Kathleen Investments (Australia) Ltd v Australian Atomic Energy Commission

The Commission shall be a body corporate with perpetual succession and a common seal, and shall be capable of acquiring, holding and disposing of real and personal property and of suing and being sued in its corporate name. Division 2 of Pt II prescribes the functions and powers of the Commission. The relevant provision of this division is s. 17 which provides in sub-s. (1) (a): to undertake, or arrange for or encourage other authorities or persons to undertake, exploration for, and mining and treatment of uranium and minerals found in association with uranium; and in sub-s. (4): The functions of the Commission specified in sub-section (1) of this section shall be performed only -

(i) uranium or atomic energy for the defence of the Commonwealth;

(ii) uranium to be supplied by or on behalf of the Commonwealth to the Government of another country or to an authority acting on behalf of the Government or Governments of another country or countries; or

(iii) uranium or atomic energy for any other purpose of the Commonwealth;

(b) for the purpose of ensuring that uranium from sources in Australia is not disposed of in a manner that may be prejudicial to the defence of the Commonwealth;

(c) in a manner incidental to the performance of the functions of the Commission for the purposes specified in the last two preceding paragraphs; or

(d) in or in relation to a Territory of the Commonwealth.

"Uranium" is defined for the purposes of the provisions I have quoted as including "compounds of uranium and all other substances that are or may be used for or in connexion with the production of atomic energy, whether or not they are prescribed substances".

Section 18 (1) and (2) of the Act, which set out the powers of the Commission, are as follows:

(1) The Commission has power to do all things that are necessary or convenient to be done for or in connexion with the performance of its functions.

(2) Without limiting the generality of the last preceding sub-section, the Commission has power -

(a) to purchase land, and to purchase or construct buildings, for use in carrying on the operations of the Commission, and to dispose of land or buildings owned by the Commission;

(b) to take on lease land or buildings for use in carrying on the operations of the Commission, and to dispose of any such lease;

(c) to purchase or take on hire plant, machinery, equipment, or other goods necessary for carrying on the operations of the Commission and to dispose of any plant, machinery, equipment, or other goods owned by the Commission;

(f) to do anything incidental to any of its functions or powers.

Division 4 of Pt II of the Act provides for the finance of the Commission. Section 26 in this division provides:

(1) Subject to this section, the moneys of the Commission shall be applied only -

(a) in payment or discharge of the expenses, charges and obligations incurred or undertaken by the Commission in the performance of its functions under this Act;

(b) in payment of the remuneration and allowances of members of the Commission, deputies of members of the Commission, and members of Advisory Committees; and

(c) in making any other payments which the Commission is authorized or required to make under this Act.

(2) No moneys shall be expended by the Commission otherwise than in accordance with estimates of expenditure approved by the Treasurer.

(3) Moneys of the Commission not immediately required for the purposes of the Commission may be invested on fixed deposit with the Commonwealth Bank of Australia or with any other bank approved by the Treasurer, or in securities of the Commonwealth.

Section 29 is as follows: The Commission shall not, except with the approval of the Minister, enter into a contract involving the payment by the Commission of an amount exceeding Fifty thousand dollars.

The plaintiff's statement of claim contains the following presently relevant passages:

In or about the month of December 1974 the first defendant purported to apply to the second defendant for the allotment to it of 30,764,142 ordinary shares of 25 cents each, paid to 10 cents in the capital of the second defendant (herein called "the said shares").

The plaintiff charges and the fact is that the making of the aforesaid application for shares was beyond the powers of the first defendant and void.

In or about the month of December 1974 the first defendant purported to enter into an agreement with the second defendant for the allotment to it of the said shares.

The plaintiff charges and the fact is that the making of the said agreement was beyond the powers of the first defendant and void.

In or about the month of December 1974 the second defendant purported to allot the said shares to the first defendant.

The plaintiff charges and the fact is that the making of the said allotment of shares was beyond the powers of the first defendant and void.

The plaintiff claims a declaration that the application for the said shares, the agreement to allot them and their actual allotment were each beyond the powers of the Commission and void and an order directing the second defendant to take all necessary steps to rectify its register by the removal therefrom of the name of the Commission.

To this statement of claim the Commission pleaded. The second defendant both pleaded and demurred. The grounds of the demurrer of the second defendant were as follows:

(a) that the agreement and the application for and the taking up of the said shares were within the powers of the firstnamed defendant or alternatively within the powers of the Commonwealth of Australia on whose behalf the firstnamed defendant acts;

(b) that the statement of claim does not allege any fact which gives the plaintiff standing in law to obtain the declaration claimed by paragraph 1 of the claim for relief or the order claimed by paragraph 2 thereof;

(c) that the statement of claim does not allege any fact which discloses that the said shares were invalidly allotted or issued by the secondnamed defendant or that the secondnamed defendant ought or ought to be directed to rectify its register of members by removing the name of the firstnamed defendant.

This demurrer was set down for hearing before a Full Court and has now been fully argued.

The first ground of the demurrer states no more than a matter of defence, more properly to be found in a statement of defence. It is basic that a demurrer admits for the purpose of its disposal all allegations of fact made in the statement of claim. It is, in my opinion, quite inappropriate that a demurrer should controvert any such statement. If the statement that the agreement and application for and allotment of the shares were beyond the powers of the Commission is a statement of fact, then an assertion to the contrary adds nothing. If particulars of what may be in truth no more than a conclusion of law had been sought, and the answer elicited had identified the basis for the asserted lack of power, a ground of demurrer may have emerged in that, properly construed, the Act constating the Commission did in truth confer the requisite power.

However, we have become accustomed to demurrers involving questions of constitutional and statutory powers which take as grounds such assertions as ground (a) above directed to the validity of a statute. Consequently, I will treat the ground of demurrer as being that, in referring to the Act, the statement of claim discloses that there was no statutory power in the Commission to do the acts complained of. Perhaps ground (c) of the demurrer might suffice to raise the question the second defendant seeks to have resolved.

Three questions seem to me to arise on the demurrer. First, whether the allotment of the shares can be set aside and the register rectified if the Commission lacked the power and authority to subscribe for shares in the capital of the second defendant and to agree to pay for the same partly on allotment and partly on call, thereby becoming a member of that defendant on the terms of the memorandum and articles of association, which have been treated by the parties as if incorporated in the statement of claim. Secondly, did the Commission lack that power and authority? Thirdly, has the plaintiff as a shareholder in the second defendant standing to seek the rectification of the register on the footing that the name of the Commission is improperly thereon?

This being a demurrer, the Court is limited to the matters of fact asserted in the statement of claim, the memorandum and articles of the second defendant, and the provisions of the Act. These three questions must be answered in the light of this material.

It is convenient that I address myself first to the second of these questions. The agreement to subscribe for shares in a limited liability company involves an agreement to become a member of the company, to subscribe to its capital and to be bound by the terms of the memorandum and articles of association. The money subscribed for the shares becomes a liability of the company but does provide it with capital to be employed in any manner allowed by the memorandum and articles of the company. With the diminishing of the scope of the doctrine of ultra vires in connexion with acts of a limited liability company, the possible avenues for the employment of the capital of such a company is somewhat extended (see s. 20 of the Companies Act, 1961 Q., as amended ("the Companies Act ")).

The memorandum and articles of the second defendant neither specifically authorize uranium exploration, mining or treatment, nor do they limit the authorized activities of the company to mining or mining activites of any kind. The objects of the second defendant include the following:

(1) To purchase, take on license, lease or otherwise acquire any Mines, Mining Rights or metalliferous lands in the State of Queensland or elsewhere and any interest therein and to prospect, explore, work, exercise and turn to account the same or any other metalliferous land in the said State or elsewhere, to crush, win, get, quarry, smelt, calcine, refine, dress, amalgamate, manipulate, and prepare for market, ore, metal and mineral substances of all kinds, and to carry on any other metallurgical operations which may seem conducive to any of the Company's objects.

(2) To buy, sell, manufacture, and deal in minerals, plant, machinery, implements, conveniences, provisions and things capable of being used in connection with metallurgical operations, or required by workmen and others employed by the Company.

(3) To construct, carry out, maintain, improve, manage, work, control, and superintend any roads, ways, tramways, railways, bridges, reservoirs, water-courses, aqueducts, wharves, furnaces, sawmills, crushing works, hydraulic works, electrical works, factories, warehouses, shops and other works and conveniences which may seem directly or indirectly conducive to any of the objects of the Company, and to contribute to, subsidise, or otherwise aid or take part in any such operations.

(4) To employ experts and/or companies to investigate and examine into the condition prospects values character and circumstances of any mining or other properties business concerns and undertakings and generally of any assets property or rights.

(5) To carry on business as merchants, traders, storekeepers, manufacturers, engineers, farmers, financiers and agents in all their branches, also but not exclusively so to carry on all or any of the businesses and do the following things, namely Custom agents, importers, exporters, building contractors, makers of all building materials and foodstuffs of all kinds, manufacturers, suppliers and vendors of and dealers in machinery plant and apparatus of every description, public works contractors, timber merchants and sawmill proprietors, hotel, refreshment-room and the restaurant keepers, fire accident, and marine insurances and indemnify business in all its branches, auctioneers, estate, house, land commission stock and station agents, assets converters, capitalists concessionaires and underwriters.

(6) To carry on any other business, whether manufacturing, trading, or otherwise, wholesale or retail, which may seem to the Company capable of being conveniently carried on in connection with the above or calculated directly or indirectly to enhance the value of or render profitable any of the Company's property or rights.

