Kawasaki (Australia) Pty Ltd (ACN 000 748 621) v ARC Strang Pty Ltd

BACKGROUND 10 On 9 June 2006 Toll (FHL), in accordance with cl 5.1(a) of the Shareholders Agreement gave notice to the directors of PrixCar of its desire to transfer the 725,283 shares it held in PrixCar. As a result of the giving of that notice the directors of PrixCar and Toll (FHL) were required to establish the fair value for the shares within 28 days of the date of the giving of the notice. 11 By letter dated 14 July 2006 (apparently received on 17 July 2006) ARC Strang gave notice to the directors of PrixCar of its desire to transfer the 362,642 shares it held in PrixCar. Accordingly, the directors of PrixCar and ARC Strang were also required to establish the fair value for those shares within 28 days of the date of the giving of the notice. 12 Issues arose between the parties as to the determination of the fair value of the shares in PrixCar held by Toll (FHL) and ARC Strang. In short, the non‑Toll directors in PrixCar determined the fair value of the shares held by Toll (FHL) as $11,665,000 whereas Toll (FHL) considered the fair value of the shares to be not less than $23,000,000 which equated to a price per share of $31.71. ARC Strang considered Toll (FHL)'s fair value to be conservative and it was prepared to participate in a negotiation between Toll (FHL) and the directors in relation to the determination of the fair value of its shares in PrixCar. 13 On 11 August 2006, the directors of PrixCar notified ARC Strang that they had determined the fair value of its shares in PrixCar to be $5,833,095. 14 On 23 November 2006, ARC Strang notified the directors of PrixCar that it was withdrawing its transfer notice given in its letter dated 14 July 2006. 15 In December 2006 Mr Robert Strang had discussions with Kawasaki and Toll interests about a proposal that the shares in ARC Strang be sold. Mr Robert Strang made an offer to Toll Holdings on 15 December 2006 to sell it the shares in ARC Strang for $12.5 million. 16 On 14 December 2006 Mr Alan Miles, the General Manager of Kawasaki and Chairman of directors of PrixCar, met with Mr Robert Strang at his request. Mr Robert Strang said that he wanted to get out of ARC Strang, sell the shares in ARC Strang and give Kawasaki the first option to purchase them because of his traditional long association with Kawasaki through Mr Yuzuru Miyachi, a director of Kawasaki. Mr Miles told Mr Robert Strang he should discuss the proposal with Mr Miyachi. At a further meeting with Mr Robert Strang on 21 December 2006, Mr Strang told Mr Miles that he had had discussions with Toll about the sale of ARC Strang but his real intention was to deal with Kawasaki and that he was confident that the pre‑emptive rights would not be triggered under the proposal. These conversations make it clear that Mr Robert Strang was not manifesting a desire on behalf of ARC Strang to sell or transfer its shares in PrixCar. He did not want the pre‑emption rights in cl 5.1 of the Shareholders Agreement triggered. 17 After the meetings between Mr Miles and Mr Robert Strang all further discussions and negotiations between Mr Robert Strang and Kawasaki and Toll proceeded on the basis that the shareholders in ARC Strang were proposing to sell their shares in ARC Strang. 18 On 18 December 2006, Mr Robert Strang telephoned Mr Miyachi and told him that he wanted to sell his company and give Kawasaki first priority in respect of such sale. Mr Robert Strang indicated to Mr Miyachi a price of $11 million. 19 The directors of Kawasaki were concerned whether the purchase of the shares in ARC Strang would circumvent the pre‑emptive provisions of cl 5.1 of the Shareholders Agreement. Mr Robert Strang told Mr Miyachi that the understanding that he had obtained from his lawyer was that the sale of the shares in ARC Strang would not trigger the pre‑emptive provisions in cl 5.1 of the Shareholders Agreement. In an email sent to Mr Miyachi on 20 December 2006 Mr Robert Strang indicated the Strang Group would be selling the shares in ARC Strang. 20 On 22 December 2006, Kawasaki wrote to Mr Robert and Mrs Elizabeth Strang confirming that Kawasaki wished to acquire all the issued shares in ARC Strang for $11 million. In the letter Kawasaki set out a number of conditions relating to the proposed transaction including the payment of a preliminary refundable deposit of $250,000 to be held by ARC Strang's lawyers on trust for Kawasaki and paid to the vendors on completion of the purchase of the shares in ARC Strang. That deposit was paid on 28 December 2006. Kawasaki was proceeding with the transaction on the basis that a sale of the shares in ARC Strang would not trigger the pre‑emption provisions in cl 5.1 of the Shareholders Agreement. It was not prepared to purchase the shares in ARC Strang unless it was certain that the purchase would not attract the operation of those pre‑emption provisions. 21 Early in January 2007, Kawasaki became aware that the PrixCar shares registered in the name of ARC Strang were only legally held by it as trustee and that the beneficial owner of the shares was The A.R.C. Strang Family Trust. Kawasaki and its solicitors were concerned that the transfer of the shares from the beneficial owner to ARC Strang in its own right might activate the pre‑emption provisions of cl 5.1 of the Shareholders Agreement which would defeat Kawasaki's reason for purchasing the shares in ARC Strang. 