H. "E Apps Smith", under entries made in 1863.
17 No doubt or difficulty arises in relation to the first two entries (A and B), so far as the message appearing on the face of the register is concerned. Mr Lunn is living and has been recognised by order of the court as having the status of a holder of 100 promoters shares. Belmont Colliery Proprietary Limited, being itself a body corporate, must be presumed to exist in the absence of evidence that it has been dissolved.
18 In relation to items C, E and G (recording "Est", or the estate of a deceased person), the entries seem to recognise no more than the death of the person named as holder in an earlier entry. In the case of "Est Wm Bullard", it appears that Wm Bullard himself went on to the register in 1909, so that it should be inferred that he died some time between 1909 and 1938. In the case of "Est G A Lloyd", the corresponding inference is that death occurred between 1886 and 1910. In the case of "Est L E Threlkeld", the inference is that death occurred between 1862 and 1909.
19 Item D - "A W Henderson & Ors" - is presumably intended to indicate that several persons were the holders of the parcel of shares concerned. But there is no way of knowing how many "Ors" there were or, indeed, that there were any identifiable holders other than A W Henderson. The only safe course is, I think, to recognise that A W Henderson was entered as a holder in 1916.
20 Item H ("E Apps Smith"), taken at face value, indicates that a person who became a member 140 years ago is today a member. Principles discussed by Dixon J in Axon v Axon (1937) 59 CLR 395 at 404-5 amply justify the inference that E Apps Smith is no longer living. Item F, taken at face value, indicates that a person who became a member 94 years ago is today a member. Bearing in mind that the disability of infancy subsisted in 1909 until age 21, the virtually irresistible likelihood is that the "Thos Fenwick" registered in 1909 was born before 1889. He, by reference to the same principles, should be presumed to be now dead.
21 In summary, therefore, the register contains the names of two persons (Mr Lunn and Belmont Colliery Proprietary Limited) clearly now in existence, three persons (Bullard, Lloyd and Threlkeld) acknowledged upon the face of the register to have died, two persons (Apps Smith and Fenwick) who, for reasons stated, should be presumed to be dead and one person (Henderson) who, if he became a shareholder at age 21, must be either more than 108 years old or dead.
Share register entries recognising holdings of persons now dead
22 With the register in this state and giving full effect to the prima facie position dictated by s.10 of the Act of 1863, it will be possible to say that there are more than five (that is, at least six) members of the Cardiff Coal Company only if it is correct to regard as a member today either persons known or presumed to be dead (being so many of Bullard, Lloyd, Fenwick, Threlkeld and Apps Smith as are necessary to bring the number to six) or some successor of each such person. This leads to the question whether a deceased holder of shares in a company of this kind is properly regarded as a member.
23 A person no longer in existence is not a member of anything. In the case of an unincorporated association such as a club, there can be no doubt that the death of a person who is a member means that he or she is no longer a member; likewise in the case of a partnership, although rights of property will devolve upon the deceased's partner's legal personal representative. By analogy, it might be expected that upon the death of a member of a company, the membership of that person would come to an end, but with his or her shares passing to the legal personal representative who thereby attained a position from which the legal personal representative might claim membership and be admitted accordingly. Such a sequence of events seems to be envisaged by the deed of settlement of the Cardiff Coal Company. Clause 11 (like s.4 of the Act of 1863) says that shares are personal property and transmissible accordingly. By clause 14, a legal personal representative, next of kin or beneficiary claiming under the will of a deceased proprietor is not, by virtue of that position, a proprietor but is required by clause 26 to give notice to the company, and upon the observance of certain formalities, may become a proprietor (or cause someone else to become a proprietor) pursuant to clauses 16 and 17.
24 Any impression thus created that the legal personal representative of a deceased proprietor is not to be regarded as himself a proprietor until recorded as such requires reconsideration in the light of the judgment of Dixon J (sitting alone and exercising the original jurisdiction of the High Court) in A L Campbell & Co Pty Ltd v Federal Commissioner of Taxation (1951) 82 CLR 452. Dixon J began his analysis by observing:
"But the case of the registered shareholder who dies has caused a difficulty which company law has not found it possible to solve by adopting the simple position that there is no shareholder in respect of the shares, no shareholder because the person who is registered is dead and the transmittee is not registered."
25 Dixon J then referred to a case involving circumstances that had arisen before the (English) Companies Act 1862 in which the status of a deceased shareholder had arisen. Because of parallels between the form of organisation in that case and that of the Cardiff Coal Company, it is appropriate to look at the case in detail. It is In re Agriculturist Cattle Insurance Co (Baird's Case) (1870) LR 5 Ch App 725.
26 Baird's case concerned a joint stock company that was not incorporated. The provisions of its deed of settlement were in many ways similar to those of the Cardiff Coal Company's deed. In particular, it was provided that the executors or administrators of deceased shareholders should not, in that capacity, be holders of shares or entitled to receive dividends which should remain in suspense until someone became the holder of the relevant shares. It was also provided that legal personal representatives might become shareholders themselves or procure someone else to become shareholders, subject to production of the relevant probates and letters of administration. The matter in issue was the status of the executrix of the will of a deceased shareholder and, in particular, her liability as a contributory in consequence of a winding up that commenced after the shareholder's death.
