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[2017] WASC 353
General information, not legal advice.
Supreme Court of WA
2018-03-27
Smith AJ
Original judgment source is linked above.
The application of such a proposition in any particular case will depend upon the starting point, that is defining 'the thing to be done'. Different answers to the question will be found depending upon how broadly or narrowly one defines 'the thing to be done'. In this case, if one defines 'the thing to be done' as holding a directors' meeting, one could say that an irregularity which denies a director reasonable notice of the meeting and causes the director not to attend the meeting has not changed the substance of the thing to be done; a meeting has still been held - what has occurred is merely an irregularity in the procedure for calling the meeting. On the other hand, if one defines the thing to be done more narrowly, for example giving reasonable notice to all the directors, then to not give reasonable notice to one director changes the substance of the thing to be done so that the irregularity is substantive and not procedural.
38 The principles applied by Le Miere J in Sandy v Yindjibarndi Aboriginal Corporation RNTBC [No 2] emerge from the judgment of Palmer J in Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd.[6] In Cordiant Communications (Australia) Pty Ltd, Palmer J drew a distinction between whether an irregularity is procedural or substantive primarily according to the degree of injustice, or inconvenience, caused. Justice Palmer explained:
The decisions in Industrial Equity and Scullion provide a useful guide to how problems arising out of irregularities at meetings may be resolved as a matter of fairness and practicality. A wrongful denial of a shareholder's statutory right to vote at a meeting is a denial of a substantive right and is not a 'procedural irregularity' within the scope of s 1322(2) at all. Nevertheless, a pragmatic means of avoiding injustice or undue inconvenience is available by recourse either to the principles upon which the remedy of a declaratory order is given under the general law or by recourse to a validating order under CA s 1322(4)(a). By virtue of CA s 1322(6)(a)(ii), (iii) and (c), the Court can make a validating order under s 1322(4)(a) where the irregularity is substantive rather than procedural if the Court is satisfied either that the parties concerned acted honestly or that it is just and equitable that the order be made. In either case, however, the Court must also be satisfied that no substantial injustice has been, or is likely to be, caused to any person.
39 In this matter, Mr Lean's evidence is that if he had been served with notice of the shareholders meeting he would have attended and voted against the resolution. Given that there are only two shareholders of BH and the passing of a special resolution requires at least 75% of votes cast by members (entitled to vote) for the resolution to be validly passed, it is apparent that the presence of Mr Lean (even if he was to vote in favour of the resolution) was essential to the passing of the resolution.
40 In these circumstances, it is clear that the absence of a quorum at the meeting of shareholders on 23 November 2017 was a substantive irregularity and not a procedural irregularity. In his absence and without the affirmative vote of Mr Lean, the resolution could not have been passed. This point was made clear in Re Richardson & Wrench Holdings Pty Ltd[8] by Brereton J when his Honour remarked:[9]
Section 1322(1)(b) contains a non-exhaustive definition of procedural irregularity, which nonetheless throws some light on what is contemplated namely, the absence of a quorum at a meeting; or a defect, irregularity or deficiency of notice or of time. It is difficult to see how the absence of authority to cast a vote of a member, whose affirmative vote was essential to the passage of the resolution, can be seen as a procedural irregularity. Had the unauthorised assent not been given, the circular resolution could not have been passed.
41 A substantive irregularity can be validated by the court under s 1322(4)(a) of the Corporations Act.
42 Section 1322(4)(a) allows the court to make an order declaring that any act, matter or thing purporting to have been done, or any other proceeding purporting to have been instituted or taken, under the Corporations Act, or in relation to a corporation, not invalid. Thus, a declaration can be made under s 1322(4)(a) only in respect of an invalidity by reason of any contravention of a provision of the Corporations Act, or a provision of the constitution of the corporation.
43 The prerequisites for the making of an order of validation under s 1322(4)(a) is prescribed by s 1322(6)(a). Section 1322(6)(a) provides that the court cannot make a validating order unless it is satisfied of at least one of the three following conditions, namely:
(a) the matter is essentially of a procedural nature;[10]
(b) the persons concerned acted honestly;[11] or
(c) it is just and equitable that the order be made.[12]
44 The conditions prescribed in s 1322(6)(a) are not cumulative. Consequently, the power to make an order under s 1322(4)(a) is not limited to cases of procedural irregularity.[13]
45 Where one of the conditions in s 1322(6)(a) are satisfied the court must not make an order unless it is satisfied that no substantial injustice has been, or is likely to be, caused to any person.[14]
46 The court must also be satisfied that it is the irregularity which occasions the 'substantial injustice' and not the 'proceeding'.[15]
47 The onus of showing the fulfilment of one of the three conditions for an order as provided for in s 1322(6)(a), and the absence of substantial injustice, rests upon the applicant for an order.[16]
48 In this matter, the invalid resolution passed at the 'shareholders' meeting was not a procedural irregularity and thus cannot be characterised as an irregularity essentially of a procedural nature within the meaning of s 1322(6)(a)(i).