22 On 11 January 2007, ARC Strang wrote to the secretary of PrixCar in the following terms: "Proposed Transfer of Shares We propose to transfer the 362,642 shares held in PrixCar Services Pty Ltd held by A.R.C. Strang Pty Ltd to a company to be known as A.R.C. Strang Australia Pty Ltd (currently known as Wahnz Pty Ltd) ACN 123 236 519. This company will be a wholly‑owned subsidiary of A.R.C. Strang Pty Ltd. Please confirm that, pursuant to clause 5.2(b) of the Shareholders Agreement dated 31 March 1995, a decision of the directors has been made approving this transaction." This letter did not refer to the proposed agreement that the shareholders in ARC Strang had reached with Kawasaki to sell their shares in ARC Strang to Kawasaki. 23 The directors of Kawasaki were not prepared to complete the proposed acquisition of shares in ARC Strang until it was certain that such acquisition could be effected without giving rise to a triggering of the pre‑emption provisions in cl 5.1 of the Shareholders Agreement. 24 On the following day, 12 January 2007, PrixCar sent to each of its directors a copy of ARC Strang's letter of 11 January 2007 and sought their prompt response to the proposed transfer. 25 On 29 January 2007, the two Toll (FHL) directors on the board of PrixCar approved the transfer proposed by ARC Strang on the basis that it was a transaction which fell within cl 5.2(b) of the Shareholders Agreement. 26 A meeting of the board of directors of Kawasaki was held on 1 February 2007 at which the managing director advised the board that: "…Strang had offered to sell ARC Strang Pty Ltd, the registered owner of its PrixCar shares to Kawasaki (Australia) and that the offer had been accepted conditional upon Kawasaki (Australia) completing due diligence investigations which were satisfactory to it and the board of directors of Kawasaki approving the proposed transaction" Around this time there was concern within Kawasaki that full disclosure of ARC Strang's proposal had not been made to Toll. Mr Robert Strang had agreed to make such full disclosure. 27 On the evening of 7 February 2007 Mr Robert Strang telephoned Mr Miles and told him that Mr Stephen Stanley from Toll Holdings had called him offering to purchase the shares in ARC Strang for $2 million more than Kawasaki's proposed price. Mr Robert Strang said that he told Mr Stanley he was negotiating with Kawasaki and had a handshake agreement. 28 On 8 February 2007, Mr Robert Strang sent Mr Alan Miles minutes of the meeting between him and his son Mr Robert A S Strang and Mr Charles Thompson and Mr Adam Martin from Toll on 7 February. The minutes were in the following terms: "We thanked Charles and Adam for seeing us today. 1. Important to speak to Toll personally 2. ARC Strang succession planning for the family. 3. Strang's concern and review of our investment in PrixCar as no control over the dividend or direction 4. RWAS getting older / wanting to stand back 5. Strang family investments to be in companies that they can control 6. We advised that we have a handshake with Kawasaki Australia sell. Details to be finalized 7. Toll requested whether there was an opportunity to change the outcome. Strang advised that there wasn't. 8. Toll advised that the ACCC had ham strung (sic) Toll's position as they would have moved earlier. 9. We expressed our concern at the long drawn out litigation set down for direction on Friday February 9 2007. 10. Strang founded PrixCar with Kawasaki Australia and the family wanted to return the shareholding to a member of the foundation team. 11. Strang has a very exciting new project that requires all our time and a considerable amount of capital going forward and we are moving on." 29 Mr Strang telephoned Mr Miles on 8 February 2007 to discuss his meeting the previous day with the Toll representatives. He said that he had explained to them that the Strang Family was restructuring its business with a view to selling its investment in PrixCar. Mr Strang said he had told the Toll representatives that he had an arrangement with Kawasaki to purchase the shares in ARC Strang and they asked whether they could make a counter-offer for the shares in ARC Strang. It was after this conversation that Mr Robert Strang sent Mr Miles the minutes of the meeting with the Toll representatives. 30 On 8 February 2007, Toll (FHL) sent a letter to Mr Alan Miles, the Chairman of PrixCar in the following terms: "As you may be away, ARC Strang Pty Ltd has recently written to the directors of the Company, seeking their consent under clause 5.2(b) of the Shareholders Agreement, for the transfer of ARC Strang's shares in the company ("Sale Shares") to Wahnz ("Proposed Transfer"). Robert Strang of ARC Strang informed us yesterday, that he had entered into an agreement with Kawasaki (Australia) Pty Ltd ("K‑Line") for the sale of Wahnz to K‑Line, which would include, the Sale Shares. In circumstances where: (a) no prior approval of the directors has been given to the proposed transfer of shares in accordance with clause 5.2(b); and/or alternatively, (b) there has been a lack of disclosure of the true circumstances surrounding the Proposed Transfer, in particular the lack of disclosure of the agreement