(7) To promote, make, construct, provide, take on lease or agreement or otherwise acquire, lease, let, grant running powers over, work, use, equip, maintain improve and dispose of any railways, tramways and other roads, ways, bridges, sidings, locomotive engines, rolling stock and plant, shafts, wharves, buildings, machinery and other works and appliances and to aid in or subscribe towards the doing of any of the matters and things aforesaid.

(8) To conduct and manage the business and affairs of any other company, co-partnership or person, whether such business be manufacturing, insurance or otherwise, mercantile, commercial, financial, insurance or otherwise.

Thus, it is apparent that there is no basis for a conclusion that the capital of the second defendant will be employed, exclusively or at all, to any extent in uranium exploration, mining or treatment.

It has been submitted that s. 8 (2) of the Act itself both empowers and authorizes the Commission to acquire shares in the second defendant. It is said that shares in a limited liability company are personal property and that subscription therefor is a manner of their acquisition. But the capacity to acquire and hold property must be distinguished from the authority to acquire or use property. In the case of a statutory corporation such as the Commission, it is "limited and circumscribed by the statute" which incorporates and regulates it: see generally Halsbury's Laws of England, 4th ed., vol. 9, par. 1333. In the Act a clear distinction between such capacity and such authority is made. Whilst s. 8 (2) endows the Commission with capacity, Div. 2 of Pt II and particularly s. 17 delineates the powers and functions, as distinct from the capacities of the Commission. Though s. 8 (2) provides the capacity to acquire and hold property, it is, in my opinion, s. 18 which grants the power and authority to acquire the property there listed. Further, Div. 4 of Pt II, in specifying the uses to which the Commission may put its funds, limits their use to the purposes of the Commission. The acquisition of property for its own sake is not such a purpose. The acquisition is only authorized if it is incidental to the execution of some authorized purpose of the Commission. In this connexion, it is not without significance that the shares in question are contributory shares so that the Commission, if its agreement with the second defendant were valid, would be under an obligation to meet calls which may be made by the second defendant. Calls may, of course, be made for the financing of some project wholly unconnected with any form of mining or of mining activity, let alone the extraction or treatment of uranium. In these days of corporate diversification, there can be no guarantee as to the corporate activities into which shareholders' funds are poured, assuming a sufficiently wide memorandum and articles. I am therefore clearly of opinion that s. 8 (2) standing alone does not authorize the making of an agreement to subscribe for shares and, in particular, for contributory shares. This conclusion is reinforced when s. 8 (2) is read with and in contrast to the provisions of the Act found in Divs 2 and 4 of Pt II.

There is in the Act no specific purpose of acquiring shares in mining companies. It is not without significance that subscription for shares in a limited liability company is not within the specific powers of acquisition given by s. 18. It is therefore necessary, in my opinion, to find in the Act some authorized purpose to the accomplishment of which the acquisition of the contributory shares might reasonably be thought to be incidental. In that connexion, and as an element in considering that question, the limitation on the use of the Commission's funds must be kept in mind. Also those limitations may in themselves afford a reason against the possibility of the making of an agreement to meet calls on the shares as and when made by the second defendant, though, no doubt, if the contract be otherwise valid the circumstance that its performance depends or may depend on the appropriation by Parliament of the requisite funds will not invalidate the contract. Cf. New South Wales v. Bardolph [43] .

The only object or purpose of the Commission which I understand to be suggested as relevant to the agreement to subscribe for the shares in the capital of the second defendant is the function of encouraging other authorities or persons to undertake exploration for, and mining and treatment of, uranium and minerals found in association with uranium in s. 17 (1) (a).

Two questions might be thought to arise in this connexion: first, can the subscription for contributory shares in the capital of a company which, on the one hand, is under no obligation to engage in uranium discovery or recovery and which, on the other hand, may lawfully employ its capital in any one of many non-mining activities, reasonably be regarded as giving encouragement to exploration for, mining or treatment of uranium within the meaning of the words of the statute? - secondly, in any case, is the subscription of capital to a limited liability company an encouragement of some activity of which the company is capable? But both questions may be discussed together.

It is important that in the case of a statutory corporation the power and authority to do any particular thing be found in the language of the statute, in what it expressly provides and what it inferentially provides as a matter of necessary implication. "What the statute does not expressly or impliedly authorise is to be taken to be prohibited": Halsbury's Laws of England, 4th ed., vol. 9, par. 1333 and cases noted under n. 1.

It may be taken that the functions of the first defendant are among its purposes. In this connexion, s. 17 (4) and the provisions of Div. 4 of Pt II are of consequence. The lack of any control by any member of the second defendant as to the manner in which its directorate shall validly pursue such objects as are within the company's competence is most significant when the Commission is required by statute to utilize its funds and authority exclusively to the attainment of the limited objectives expressed in s. 17 (4).

The dictionary meaning of "encourage" as set out in the Shorter Oxford English Dictionary, 3rd ed., is "to inspire with courage, animate, inspirit; to embolden; to incite, instigate, to recommend; to stimulate, to countenance; in bad sense, to abet; to allow or promote the growth of; to foster". But, in my opinion, the word "encourage" in s. 17 (1) (a), bearing in mind the provisions of the Act generally, is of even narrower content than that word used in general parlance or in some other context.

The first authorized function in s. 17 (1) (a) is the undertaking by the Commission itself of one or more of the stated activities: and to do so for one of the objects specified in s. 17 (4). The second mentioned function is the arrangement by the Commission for others to undertake one or more of those activities, no doubt for the attainment of one of the said objects. Thus, there is an element of certainty by the performance of either of these functions that the activity will take place and take place to secure one of the objects set out in s. 17 (4). To encourage is the third mentioned function. Whilst there is a declension in the paragraph of the extent of the first defendant's participation in the activity or in its proximity to the activity, the end point in each case is the certainty of the performance of the activity. Because the Commission's participation is less in the case of mere encouragement, the certainty of the performance of the activity is not diminished in contemplation. Thus the word "encourage" in the paragraph requires that what it authorizes will or will most probably result in the performance of the activity and with the attainment of a designated object. One would expect that, in the context of the Act, the inception of that performance will be proximate either in esse or in posse to the act which is said to be an encouragement of that activity. Here, quite clearly, for the reasons I have expressed, on the material to which the Court is presently authorized to have regard, there is no such relationship. It is not enough to say that on different facts that relationship may possibly be demonstrated. As the matter stands, the Commission has done no more than seek to become a member of the second defendant, and to contribute to its capital, that defendant not being obliged to undertake any of the activities specified in par. (a) of s. 17 (1), nor to do so to attain any of the objects of sub-s. (4) of that section. Whether a promise by the second defendant to do so, or a representation that it will do so, would suffice to remove the possibility of the use of the Commission's funds in some disparate activity must remain a question which I have no need presently to decide.

After much consideration, I am unable to bring myself to the conclusion that to subscribe capital to a company which in its own discretion may or may not explore for or mine and treat uranium is to encourage any one of those activites.

I am therefore of opinion that it cannot be said that the agreement to become a member of the second defendant with the concurrent assumption of an obligation to contribute to its capital can be said to be an exercise of the function to encourage the undertaking of exploration, mining or treatment of uranium, within the meaning of s. 17 of the Act.

I may add that, had it been contemplated by the Parliament that the Commission should become a member of a limited liability company and assume the obligations of such a member, I would have expected in relation to what might be thought such an unusual activity that the Act would have been specific in its grant of the necessary power, involving as it well might a considerable demand for funds for which no budgetary provision may have been made. It seems to me unlikely that the Parliament, unless express words were used, would by implication authorize those in control of the Commission to place it in a position where it would be called upon to make appropriations of considerable sums. As I have already observed, so far from giving any express power to subscribe for shares in a limited liability company, s. 18 contains no power to do so.

Even if the second defendant had as an object exploration for and mining and treatment of uranium, I would not regard the agreement to become a member of and to subscribe to the capital of such a company as an encouragement to undertake any such activity within the meaning of s. 17.

There remains the first and third of the questions which I posed at the inception of these reasons. They can conveniently be discussed together for, in a sense, they are obverse and reverse of the one basic principle of company law.

A person, including of course a corporation or company, can only become a member of a limited liability company by making an agreement to do so with the company and must agree to pay the face value of the shares in respect of which he or it proposes to become a member unless the allotment without such payment is authorized by statute. The company has no right to enter upon the register a person who has not so agreed. If the name of a person is on the register without that person's agreement in that behalf, any member of the company may apply to the appropriate court for the rectification of the register: see, e.g., s. 155 of the Companies Act.

If it be right to say, as in my opinion it is, that the Commission lacked power and authority to agree to become a member of the second defendant, that defendant could not make an agreement with the Commission to become a member of the second defendant. It matters not that the second defendant is quite willing to have the Commission as one of its members. If that defendant has no capacity so to agree in the necessary sense, no agreement in that sense with it can result: and, of course, the Commission itself can assert its own lack of power and authority. Thus, in my opinion, there was no agreement by the Commission to become a member of the second defendant. In my opinion, the name of the Commission has been improperly entered in the register of the second defendant.

It follows, in my opinion, that the plaintiff as a member of the second defendant has standing to seek the rectification of the register by an appropriate court. As that defendant was incorporated under the Companies Act of Queensland, it is the Supreme Court of that State which has jurisdiction to order the removal of the Commission's name from the register of members of the second defendant.

