on which the second plaintiff's shareholding, (he says), was shown.
The applicant brings this interlocutory application pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) and, in essence, the applicant's contention is that it is an abuse of process for a person who lacks the legal right to do so to commence or to continue court proceedings. Reference is made to what was said by Campbell JA with whom Beazley JA (as her Honour then was) and Hodgson JA agreed, in Samootin v Shea [2010] NSWCA 371 at [65] to the effect that because the Court should not permit an abuse of its process to occur, the Court should exercise its power to dismiss proceedings once it is satisfied that proceedings are incompetent.
In relation to the first plaintiff, the applicant maintains that in circumstances where the debt claimed is disputed, this would be sufficient for summary dismissal of the application on the basis of what was said in Treadtel International Pty Ltd v Cocco [2016] NSWCA 360; 117 ACSR 176 at [83]. There Barrett AJA, referring to a submission that Mr Cocco had done all he could possibly do to become a member of the company and that equity ought to compel the plaintiff company or another individual to take the steps necessarily to complete the status, said:
… [that] is not an arguable position that it is open to him to take, in initiating winding up proceedings as a contributory by reason of his asserted entitlement to the trust share as beneficiary. Such proceedings are not the occasion for testing the standing of the applicant. A long line of cases makes it clear that the Court should not entertain a petition presented by an applicant whose standing is disputed on cogent grounds.
In the Treadtel case it was said that the primary judge had acted on a wrong principle when his Honour held that, for the purposes of the claim under Pt 5.4A pleaded in the amended statement of claim, it was sufficient to put forward an arguable case of standing as a contributory of the company.
Reference is also made to what was said by Barrett AJA at [57]:
The view to be taken of a contingent or prospective creditor will, in my opinion, differ according to the purpose for which the creditor's position is under consideration. Recognition as someone qualified to be heard on another applicant's winding-up petition or as someone whose claim should be taken into account in judging solvency is one thing. Recognition as someone who may initiate winding-up proceedings is another. It is a well-established rule of practice that a person who claims to be a creditor but whose debt is disputed on genuine grounds will not be permitted to initiate or pursue a winding-up application.
The position in relation to the first plaintiff, whatever the first plaintiff's status as a creditor was at the time the proceedings were commenced, is made difficult by the fact that a cheque has been tendered in full payment of the amount claimed, albeit that the cheque has been forwarded effectively under protest or accompanied by the denial that the amount is payable. I accept the proposition put forward by the applicant that it would be an abuse of process for the first plaintiff to continue proceedings seeking a winding-up order under s 461 of the Corporations Act, in circumstances where payment has been tendered in the full amount of the claimed debt.
As to the position in relation to the second plaintiff, reliance is placed not only on what was said in Treadtel but also on what was said by Barrett J (as his Honour then was) when sitting at first instance in Maertin v Klaus Maertin Pty Ltd [2006] NSWSC 588; 233 ALR 358; 34 ACLC 676; 57 ACSR 714. There, his Honour said that the essence of the status contemplated by subs (a) of the definition of "contributory" in s 9 of the Corporations Act is "membership of the company by virtue of registration as the holder of fully paid shares, with the person's name actually recorded in the register": see [11] of his Honour's reasons. His Honour referred, in support of that proposition, to Re Exclusive Master Book-binding & Manufacturing Pty Limited (1977) 2 ACLR 549; Re Gattopardo Ltd [1969] 2 All ER 344; and Re A Company [1894] 2 Ch 349.
The plaintiffs seek to distinguish those two cases on the basis of a factual distinction. In the Klaus Maertin case, at [7], his Honour said it was common ground that none of the transfers had been registered so as to cause the transferee to be recorded in the company's register of members as the holder of the shares for the plaintiffs. It is said that is not the case here and that there is no common ground on that issue; rather, it is squarely alleged by the plaintiffs that as at 6 June 2018 the second plaintiff was registered on the register of the company, and it is submitted that that is sufficient, for reasons to which I will turn in a moment. There is also said to be a distinction by reference to [21] of the Maertin case, where his Honour said:
If the first course is taken, that is, the legal personal representative elects to becomes [sic] registered as holder, it seems to me that the registration is in recognition of the transmission to the legal personal representative; and if the second course is taken, the legal personal representative's action is, in the words of the section, a transfer being, it seems to me, a transfer which the legal personal representative becomes qualified to make only because of the prior transmission to him or her.
It is said that the relevant factual distinction is that Maertin and Treadtel were cases where the shares were said to have been held on trust or, in the Maertin case, by the executor, and there had to be a supervening event by way of the placing of the plaintiff's name on the register in the plaintiff's own right. It is said that there was no allegation in either of those cases that the plaintiff's name had been on the register in his own right, as is said here to have been the case in relation to the second plaintiff. I accept that there may be a factual distinction in that regard between those two cases, but it is not clear to me how that factual distinction would have made any difference to the reasoning of the primary judge in either of those cases in relation to the meaning of the word "contributory" in the definition in s 9 of the Corporations Act.