27 Sir W M James LJ referred to the general law of partnership under which a person ceases to be a partner on death and cannot be under any liability in respect of subsequent dealing and transactions of the surviving partners. But, as his Lordship observed, partnerships are based on mutual trust and confidence of each partner in the skill, knowledge and integrity of each other, so that a partner's executor cannot claim to succeed the partner unless the other partners consent. Joint stock companies were seen as standing on a different footing:
"A joint stock company is not an agreement between a great many persons that they will be co-partners, but is an agreement between the owners of shares, or the owners of stock, so that they or their duly recognized assigns, the owners of the shares for the time being, whoever they may be, shall be and continue an association together, sharing profits and bearing losses. No shareholder in a joint stock company is, in the legal sense of the word, any more a partner than the owner of bank stock is; he may not have the same limit of liability, but in every other respect he is the same; he has the same right to take part in public meetings of the body, he has the same right to elect or remove directors, he has the same right to vote for or against the resolutions of the body, he has the same right to such dividends as may be declared, and he has the same right to dispose of his share as a separate and distinct piece of property, and no other rights in or over the association, its assets, or its transactions, and if he is liable under any contracts or obligation, or in respect of any act of the body, it is not because they are the contracts, obligations, or acts of his partners or partner, but because they are the contracts, obligations, and act of the quasi body corporate (under present legislation the actual body corporate), by its properly constituted agents. It may be, and generally is, no doubt, that the agents, the directors, are shareholders, and in that sense partners, but it is certain that there may be a board of directors perfectly competent to bind the whole body, although every one of them may have disqualified himself by parting with every share."
28 The significance of this form of organisation in case of the death of a party was then stated:
"Starting then, with this view of the relation which exists between the associates in a joint stock adventure, the presumption is that the death of a shareholder makes not the slightest difference, either in right or liability; that the executor of a deceased shareholder, who succeeds in point of property to the share, takes it (of course in his executorial character) on exactly the same terms and conditions as every other owner of a share - equal benefit, equal liability; and the deed has therefore to be scrutinized, not to see whether it gives or creates such equal benefit and liability, but whether it takes away the one or releases the other."
29 Turning to the deed of settlement before him, Sir W M James LJ said, in relation to executors, as distinct from living members:
"The only difference made with respect to executors is that, although they are talked of throughout as 'holders of shares', they are talked of as only having a right to become 'shareholders', and they are not actually to receive dividends, or to exercise any right in respect of their shares until they shall have either got themselves or procured other persons to become formally registered as shareholders, having duly bound themselves by covenant to the articles of association.
The object of these provisions is so plain, so reasonable, so natural, that it is impossible to draw from them any implication adverse to the conclusions to be drawn from the nature of the association or the rest of the deed. The dead shareholder remains - that is, his estate remains - a member, but the association would of course like something more than a dead man or an estate; they would like a living member, actually bound by personal covenant like all the others, and so they put this pressure on the executors: 'You cannot actually draw out the property, you cannot vote, you cannot exercise any other right'; but they do not forfeit the shares, they do not absorb them, they do not even suspend the dividends; the share remains untouched, all dividends declared are declared upon the executor's share like all others; whenever he chooses to deal with the shares the dividends are there for him, and if the company were to be wound up and to wind up prosperously and not disastrously, those dividends would have to be paid to the executor before any distribution of capital, and in the final distribution of capital the executor's share would be credited with the same quota as every other holder's share. It appears to me, therefore, that on every principle of equity, as well as on the plain construction of the deed, it is impossible to draw any distinction between the dead shareholder's estate and the living shareholders', as to the extent and measure of liability."
30 In A L Campbell & Co Pty Ltd (above), Dixon J went on to review a number of other cases concerning the consequences of the death of shareholders in companies and continued:
"I have dealt at length with the foregoing cases because they show, as it appears to me, that when statutory provisions and articles attaching rights or privileges and liabilities or duties to shares employ for the purpose the expressions 'member' or 'shareholder' they are not to be construed as excluding the shares of a deceased registered member because there is no personal representative who is on the register. If the appellant company had declared a dividend as on 30th June 1946 it would have been bound to include the shares of the deceased and to appropriate a sum representing the dividend on those shares for payment to a properly constituted representative of her estate. Article 86 of the articles of association enables the directors to declare a dividend to be paid to the members in proportion to amounts paid up on the shares held by them respectively. But the authorities to which I have referred show that the use of the word 'member' would not exclude her estate from the dividend."