However, the plaintiff seeks of this Court a declaration that the purported agreement of the Commission to become a member of the second defendant was beyond the powers and authorities given to the Commission by the Act. It also seeks an order that the second defendant take all necessary steps to rectify its register. The plaintiff also seeks an injunction restraining the Commission from dealing with the shares in respect of which its name is on the register of members.

The competence of this Court to entertain this suit is not challenged by the demurrer. It would seem that the parties have taken the view that the Commission is sued either as the Commonwealth or as a person sued on behalf of the Commonwealth.

Finally, in stating the grounds of demurrer, the second defendant asserted in the alternative to an assertion of power under the Act that the agreement, application and allotment were within the power of the Commonwealth itself. But, in my opinion, this part of the ground of demurrer sought to raise an irrelevancy. The acts of the first defendant must be justified under its constating statute. It is nothing to the point that the Commonwealth could have granted it larger and more extensive powers. It has not done so. Thus the extent of Commonwealth power is not relevant as a source of justification of the Commission's acts. No question has been raised that the Commonwealth lacked power to enact the Act, though had the Act authorized subscription for shares in the second defendant as an object in itself, that question might have arisen.

This action was commenced in the original jurisdiction of this Court by Kathleen Investments (Australia) Ltd. ("Kathleen Investments") as plaintiff against Australian Atomic Energy Commission ("the Commission") and Mary Kathleen Uranium Ltd. ("MKU") as defendants. The plaintiff's claim, as stated in the statement of claim, is for a declaration that the purported application by the Commission for 30,764,142 ordinary shares of 25 cents each, paid to 10 cents, in the capital of MKU, the purported agreement made between the Commission and MKU for the allotment of the said shares, and the purported allotment of the said shares by MKU to the Commission were beyond the powers of the Commission and void, for an order that MKU do all acts necessary to rectify its register by removing the name of the Commission therefrom, for an order restraining the Commission from selling, transferring or otherwise disposing of the said shares, and for costs. Both defendants have demurred to the statement of claim, and the demurrers have been set down before us for argument.

The allegations contained in the statement of claim, so far as they are material, are as follows. Kathleen Investments is a company incorporated under the laws of the Australian Capital Territory. The Commission is a body corporate incorporated under the provisions of the Atomic Energy Act 1953-1973 Cth ("the Act"). MKU is a company incorporated under the laws of the State of Queensland. Prior to the purported allotment of shares made in December 1974, Kathleen Investments held 1,989,600 ordinary shares of 25 cents each fully paid in the capital of MKU. It has since sold some of those shares and at all material times since the purported allotment has held 1,955,500 such ordinary shares. Prior to 7th October 1974 the authorized capital of MKU was $7,416,800 divided into 16,000,000 ordinary shares of 25 cents each and 1,708,400 redeemable eight per cent cumulative non-participating preference shares of $2 each. As a result of special resolutions passed on 7th October 1974 and 20th December 1974 respectively, the authorized capital of MKU immediately prior to the purported allotment consisted of $26,000,000 divided into 104,000,000 ordinary shares of 25 cents each. Of those shares 5,683,678 were issued. The articles of association of MKU conferred upon Kathleen Investments, as the holder of its shares, certain voting rights. The articles, having been referred to in the statement of claim, have been placed before the Court (although not in the manner required by O. 26, r. 6 of the High Court Rules). They show that on a poll each share carries one vote (art. 98). By agreement the memorandum of association of MKU has also been placed before the Court.

The statement of claim then proceeds to make the following allegations which, since they are crucial, should be set out verbatim:

In or about the month of December 1974 the first defendant purported to apply to the second defendant for the allotment to it of 30,764,142 ordinary shares of 25 cents each, paid to 10 cents in the capital of the second defendant (herein called "the said shares").

The plaintiff charges and the fact is that the making of the aforesaid application for shares was beyond the powers of the first defendant and void.

In or about the month of December 1974 the first defendant purported to enter into an agreement with the second defendant for the allotment to it of the said shares.

The plaintiff charges and the fact is that the making of the said agreement was beyond the powers of the first defendant and void.

In or about the month of December 1974 the second defendant purported to allot the said shares to the first defendant.

The plaintiff charges and the fact is that the making of the said allotment of shares was beyond the powers of the first defendant and void.

The first defendant has threatened to sell or otherwise dispose of the said shares.

It should be mentioned immediately that it was made clear in argument that it was not intended by par. 12 to raise any issue as to the powers of MKU to allot shares; what was intended to be alleged was that the allotment to the Commission was void because the Commission had no power to apply for or take up the shares.

A party is entitled to demur to the pleading of his opponent "on the ground that the facts alleged do not show a cause of action to which effect can be given by the Court as against the party demurring" (O. 26, r. 1). A defendant who demurs to a statement of claim admits, for the purposes of the demurrer, the facts pleaded by the plaintiff, and submits that those facts do not reveal a cause of action against him. The only facts which can be taken to be admitted for this purpose are those which are, expressly or impliedly, averred in the statement of claim itself, and the court cannot take as admitted a fact which is not averred but which is an inference from facts which are averred in the pleading: Lubrano v. Gollin and Co. Pty. Ltd. [44] . Moreover it has long been settled that a "demurrer admits all those facts only, that are well pleaded; and the facts alone without the conclusion of law": Ford v. Peering [1] . The result of these principles was expressed by Dixon C.J. in South Australia v. The Commonwealth [2] , as follows: "When a court deals with a demurrer it should in strictness discard all statements which are no more than evidentiary and all statements involving some legal conclusion."

1. (1919) 27 C.L.R. 113, at p. 118. 2. (1789) 1 Ves. Jun. 72, at pp. 77-78 [30 E.R. 236, at p. 238]. 3. (1962) 108 C.L.R. 130, at p. 142.

The virtue of proceeding by demurrer is that in an appropriate case it enables à quick decision to be given on a question of law when that will dispose of the whole action. Sometimes however, particularly when the pleadings are defective, the demurrer will not lead to any final decision but (to use the words of Daniell's Chancery Practice, 7th ed. (1901), vol. 1, p. 460) will result "only in delay of the proceedings and increase of costs".

Counsel for Kathleen Investments, in submitting that the statement of claim disclosed a cause of action, advanced four propositions: (1) that the Commission, which is a statutory corporation, is not authorized, by the Act, under which it is constituted, to hold shares in any company; (2) alternatively, that it was not authorized to take up shares in MKU; (3) that if it was beyond the powers of the Commission to apply for the allotment of the shares, and to agree to accept them, the allotment was itself void and of no effect; and (4) Kathleen Investments had a sufficient interest to enable it to bring the present proceedings and obtain the relief which it sought. As has already been indicated, the statement of claim does little more than assert a conclusion of law in relation to the first three propositions. The only facts alleged in support of the conclusion that the allotment was invalid are that the Commission is incorporated under the Act and that MKU is incorporated under the laws of Queensland, and, if we treat the memorandum of association as part of the pleading, that MKU had the objects therein set out. No doubt these statements would reveal a cause of action if, as a matter of law, the Commission has no power, under any circumstances, to apply for shares in a company or to agree to take up shares. It is therefore possible, on the demurrer, to dispose of the first contention of law made on behalf of Kathleen Investments, namely that the Act did not authorize the Commission to take up shares at all.

The capacity, functions and powers of the Commission are defined by the Act. Section 8 (2) of the Act provides as follows:

The Commission shall be a body corporate with perpetual succession and a common seal, and shall be capable of acquiring, holding and disposing of real and personal property and of suing and being sued in its corporate name. The functions of the Commission are stated in s. 17 (1) of the Act. It is sufficient to refer to s. 17 (1) (a) which is as follows: Subject to this Act, the functions of the Commission are -

(a) to undertake, or arrange for or encourage other authorities or persons to undertake, exploration for, and mining and treatment of, uranium and minerals found in association with uranium.

Section 17 (4) is in the following terms: The functions of the Commission specified in sub-section (1) of this section shall be performed only -

(i) uranium or atomic energy for the defence of the Commonwealth;

(ii) uranium to be supplied by or on behalf of the Commonwealth to the Government of another country or to an authority acting on behalf of the Government or Governments of another country or countries; or

(iii) uranium or atomic energy for any other purpose of the Commonwealth;

(b) for the purpose of ensuring that uranium from sources in Australia is not disposed of in a manner that may be prejudicial to the defence of the Commonwealth;

(c) in a manner incidental to the performance of the functions of the Commission for the purposes specified in the last two preceding paragraphs; or

(d) in or in relation to a Territory of the Commonwealth.

The powers of the Commission are set out in s. 18 which reads as follows:

(1) The Commission has power to do all things that are necessary or convenient to be done for or in connexion with the performance of its functions.

(2) Without limiting the generality of the last preceding sub-section, the Commission has power -

(a) to purchase land, and to purchase or construct buildings, for use in carrying on the operations of the Commission, and to dispose of land or buildings owned by the Commission;

(b) to take on lease land or buildings for use in carrying on the operations of the Commission, and to dispose of any such lease;

(c) to purchase or take on hire plant, machinery, equipment, or other goods necessary for carrying on the operations of the Commission and to dispose of any plant, machinery, equipment, or other goods owned by the Commission;

(f) to do anything incidental to any of its functions or powers.

By s. 26 it is provided that the moneys of the Commission shall be applied only in making the payments specified in that section; for present purposes it is enough to say that the moneys of the Commission could not be applied in making payments for purposes which were not authorized by the Act.

