MATTER : Section 175(1) and s 1323(1) of the Corporations Law

BETWEEN : NETBUSH PTY LTD (ACN 079 680 809) as Trustee for the RUSSELL ROBERTS FAMILY TRUST

Trustees Act, s 78 - Application for order certain share transfer be registered - Turns on own facts

Trustees Act 1962, s 78

Andco Nominees Pty Ltd v Lestato Pty Ltd & Ors (1995) 17 ACSR 239

New Lambton Land & Coal Co Ltd v London Bank of Australia Ltd & Ors [1904] HCA 23; (1904) 1 CLR 524

Ascot Investments Pty Ltd v Harper [1981] HCA 1; (1981) 148 CLR 337

Gray Eisdell Timms Pty Ltd v Combined Auctions Pty Ltd (1995) 13 ACLC 965

News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 139 ALR 193

Ord v Calan Healthcare Properties Ltd [2004] 2 NZLR 122

Roberts v Coussens (1991) 25 NSWLR 171

Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd [1993] FCA 646; (1993) 115 ALR 294

Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291

1 MASTER SANDERSON: By an amended originating process issued 25 June 2004, the plaintiff seeks to have the first, second and third defendants register certain share transfers which evidence the transmission of certain shares in each of the defendants from the former trustee to the present trustee, the plaintiff in this action. Primarily the application is brought under s 78 of the Trustees Act 1962. That section is in the following terms:

"78. Vesting orders, when Court may make

(1) The Court may make an order, in this Act called a "vesting order", that has effect as provided in section 85.

(2) A vesting order may be made in any of the following cases, namely -

(a) where the Court appoints or has appointed a new trustee;

(b) where a new trustee has been appointed out of Court under any statutory or express power;

(c) where a trustee retires or has retired;

(d) where a trustee is under a disability;

(e) where a trustee is out of the jurisdiction of the Court;

(f) where a trustee cannot be found;

(g) where a trustee, being a corporation, has ceased to carry on business or is in liquidation or has been dissolved;

(h) where a trustee neglects or refuses to convey any property, or to receive the dividends or income of any property, or to sue for or recover any property according to the direction of the person absolutely entitled to the same for 28 days next after a request in writing has been made to him by that person;

(i) where it is uncertain who was the survivor of 2 or more trustees jointly entitled to or possessed of any property;

(j) where it is uncertain whether the last trustee known to have been entitled to or possessed of any property is alive or dead;

(k) where there is no personal representative of the last trustee who was entitled to or possessed of any property or where it is uncertain who is the personal representative of that trustee or where the personal representative of that trustee cannot be found;

(l) where any person neglects or refuses to convey any property, or to receive the dividends or income of any property, or to sue for or recover any property in accordance with the terms of an order of the Court;

(m) where a deceased person was entitled to or possessed of any property and his personal representative is under a disability_;_ or

(n) where property is vested in a trustee and it appears to the Court to be expedient to make a vesting order.

(3) Where the provisions of subsection (2) are applicable, they extend to a trustee entitled to, or possessed of, any property either solely or jointly with any other person and whether by way of mortgage or otherwise."

2 In the alternative, the plaintiff seeks an order under s 1071F of the Corporations Act for the registration of the shares or an order that the transmission be registered. As a further alternative, the plaintiff seeks an order that the defendants or a specified member of each of the defendants purchase the shares. For reasons which I will detail below, I am satisfied that an order should be made under s 78. I do not propose to deal at all with submissions made with respect to s 1071F of the Corporations Act.

3 The plaintiff is and has been since 31 July 2003, the duly appointed trustee of the Russell Roberts Family Trust ("the Trust"). Prior to the plaintiff becoming trustees of the Trust, there were two other trustees. BCH Custodians Pty Ltd ("BCH Custodians") was the trustee of the Trust between 10 February 2000 and 25 July 2003. Devin Park Pty Ltd ("Devin Park") was the trustee of the Trust between 25 July 2003 and 31 July 2003.