to sell the shares in Wahnz to K‑Line which has the effect of transferring the Sale Shares to K‑Line ; and/or alternatively (c) ARC Strang has (and another shareholder may have) acted in breach of the duty of utmost good faith contained in clause 23 of the Shareholders Agreement by reason of it not disclosing the full details of the Proposed Transfer to circumvent the operation of clause 5.1 of the Shareholders Agreement, the Company should not take any steps to register the Proposed Transfer and/or alternatively, the ultimate transfer of the Sale shares to K‑Line. We should be grateful if you would acknowledge receipt of this letter, and confirm in writing by 2.00 pm today (8 February 2007) that: (i) neither you nor the Company will take any steps to register the Proposed Transfer nor the transfer of the Sale Shares to K‑Line, pending ARC Strang's compliance with clause 5.1 of the Shareholders Agreement; and (ii) you will convene a meeting of the directors of PrixCar, to consider a resolution to decline to register the proposed Transfer and/or the ultimate transfer of the Sale Shares to K‑Line, in accordance with Article 21 of the company's Constitution. Failing receipt of your written undertakings as sought, we reserve the right to approach the Supreme Court of Victoria for appropriate relief." 31 On the same day, Toll (FHL)'s solicitors wrote to Mr Robert Strang and ARC Strang seeking an undertaking that they would take no further action to effect a transfer of the shares to Wahnz Pty Ltd ("Wahnz"). 32 On 8 February 2007, ARC Strang's solicitors wrote to Toll (FHL)'s solicitors notifying them that ARC Strang would not proceed with the transfer of the shares in PrixCar to Strang Australia Pty Ltd, that the PrixCar shares would continue to be held by ARC Strang, that no binding arrangements had been entered into with Kawasaki but it was the intention of the shareholders of ARC Strang to transfer their shares in ARC Strang to Kawasaki and that the Shareholders Agreement did not have any application to a transaction of this nature. 33 On 9 February 2007, ARC Strang's solicitors wrote to Toll (FHL)'s solicitors informing them that the shareholders of ARC Strang would not conclude a binding agreement with Kawasaki before a proposed directors' meeting to be held on 19 February 2007 without giving them 72 hours' notice. 34 On 15 February 2007, Kawasaki's solicitors wrote to ARC Strang's solicitors in the following terms: "Thank you for sending us a copy of your letter of 8 February 2007 to Clayton Utz. Is that letter you have indicated that it is the intention of the shareholders of ARC Strang Pty Ltd (ARC Strang) to transfer their shares in ARC Strang to Kawasaki. However, as the shares in PrixCar held by ARC Strang are presently held by it in its capacity of trustee of the Strang Family Trust, before Kawasaki could acquire the shares in ARC Strang (and thereby the interest in the PrixCar shares) there would need to be a transfer of all of the beneficial interest in the PrixCar shares to ARC Strang in its personal capacity. In our view this will be a transfer of shares for the purposes of clause 5.1 of the Shareholders' Agreement relating to PrixCar. As you will recall, for this reason Kawasaki withdrew from the original proposal to purchase ARC Strang once Kawasaki became aware of the existence of the Trust. While Kawasaki remains interested in acquiring (directly or indirectly) the PrixCar shares held by ARC Strang, in the circumstances it is not able to consider any transaction relating to the shares in ARC Strang without the agreement of all of the shareholders in PrixCar. Kawasaki accordingly proposes to advise Toll that it is not presently intending to acquire the shares in ARC Strang. It would also be appropriate for your client to advise Toll of the true nature of the existing ownership of the shares in PrixCar held by ARC Strang." 35 On 15 February 2007 Kawasaki wrote to Toll (FHL) informing it that Kawasaki had no agreement with the shareholders of ARC Strang to acquire the shares in ARC Strang and that it had no intention in the present circumstances, given its knowledge of ARC Strang's holding in PrixCar, of acquiring ARC Strang. 36 There the matter rested until towards the end of April 2007 when Mr Robert Strang had discussions with Toll (FHL) about it acquiring all the issued shares in ARC Strang for a proposed purchase price of $13.5 million. It was apparently the view of Mr Strang that such a sale was not caught by cl 5.1 of the Shareholders Agreement. 37 On 1 May 2007 Mr Robert Strang sent an email to Mr Miyachi in the following terms: "We have received an offer regarding our Prix Car shareholding which we have referred to our lawyers and accountants for their edification. The Strang board will then need to take a view as to the direction we will take thereafter." 38 On 11 May 2007 Mr Miyachi sent an email to Mr Robert Strang in the following terms: ""Further to our recent exchange of emails, I confirm that Kawasaki remains very keen to acquire control of the shares in Prix Car held by your family trust. We have been working with our lawyers and are confident that we can structure a purchase of the Trust (after all assets other than the Prix Car shares are divested) in a way which will not trigger the pre‑emption provisions of the Prix Car shareholders agreement and will have no tax disadvantages for you. We would expect that we can manage any tax risks which arise for Kawasaki from such a purchase." 