I cannot regard the words of s. 8 (2) as a mere empty formula. Shares are of course personal property. Section 8 (2) in plain terms endowed the Commission with the capacity to acquire and hold shares. The provisions of s. 18 (1) give the Commission power to exercise that capacity and to acquire and hold shares if that is necessary or convenient to be done for or in connexion with the performance of its functions. The fact that s. 18 (2) expressly empowers the Commission to purchase land, machinery, equipment and other goods, but not shares, does not in my opinion require it to be inferred that the Commission lacks the power to acquire shares. It is expressly provided that s. 18 (2) shall not limit the generality of s. 18 (1), and the provisions of that sub-section are wide enough to enable the Commission to take up shares. The acquisition of shares in a company could in appropriate circumstances be something necessary or convenient to be done to encourage that company to undertake exploration for, and mining and treatment of, uranium, for one of the purposes specified in s. 17 (4). It is therefore in my opinion impossible to maintain that under no conceivable circumstances is the Commission unable to take up shares in a company. The first proposition advanced by Kathleen Investments cannot in my opinion be maintained.

It follows from what I have said that the Commission has not an unfettered power to take up shares in any company no matter what the circumstances. Although no limitation is expressed in s. 8 (2), that provision has to be read in the context provided by the Act as a whole, and it cannot be doubted that the Commission can use the capacity with which it is endowed by that sub-section only for the purpose of carrying out the functions which the Act casts upon it. Similarly the powers conferred by s. 18 are to be exercised only so far as is necessary for or in connexion with the performance of its functions. The limitation effected by s. 17 (4) is important - it prevents the Act, and the Commission, from going beyond constitutional power. If the Commission acquired shares in a company for a purpose which had no connexion with the functions defined by s. 17, its action would be unconstitutional as well as unauthorized. However the facts alleged in the statement of claim do not show that the acceptance by the Commission of shares in MKU was not necessary or convenient to be done for or in connexion with the performance of any of the functions prescribed by s. 17. It may be accepted that the objects of MKU, which are framed with the usual width, would enable that company to engage in a business which had nothing to do with the exploration for, or the mining and treatment of, uranium. Further, the business of MKU, even if limited to the exploration for, and the mining and treatment of, uranium, might have no connexion with any of the purposes indicated in s. 17 (4). It is therefore possible that the acceptance of the shares by the Commission had nothing to do with the performance of the functions to which it is bound to confine itself. But whether that was in fact so depends not on the activities in which MKU might theoretically engage, but on all the circumstances of the case. And as to those circumstances the statement of claim is silent. It does not allege any facts that show that the application by the Commission to take these shares in MKU, or the agreement made by the Commission for the allotment to it of the shares, was beyond the powers of the Commission, or that the allotment itself was for any reason invalid. For these reasons the demurrers must be allowed.

It then becomes unnecessary to decide whether, if it had been beyond the power of the Commission to acquire the shares, the allotment, once made, should nevertheless be treated as valid. I must say, however, that whatever may be the position of a company which goes beyond the limits of its power and acquires shares in another company, I find it difficult to accept that if a corporation which is established for public purposes exceeds its constitutional functions by taking up an allotment of shares, the allotment may nevertheless be treated as valid.

The conclusion that I have expressed is enough to dispose of the demurrers, but in order to decide whether the power of amendment, recognized by O. 26, r. 13, should be exercised in favour of Kathleen Investments, it is necessary to consider the further question whether Kathleen Investments had a sufficient interest to enable it to bring these proceedings. Clearly in my opinion it did. The allotment of the shares directly affected the position of Kathleen Investments as a shareholder in MKU. It resulted in the Commission acquiring about 41 per cent of the voting power of MKU and thus reducing the effective voting power of Kathleen Investments. It is no answer to say that the shares taken up by the Commission might validly have been allotted to someone else, because that did not in fact occur. A shareholder has an individual right to have the register rectified under s. 155 of the Companies Act, 1961 Q., as amended, and corresponding legislation: see Grant v. John Grant & Sons Pty. Ltd. [3] ; Ngurli Ltd. v. McCann [4] . It is not necessary to consider whether in the present proceedings this Court would have power to make such an order. But if it be assumed that the only court competent to rectify the register of MKU is the Supreme Court of Queensland, it would be open to this Court to make a declaration that Kathleen Investments was entitled to rectification, and if such a declaration were made it would be the duty of MKU to rectify its register. If it did not do so the Supreme Court would no doubt order rectification: cf. Ex parte V.G. Haulage Services Pty. Ltd.; Re Industrial Commission N.S.W. [5] .

1. (1950) 82 C.L.R. 1, at pp. 31-32, 51. 2. (1953) 90 C.L.R. 425, at p. 447. 3. [1972] 2 N.S.W.L.R. 81, at p. 88.

Since Kathleen Investments had a sufficient interest to bring these proceedings it seems to me that it is appropriate to give it leave to amend the statement of claim should it so be advised. If there is a real issue as to whether the Commission in fact exceeded its powers by taking up the shares, it is right to allow Kathleen Investments to litigate it.

For these reasons I would allow the demurrers but would give the plaintiff leave to amend the statement of claim as it may be advised.

The plaintiff is a shareholder in Mary Kathleen Uranium Ltd. ("MKU"); before December 1974 its shareholding of almost two million fully paid ordinary shares of 25 cents each represented some 35 per cent of MKU's issued capital, which then consisted of over five and a half million of such shares. In December 1974 MKU allotted to the Australian Atomic Energy Commission almost thirty-one million shares of 25 cents each in its capital, paid to 10 cents, thereby increasing its issued capital manyfold and at the same time reducing very substantially the plaintiff's percentage shareholding in MKU.

The plaintiff by its statement of claim asserts that the Commission's application for those shares, the making by it of an agreement with MKU for their allotment and the subsequent allotment were each beyond the Commission's powers and void accordingly. It seeks a declaration to that effect, an order for rectification of MKU's register and other relief.

The defendants, the Commission and MKU, have each demurred to the statement of claim. Although the terms of these demurrers differ the points of law which were in fact relied upon do not; their general character sufficiently emerges from MKU's demurrer; it alleges that the statement of claim discloses no cause of action and then proceeds with a statement of the following grounds:

(a) that the agreement and the application for the taking up of the said shares were within the powers of the firstnamed defendant or alternatively within the powers of the Commonwealth of Australia on whose behalf the firstnamed defendant acts;

(b) that the statement of claim does not allege any fact which gives the plaintiff standing in law to obtain the declaration claimed in par. 1 of the claim for relief or the order claimed by par. 2 thereof;

(c) that the statement of claim does not allege any fact which discloses that the said shares were invalidly allotted or issued by the secondnamed defendant or that the second-named defendant ought or ought to be directed to rectify its register of members by removing the name of the firstnamed defendant.

The first of these grounds is a positive assertion that what was done by the Commission was within its powers or those of the Commonwealth; the second puts in issue the plaintiff's standing; the third attacks the pleading as disclosing no defect in the allotment and no cause for rectification of MKU's register. I shall deal first with the Commission's power and then with locus standi and in the course of doing so will incidentally deal with the relevant aspects of the third ground.

The powers of the Commission stem from the Atomic Energy Act 1953-1973. That Act contains only five provisions which might be thought relevantly to bear upon the Commission's power (ss. 8 (2), 17 (1) (a), 17 (4) (a), 18 and 26 (1) (a)). Their interpretation much depends upon context.

Section 8 of the Act, by sub-s. (1), constitutes a Commission, to be known as the Australian Atomic Energy Commission. Sub-section (2) is in the following terms:

(2) The Commission shall be a body corporate with perpetual succession and a common seal, and shall be capable of acquiring, holding and disposing of real and personal property and of suing and being sued in its corporate name.

For the plaintiff, it was said of this provision that it could not provide any source of power upon which the Commission could relevantly rely; that it did not more than confer capacity and that in so far as it referred to the acquisition and holding of property that was to be explained as an anachronism, related to some vestigial concern with mortmain. It cannot, I think, be dismissed in quite this way; the distinction sought to be drawn between power and capacity is not, I think, an acceptable one and standing on its own, without regard to other provisions of the Act, sub-s. (2) does clearly enough confer power to acquire and hold all forms of property. Its terms have a familiar ring; the matters to which it refers, the enjoyment of perpetual succession, the possession of a common seal, the capacity to acquire, hold and dispose of property and to sue and be sued in its corporate name, were, as long ago as Lord Coke's day, regarded as attributes which, by necessary implication, were possessed by corporations - Holdsworth, History of English Law, vol. IX, p. 53; Riche v. Ashbury Railway Carriage and Iron Co. Ltd. per Blackburn J. [6] .

Provisions similar to s. 8 (2) occur in s. 16 (4) of the uniform Companies Acts of the various States, the sub-section which describes the effect of incorporation under that legislation; but the power concerning property is there restricted to the holding of land. Section 16 (4) does appear to find its origins in mortmain; it derives from English company legislation containing both a section describing the effect of registration - e.g. s. 13 of the Companies Act 1948 U.K., and, until the repeal of the various statutes of mortmain in 1960, a distinct section, s. 14 of the 1948 Act, conferring power upon companies to hold lands without licence in mortmain. It has elsewhere been observed that, although the statutes of mortmain never applied to other than English land, as was shown in Whicker v. Hume [7] , they appear nevertheless to have infected Australian company legislation - see generally notes in Australian Law Journal, vols. 28 and 29, pp. 606 and 110 respectively. However the reference in s. 8 (2) of the Atomic Energy Act not only to real property but also to personal property, never the subject of the mortmain statutes, casts doubt upon the suggestion that its origin lies in some concern lest aspects of mortmain should apply.