49 However, no issue is taken with Mrs Banning's honesty in taking the action she did. Consequently, I am satisfied that the precondition specified in s 1322(6)(a)(ii) is met.
50 The question is then whether the court is of the opinion that the irregularity has caused, or may cause, substantial injustice that cannot be remedied by any order of the court.
51 In Re Compaction Systems Pty Ltd[17] Bowen CJ in Eq explained how 'injustice' within the meaning of s 1322(6)(c) arises:[18]
In my view, the word 'injustice' in this provision requires the Court to consider any real, and not merely insubstantial or theoretical, prejudice which will be suffered by, for example, a member by the making of an order, and to weigh this in the scales against the prejudice to the company, other members and creditors, if an order be not made. In other words, it is insufficient to show that there may be some prejudice to a member if, on a consideration of the whole matter, the overwhelming weight of justice, as it were, is in favour of making the order.
52 In Chalet Nominees (1999) Pty Ltd v Murray,[19] the issue was whether substantial injustice was caused by an irregularity raised by an absence of a quorum. In that matter a company had issued a notice of meeting proposing resolutions to remove a number of directors. An article in the company's constitution provided that the quorum for a general meeting was two members. The meeting was held, but was only attended by one director (who held proxy votes for Part 1 Pty Ltd who was majority shareholder), the company secretary, a solicitor (who also held proxy votes for Part 1 Pty Ltd) and an observer. At the meeting, the secretary and others were appointed as directors. Subsequently, the new directors resolved to undertake a significant capital raising for the company. Chalet Nominees (1999) Pty Ltd also held share capital in the company. It disputed that the new board was validly appointed, contending that the shareholders meetings were invalid because no quorum was present and no resolutions could be validly passed. Prior to the hearing, it was conceded that a quorum was not constituted at the meeting. Whilst two proxies attended the meeting, the proxies were for only one member. Justice Le Miere observed that a failure to receive notice of a meeting may constitute substantial injustice, by denying those entitled to be present at a meeting the opportunity to consult together, to express views, to hear the views of others and then to vote at the meeting after discussion and a debate.[20] However, in the matter before him, the members and directors of Chalet Nominees (1999) Pty Ltd had received proper notice of the meeting but chose not to attend. From these facts, Le Miere J inferred that other members of the company also chose not to attend the meeting.
53 Justice Le Miere found that no substantial injustice had been, or was likely to be, caused by the procedural irregularity as the shareholders had the opportunity to attend the meeting and make such representations as they wished in relation to the business conducted at the meeting. In circumstances where they chose not to take that opportunity, his Honour found that no injustice would be caused by permitting the meeting to proceed and the majority members to vote for, and thereby effect, the removal of directors and to appoint others in their place.
54 Whilst Chalet Nominees (1999) Pty Ltd raised different circumstances than the circumstances to be considered by the court in this matter, Le Miere J made relevant observations about the difficulties of constituting a quorum where there are only two shareholders. His Honour said:[21]
There are many companies with only two shareholders, and then life can become difficult where one shareholder ceases to co-operate. If one shareholder refuses to attend meetings, it would appear that the other is unable to hold a valid meeting and is therefore unable to pass resolutions necessary to conduct business. In Re Opera Photographic Ltd [1989] 1 WLR 634 a company consisting of two members with 51: 49 holding, the majority shareholder was not able to remove the other from directorship because under the articles a meeting without the other attending was not possible. So the majority member applied for a court order that a meeting should be called at which the attendance of one would be the quorum. Since the majority shareholder had a right to remove the other from directorship his right could not be vetoed by quorum requirements and therefore the court made the necessary orders. In Hancock Family Memorial Foundation Ltd v Porteous [2000] WASCA 29; (2000) 22 WAR 198 counsel submitted that Mrs Rinehart could have prevented HPPL from resolving to declare discriminatory dividends by refusing to attend any general meeting of the company, thereby preventing the formation of a quorum. In response to that submission the Court of Appeal stated:
'There are a number of answers to this proposition. It is sufficient to state that the courts will not allow a minority of shareholders to so obstruct the wishes of the majority: In Re Opera Photographic Ltd [1989] 1 WLR 634 ...'