39 On or about 18 May 2007 a recommendation was prepared for the board of Toll Holdings in relation to a "Proposed acquisition of 17% interest in PrixCar Services Pty Ltd - May 2007". It was in the following terms: "Approval sought • Board approval is sought to acquire 100% of the shares in ARC Strang Pty Ltd (ARC Strang) for A$13.5m. (ARC Strang has a 17% direct shareholding PrixCar Services Pty Ltd (PrixCar)). Recommendation • It is recommended that Toll acquire the Strang Group's 17% interests in PrixCar, held through its family entity ARC Strang Pty Ltd (the Strang Stake). • The acquisition is proposed to be effected by Toll acquiring all of the issued shares in ARC Strang for a proposed purchase price of $13.5m. the share sale agreement must, among other things, provide Toll with tax and entity risk warranties and indemnities. • Taken together with Toll's existing 33% stake in PrixCar, upon completion of the proposed acquisition Toll would control exactly 50% of the issued shares in PrixCar. The remaining shares will be held as to 33% by K‑Line and 17% by P&O (DP World). … Background • ARC Strang holds 362,642 shares in PrixCar which taken together with Toll's existing shareholding of 725,283 shares equates to exactly 50% of PrixCar's total issued capital. • Consistent with our reading of the PrixCar shareholders agreement, the Strang Group considers that the sale is not caught by the pre‑emptive rights provisions of the PrixCar shareholders agreement (as they do not apply downstream to the PrixCar shareholder). …" 40 On 30 May 2007 the following documents were executed: (a) A deed of assignment was executed by ARC Strang in its capacity as trustee of The A.R.C. Strang Family Trust and in its own capacity whereby ARC Strang in its capacity as trustee of The A.R.C. Strang Family Trust assigned to ARC Strang in its own capacity the beneficial interest in 362,642 ordinary shares in PrixCar. The purchase price for such assignment was $13.5 million. (b) A deed of appointment and retirement of trustee was entered into by ARC Strang, A.R.C. Strang Australia Pty Ltd and Mr Robert Strang whereby Mr Strang appointed A.R.C. Strang Australia Pty Ltd to be the trustee of The A.R.C. Strang Family Trust and ARC Strang retired as trustee of that Trust. (c) A share sale and subscription agreement was entered into by Mr Robert William Alistair Strang, Mrs Elizabeth Anne Strang and Toll Holdings whereby Mr and Mrs Strang sold to Toll Holdings all the shares in ARC Strang and procured that at completion of the agreement 13,500,000 shares in the capital of ARC Strang to Toll Holdings or its nominee at an issue price of $13.5 million. The purchase price for the issued shares in ARC Strang was $2.00. (d) A deed of guarantee by ARC Strang and Strang Family Superannuation Pty Ltd in favour of ARC Strang. This deed is of no relevance for present purposes. 41 In short, there was no change in the legal ownership of the shares held by ARC Strang in PrixCar. The beneficial interest in those shares vested in ARC Strang and the ownership and control of ARC Strang was transferred from Strang interests to Toll interests. 42 Kawasaki and DP World first became aware of the change in control of ARC Strang on 19 June 2007 when the ARC Strang company secretary wrote to PrixCar, Toll (FHL), Mr Miyachi and Mr Andrew Cridland informing them that ARC Strang was now a wholly‑owned subsidiary of Toll Holdings. Kawasaki and DP World sought information from Toll Holdings as to whether there had been a transfer of the beneficial ownership of the shares in PrixCar registered in the name of ARC Strang and certain other information. On 28 June 2007, Toll Holdings informed Kawasaki that it had acquired the shares in ARC Strang and that there was no transfer of the shares in PrixCar. It said, as was the fact, that the registered proprietor of the shares in PrixCar "is and remains ARC Strang".

ISSUES 43 The question for determination in this proceeding is whether the transactions constituted and evidenced by the documentation executed on 30 May 2007 resulted in a breach by Strang interests of cl 5.1 of the Shareholders Agreement. 44 In their claims as initially formulated and filed, Kawasaki and DP World made claims alleging estoppel, breach of s 52 of the Trade Practices Act 1974 (Cth), the commission of equitable fraud by the respondents arising out of, or in respect of, the sequence of events and correspondence which occurred between the parties in or about and during January and February 2007, breach of fiduciary duty and lack of good faith. In the course of the hearing Kawasaki and DP World abandoned these claims and as a result, the issues in the proceeding were limited to whether, on 30 May 2007 and prior thereto, ARC Strang was desirous of transferring its shares in PrixCar, the construction of cl 5.1 of the Shareholders Agreement, whether it was breached by the transactions entered into on 30 May 2007 and whether the assignment by ARC Strang as trustee of the beneficial interest in the shares in PrixCar it held as trustee for The A.R.C. Strang Family Trust to itself in its own right triggered the operation of cl 5.1.