1. (1858) 7 H.L.C. 124, at p. 151 [11 E.R. 50, at p. 61].

The numerous Commonwealth Acts creating statutory corporations frequently, but not invariably, contain provisions similar to s. 8 (2), but the relatively common form of such provisions does not appear to cast any fresh light upon the interpretation of s. 8 (2). Despite their common occurrence there is little reference in the authorities to the effect of such provisions as s. 8 (2). I know of none in point other than In re the Registrar-General [8] in which, in the Full Court of the New South Wales Supreme Court, both Stephen J. [9] and G. B. Simpson J. [10] spoke of a company, incorporated under companies legislation containing a provision similar to s. 8 (2), as having nevertheless no power to hold land unless to do so was incidental to or consequential upon the objects stated in its memorandum of association. Their Honours did not find it necessary in that case to examine the matter in any detail but apparently regarded the provision there in question, which, like s. 8 (2) of the Atomic Energy Act, specifically referred to a power to hold land, as, in the words of G. B. Simpson J., necessarily "limited by the memorandum of association".

1. (1900) 21 N.S.W.L.R. 225. 2. (1900) 21 N.S.W.L.R., at p. 229. 3. (1900) 21 N.S.W.L.R., at p. 230.

In the present case, whatever effect it might be appropriate to have given to s. 8 (2) were it standing alone, its operation as a grant of power to acquire and hold real and personal property, must, I think, be restricted by reference to the terms of ss. 17 and 18 of the Act. A later and more detailed examination of these sections will be necessary but for present purposes it is enough to refer to the powers which they grant, including a power to purchase and dispose of land, which powers are expressly restricted by reference to that which is necessary or convenient for the performance of the Commission's functions, those functions being in turn quite narrowly confined by the interaction of sub-ss. (1) and (4) of s. 17. In those circumstances and in that context s. 8 (2) should not, I think, be understood as conferring any power to acquire and hold property otherwise than in situations which would be authorized by the interplay of ss. 17 and 18, which are the provisions of the Act expressly concerned with the functions and powers of the Commission.

If requisite power cannot be found in s. 8 (2) it is to Div. 2 of Pt II of the Act, entitled "Functions and Powers of the Commission" and to ss. 17 and 18 within that division that one must turn. Section 17 is concerned with the "functions" of the Commission and s. 18 with its "powers". The two sections interact, the general grant of power to the Commission in s. 18 (1) being "to do all things necessary or convenient to be done for or in connexion with the performance of its functions". Just as the Commission's powers are thus restricted by reference to its functions those functions are in turn restricted by reference to the specified purposes enumerated in s. 17 (4) (a), (b); it is only for those purposes that the functions of the Commission may be performed (I can for present purposes disregard pars (c) and (d) of sub-s. (4)). The primary purpose of sub-s. (4) is, no doubt, to keep within constitutional limits of Commonwealth legislative power; its effect is to restrict quite narrowly the Commission's functions and hence its powers.

Concerned as one is with the question of the Commission's power to take up shares in MKU, the most relevant function is that described in s. 17 (1) (a):

(a) to undertake, or arrange for or encourage other authorities or persons to undertake, exploration for, and mining and treatment of, uranium and minerals found in association with uranium;

The Commission will have power to do all things necessary or convenient to be done for or in connexion with the performance of this function, but only so long as it is for one of the purposes specified in s. 17 (4).

If, with this in mind, the functions in s. 17 and the powers in s. 18 are examined in the context of the taking up of shares in MKU by the Commission a conclusion may be reached concerning the Commission's power. Only if the transaction involved in the taking up of shares in MKU was necessary or convenient for the performance of the Commission's function of encouraging the undertaking of exploration for, or the mining and treatment of, uranium, and then only if that encouragement was for one or more of the purposes specified in sub-s. (4) (such as the purpose of ensuring the provision of uranium or atomic energy for the defence of the Commonwealth or of uranium for supply by the Commonwealth to an overseas government), will it have been within the Commission's power.

The remaining provision of the Act referred to in argument, s. 26 (1) (a), neither adds to nor subtracts from the extent of the power otherwise conferred upon the Commission; it provides for the application of the moneys of the Commission only in performance of its statutory functions.

It is at this point that the inadequacy of the material upon which this Court is to resolve the question of the Commission's power becomes apparent: once the relevant reach of its power has been identified that inadequacy itself demonstrates the unsuitability of these present demurrer proceedings as a means of resolving the critical issue between the parties - whether or not the Commission has exceeded its powers. For this purpose it is enough to refer to passages from the judgment of Sir Owen Dixon in South Australia v. The Commonwealth [11] . After observing that all that a defendant's demurrer does is "to deny the legal sufficiency of the facts alleged in the pleading, that is, the sufficiency to entitle the plaintiff to a legal remedy" his Honour remarked upon the difficulties which could arise from the conjunction of the procedure of demurrer and the narrative, Judicature Act form of pleading. The use of a demurrer, his Honour said,

presupposes a pleading which is drawn so as to allege with distinctness and clearness the constituent facts of the cause of action or defence set up and which puts aside the temptation to adorn the pleading with evidentiary statements and tendentious legal conclusions. It is not going too far to say that what justifies demurrer as a means of determining a legal controversy is the supposition that the pleading will contain and contain only a statement of the material facts on which the party pleading relies for his claim or defence and not the evidence by which they are to be proved. (cf. 20, 4 (1)). When a court deals with a demurrer it should in strictness discard all statements which are no more than evidentiary and all statements involving some legal conclusion. The plaintiff's statement of claim lacks those very qualities which make procedure by demurrer a satisfactory means of resolving issues of law. It contains no statement of the material facts upon which the plaintiff relies for the contention that the acts of the Commission were ultra vires; instead it contains only "tendentious legal conclusions". If, as Sir Owen suggests, these should be discarded as mere "statements involving some legal conclusion", nothing remains of the plaintiff's statement of claim which could in any way entitle it to the relief it seeks. 1. (1962) 108 C.L.R. 130, at pp. 141-142.

I am led to say this by the form which the statement of claim takes. In it the pleader has set out at some length the relevant facts as to the issued capital from time to time of MKU, the extent of the plaintiff's own shareholding and that of the Commission and the voting rights conferred by the holding of shares, but no facts are pleaded which in any way bear upon the question of the Commission's powers, either generally or as they may in particular relate to the subscription for shares in MKU: instead there are only bare assertions that the Commission has acted beyond power.

If the Atomic Energy Act specifically forbad the subscription of shares by the Commission or even if, not going that far, it nevertheless conferred powers upon the Commission in such a restricted form as to make it clear from a reading of the Act that no subscription for shares in MKU could in any circumstances be within power, the issue concerning the Commission's power might be capable of being determined in these proceedings and on the present pleadings.

The Act, however, does neither of these things. It contains no specific prohibition nor are the terms of s. 17(1)(a), limited though they be by s. 17 (4) and s. 18, such as in my view to foreclose the possibility of an intra vires subscription by the Commission of shares in MKU. No doubt one might wish for more explicit words than those to be found in s. 17 (1) (a). It must also be recognized that the objects clause of MKU (if, indeed, it may be consulted, the company's memorandum of association having been, by consent, tendered during argument) is in no way confined to the mining of uranium; on the contrary it is in the usual very wide terms and makes no mention of uranium, which is nowhere referred to save in the company's name. Moreover a company may by special resolution at any time alter its objects.

However I do not regard these matters as necessarily precluding the Commission, in all circumstances, from lawfully subscribing for shares in MKU as a means of encouraging it, within the meaning of s. 17 (1) (a), to mine for uranium. If, for example, it was a term of some agreement, whereby MKU had agreed with the Commission to mine a specific uranium ore body, that the Commission should provide the necessary working capital by way of a subscription of shares in MKU, I would have thought that the taking up of such shares by the Commission would then be within power.

However, in the present case, the plaintiff's bald assertion that what the Commission has done is beyond power is inadequate to show any entitlement to relief such as it claims. It is not in a position to rely upon the provisions of the Atomic Energy Act as themselves demonstrating that the pleaded actions of the Commission are beyond power. It should instead have pleaded facts which would, if proved, have shown the want of power which it asserts.

It may well be, of course, that were the facts known the plaintiff's assertions might prove to be correct. However this may be, the statement of claim in its present form alleges no facts the establishing of which would show a cause of action based upon any want of power on the part of the Commission. Accordingly the demurrers must succeed, the statement of claim disclosing no cause of action. This does not go upon the merits of the case but simply upon the inadequacy of the plaintiff's case as pleaded.

Before coming to the form of order which should in these circumstances be made I turn to the second substantial ground of demurrer, that the plaintiff lacks standing to claim the relief it seeks by way of declaration and an order for rectification of the register.

The standing of the plaintiff is challenged essentially upon the ground that this is not a case of an allotment by MKU said to be ultra vires its powers or those of its directors but rather an attack upon the validity of acts of the Commission, a fellow shareholder in MKU, by which it acquired its shareholding in MKU. It is said that the plaintiff has no standing to challenge these acts of the Commission and accordingly cannot obtain any declaration as to the wrongfulness of those acts or any order for rectification of the register of MKU.