4 At all material times, the Trust has owned beneficially 4999 A Class and 4999 B Class ordinary shares in the first defendant. It has owned 20 management shares in the second defendant and it has owned 1,516,000 ordinary shares and 376 management shares in the third defendant. So far as the first defendant is concerned, the Trust is entitled to 99.9999 per cent of the shares, with the remaining 0.0001 per cent being held by Russell Roberts. With respect to the second defendant, the plaintiff is entitled to 6.445 per cent of the shares. R W Roberts is entitled to 66.065 per cent of the shares, with the remaining shares held by three independent parties. With respect to the third defendant, R W Roberts is entitled to 0.063 per cent of the shares, Russell Roberts is entitled to 0.018 per cent of the shares, and the plaintiff is entitled to 91.524 per cent of the shares. The remaining shareholding is once again held by three independent, unrelated parties. Fortunately, it is not necessary to explain what has given rise to this labyrinthine interconnecting shareholding.

5 The Trust is a fixed trust established for the benefit of four beneficiaries. Mark Roberts (aged 48 years), Sandra Lee Cambridge (aged 46 years), Russell Wyatt Roberts (aged 8 years) and Montana Roberts (aged 7 years). All of these individuals are the children of Russell Roberts. On 25 July 2003, Mark Roberts and Sandra Lee Cambridge purported to appoint Devin Park as trustees of the Trust. They were in a position to make this appointment because they were the appointors of the Trust pursuant to a deed executed on 10 February 2000. The only beneficiaries of the Trust are the adult and infant children of Russell Roberts.

6 Pursuant to cl 8.1 of the Trust Deed, the appointor may appoint new trustees. That clause also provides that if the appointor is a beneficiary, he shall not be eligible to be appointed as the trustee. Mark Roberts was the only shareholder in Devin Park. When the provisions of cl 8 came to the attention of Mark Roberts, Devin Park retired as trustee and the present plaintiff was appointed. The plaintiff now seeks to have the shares registered in its name. Each of the defendants has declined to effect such registration. At present the shares remain registered in the name of BCH Custodians.

7 Subarticles (B) to (H) of Article 21 of the Articles of Association of the first defendant and subarticles (B) to (G) of Article 21 of the Articles of Association of the second defendant provide pre-emption rights in relation to the transfer of shares in those companies. Subarticle (H)(ii) of Article 21 of the Articles of Association of the first defendant and subarticle (G)(ii) of Article 21 of the Articles of Association of the second defendant respectively, provide that the directors may from time to time waive the application wholly or in part of the provisions of subarticles (B) to (H) of Article 21 of the Articles of Association of first defendant, and subarticle (B) to (G) of Article 21 of the Articles of Association of the second defendant. Subarticle (K) of Article 21 of the Articles of Association of the first defendant and subarticle (J) of Article 21 of the Articles of Association of the second defendant provide in effect that the directors may in their discretion, and without assigning any reason, refuse to register a transfer of any share to any person whom it shall be, in their opinion, undesirable in the interest of the company to admit to membership.

8 The Articles of Association of the third defendant do not contain articles similar to subarticles (B) to (H) or (K) of Article 21 of the Articles of Association of the first defendant. Rather, Article 20 of the Articles of Association of the third defendant provides in effect that upon the presentation of an instrument of transfer in any usual or common form, and such other information as the directors may properly require to show the right of the transfer or to make the transfer, the third defendant is obliged to register the transferee as a shareholder.

9 By letters dated 9 September 2003 addressed to each of the defendants, the plaintiff, by its then solicitors, provided the relevant executed standard transfer forms to each of the defendants and requested that each of the defendants register the same. By letters dated 26 September 2003 and 23 October 2003, Bentleys MRI ("Bentleys") acting on behalf of the boards of directors of each of the defendants, advised the plaintiff's solicitors in effect that they would register the transfer of the shares under certain conditions. These conditions were, first, that the plaintiff provide a statutory declaration in compliance with s 1070D of the Corporations Act, stating that the share certificates in relation to the shares had been lost. Second, that the beneficiaries of the Trust satisfied the directors of the third defendant of their compliance with obligations which arise under s 31B of the Stamp Act. Thirdly, that the plaintiff made application to the Family Court of Western Australia and obtained orders ensuring that the registration of the share transfers was not in breach of the injunction granted by Barlow J against Russell Roberts on 27 February 2003.