SUBMISSIONS 45 The applicants' submissions may be summarised as follows: (a) ARC Strang, as trustee, in effect transferred its beneficial interest in the shares in PrixCar so that cl 5.1 of the Shareholders Agreement was triggered. (b) ARC Strang was desirous of selling the PrixCar shares in May 2007, so that cl 5.1 of the Shareholders Agreement was triggered. This desire was evidenced by ARC Strang denuding itself of its assets in taking part in a scheme to give control of its only remaining asset to Toll Holdings. The deed of assignment did not occur in isolation, but as part of a wider transaction to sell the PrixCar shares held by ARC Strang to Toll Holdings. (c) Clause 5.1 of the Shareholders Agreement should be construed so that the words "desire to transfer any shares" included a desire to transfer the beneficial interest in any shares. 46 The applicants submitted that the object of cl 5.1, when considered in the context of the Shareholders Agreement as a whole, was that any shareholder desirous of transferring the legal or equitable interest therein should inform the company and offer the other shareholders an opportunity to participate in the transfer on a pro rata basis. In support of this submission, the applicants relied on Lyle & Scott Ltd v Scott's Trustees [1959] AC 763, and in particular the passage at 785: "If I may express my view of the article in the most general sense, I think the prohibitory part of the article is the sanction which prevents a shareholder from carrying through a transfer of shares without complying with the machinery of transfers set out in the second part of the article. And I think a shareholder who has transferred, or pretended to transfer, the beneficial interest in a share to a purchaser for value is merely endeavouring by subterfuge to escape from the peremptory provisions of the article. A share is of no value to anyone without the benefit it confers. A sale of a share is the sale of beneficial rights that it confers, and to sell or purport to sell the beneficial rights without the title to the share is, in my opinion, a plain breach of the provisions of article 9." However, that passage must be understood in the context of the findings of fact in that case to which I refer later. 47 The respondents submitted that: (a) The evidence demonstrated that ARC Strang was not desirous of transferring the PrixCar shares, as if it was so desirous it could not achieve the outcome it sought, namely, avoiding triggering the provisions of cl 5.1 of the Shareholders Agreement. Rather, the shareholders in ARC Strang were desirous of selling their shares in ARC Strang. (b) There was no change of control clause in the Shareholders Agreement, that is there was no clause which regulated or related to a sale or transfer of shares in the companies whose assets included shares in PrixCar. The evidence demonstrated that all parties proceeded on the basis that cl 5.1 was not triggered when shares in a joint venturer were sold, as distinct from a sale of shares in the joint venture company, PrixCar, itself. The applicants attempted to achieve a change of control in ARC Strang in favour of themselves previously, but did not proceed when they formed a view about the problematic impact of the trust structure. (c) On the proper construction of cl 5.1 it is concerned only with transfers of legal interests, not beneficial interests. This follows textually from the words of the Shareholders Agreement. It is the sale of the shares that is relevant, not the equitable obligations pursuant to which ARC Strang held its assets.

Was ARC Strang desiring to transfer its shares in PrixCar? 48 The initial issue to be determined is whether on 30 May 2007 and prior thereto ARC Strang was a person "desiring to transfer" its shares in PrixCar within the meaning of cl 5.1 of the Shareholders Agreement. ARC Strang had withdrawn its transfer notice given in its letter dated 14 July 2006 on 23 November 2006. At that time, ARC Strang's desire to transfer its shares in PrixCar terminated. Was that desire resurrected thereafter? I do not consider that it was. During December 2006, Mr Robert Strang had discussions with Kawasaki and Toll interests about a proposal that the shares in ARC Strang be sold. It does not follow from this fact that ARC Strang was desiring to transfer its shares in PrixCar. Indeed, the proposal that the shares in ARC Strang be sold was for the reason that Kawasaki and Toll did not want the pre‑emptive provisions of cl 5.1 of the Shareholders Agreement triggered by any proposal or desire by ARC Strang that its shares in PrixCar be transferred. Although a sale of the shares in ARC Strang would change the ultimate ownership and effective control of the shares ARC Strang held in PrixCar, a desire by the shareholders in ARC Strang to sell the shares they held in it does not, of itself, demonstrate a desire by ARC Strang to transfer its shares in PrixCar. Indeed, if the concern of all relevant parties was to avoid triggering the pre‑emptive provisions in cl 5.1 of the Shareholders Agreement, a proposal by the shareholders in ARC Strang to sell the shares they held in it made it clear that ARC Strang did not desire to transfer its shares in PrixCar. 49 Mr Robert Strang who appeared to be the controlling person of ARC Strang and was its spokesman, was not called as a witness in the proceeding. There is no direct evidence from Mr Strang, either oral or documentary, which demonstrates a desire by ARC Strang to transfer its shares in PrixCar after 23 November 2006 and up to and including 30 May 2007. 50 There is nothing in the minutes of the meeting between Mr Robert Strang, his son and the Toll representatives on 7 February 2007 (par [28] above) which demonstrates a desire of ARC Strang to transfer its shares in PrixCar. Nor is there any demonstration of such a desire in the telephone conversation the following day, 8 February 2007, between Mr Miles and Mr Strang. 51 The email sent by Mr Robert Strang to Mr Miyachi on 1 May 2007 (par [37] above), takes the matter no further. There is nothing in that email which demonstrates a desire by ARC Strang to transfer or sell its shares in PrixCar. The Toll Holdings Board recommendation par [39] above does not assist the applicants. It is not an admission by Mr Robert Strang or ARC Strang and although it identifies the consequences of the proposal, in relation to control of the shares in PrixCar, it nevertheless shows that what was intended was the acquisition of the shares in ARC Strang. 52 I am satisfied that between 23 November 2006 and 30 May 2007 ARC Strang did not desire or manifest a desire to transfer its shares in PrixCar so that it was obliged, by virtue of the existence of that desire to observe and comply with the pre‑emptive provisions contained in cl 5.1 of the Shareholders Agreement. During that period the shareholders in ARC Strang did manifest a desire to sell their shareholding in that company but that is quite a different issue.