Reference was also made to [95] of Barrett AJA's reasons in Treadtel, in which his Honour referred to "other jurisdictions where standing under provisions akin to those in Pt 2F.1 is afforded to a 'member'" and where, according to his Honour's review of those authorities, "attempts have been made to rely on an enlarged concept of 'member'", his Honour noting that such an attempt had been "met with a measure of apparent success" in Owen Sim Liang Khui v Piasau Jaya Sdn Bhd [1996] 1 MLJ 113. The relevance of the import or interpretation of Malaysian legislation in relation to similar provisions is not clear to me; nor is it of assistance to me.
In Treadtel, his Honour concluded as follows (at [84]-[85]):
Under s 462(2) of the Corporations Act, an application for a winding up order may be made by a person within one of the categories there specified. Application by a person not within any of those categories is not permitted and the court may not order winding up on such an application. That is made plain by s 462(5).
Mr Cocco cannot maintain a winding up application in his own name as a contributory of Treadtel unless and until his dispute with Mr Crosher about the trust share leads to a result that sees him recorded in the register of members as the holder of that share. … Apposite, therefore, are observations in two decided cases to which I now turn. The first is Re JN2 Ltd [1977] 3 All ER 1104. Observations of Brightman J in that case at 1108-1109 warrant quotation in full:
It is, of course, common practice to dismiss a creditor's petition if the debt is bona fide disputed by the company. This seems to me a wholly proper attitude to be adopted by the Court. The presentation of a winding up petition has an immediate effect on the ability of a company to deal with its assets, although capable of mitigation by an order under s 227. Frequently in the case of a trading company the presentation of a petition will damage the financial standing of the company. It therefore seems to me obviously correct that the Court should not allow a creditor's petition to remain on the file longer than is necessary once the status of the petitioner is in doubt…
I am not satisfied that the basis on which a distinction is here sought to be drawn by the plaintiffs is maintainable. Nor am I satisfied that, provided a plaintiff has standing at the time proceedings are initiated, that is determinative of whether the Court will permit the proceedings to continue after it has become apparent that, for whatever reason, there is no longer standing to prosecute the proceedings.
There appeared to be an argument for the plaintiffs to the effect that if, at the time of initiation of the proceedings, there was standing, then in order to make it an abuse of process to continue those proceedings, something would have to have happened which caused the plaintiff not to have standing (in effect by the plaintiff's own conduct, as I understand it). There was certainly a suggestion made that the circumstances in which Mr Daher says he saw on a computer screen a reference to the company's share register showing the second plaintiff as registered, and the document which is annexed to Mr Beaver's affidavit does not disclose that, indicates that there was some improper conduct which led to the removal of the second plaintiff from the share register.
Significance is drawn by the plaintiffs to the chronology of four particular dates: 6 June 2018, when Mr Daher says he saw the registration on the company's share register; 13 June 2018, the date on which the originating process was filed; 25 June 2018, when a cheque in payment of the claimed debt was paid; and 26 July 2018, when the affidavit was filed, annexing an extract from the share register.
In my opinion, the authorities to which I have referred make clear that if the evidence establishes that, as at 26 July 2018, the share register did not record the second plaintiff as a registered shareholder of the company, then there is no longer any standing on the part of the second plaintiff to continue to maintain or prosecute the proceedings, and it would be an abuse of process to permit it so to do. It certainly may be the case that there are other steps that could be taken by Mr Daher and Paddington Daintrees Pty Ltd in order to prosecute a claim against the defendant, but for it to be a claim for a winding-up order under s 461 of the Corporations Act, their standing to bring those proceedings must be established.
It was submitted that the applicant's application did not satisfy the test in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69, where Barwick CJ said (at 129):
It is sufficient for me to say that … the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; "be manifest that to allow them" (the pleadings) "to stand would involve useless expense".
However, this is a question of standing, not a question as to whether or not a claim is tenable or untenable, and in the present case, on the evidence before me, there is no standing on the part of the second plaintiff to bring an application under s 461 of the Corporations Act and, a cheque having been tendered to the first plaintiff for the whole amount of the disputed debt, I cannot see why it would be other than an abuse of process for the first plaintiff to seek to continue the proceedings claiming to be a creditor of the company.
Therefore, I propose to grant the relief that is sought by the applicant.
It was submitted for the plaintiffs that if I were to do so, there should not be an order for costs against the plaintiffs because of the fact that the interlocutory process had been filed two days late, orders having been made by the Registrar for the filing of the interlocutory process by 23 July 2018 and it not having been filed until 25 July 2018. It was also said that the affidavit evidence was late but, as I understand it, a draft of the affidavit evidence was provided - or unsealed copies were provided on or about 25 July 2018, putting the plaintiffs on notice of the claim.
In my opinion, costs should follow the event. I am not persuaded that the delay has been such as to have affected in any way the course that this application would otherwise have taken. It was suggested that if the interlocutory process had been served at an earlier stage and/or if the affidavit evidence had been served at an early stage, applications could have been made for subpoenas to be issued in relation to the share registry. Any such application would probably have needed to have been by leave, given the time frame, in any event; and I do not consider the time delay to be such as to warrant a departure from the general rule in relation to costs.
Accordingly, the orders that I make will be as follows:
1. The proceedings be dismissed.
2. The plaintiffs pay the defendant's costs of the proceedings and of this summary dismissal application.
[2]
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Decision last updated: 03 August 2018
Parties
Applicant/Plaintiff:
In the matter of Indoor Climate Technologies Pty Ltd - Daher