10 The plaintiff complied with all three of these requirements. On or about 8 October 2003 the plaintiff provided to Bentleys a statutory declaration in compliance with s 1070D of the Corporations Act, stating that the share certificates in relation to the shares had been lost. On 21 October 2003 Mark Roberts made an application to the Family Court of Western Australia and pursuant to that application, obtained orders on 24 October 2003, recognising that registration of the share transfers was not in breach of the injunction granted by Barlow J against Russell Roberts. On 8 December 2003 the plaintiff's then solicitors wrote to the Office of State Revenue seeking a determination whether the plaintiff or the beneficiaries of the Trust had complied with obligations which arise under s 31B of the Stamp Act. By letter dated 24 November 2003 the Office of State Revenue confirmed in writing that all such obligations had been met. On the same day, a copy of that letter was passed on to Bentleys. Also on the same day the plaintiff's then solicitors demanded that the defendants register the share transfer. The transfers remain unregistered.

11 It is worth pausing at this point to note just what it is that the plaintiff is seeking to achieve by this application. There is no question that the plaintiff is the proper trustee of the Trust. The plaintiff holds a valid appointment - there is no suggestion to the contrary. Yet BCH Custodians, which no longer has any connection with the Trust, remains the registered holder of the shares. Each of the defendants refuses to transfer the shares. Put in those stark terms, the position is clearly untenable, bordering on the bizarre. What then is to be done?

12 There are, I think, three relevant legal principles which provide the background for determination of this application. First, the law presumes that shares are freely transferable. This is nothing more than a manifestation of the well-established bias the law has against restrictions on the transfer of property: see New Lambton Land & Coal Co Ltd v London Bank of Australia Ltd & Ors [1904] HCA 23; (1904) 1 CLR 524 at 544.

13 Second, there may be succession to shares otherwise than by transfer from their former owners. These other types of succession are called transmission. A vesting order made under s 78 of the Trustees Act which has effect as provided by s 85 of the Trustees Act, vests ownership by operation of law and operates as a transmission and not a transfer: see Andco Nominees Pty Ltd v Lestato Pty Ltd & Ors (1995) 17 ACSR 239 at 258.

14 Thirdly, a pre-emptive rights provision or a provision conferring a discretion upon directors to refuse to register any proposed transfer of shares has no application where the transfer in question is pursuant to a vesting order under s 78 and s 85 of the Trustees Act, at least in the absence of some compelling textural indication to the contrary: see Andco Nominees (supra) at 260 - 261.

15 It would seem then that there are compelling reasons for making the orders sought by the plaintiff. There can be no question that the proper holder of the shares is the plaintiff and the orders sought are doing nothing more than regularising the position. There is no reason why the pre-emptive rights in the Articles of the first and defendant should be triggered. The position with respect to the third defendant is even more stark. There appears to be no basis whatever upon which the third defendant could refuse to make the orders sought. Yet the defendants see the matter differently. They say there are good reasons for refusing the vesting.

16 First they say that the order in its terms seeks to have the shares vested in Devin Park. Devin Park was not qualified as a trustee and to make the orders sought would be to sanction a breach of the Trust Deed. While this point is validly made, it is easily overcome. There is no reason why the vesting order should not be made in favour of the plaintiff, without the need for the shares first to be vested in Devin Park. That is the order that I propose to make.

17 Second, it is said that orders should not be made because they may affect the pre-emption rights of third parties and both those parties have not been joined in these proceedings. In my view, for the reasons set out in Andco Nominees (supra), a transmission of the type anticipated by a vesting order made under s 78 does not trigger the pre-emptive provisions in the Articles. Furthermore, each of the third parties who have not been joined are well aware of these proceedings. No purpose would be served in having them participate in the action.

18 Thirdly, it was said in relation to the first defendant, Russell Roberts had validly exercised his rights to acquire the shares owned by the Trust and presently registered in the name of BCH Custodians. That may well be the case. Indeed it was conceded by counsel for the plaintiff that if the exercise of the right was valid, then the shares may have to be retransferred from the plaintiff to Russell Roberts. But that does not provide a ground for refusing the orders sought by the plaintiff.

19 In summary then, there is no basis upon which the orders sought by the plaintiff could be refused. In my view, the appropriate order is that the shares be vested in the plaintiff. I will hear the parties as to precisely how the order ought be framed and as to costs.