The proper construction of cl 5.1 of the Shareholders Agreement 53 The applicants submitted that the Court should look at the surrounding circumstances of the Shareholders Agreement, namely that PrixCar was a closely held joint venture corporation and that the purpose or the object of the Shareholders Agreement was that specified persons should carry on business together and only control the joint venture vehicle in specified portions. It was submitted that with this in mind the Court should give the Agreement a commercially, sensible construction. In this context, Kawasaki referred to Lion Nathan Australia Pty Ltd v Coopers Brewery Limited (2006) 236 ALR 561 where Weinberg J (at 563-4) and Kenny J (at 580) considered the principles which apply to the construction of commercial documents. These principles of construction may be accepted but they do not entitle the Court to distort the language used in an agreement or imply into the provisions of an agreement terms which are not there. 54 The applicants submitted that the parties should be taken to have desired no change in the effective ownership and control of PrixCar unless all members first had a pro rata opportunity to participate in that change of ownership or control. However, that desire in those terms was not translated into a specific provision in the Shareholders Agreement nor is it to be implied from the terms used in the Shareholders Agreement. The parties to the Shareholders Agreement turned their minds to the nature of the pre‑emptive rights which they wanted to enshrine in the agreement but they did not include a change in control of a shareholder provision. 55 The applicants placed particular emphasis upon observations in Lyle & Scott Ltd v Scott's Trustees (supra). In that case the relevant article of association of the company contained pre‑emptive provisions which were activated by a shareholder "who is desirous of transferring his ordinary shares". An offer was made to the shareholders in the company offering to purchase their shares for a specified amount. The consideration was payable on receipt of valid and effective transfers of the shares and a general proxy in favour of the purchaser's nominees. Some shareholders in the company accepted the offer by completing and returning the form of acceptance and a form of proxy. In their acceptance they agreed to sell their shares, authorised the use of the proxy, and agreed to deliver up their share certificates and to sign transfer deeds when called on in exchange for the price. 56 The House of Lords concluded that the actions of the shareholders were such that it could be inferred that they were "desirous of transferring" their shares within the meaning of the article containing the pre‑emptive provisions. Viscount Simonds said at 774‑775: "In my opinion, it is not open to a shareholder, who has agreed to do a certain thing and is bound to do it, to deny that he is desirous of doing it. I wish to make it quite clear, for it goes to the root of the matter, that I regard Scott's trustees as desirous of transferring their ordinary shares unless and until their agreement with Mr. Fraser has been abrogated. … I have already indicated that a shareholder who has agreed to sell his shares and has received the price is to be deemed to be desirous of transferring them." Lord Reid said at 777‑778: "I have come to the conclusion without difficulty that on their own admissions the respondents are in breach of article 9. The purpose of the article is plain: to prevent sales of shares to strangers so long as other members of the company are willing to buy them at a price prescribed by the article. And this is a perfectly legitimate restriction in a private company. But the respondents argue that, whatever may have been the intention, the terms of the article are such that it has only very limited application. They say that 'transfer' and 'transferring' only apply to a complete transfer of the ownership of shares by acceptance and registration of deeds of transfer, and that a shareholder who agrees to sell his shares is quite entitled to do so and to receive the price and vote as the purchaser wishes so long as he is not desirous of having a transfer registered. I see no reason for reading the article in that limited way. Transferring a share involves a series of steps, first an agreement to sell, then the execution of a deed of transfer and finally the registration of the transfer. The word transfer can mean the whole of those steps. Moreover, the ordinary meaning of 'transfer' is simply to hand over or part with something, and a shareholder who agrees to sell is parting with something. The context must determine in what sense the word is used." 57 That case and the reasoning in it is of no assistance to applicants. In that case it was found as a fact that the shareholders were desirous of transferring their shares because of the actions they had taken. The shareholders had entered into an agreement to sell their shares and had received and retained the sale price and had agreed to sign transfer deeds when called on to do so. Their abstaining from delivering executed transfer forms did not displace the finding that they were desirous of transferring their shares. I have made no such finding in this case. Rather, I have found that the evidence does not support such a finding. 58 It may be accepted, as the applicants submitted, that the documentation and transactions entered into on 30 May 2007 delivered to Toll Holdings and its associate Toll (FHL) control of the interest in PrixCar held by ARC Strang as a matter of substance. But it does not follow from such a conclusion that cl 5.1 was triggered by what occurred on 30 May 2007. 59 The applicants submitted that the provisions of cl 5.1 of the Shareholders Agreement would have no substance if the shareholder could transfer its beneficial interest in PrixCar to a third party as was done in this case. In this context, the applicants relied on the observation of Lord Keith in Lyle & Scott Ltd v Scott's Trustees (supra) set out in par [46] above. 60 That observation must be understood in the context of the facts as found, namely that there had been an agreement to sell the shares which were the subject of the pre‑emptive provisions. Lord Keith was saying no more than if a shareholder sells its whole interest in a share, which includes its legal interest and its beneficial interest, the withholding of the delivery of an executed transfer of the share, in the circumstances which obtained in that case, does not mean that the shareholder is not desirous of transferring the share as contemplated by the relevant article. 61 The applicability of Lord Keith's observation depends upon the extent to which the provisions of cl 5.1 of the Shareholder's Agreement have been triggered. In Lyle & Scott Ltd v Scott's Trustees(supra) the relevant article was triggered because of the finding that the shareholders were "desirous of transferring" their shares in the company. That is not a finding which I have made in the present case. 62 I am satisfied that on its proper construction cl 5.1 of the Shareholders Agreement does not extend to, or cover, a transfer of shares in a company which includes within its assets shares in PrixCar. Clause 5.1 does not include within its terms, nor is it appropriate to imply into its terms, a change in control of shareholder provision. There is no part of the transactions entered into on 30 May 2007 which falls within cl 5.1 of the Shareholders Agreement or which triggers its operation. Clause 5.1 is not triggered by the sale by Mr and Mrs Strang of their shares in ARC Strang, the shareholder whose assets include shares in PrixCar, nor is it triggered by the deed of assignment whereby ARC Strang as trustee transferred the beneficial interest in the PrixCar shares to itself.