55 In this matter, Mr Lean was denied the right to attend the shareholders meeting. Although he states in his affidavit he would have attended and voted against the resolution if he had notice of the meeting, in circumstances where he has been denied the opportunity of doing so, I am not satisfied that no substantial injustice has been, or is likely to be caused to any person, within the meaning of s 1322(6)(c) of the Corporations Act. Whilst Mr Lean has given no explanation why he would oppose the resolution put at the meeting of shareholders, in the absence of an explanation it is not appropriate to speculate why he would do so. In any event, if he attended the meeting, he may have changed his mind.
56 For these reasons, I am of the opinion that no order should be made to declare the meeting of shareholders of BH on 23 November 2017 not invalid.
57 If however, there was evidence before me that the meeting of shareholders had been validly called by notice being given to Mr Lean and there was evidence of a lack of cooperation between the two shareholders of BH at a properly convened meeting which resulted in BH substantially not being able to function, I would have made an order declaring the meeting not invalid (by reason of a contravention of the quorum requirements of the Articles). I would have also made an order that the resulting resolution passed at the meeting was not invalid.
58 The third relevant act of Mrs Banning as a single director of BH was her act to affirm the retainer of lawyers at the meeting of directors that immediately followed the meeting of shareholders on 23 November 2017. The resolution passed at this meeting also resulted in a substantial irregularity, as there was no quorum of directors present at the meeting as required by the Articles. In these circumstances, the resolution passed at the meeting to affirm the retainers was also invalid.
59 As Mr Lean had not been given an opportunity to attend the meeting of shareholders which immediately proceed this meeting, I am not satisfied that no substantial injustice has been, or is likely to be, caused to any person if an order was made to validate the resolution passed at the meeting.
60 Consequently, I am not satisfied that any of the actions taken by Mrs Banning in respect of the management of BH on 23 November 2017 should be validated.
61 Returning to the first relevant act of Mrs Banning of appointing lawyers to act for BH by a retainer agreement with lawyers in July 2017 to defend BH in these proceedings, I am satisfied that an order should be made to correct the irregularity of this act.
62 This act can also be characterised as a substantial irregularity. The entering into the retainer agreement to defend the proceedings brought against BH was only something that could be done by two directors and not by one. It was an act not authorised by s 248F of the Corporations Act. In these circumstances, the irregularity was substantive.
63 I accept that Mrs Banning was acting honestly in appointing lawyers to defend the application to wind up BH. In particular, I accept that she did not know, or she did not understand at the time, she entered into the agreement to retain lawyers, the legal requirement that the affairs of BH could only be managed by two directors.
64 To the extent that it is necessary, I am satisfied that at the time Mrs Banning entered into the retainer agreement that she acted innocently, and in good faith, to protect BH's interests.
65 I also find that no substantial injustice has been or is likely to be caused by this irregularity. The only consequence of making an order to correct this irregularity is that BH will be entitled to an order for its costs. Given that the ordinary rule is for costs to follow the event, no injustice will be caused to any person, or is likely to be caused to any person, if an order is made that Mr Lean is to pay BH costs of the action.
66 BH seeks indemnity costs on the grounds that, on a proper consideration, Mr Lean ought to have known that his case against BH was hopeless as he had no standing to make the application.
67 BH claims that it made it plain to Mr Lean at a very early stage of the proceedings that his case as to standing was hopeless.
68 BH also says that the proceedings were conducted improperly or unreasonably because Mr Lean was not a creditor of BH. It says it should have been plain to him that nothing could be reasonably gained by him in seeking liquidation of BH. BH says the apparent purpose of the application to wind up BH was to investigate transactions going back as far as 2009 and 2010 (well before Mr Lean's fees as receiver of Professional Services Pty Ltd were assessed and allowed in 2017) so as to determine whether any assets had been 'disposed of' by BH 'without just cause'. BH also say that it was clear that the apparent purpose of the application was also to criticise the historical accounts of BH and make spurious claims as to improper management and insolvency.