31 It seems to me that this extended concept of "member" must be applied to the Cardiff Coal Company, with the result that it must be recognised that some person is a "member" by virtue of the shares appearing in the share register in respect of each of "Est Wm Bullard", "Est G A Lloyd" and "Est L E Threlkeld", as well as the shares appearing in respect of each of "E Apps Smith" and "Thos Fenwick" who, for reasons stated, must be presumed dead. There is no evidence as to the identity of the legal personal representative of any of these persons or, indeed, that there was a grant of probate or letters of administration. Nor is there evidence of devolution upon persons entitled upon intestacy including, perhaps, the Crown pursuant to s.61B(7) of the Wills Probate and Administration Act 1898. But none of that matters. The relevant point, for present purposes, is that there must exist some person or entity who, in accordance with the principles discussed in Baird's case and A L Campell & Co Pty Ltd is capable of establishing in relation to each parcel of shares such a claim as will warrant the person's being regarded as a "member" of the Cardiff Coal Company.
32 For that reason, I consider that, so far as the position shown in the share register is concerned, the company must be regarded as a body that "consists of more than 5 members" as referred to in s.469(1)(b) of the Companies (New South Wales) Code.
33 The position thus derived from the register must, however, be examined in the light of findings made in proceedings which culminated in the judgment of the Court of Appeal (Handley JA, Sheller JA and Sheppard AJA) in Savage v Lunn (unreported, NSWCA, 9 March 1998). It is unnecessary to recite those findings in detail. It is sufficient to note that it was held both at first instance and on appeal that certain transfers of shares and other documents material to the pattern of ownership reflected on the face of the register before 1996 were forged, although by whom and to what extent was not established. It was on that basis that the 1996 order that Mr Lunn be recorded as a proprietor was made.
34 For present purposes, however, I do not need to delve into those matters. If the transfers to Belmont Colliery Company Proprietary Limited in 1938 or those to L Blackwood in 1916 (or both) were (or were dependent on) forgeries and are void, the only consequence in relation to the shares in question is that the register is subject to rectification. Other persons - probably successors of persons now dead - would be entered. The position is therefore no different from that pertaining in relation to the several persons now dead (or presumed to be dead) currently named in the register.
35 Whatever may have been the true position in relation to forgeries and their effect, the conclusion remains that the Cardiff Coal Company today has more than five members and is, in terms of s.470 of the Companies (New South Wales) Code, "a body to which this Division applies".
The continuing effect of s.470 of the Companies (New South Wales) Code
36 Having determined that the Cardiff Coal Company is a body to which Division 6 of Part XII of the Companies (New South Wales) Code applies, I proceed to the question whether the provisions of the Code have continued in operation in such a way as to be the source of a power for the court to make a winding up order.
37 The Companies (New South Wales) Code was created by the Companies (Application of Laws) Act 1981 which, in s.6, enacted that the provisions of the Companies Act 1981 (Cth), other than ss.1, 2, 3 and 4, applied, as if amended as set out in Schedule 1 and subject to and in accordance with the Companies and Securities (Interpretation and Miscellaneous Provisions) (Application of Laws Act) 1981, as laws of New South Wales. Section 11 of the Companies (Application of Laws) Act 1981 empowered the Minister to authorise the publication of a document containing the provisions of the Commonwealth Act so applied and provided that that document might be cited as the "Companies (New South Wales) Code".
38 The Companies (New South Wales) Code was, by s.84 of the Corporations (New South Wales) Act 1990, designated one of the "co-operative scheme laws" for the purposes of that Act. Section 85, as enacted in 1990, was as follows:
" 85(1) [Continued operation of Codes] This section provides for the national scheme laws of this jurisdiction to supersede the co-operative scheme laws, which are to continue to operate of their own force only in relation to:
(a) matters arising before the commencement of this section; and
(b) matters arising, directly or indirectly, out of such matters,
in so far as the national scheme laws do not deal with those matters.
85(2) [National scheme law prevails] Where a co-operative scheme law is inconsistent with a national scheme law of this jurisdiction, the national scheme law prevails and, to the extent of the inconsistency, the co-operative scheme law does not operate.
85(3) [Meaning of inconsistency] For the purposes of subsection (2), a co-operative scheme law is inconsistent with a national scheme law if it would be inconsistent within the meaning of section 109 of the Constitution of Commonwealth of Australia if the national scheme law were an Act of the Commonwealth."
39 The present form of s.85, following amendment by the Corporations (Ancillary Provisions) Act 2001, is as follows:
"85. National scheme laws prevail over co-operative scheme laws
(1) This section provides for the national scheme laws of this jurisdiction to supersede the co-operative scheme laws, which are to continue to operate of their own force only in relation to:
(a) matters arising before the commencement of this section, and
(b) matters arising, directly or indirectly, out of such matters,
in so far as the national scheme laws or the Corporations legislation do not deal with those matters.
(2) Where a co-operative scheme law is inconsistent with a national scheme law of this jurisdiction, the national scheme law prevails and, to the extent of the inconsistency, the co-operative scheme law does not operate.
(3) For the purposes of subsection (2), a co-operative scheme law is inconsistent with a national scheme law if it would be inconsistent within the meaning of section 109 of the Constitution of the Commonwealth of Australia if the national scheme law were an Act of the Commonwealth.
(4) In this section:
'Corporations legislation' means the Corporations legislation to which Part 1.1A of the Corporations Act 2001 of the Commonwealth applies."