Was there a "transfer" of shares in PrixCar? 63 The expression "transfer" in cl 5.1 of the Shareholders Agreement refers to a transfer of the legal interest in the shares and not to a transfer of the beneficial interest. I reach this conclusion as result of a textual analysis of cl 5.1 and on the basis of principles found in authorities. 64 That the expression "transfer" in cl 5.1(a) of the Shareholders Agreement is referring to the transfer of the legal interest in the shares in PrixCar is supported by the context in which the expression "transfer" is found in cls 5.1(g), 5.1(j) and 5.2(a). These clauses only have effect if it is accepted that transfers of shares, to be effective, must be transfers of the legal estate or interest in the shares. These clauses do not allow for the transfer of beneficial interests in the shares. 65 Clause 5.1(g) provides: "If the whole of the shares desired to be transferred have not been transferred within 90 days from the date of the offer made pursuant to clause 5.1(c), the proposing transferor may sell the shares for a price not less than the Fair Value to any person, but the Directors may refuse to register the transfer on the grounds that either: (i) they are not satisfied that the transaction is a bona fide sale at a price not less than the Fair Value; or (ii) the proposing transferee is a competitor of the Company…" This clause contemplates that the transfer of the shares will occur by the execution of an instrument of transfer which passes the legal interest in the shares. 66 Clause 5.1(j) provides: In this clause: (i) 'Transfer Notice' means a notice given by a person to the Directors stating that he proposes to transfer shares and specifying the number of shares the subject of the notice; …" The shares referred to are "shares in the capital of the Company", and any transfer of shares in this context must be a transfer of the legal interest in the shares. 67 Clause 5.2 provides: "Subject to the prior approval of the Directors, a Shareholder shall not be required to comply with the provisions of clause 5.1 where it proposes to transfer shares in the capital of the Company to: (a) the trustee of a trust under which the Shareholder is the sole beneficiary; (b) a corporation which is deemed by section 50 of the Law to be related to the Shareholder." A transfer contemplated by subcl (a) can only be a transfer of the legal estate or interest held by the shareholder as it would be transferring the legal estate or interest in shares to the trustee of a trust. It would not be transferring the beneficial interest to the trustee. 68 The expression "desiring to transfer any shares in cl 5.1(a) is to be contrasted with the expression "the beneficial interest in the shares …" in cl 2 which provides: "It is acknowledged that as at the date of this Agreement the beneficial interest in the shares in the capital of the Company belong to the Shareholders in the following proportions: Kawasaki 50.0101% Strang 16.6633% Finemore 16.6633% Conaust 16.6633% 100% 69 This clause demonstrates that the Shareholders Agreement recognises a distinction between the legal interest in PrixCar shares and the beneficial interest in PrixCar shares. Clause 2 also demonstrates that the parties to the Shareholders Agreement assumed that each joint venturer held both the legal and the beneficial interest in its PrixCar shares. The only time a trust is specifically contemplated in cl 5 of the Shareholders Agreement is in cl 5.2(a) (par [4] above) where approval of the directors of PrixCar is sought to a transfer of shares to the trustee of a trust under which the shareholder is the sole beneficiary. 70 My conclusion that in the context in which it appears in cl 5.1 of the Shareholders Agreement the expression "transfer" means a transfer of the legal interest or estate in shares from one person to another person and not a transfer of the equitable or beneficial interest in the shares is supported in a number of cases. Such a connotation or definition of the expression "transfer" is implicit in the reasoning in Safeguard Industrial Investments Ltd v National Westminster Bank [1981] 1 WLR 286; Scotto v Petch [2000] 2 BCLC 211, on appeal [2001] BCC 889; Lyle & Scott Ltd v Scott's Trustees (supra); Coles Myer Limited v Commissioner of State Revenue [1998] 4 VR 728. 71 In Safeguard Industrial Investments Ltd v National Westminster Bank (supra) the Court was concerned to construe an article of association of a company which provided that: "A member shall not be entitled to transfer an ordinary share except … in accordance with the following provisions: (a) … (b) Except where the transfer made is pursuant to article 8 hereof, in order to ascertain whether any member is willing to purchase an ordinary share, the proposing transferor shall give notice in writing (hereinafter called 'the transfer notice') to the company that he desires to transfer the same. …" The Court held that "transfer" in this article meant a transfer of the legal interest in the shares and did not refer to the transfer of the beneficial interest in the shares. Vinelott J said at 297‑298: "A 'transfer of a share' in the ordinary sense of that expression is a transfer of the legal title to the share with the rights and liabilities attaching to it; on registration of the transfer the transferor ceases to be and the transferee becomes a member of the company in right of that share. A member who desires to transfer a share will carry his intention into effect by executing a transfer and lodging it for registration. At that stage the restrictions in the pre‑emption provisions come into operation. To treat the references to the transfer of a share as comprehending a transfer or disposition of a beneficial interest in a share is to give the expression 'transfer of a share' a meaning wider than it would ordinarily bear. …" Vinelott J's reasoning was upheld by the Court of Appeal: Safeguard Industrial Investments Ltd v National Westminster Bank [1982] 1 WLR 589 at 598‑599. It was also accepted by the Queensland Court of Appeal in Reef & Rainforest Travel Pty Ltd v Commissioner of Stamp Duties [2002] Qd R 683 at 688. 