Plaintiff v Second Defendant

MORTGAGES - Equitable mortgagee of shares bound by pre-emption provisions in constitution.

Hunter v Hunter [1936] AC 222; Hawks v McArthur [1951] 1 All ER 22; Coachcraft Ltd v SVP Fruit Co Ltd & Chapman [1978] VicRp 66; [1978] VR 706; Tett v Phoenix Property & Investment Co Ltd [1984] BCLC 599 and on appeal [1986] BCLC 149; Belmont Holdings Ltd v Permanent Trustee Co Ltd (1989) 7 ACLC 420; Hunters Beach Investments Pty Ltd v Braams [2001] NSWSC 577; (2001) 38 ACSR 701; Hurst v Crampton Bros (Coopers) Ltd [2002] EWHC 1375; [2003] 1 BCLC 304.

Adelaide Building Co Pty Ltd (in liq) v ABC Investments Pty Ltd (1990) 8 ACLC 445.

Introduction

1 This case concerns a company named Advanced Communications Technologies (Australia) Pty Ltd ("ACTA"). The plaintiff, Mr Rathner, is the deed administrator of that company. The first and second defendants, Mr Lindholm and Mr Georges, are the present receivers and managers of that company. ACTA owns 1,150 ordinary shares in the third defendant ("AEPL"). This represents approximately 57.5 per cent of AEPL'S capital. I will refer to these shares as "ACTA's shares in AEPL". AEPL, in turn, owns a number of shares in a listed company named Intermoco Limited ("Intermoco"). The other shareholders in AEPL, in addition to ACTA, are the fifth defendant ("Newpage") and the sixth defendant ("Springwell"). The seventh to ninth defendants are persons associated with Newpage and Springwell.

2 ACTA was a company associated with Mr Roger May and his son, Mr Jason May, who I will together refer to as "the Mays". The Mays are also associated with a company named Global Communications Technologies Pty Ltd ("Global") and with the tenth defendant. In December 2001, ACTA gave Global a debenture charge over all of its assets, including ACTA's shares in AEPL. Between 2001 and 2005 the activities of the Mays have led to the creation of a complex series of competing claims concerning ACTA's shares in AEPL. These claims have resulted in a considerable amount of litigation. A number of judgments have already been delivered, and there are several proceedings which remain pending.

3 The Mays and Global entered into a deed of company arrangement with Mr Rathner and, after allegedly defaulting under that deed, entered into a settlement deed with him on 17 August 2004, pursuant to which Global, in its capacity as mortgagee in possession of ACTA's shares in AEPL, purported to assign those shares to Mr Rathner, amongst other things. Thereafter, on 13 December 2004, Global, through its then sole director, Mr Roger May, appointed Mr Lindholm and Mr Georges as receivers and managers of all of ACTA's property. Acting under that appointment, on 16 June 2005, Mr Lindholm and Mr Georges entered into an agreement with all of the other defendants, pursuant to which, subject to a number of conditions including court approval, they purported to deal with ACTA's shares in AEPL. In this proceeding, Mr Rathner seeks relief on the basis that Mr Lindholm and Mr Georges had no right to deal with, or to purport to deal with, ACTA's shares in AEPL.

4 The issue before me is: what rights, if any, does Mr Rathner have in relation to ACTA's shares in AEPL?

5 It is impossible in this judgment to set out in any detail the labyrinth of claims and interests created by the Mays which relate to ACTA, ACTA's shares in AEPL, and AEPL's shareholding in Intermoco. In order to understand the existing dispute as to Mr Rathner's position, it is necessary to review the sequence of events to some extent. Neither the Mays nor Global are parties to this proceeding. Each of the Mays is bankrupt. Their trustee in bankruptcy was notified of the proceeding and advised that he does not wish to participate. Global is deregistered. An application to have it reinstated is one of the many pending proceedings concerning these companies.

The Relevant Events and Agreements

ACTA's Constitution and the Shareholders' Agreement

6 At all relevant times the shareholders of AEPL have been ACTA, Newpage and Springwell. One of the reasons why it is contended that Mr Rathner has no interest in ACTA's shares in AEPL is because it is alleged that the settlement deed he entered into with Global and the Mays on 17 August 2004 contravened restrictions on the disposition of ACTA's shares in AEPL contained in AEPL's constitution and in a shareholders' agreement dated 3 December 2001 between ACTA, Newpage, Springwell and AEPL ("the shareholders' agreement").