69 It is conceded, however, by BH, that if Mr Lean did have standing to bring the proceedings it may have been proper for him to raise such matters. However, he did not have standing as found by the court.
70 BH also makes a claim that even after the proceedings were dismissed, Mr Lean has sought to raise technicalities to avoid liability for the payment of legal costs which has caused the costs argument to become complicated and timeconsuming.
(a) Solicitor and client costs can properly be awarded in appropriate cases, where 'there is some special or unusual feature in the case' to justify the court exercising its discretion in that way.[24]
(b) To obtain an indemnity costs order, it is not the case that the successful party needs to show collateral purpose, or establish some species of fraud against the successful party. It is sufficient, to enliven the discretion to award such costs that, what forever reason, a party persists on what should on proper consideration to be seen to be a hopeless case.[25]
(c) Competing principles need to be balanced in assessing the making of a potential award for indemnity costs. On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as 'hopeless' so as justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost to litigation, it is appropriate the parties so acting should bear that increased cost.[26]
72 The difficulty with the submissions put on behalf of BH is that whilst the court found that Mr Lean had no standing to bring the proceedings, the application failed on grounds that Mr Lean was not 'a contributory' of BH within the meaning of s 9 of the Corporations Act.[27] The grounds upon which BH put forward to the court that Mr Lean had no standing to institute the proceedings were put on an entirely different basis. It was argued on behalf of BH that Mr Lean's entitlement to be registered as a shareholder of BH ceased upon the cancellation of the receivership of Professional Services Pty Ltd on 10 November 2010. It was also argued that notwithstanding the transfer of the one share of BH to Mr Lean, the property in the share did not vest in him at any time. These arguments were implicitly rejected by the court in the proceedings.[28]
73 The means by which Mr Lean became the owner of the one share in BH are somewhat unusual in that in the normal course of a receivership a receiver is not usually entitled to have property transferred into his or her name by virtue of his or her appointment as receiver.[29]
74 In circumstances where the arguments put on behalf of BH as to standing were rejected by this court and decided on a point not raised by counsel for BH, it cannot be said that the case put on behalf of Mr Lean could be regarded as hopeless which merits the sanction of an indemnity costs order. In addition, there was no determination made by the court as to whether it was proper for Mr Lean to put arguments before the court in affidavit form criticising the historical accounts and management of BH and whether it was insolvent. In the absence of any findings in this regard, it is not open to BH to raise an argument that Mr Lean's engagement in the proceedings was either for an improper purpose or unreasonable.
75 For these reasons, I will make an order that Mr Lean pay BH's costs of the proceedings, to be taxed if not agreed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
[1] Australian Securities and Investments Commission current and historical company extract.
[2] See Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183.
[4] See Lean v Banning Holdings Pty Ltd [2017] WASC 353 [31] [32].
[5] Sandy v Yindjibarndi Aboriginal Corporation RNTBC [No 2] [2016] WASC 75; (2016) 306 FLR 206.
[6] Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 194 FLR 322.
[7] Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 194 FLR 322 [97].
[8] Re Richardson & Wrench Holdings Pty Ltd [2013] NSWSC 1990; (2013) 97 ACSR 351.
[9] Re Richardson & Wrench Holdings Pty Ltd [2013] NSWSC 1990; (2013) 97 ACSR 351 [27].
[13] Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 [10] (French CJ).
[15] Re Pembury Pty Ltd [1993] 1 Qd R 125.
[16] Australian Hydro Carbons NL v Green (1985) 10 ACLR 72; (1985) 3 ACLC 779.
[17] Re Compaction Systems Pty Ltd [1976] 2 NSWLR 477.
[18] Re Compaction Systems Pty Ltd [1976] 2 NSWLR 477, 493; as applied in Chalet Nominees (1999) Pty Ltd v Murray [2012] WASC 147 [27]; Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 [11] (French CJ).
[19] Chalet Nominees (1999) Pty Ltd v Murray [2012] WASC 147.
[20] Chalet Nominees (1999) Pty Ltd v Murray [2012] WASC 147 [30] [32].
[21] Chalet Nominees (1999) Pty Ltd v Murray [2012] WASC 147 [33].
[22] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S).
[23] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [7].
[24] Fountain Selected Meat Sales Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1998) 81 ALR 397, 400 (Woodward J).
[25] J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301; [1993] FCA 70 (French J).
[26] Quancorp Pty Ltd v McDonald [1999] WASCA 101 [7] (Wheeler J).