72 What occurred on 30 May 2007 by virtue of the provisions of the deed of assignment was not a "transfer" of any interest in the PrixCar shares held by PrixCar. Prior to the assignment, the legal and beneficial interest in the 362,642 PrixCar shares was held by ARC Strang, albeit subject to the terms of the trust deed by which The A.R.C. Strang Family Trust was constituted and established. The beneficial interest was not held by anyone other than the trustee ARC Strang which held the beneficial interest on the terms of the trust deed. The effect of the assignment was not a disposition of anything, it was not to transfer, pass or transmit the beneficial interest in the shares from one person or entity to, a third party, another person or another entity. In Coles Myer Ltd v Commissioner of State Revenue (supra), Ormiston J, with whom Winneke P agreed, said in relation to the expression "transfer" at 740: "Although the word 'transfer' is not a term of art and is a word of wide connotation, to my way of thinking it is the passing of rights to another, so as to vest them in that other person, which is essential to a transfer, properly understood. It is not a mere disposition, a ridding oneself of the right or interest, it is the vesting in the transferee of that right or interest, precisely or substantially, which is necessary to effect a transfer, as ordinarily understood in the law." Rather, the effect of the assignment was to free the beneficial interest in the shares from the burden or encumbrance of the terms of the trust deed. It follows that the deed of assignment did not constitute or evidence a transfer in any sense of that word or a desire to transfer the shares. 73 As noted earlier in par [6] above, The A.R.C. Strang Family Trust is a discretionary trust. There is no beneficiary under it with a vested interest and the trustee has a discretion as to the distribution of the income and capital of the trust fund among a wide range of potential beneficiaries. Accordingly, by the Deed of Assignment there was no disposition of the beneficial interest in the shares by the trustee to a third party. There was no separation of the legal and equitable interests in the PrixCar shares: Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 at 712; Barns v Barns (2003) 214 CLR 169 at 189. Such interest as those who fell within the definition of "beneficiaries" in the trust deed had in the trust property was a right to have the trust administered in accordance with the terms of the trust deed: Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 313‑314. 74 The relevant principle was recently re‑stated by Hollingworth J in Lygon Nominees Pty Ltd v Commissioner of State Revenue (2005) 60 ATR 135 at [58]: "Neither the right to due administration of the trust nor the fiduciary obligations owed by the trustee is capable of making the object of a power of appointment into a 'beneficial owner' of the subject matter of the trust. The right of an object to take legal proceedings to prevent a disposal of income or capital by the trustee to persons outside the designated object does not involve the assertion of a proprietary right by the object and does not require the conclusion that the object has a proprietary interest in particular assets within the fund or is a 'beneficial owner' of such assets". (See also R&I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59 at 79‑80 per Owen J.) 75 There is nothing in the reasoning of French J in Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509 which doubts these principles in relation to the nature of interests in or under a discretionary trust. French J was concerned with the content and extent of a contingent interest for the purposes of s 9 of the Corporations Act 2001 (Cth).

CONCLUSION 76 My conclusion is that on 30 May 2007 the transactions which occurred on that day did not trigger the pre‑emptive provisions in cl 5.1 of the Shareholders Agreement. Nor were these provisions triggered by any action of ARC Strang subsequent to 23 November 2006 and up to and including 30 May 2007. There has been no contravention by ARC Strang of cl 5.1 of the Shareholders Agreement or a failure by it to observe the pre‑emptive provisions of that clause. It follows that the application by the applicants should be dismissed with costs. I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.

Associate: Dated: 9 April 2008 Counsel for the Applicants: J W S Peters S.C. and D J Crennan

Counsel for the Respondents: N Mukhtar QC and P D Crutchfield

Solicitor for the Respondents: Clayton Utz Date of Hearing: 7 and 8 February 2008