7 AEPL's constitution contains relevant provisions to the following effect:

• A member may transfer all or any of his shares by an instrument in writing; the transferor remains the holder of the shares until the transfer is registered and the name of the transferee is entered in the register of members: paragraph 22.

• An instrument of transfer, accompanied by the certificate of the shares and such other evidence as the directors may reasonably require, is to be left for registration at the registered office of the company: paragraph 23.

• The directors have a wide power to refuse registration of a transfer in the following terms:

"The directors may (except where the transfer is to a member or person selected by them) refuse to register a transfer of shares without assigning any reasons for the refusal": paragraph 24(2).

• A member may not transfer a share unless rights of pre-emption in favour of other members, in accordance with a specified procedure, have been exhausted: paragraph 25.

• A person becoming entitled to a share in consequence of the death or bankruptcy of a member may elect either to be registered as the holder of the share or nominate some other person to be registered. In either case, the directors have the same right to decline or suspend registration as they would have had in the case of a transfer by that member before death or bankruptcy, and any such transfer is subject to all the limitations, restrictions and provisions of the constitution as if the death or bankruptcy had not occurred: paragraph 28.

• The personal representative or assignee of a deceased or bankrupt member is, upon production of such evidence as is properly required by the directors, entitled to the same dividends and other advantages and to the same rights as the registered holder would have been if he had not died or become bankrupt: paragraph 28 (and see also paragraphs 108-109).

8 The shareholders' agreement contains relevant provisions to the following effect:

• The shareholders' agreement is to prevail over the constitution if there is any inconsistency: clause 2.1.1.

• Provision is made for the appointment of directors separately by the three shareholders, and certain transactions, including disposal of any asset with a value of more than $10,000, require unanimous approval: clauses 4 and 5.

• Detailed restrictions are imposed upon the "Disposal" of shares: clause 12. In this respect, clause 1 contains the following relevant definition:

"Dispose means sell, transfer or assign, and Disposal has a corresponding meaning."

• Provision is made whereby if an "Insolvency Event", which includes the appointment of a liquidator or administrator or the proposing of a deed of company arrangement, occurs in relation to a shareholder, then the other shareholders have an option to purchase at 80 per cent of valuation: clause 13.

9 Before proceeding with the sequence of events, it is necessary to note certain aspects of the combined operation of the constitution and the shareholders' agreement.

10 First, it is not an oversight that the constitution provides for the position which is to apply where a member dies or becomes bankrupt, but does not provide for a position where a corporate member is wound up. Upon bankruptcy, the property of the bankrupt vests in his or her trustee.[1] Similarly, in Victoria, the personal estate of a testate person vests forthwith at death in the person's named executor.[2] This is not the case when a company is wound up. As the High Court recently observed in Commissioner of Taxation v Linter Textiles Australia Ltd (in liq):[3]

"Long-standing Australian authority indicates that, despite the making of a winding up order, 'the company is not deprived of any ownership that it has in any assets, unless the court makes an order under s 474(2) vesting its property in the liquidator.' The company holds its property beneficially, but subject to the statutory scheme of liquidation, 'under which the liquidator is to pay creditors and distribute any surplus among members.'"[4]

11 When a shareholder dies or becomes bankrupt, the process of succession to the executor or the trustee in bankruptcy is "transmission", not transfer. On bankruptcy, the trustee in bankruptcy becomes the successor to the member. When a company is wound up, nobody else succeeds to the shares.[5]

12 Restrictions on the "transfer" of shares in articles of association have been held not to apply to the transmission of shares as a consequence of bankruptcy.[6] Thus, if it is intended to impose restrictions on the registration of a person who succeeds to a member's share by operation of law as executor or trustee in bankruptcy, then a provision in addition to a provision restricting "transfer" is required.[7]

13 This is no doubt why the constitution of AEPL contains the provisions which it does concerning death and bankruptcy, but contains no similar provision concerning winding up. Separate provision is made for death and bankruptcy because otherwise the provisions dealing with "transfer" would not apply, as there would be no "transfer" but instead a "transmission". No provision is made for winding up because in that eventuality there is neither a "transfer" nor a "transmission".