The standing of the plaintiff to obtain a declaration such as it here seeks will depend upon it possessing a sufficient or substantial interest in the subject matter with which its proceedings are concerned - see the authorities to which I referred in Green v. Daniels [12] . That it does possess such an interest emerges, I think, from a consideration of its relationship to the allegedly ultra vires acts of the Commission. That relationship may be viewed from two angles: first the plaintiff is a shareholder in a company which has allotted to a statutory corporation a very large parcel of shares, far outnumbering its own shareholding which before that allotment represented a significant proportion of the company's issued capital; secondly, the plaintiff is a member of the public complaining of a public wrong, an excess of power consisting of the ultra vires acts of a statutory corporation involving large expenditure, that public wrong affecting it in a special sense since by that expenditure the corporation has become a major shareholder in a company in which the plaintiff's investment had previously represented if not a majority interest at least a very significant one.

Whatever doubts there may be concerning the plaintiff's locus standi if considered from this second viewpoint, doubts such as were discussed by my brother Jacobs, when sitting in Equity in the New South Wales Supreme Court, in Helicopter Utilities Pty. Ltd. v. Australian National Airlines Commission [13] , I would regard the plaintiff's standing as sufficiently established, in the circumstances of this case, by reference to its position as a shareholder in MKU. If, as it contends, the acts of the Commission in applying for, agreeing to take and accepting the allotment to it of the MKU shares were beyond the powers of the Commission, the consequences for the plaintiff will be both direct and serious. It will find itself a member of a company of which a purported major shareholder has attained that position as a result of a contract into which it had no capacity to enter.

There appears to be little authority concerning the consequence of the allotment of shares to a corporation which lacks capacity to hold such shares. Since it is only for the purpose of considering locus standi that, at this stage and in these present proceedings, I regard this question as at all relevant, it does not at present call for that detailed consideration which it might otherwise merit. However upon general principles the position would seem to be that the purported contract to take the shares will be a nullity, the purported shareholder being in a position to disclaim its character as shareholder and demand return of the capital it has subscribed. That the contract which would otherwise have resulted from offer and acceptance will be a nullity will be because there was no valid offer capable of acceptance by MKU. The position will be that described by Latham C.J. when, in Commonwealth Homes and Investment Co. Ltd. v. Smith [14] he spoke, in this context, of a void contract as "strictly a contradiction in terms, but the phrase is conveniently used to describe cases where what appears to be a contract is not really a contract and never has been a contract". The consequence of a purported offer made ultra vires the objects of a company is that no contract can result, the contract is "wholly void" - see Lord Cairns in Ashbury Railway Carriage and Iron Co. Ltd. v. Riche [15] , citing the judgment of Blackburn J. in the Court of Exchequer Chamber - and no different consequence will flow from an offer made by a statutory corporation which offer is ultra vires in the sense that it is made in excess of the extent of statutory power which the legislation has conferred upon that corporation.

1. (1937) 59 C.L.R. 443, at p. 455. 2. (1875) L.R. 7 H.L. 653, at p. 673.

A purported allotment of shares made in the absence of any valid agreement by the purported allottee will be ineffective and will not constitute the purported allottee a member - Gower, Modern Company Law, 3rd ed. (1969), p. 377. The purported allottee can in these circumstances recover from the company the moneys paid to it in an action for money had and received (per Dixon J. in the Commonwealth Homes Case [16] ). Since the allottee has never agreed to become a member of the company, he will be no member, despite his presence on the register - see s. 16 (5) of the uniform Companies Acts. If the plaintiff's contention that the Commission has acted ultra vires in connexion with the MKU shares be correct, it seems to follow that the plaintiff is in the position of being a member of a company, MKU, in which a purported major shareholder, which has made a massive contribution to its issued capital and has no doubt exercised a corresponding influence in the formation of its policy, may at any time elect to, or be required by others (perhaps by the Minister who is, by the Atomic Energy Act - see esp. s. 19 - given very great power over the Commission) to recover its capital contribution and wholly disassociate itself from MKU.

A number of arguments were urged on behalf of the defendants as to why, even if the Commission's contract to take shares in MKU were void, the consequences which I have described above would nevertheless not follow. For the purposes of determining, on the present demurrer, the plaintiff's standing to sue it will be enough to say that I am not satisfied as to the correctness of these arguments. There is, I think, no question here of contractual rights merging in a conveyance, should that doctrine indeed have any application to a void contract; the allotment of shares is not a matter of any conveyance - see Ford, Principles of Company Law (1974), p. 224 and cases there cited. Nor, I think, is the maxim quod fieri non debet factum valet applicable where a transaction is void for want of capacity on the part of one of the parties to it - see generally Broom's Legal Maxims, 9th ed. (1924), pp. 125-6 and the cases there cited, suggesting that the maxim reflects a doctrine of convenience inapplicable where the initial transaction is void as a nullity. Again, I would not accept the distinction, in the case of ultra vires contracts, between executory and executed contracts, a distinction adopted in a line of United States decisions; instead I would adopt what was said by Mocatta J. in Bell Houses Ltd. v. City Wall Properties Ltd. [17] , a view also inherent in the observations of Fullagar J. in In re K.L. Tractors Ltd. (In liquidation) [18] . Reliance was also placed upon two cases said to be concerned with the consequence of ultra vires acts, Ayers v. South Australian Banking Co. [19] and Batson v. London School Board [20] . Ayers' case is not, I think, authority for any general proposition that rights may be validly acquired under a contract void as ultra vires the powers of one of the contracting parties. It concerned a chartered corporation and it was upon this fact and its consequences that their Lordships appear to have concentrated. Having referred to the difficulty of determining whether what had occurred in fact fell within the terms of the relevant clause of the bank's charter, their Lordships then referred to another difficulty which revealed their approach to the question as one concerned not with the ordinary concept of a joint stock company's ultra vires acts but rather with the consequences of a chartered corporation failing to observe the terms of its charter. They said [21] : "There may be also question whether, under any circumstances, the effect of violating such a provision is more than this, that the Crown may take advantage of it as a forfeiture of the Charter". In the event their Lordships found it unnecessary to decide this point; counsel for the appellant had "admitted that he could find no authority for the proposition, that any violation of such a condition of a Charter would prevent the property in goods passing to the person to whom an instrument otherwise valid professed to pass it, and their Lordships are of opinion, that whatever other effect the violation of such a condition may have, it has not the effect of preventing the property in the goods passing, or of preventing an action of Trover being maintained if there is a wrongful conversion". Nowhere in the judgment is there any reference to the doctrine of ultra vires. It was counsel for the appellant who had sought to apply to this chartered corporation the ultra vires doctrine appropriate to joint stock companies, citing for that purpose National Bank of Australasia v. Cherry [22] decided the previous year by a Board two members of which were also parties to the advice in Ayers' Case [19] . In Ayers' Case respondent's counsel were not called on, perhaps because their Lordships felt no difficulty in disposing of the appellant's submission in the light of the peculiar nature of the bank as a chartered corporation, to which the doctrine of ultra vires has no application - see Gower op. cit., at pp. 83-84, and the more detailed and somewhat different treatment of the matter in Street, Doctrine of Ultra Vires (1930), pp. 18-22. This impression is supported not only by their Lordships' repeated reference to the nature of the bank as a chartered corporation but also by the contrast between their vigorous repudiation in Ayers' Case [23] , of the suggestion that a transaction in breach of a clause of the charter might not be effective to pass property to the bank and the Board's acceptance of a contrary view only the previous year in National Bank of Australasia v. Cherry. In the latter case the bank was no chartered corporation, it had been incorporated by colonial Act as a joint stock company, and their Lordships there accepted with equanimity that the consequence of its limited powers, conferred in terms very similar to the South Australian Banking Co.'s charter, was that it was "ultra vires the bank to take" particular types of securities [24] , the bankers accordingly being "unable to have enforced the security which was given to them" [25] and the customer being in a position to "have said to the Bank "You may proceed against me and recover your debt but the deposit of my deeds is invalid. It was ultra vires the Bank to obtain such a security. I demur, therefore, to your interfering with my estates, and I require you to deliver up these deeds, which you had no right under your Act to take from me" " [26] .

1. [1966] 1 Q.B. 207, at pp. 225-226. 2. (1960) 106 C.L.R. 318, at p. 337. 3. (1871) L.R. 3 P.C. 548. 4. (1903) 20 T.L.R. 22; 67 J.P. 457. 5. (1871) L.R. 3 P.C., at p. 559. 6. (1870) L.R. 3 P.C. 299. 7. (1871) L.R. 3 P.C. 548. 8. (1871) L.R. 3 P.C., at p. 559. 9. (1870) L.R. 3 P.C., at p. 307. 10. (1870) L.R. 3 P.C., at p. 308. 11. (1870) L.R. 3 P.C., at p. 309.

Ayers' Case must, I think, be regarded as confined to the very special case of chartered corporations and as no authority in relation to the general doctrine of ultra vires contracts and their consequences. In these circumstances Batson's Case [27] cannot assist the defendants; in so far as that decision was based on Ayers' Case, which Channell J. regarded as an application of the doctrine of quod fieri, I wouldwith respect regard it as of doubtful authority.