[27] Lean v Banning Holdings Pty Ltd [2017] WASC 353.
[28] Lean v Banning Holdings Pty Ltd [2017] WASC 353.
[29] Re Scottish Properties Pty Ltd (1977) CLC 40-307.
6 On 21 November 2008, in CIV 2265 of 2006 Mr Lean was appointed receiver of PSA by order of Justice Simmonds for a limited purpose of appropriating and realising property to satisfy a judgment debt. At the time the order was made Mr Banning together with PSA owed to CAT a judgment debt: see Computer Accounting and Tax Pty Lt (in liq) v Professional Services of Australia Pty Ltd [No 2] [2010] WASC 318 (CIV 2265 of 2006); Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133. The defendants to the action in CIV 2265 of 2006 were at that time PSA and Mr Banning.
12 The Friggers commenced proceedings, against Mr Lean, Mr CampbellSmith and Mrs Banning (in their capacities as directors of BH) and BH, seeking transfer of the share to them (CIV 1727 of 2009). Before the action proceeded to trial, the judgment debt owed to CAT was in effect deemed to have been paid following a decision of the Court of Appeal in October 2009 reducing damages on a claim of statutory compensation by $680,000 (substantial components of the debt having been paid prior to the delivery of the judgment of the Court of Appeal): see Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183.
16 On 2 December 2010, Kenneth Martin J granted a permanent stay of the proceedings instituted by the Friggers to enforce the sale of the share of BH in CIV 1727 of 2009: Frigger v CampbellSmith [2010] WASC 353.
20 Master Sanderson found that the sale process was flawed and the actions of Mr Lean after the sale of the share were not appropriate and any amount charged by him should not be the subject of an order for remuneration: Computer Accounting and Tax Pty Ltd (in liq) v Professional Services of Australia [No 11] [2016] WASC 365 [27] [28].
30 As counsel for Mr Lean points out, a court appointed receiver is entitled to a proprietary equitable lien over those assets which he is appointed in respect of his remuneration and expenses: Re Lawrenson Light Metal Die Casting Pty Ltd [1999] VSC 500; (1999) 33 ACSR 288 [57] [59]. The receiver's right to remuneration is not affected by his discharge and the lien continues to exist independently: Mellor v Mellor [1992] 4 All ER 10; Shirlaw v Taylor [1991] FCA 415; (1991) 102 ALR 551. The lien takes priority over creditors, including the costs of parties to the action. The equitable lien made the receiver a secured creditor whose claim ranks ahead of the priority creditors: O'Donovan J, Company Receivers and Administrators, vol 2 [25.360].
31 Whilst Mrs Banning may have a beneficial interest in the share held by Mr Lean as the beneficiary of the estate of Mr Banning, Mrs Banning has no more than an equitable interest in that share as her name is not entered into the register of members in respect of that share: s 231 Corporations [1982] HCA 17; Act; Maddocks v DJE Constructions Pty Ltd (1982) 148 CLR 104, 117.
33 In Yara Australia Pty Ltd v Oswal [No 2] [2013] WASCA 187 the Court of Appeal found the holder of shares at law means the legal entity registered in the register of members of a company, and whether the holder holds the shares in respect of a trust is not relevant to the status of a holder. President McLure explained [56] [63]:
'Holder' in the CA retains its ordinary meaning notwithstanding other provisions relating to notification in the register as to beneficial ownership. The CA requires that a company set up and maintain a register of members (s 168). At all material times, BHL was required to indicate in its register of members any shares that a member did not hold beneficially (s 169(5A)). Further, registered shares held by a trustee in respect of a particular trust may (not must), with the consent of the corporation, be marked in the register in such a way as to identify them as being 'held in respect of the trust' (s 1072E(9)). Finally, where a non-beneficial holding of shares becomes beneficial, the holder is required to give to the company notice that, among other things, the person holds the relevant shares beneficially (s 1072H(6)).
The approach taken to the word 'holder' in s 1072F is informed by the broader legal framework. The relationship between shareholder and company and shareholders inter se is contractual. A company's constitution and any replaceable rules that apply have effect as a contract: s 140 CA.
If s 1072F applies, registration of a transfer of shares in the register of members of a company results in the novation of that (statutory) contract as between the existing registered shareholders, the transferee and the company.