The situation which may affect MKU and in turn its shareholders, including the plaintiff, in relation to the Commission's very large investment in its capital, should the Commission prove to have acted ultra vires, serves clearly to confer standing upon the plaintiff to have determined whether in fact such be the position. To allow the status quo to continue with the matter unresolved, the Commission continuing to exercise its influence and being regarded as entitled to all the rights of a member of MKU must very closely affect the plaintiff, itself a member of MKU. Moreover, if the Commission is not in truth a member of MKU the contract which, by virtue of s. 33 (1) of the uniform Companies Acts, would otherwise exist as between the plaintiff and the Commission, constituted by the memorandum and articles of association of MKU (Rayfield v. Hands [28] ) will not exist. This provides a further interest on the plaintiff's part in having determined whether the Commission is in truth a member of MKU.

The foregoing considerations satisfy me of the quite direct and substantial interest which the plaintiff possesses in the determination of the question whether or not the Commission has acted ultra vires, an interest which affords it standing to seek a declaration such as it presently claims.

The plaintiff will likewise be entitled to have rectified the register of members of MKU if in fact the Commission ought not to appear upon that register as a member of MKU. As Fullagar J. said in Grant v. John Grant & Sons Pty. Ltd. [29] of a person claiming rectification, he

must show that he has some equity which the court will protect. If he is a shareholder, then prima facie he shows such an equity if he establishes that a name is wrongly included in or omitted from the register of his company. Some definite reason must be shown, I would think, for refusing rectification before rectification will be refused. Of course at the trial circumstances may be shown to exist, such as those which Fullagar J. there went on to consider, which might lead the Court in its discretion to refuse the plaintiff an order for rectification or, for that matter, any declaratory relief; but with such questions of discretion we are not presently concerned. 1. (1950) 82 C.L.R. 1, at p. 51.

If at the trial it emerges that there is any such difficulty as counsel for the plaintiff envisages concerning this Court's power to order rectification, a difficulty said to arise from the reference in s. 155 of the uniform Companies Acts to "the Court", defined in those Acts as the Supreme Court of a State, this may no doubt be overcome, as the Chief Justice suggested in argument, by an appropriate declaration to which effect could be given in a subsequent application in a Supreme Court. In any event I do not regard it as clear that any such difficulty arises. The jurisdiction to rectify the register is not confined to the statutory power (Burns v. Siemens Bros. Dynamo Works Ltd. [30] ) which is merely a procedural provision (In re New Pinnacle Group Silver Mining Co. N.L. [31] ). It may be that the apprehended difficulty may be disposed of on lines such as these.

1. [1919] 1 Ch. 225. 2. (1897) 18 N.S.W.L.R. (Eq.) 168, at p. 169.

The form of order which my conclusions call for is, I think, one which would, while allowing the defendants' demurrers upon the ground that the statement of claim discloses no entitlement to the relief sought, afford to the plaintiff an opportunity of making application for leave to so amend its pleadings as to overcome, if it can, the defects of pleading to which I have already referred - see Parker, Practice In Equity (N.S.W.), 2nd ed. (1949), p. 210 (notes to r. 105) and the High Court Rules, O. 26, rr. 12-14, 17. The action should not be determined in the defendants' favour on these proceedings as a result of what may be no more than defective pleading and this possibly at the expense of substantial justice; instead there should be an opportunity to have determined the real question at issue between the parties.

I would accordingly allow the defendants' demurrers upon the above ground but would also entertain an application by the plaintiff for leave suitably to amend its statement of claim.

In my opinion the plaintiff's case for a declaration that the Commission's application for 30,764,142 shares at 25 cents each paid to 10 cents in the capital of Mary Kathleen Uranium Ltd. ("MKU"), the agreement for allotment and the allotment of those shares to the Commission were beyond its powers and invalid fails on the ground that the plaintiff has not shown that the transaction as pleaded in the statement of claim was outside the powers conferred upon the Commission by the Atomic Energy Act 1953-1973.

The Commission was established by s. 8 (1) of the Act as a body corporate. Section 17 (1) (a) provides that -

Subject to this Act, the functions of the Commission are -

(a) to undertake, or arrange for or encourage other authorities or persons to undertake, exploration for, and mining and treatment of, uranium and minerals found in association with uranium;

The functions of the Commission as expressed in s. 17 (1) (a) are qualified by s. 17 (4) which provides that the functions of the Commission shall be performed only for the purposes mentioned in the sub-section. The sub-section is designed to ensure that the statutory functions and powers of the Commission do not trespass beyond the boundaries of Commonwealth constitutional power. There is no occasion to examine in detail the particular provisions of s. 17 (4), for the plaintiff makes no allegation of fact upon which it could be suggested that by entering into the impugned transaction the Commission was exercising its functions for purposes outside the sub-section.

Section 17 (1) (a) has to be read in association with s. 18 which sets out the power of the Commission. Section 18 (1) provides: "The Commission has power to do all things that are necessary or convenient to be done for or in connexion with the performance of its functions."

The transaction pleaded in the statement of claim is that in or about the month of December 1974 the Commission applied to MKU for the allotment of the shares in question, that the Commission entered into an agreement with MKU for the allotment of the shares and that the shares were allotted. The pleading tells us no more and no less than that. No attempt has been made to plead the contents of the agreement. Nor, for that matter, does the pleading condescend to inform us whether MKU is engaged in the exploration, mining or treatment of uranium or minerals associated with uranium.

The capacity of the Commission to acquire and hold shares in a company in the exercise of its powers and functions is, if there were any reason to doubt it, put beyond doubt by s. 8 (2) which provides that the Commission "shall be capable of acquiring, holding and disposing of real and personal property".

The issue then is whether the Court can conclude as a matter of law that the transaction as pleaded goes beyond that which is "necessary or convenient to be done for or in connexion with the performance" by the Commission "of its functions", the relevant function being that of encouraging others to undertake exploration for, and mining of, uranium within the meaning of s. 17 (1) (a).

Encouragement of others to undertake exploration for, and mining of, uranium can be given in various ways. It may be given by a contract which offers a sufficiently attractive financial reward to induce another to explore and mine uranium. It may be given by the provision of a loan which enables the borrower to engage in those activities on terms which it considers to be satisfactory. It may also be given by the provision of a loan and of share capital which has a like effect. And it may be given by the provision of share capital without the making of a contemporaneous loan. These are all recognized commercial methods of financing and, I would say, encouraging a person to explore for, and mine, a mineral.

Whether the transaction pleaded was one which fell within the powers of the Commission under ss. 17 (1) (a) and 18 (1) is a question which cannot be answered without the benefit of facts additional to those alleged in the statement of claim. We would need to know, for example, the details of, and the circumstances surrounding, the transaction so as to enable us to determine its purpose, whether it was to enable or to encourage MKU to explore for, or mine, uranium or some associated mineral. But the failure of the plaintiff to allege additional and essential facts has the consequence that the Court is unable to conclude that the transaction is beyond the Commission's powers. All that the plaintiff has done is to allege the existence of a transaction which, for all we know, may constitute a valid exercise of the Commission's powers. That is not enough. To succeed the plaintiff, which bears the onus, would need to aver facts from which it necessarily appears that the transaction is ultra vires, for it is not permissible on demurrer to draw inferences from the pleading which is the subject of the demurrer.

We were presented with the memorandum of association of MKU which discloses, as one might expect, that it is a company which is permitted by its objects clause to engage in exploring for, mining and treating mineral substances of all kinds. It was submitted that this circumstance necessarily carried the transaction beyond the limits of the Commission's powers, more particularly the limits arising from s. 17 (4). I disagree. Section 17 (4) (a) (i) acknowledges that the functions of the Commission under s. 17 (1) may be performed (inter alia) -

(i) uranium or atomic energy for the defence of the Commonwealth.

The Commission may by the provision of share capital encourage a company engaged in, or proposing to engage in, the mining of uranium to undertake that activity and the Commission may do this for the purpose of ensuring the provision of uranium or atomic energy for the defence of the Commonwealth. The fact that the company is authorized to mine other minerals not associated with uranium does not of itself demonstrate that the Commission's investment is not for the purpose already stated. The capacity or authority to engage in another activity is not inconsistent with the investment having been made for the stated purpose.

No doubt when the Commission subscribes for shares in a company mining uranium it will be relevant to ascertain whether the company is carrying on any other, and if so what, activities in order to determine whether the transaction falls within the Commission's function under s. 17(1)(a) and whether, in this event, the function is being performed only for the purposes stated in s. 17 (4). And even if the company is carrying on some other activity it may be possible to conclude that the investment is intra vires. But when all that is suggested is that a company exploring for, or mining, uranium is authorized to carry on some other activity, this circumstance in itself is not enough to take the investment outside the powers of the Commission under s. 17 (1) (a) and s. 17 (4). In what I have said in this respect I have assumed that MKU explores for, or mines, uranium, this assumption not having been negatived by the statement of claim.

In the result I would allow the demurrers and I would give leave to the plaintiff to amend its statement of claim to plead additional facts entitling it to the relief claimed if it be so advised. I do so without reaching any conclusion on the plaintiff's locus standi to seek the relief claimed.

The statement of claim, to which the defendants demur, is drawn in such a way as to invite an issue on a question of law only. After preliminary paragraphs it alleges that the first defendant applied for the allotment to it of shares in the second defendant and that the application was beyond the powers of the first defendant and was void. It then alleges the agreement of the defendants for the allotment of the shares so applied for and the allotment of those shares and it alleges that the agreement and the allotment were respectively void.

The first defendant being constituted by a public statute, the issue of law thus raised was whether the application for and issue to the first defendant of shares in the company were in all circumstances ultra vires the statute. In support of that contention two submissions were made on behalf of the plaintiff. It was first submitted that the first defendant was wholly incapable of holding shares in any limited company. It was secondly submitted that, even if the first defendant was in law capable of holding shares in a limited company, it had no power to hold shares in a company which has the multitude of objects expressed in the memorandum of association of the second defendant.

In my opinion neither submission can be sustained. Section 8 (2) of the Atomic Energy Act 1953 Cth provides that the first defendant shall be capable of acquiring, holding and disposing of personal property and there is no reason to exclude shares in a limited company from these words. Section 18 (1) provides that the first defendant has power to do all things that are necessary or convenient to be done for or in connexion with the performance of its functions. Those functions are set out in s. 17. The function expressed in s. 17 (1) (a) is as follows:

to undertake, or arrange for or encourage other authorities or persons to undertake, exploration for, and mining and treatment of uranium and minerals found in association with uranium A power to take up and hold shares in a limited company may be for or in connexion with the performance of this function. The objects of the second defendant do not appear in the statement of claim. In the absence thereof from the pleading it could not be established that the objects of the second defendant do not encompass exploration for, and mining and treatment of, uranium and minerals found in association with uranium. But in fact the memorandum of association has been produced and treated on the hearing of the demurrer as incorporated into the statement of claim. The first object stated is as follows:

(1) To purchase take on license, lease or otherwise acquire any Mines, Mining Rights or metalliferous lands in the State of Queensland or elsewhere and any interest therein and to prospect, explore, work exercise and turn to account the same or any other metalliferous land in the said State or elsewhere, to crush, win, get, quarry, smelt, calcine, refine, dress, amalgamate, manipulate, and prepare for market, ore, metal, and mineral substances of all kinds, and to carry on any other metallurgical operations which may seem conducive to any of the Company's objects.

This object encompasses exploration for, and mining and treatment of, uranium and minerals found in association with uranium. The objects of the second defendant encompass much more than exploration for, and mining and treatment of, uranium and minerals found in association with uranium; and that is the basis of the plaintiff's second submission. It was submitted that the funds subscribed for the shares allotted to the first defendant might lawfully be used by the second defendant for objects which do not fall within any function of the first defendant, and that therefore the application for, and holding of, the shares by the first defendant went beyond a power exercised for and in connexion with undertaking, or arranging for or encouraging other authorities or persons to undertake, exploration for, and mining and treatment of, uranium and minerals found in association with uranium.

It is submitted that the subscription or the payment of money to take up shares in a company is only within Commonwealth powers (and hence within the powers and functions of the first defendant) if the objects of that company are limited to objects which are themselves within Commonwealth power; that since the objects of the company cannot be read down, the subscription of money to this company with objects enabling it to carry on activities outside Commonwealth power is a subscription of moneys which is not limited to Commonwealth purposes, and in particular to the functions of the first defendant under the Act, and which cannot be read down so that it is limited to such purposes and functions.

The basis of this submission is that there is applicable to such a situation the same principle as has been developed in considering whether a provision in a statute is ultra vires where the provision may operate on things outside power and as well as on things within power. But the situation is different. In the case of a statute it is a question of construction and if a legislature discloses an intention that it shall have a distributive operation that intention will be effective to preserve the validity of the provision. It does not appear to me that these principles of statutory interpretation can govern the present case. Even assuming that it is beyond Commonwealth power to hold shares in a company whose objects are all outside any conceivable purpose of the Commonwealth (assuming at the same time that there may be such a company) it does not follow that it is in all circumstances beyond Commonwealth power to subscribe for shares in a company, one or more of whose objects fall within a subject matter of Commonwealth power. Whereas in the case of a statute the legislature may disclose an intention that it should or should not have a distributive operation, in the case of a power to take up and hold shares in a company for certain functions or purposes it is not a hypothetical but an actual absence of relationship between the purported exercise of the power and the function or purpose which would need to exist.

There are not in the statement of claim any allegations of fact which would support a conclusion that in the present case the relationship did not exist at material times. There is no allegation at all on the matter because the plaintiff did no more than raise an issue of law. In these circumstances and in the absence of any application for leave to amend I would order judgment on the demurrers and consequently in the action for the defendants.

In these circumstances I do not need to determine whether the plaintiff has a standing to bring this action in its own name rather than on relation to the Attorney-General. I am by no means satisfied that it has. If an issue of shares in a company to a corporation which has no power to hold the shares be void for all purposes and at all times then it may be that the standing of the plaintiff as a shareholder in the company would entitle it to seek a rectification of the register in the proper court. But if the corporation has a capacity to hold shares and lapse of time or the discretion of a court whether or not to order rectification be relevant considerations, or if, having a capacity to hold shares, the lack of power springs from the absence of a valid purpose, in which case the knowledge of the other party may be relevant (Cf. In re Introductions Ltd.; Introductions Ltd. v. National Provincial Bank Ltd. [32] ), or if such a corporation, having the capacity to hold shares but not the power within its objects or functions to hold the particular shares, can validly transfer the shares to a third party capable of holding the shares then it appears to me to be strongly arguable that the defect in the title of the corporation is a matter between it and the company, not between it and other shareholders in the company. But I do not need to express a concluded opinion on this very contentious question.

To succeed on these demurrers, the plaintiff must have stated facts which (if proved) show a cause of action (High Court Rules, O. 26, r. 1). It was necessary (although it may not have been sufficient) for the plaintiff to have alleged facts which show that the Australian Atomic Energy Commission's acquisition of shares in Mary Kathleen Uranium Ltd. ("MKU") was not "necessary or convenient to be done for or in connexion with the performance of its functions" (see s. 18 (1) of the Atomic Energy Act 1953-1973 Cth). The plaintiff has not done so. The Commission's acquisition of shares in a company could have, for example, encouraged the company or others to undertake exploration for, and mining and treatment of, uranium (a function mentioned in s. 17 (1) (a)).

1. that the Act did not permit the Commission to hold shares in any limited company.

This contention is met by s. 8 (2) of the Act, which states:

The Commission shall be capable of acquiring, holding and disposing of real and personal property

The plaintiff referred to s. 18 (2) which empowers the Commission to purchase and lease land and to purchase or hire plant machinery equipment or other goods. It argued that the absence of power to acquire shares from the specific powers in s. 18 (2) discloses a legislative intention to exclude such a power. This has no merit. Section 18 (2) expressly states that the powers are conferred without limiting the generality of the "necessary or convenient power" in s. 18 (1). The reference to personal property in s. 8 (2) clearly embraces company shares.

2. that if the Act (in particular s. 8) permitted the Commission to acquire shares in a company with objects which went beyond the limits of performance of the Commission's functions stated in s. 17 (4) the Parliament would have exceeded its legislative power.

The objects of MKU (these were dealt with on the hearing as incorporated in the statement of claim) sufficiently embrace exploration for, and mining and treatment of, uranium and minerals found in association with uranium. The objects go well beyond this. They are those of a trading corporation. In my view, the Parliament has legislative competence under the corporations power (s. 51 (20) of the Constitution) to authorize the acquisition and holding by the Commonwealth or its agent of shares in any foreign corporation or in any trading or financial corporation formed within the limits of the Commonwealth. It may form or authorize the formation of trading or financial corporations. The word "formed" in s. 51 (20) does not confine Parliament to laws with respect to corporations which have been formed. Past participles are often used to apply to the future as well as the past (see Stephen J.'s observations in Mikasa (N.S.W.) Pty. Ltd. v. Festival Stores [33] ).

The Parliament also has power under s. 51 (1) of the Constitution to make laws with respect to trade and commerce with other countries and among the States. This power is very wide and extends to all matters which may effect beneficially or adversely trade with other countries or among the States (see Fullagar J., O'Sullivan v. Noarlunga Meat Ltd. [34] ; Strickland v. Rocla Concrete Pipes Ltd. [35] ). In my view, the Parliament may authorize the conduct by the Commonwealth of trade and commerce with other countries and among the States. This may be done directly through a department of the Government or through an agency such as a trading corporation. The Parliament may provide for supervision and regulation of corporations engaged in such trade and commerce. It may also provide for participation by the Commonwealth as a shareholder or otherwise in such corporations.

1. (1954) 92 C.L.R. 565. 2. (1971) 124 C.L.R. 468.

Other legislative powers may also be relevant in considering whether there is constitutional power to authorize the acquisition. The lack of power has not been demonstrated. There is ample constitutional power to enable the Commonwealth to engage directly and indirectly in the exploitation of Australia's mineral and energy resources.

3. that the Commission could not lawfully acquire or hold shares in a company whose objects went beyond the limits on performance of the Commission's functions stated in s. 17 (4).

This contention relies on the construction of the Act and treats s. 17 (4) and s. 18 as controlling s. 8. Even if this construction is assumed to be correct, the facts stated do not show that the acquisition of shares in MKU by the Commission was not "necessary or convenient to be done for or in connexion with the performance of its functions". The acquisition of shares in order to encourage exploration for mining or treatment of uranium (a function in s. 17 (1) (a)) may also encourage other activities. This does not take the Commission outside s. 17.

The plaintiff has not established any of its contentions. The facts stated do not show that the Commission has acted unlawfully.

The plaintiff has standing to bring the proceedings. This arises at least from its shareholding in MKU.

The demurrers should be allowed. The plaintiff should be allowed leave to amend the statement of claim. If it does not amend, the action should be dismissed.