A trust is not a legal entity. It cannot be a party to a contract. A trustee contracts as principal in his or her personal capacity as a legal entity without limitation. Thus, a trustee is personally liable, as are his assets, under the contract (unless the contract otherwise provides): Octavo Investments Pty Ltd v Knight [1979] HCA 61; , 367. However, the capacity in which the trustee acts is relevant to other contracting parties. Unless the contract otherwise provides, creditors of the trustee are entitled to be subrogated to the trustee's right of indemnity against the trust assets: Octavo (367). There are also insolvency ramifications.
34 With respect, these observations in Yara do not assist in determining whether Mr Lean has standing to bring this application as a 'contributory'. Although it is clear that Mr Lean is a holder of a fully paid share in a company with share capital, he does not hold that share as a trustee. It is well established that any property which a receiver appointed by a court, holds subject to his or her appointment, is to be treated as property in the possession of the court that appointed him or her: Viola v AngloAmerican Cold Storage Company [1912] 2 Ch 305, 311; In Re Savoy Estate Ltd (1949) Ch 622, 635; Re Van Reesema; Ex parte Australian Growth Resources Corporation Pty Ltd (Receivers and Managers Appointed) [1987] FCA 336.
37 It is a modern rule of statutory construction that an Act of Parliament is to be read as a whole. The object of statutory construction is to construe the meaning of words used in a section in the context of the language in the legislation as a whole, to try to discern the intention of the legislature: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69] (McHugh, Gummow, Kirby & Hayne JJ).
CITATION : LEAN -v- BANNING HOLDINGS PTY LTD [2017] WASC 353 (S)
Chalet Nominees (1999) Pty Ltd v Murray [2012] WASC 147
Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 194 FLR 322
Fountain Selected Meat Sales Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1998) 81 ALR 397
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301; [1993] FCA 70
Quancorp Pty Ltd v McDonald [1999] WASCA 101
Re Richardson & Wrench Holdings Pty Ltd [2013] NSWSC 1990; (2013) 97 ACSR 351
Sandy v Yindjibarndi Aboriginal Corporation RNTBC [No 2] [2016] WASC 75; (2016) 306 FLR 206
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396
In Re Sidex Australia Pty Ltd (Receiver and Manager Appointed); Sipad Holdings DDPO v Popovic (1995) 18 ACSR 436, 449 Lehane J suggested that a procedural irregularity may arise where the parties have attempted to do something which the Act permits but have failed to do it effectively because of a procedural failure or a omission but not where the parties have tried to do something which the Act does not authorise. The Court of Appeal took the same approach in Smolarek v Liwszyc [2006] WASCA 50; (2006) 32 WAR 129 [59]. In Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 55 ACSR 185 Palmer J addressed the issue of what is a substantive irregularity as distinct from a procedural irregularity. His Honour referred to the cases concerning the distinction between a substantive law or rule and a procedural law or rule and in particular dicta from the joint judgment in John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503, 543 - 544 and continued:
(1982) 148 CLR 104
(1993) 46 IR 301
(2016) 306 FLR 206
(2013) 251 CLR 396
(1991) 102 ALR 551
(1972) 127 CLR 503
(1998) 194 CLR 355
(2006) 32 WAR 129
(2000) 22 WAR 198
(1979) 144 CLR 360
(2005) 194 FLR 322
(1998) 81 ALR 397
(2000) 203 CLR 503
Further, the holders (legal owners) of shares have, as between themselves and the company, all the rights attached to shares including voting, entitlement to receive dividends and benefits on a winding up: Glennon v Federal Commissioner of Taxation [1972] HCA 52; (1972) 127 CLR 503, 511 - 512. Walsh J in Glennon considered the effect of s 156(3) of the Companies Act 1961 (Qld) which, like s 1072E(9) of the CA, provided that shares held by a trustee in respect of a particular trust may, with the consent of the corporation, be marked in the register in such a way as to identify them as being held in respect of the trust. Walsh J concluded that even if the shares in question in that case had been marked in the register so as to identify them as shares held in trust that had no consequence in relation to the rights of the holders of the shares as between themselves and the companies (512). That is, a notification in the register that shares are held in trust does not have any legal consequences affecting the mutual rights and obligations of shareholders and the company.
If the capacity in which the trustee held the shares is part of its status as the holder, there would be a requirement, not just a statutory power, for that information to be included in the register.
These features explain why the 'holder' of a share is, for CA purposes, the legal entity entered on the register of members. The capacity in which the legal owner of the share is acting is not relevant to the status of 'holder'.