14 A trustee in bankruptcy might wish to be registered and if he or she does, then restrictions on transfer contained in the constitution will apply. However, the securities vest in the trustee in equity whether the trustee obtains registration or not.[8] AEPL's constitution reflects that position by its express terms in paras 28 and 108-109.

15 Although the matter was not argued before me, it seems to me that the position described in relation to winding up would equally apply to administration. Whether that position applies to a company under a deed of company arrangement will depend on the terms of the deed.

The Global Charge

16 By a debenture charge dated 21 December 2001 ("the Global charge"), ACTA (misnamed at one point as "the Mortgagee") charged in favour of Global (similarly misnamed at one point as "the Mortgagor") the whole of its undertaking and all of its assets. The Global charge is a fixed charge in relation to certain specified assets and a floating charge in relation to all other assets. ACTA's shares in AEPL were the subject of the floating charge. The floating charge automatically becomes fixed "at the moment immediately prior to the happening of an event which provides the Mortgagee with the right to enforce this Debenture."[9] The Global charge constitutes an equitable mortgage over ACTA's shares in AEPL. ACTA remained the registered member of AEPL.

17 The shareholders' agreement contains a restriction on the creation of a "Security Interest" over shares in AEPL without the consent of the other shareholders. Counsel for Newpage and Springwell in the proceeding before me told me that there is no issue raised as to the absence of that consent. I accordingly proceed on the basis that the Global charge was properly given by ACTA over ACTA's shares in AEPL.

18 It is again necessary to pause to observe that restrictions on transfer contained in a corporate constitution apply to the mortgagee where a shareholder creates an equitable mortgage over the shares it holds. The mortgagee can receive no more as security than the mortgagor has to transfer; restrictions on the transferability of the shares are an incident of the shares themselves.[10] It is unnecessary in this case to determine whether the mortgagee is bound by both the provisions of the constitution and the provisions of the shareholders' agreement as the relevant transaction, if properly characterised as a "transfer" or "Disposal", does not comply with either set of restrictions.

Events in 2002: the DCT Proceeding, Administration and Receivership, Sale to Asia Infotech

19 On 15 July 2002, the Deputy Commissioner of Taxation ("DCT") filed an application to wind up ACTA based upon non-compliance with a statutory demand. The amount demanded was $1,568,853.32. On the same day, the DCT applied for urgent injunctions restraining ACTA from dealing with its assets. On the next day, 16 July 2002, the DCT filed a writ instituting proceeding no. 6401 of 2002 against ACTA and another company, seeking injunctions in relation to the disposition of ACTA's assets.

20 On 18 July 2002, the plaintiff, Mr Rathner, was appointed administrator of ACTA by the Mays, as directors of ACTA. On 29 July 2002, the Mays, as directors of Global, appointed Mr David Lockwood and Mr Kenneth Sellers as receivers and managers of the whole of the property of ACTA under and pursuant to the Global charge. In accordance with the usual practice, the appointment provided that they were to act as agents of ACTA.

21 In August 2002, Mr Lockwood and Mr Sellers were joined as defendants to the DCT's proceeding (6401 of 2002), and Hansen J made orders providing for exceptions to certain injunctions that had been granted so as to enable them to advertise and begin negotiations for the sale of ACTA's assets.

22 In late August 2002, Mr Lockwood and Mr Sellers obtained further specific exceptions to the injunctions, permitting them to sell ACTA's shares in AEPL to a company named Asia Infotech Pte Ltd ("Asia Infotech") pursuant to a sale deed dated 27 August 2002 ("the sale deed"). That sale was for the sum of $6m payable by instalments. It was subject to four conditions precedent being, in brief summary, approval by the Supreme Court, approval by the shareholders of Intermoco, exemption or approval from the ASX, and written consent of all parties to the shareholders' agreement. The sale deed provided that if the conditions precedent were not satisfied by 31 January 2003, either party might terminate the deed. It also provided that if the conditions precedent were not satisfied, or if completion did not occur for any reason, then any money paid by Asia Infotech would be retained by ACTA and the receivers and managers.

23 The DCT's proceeding to restrain disposition of ACTA's assets (6401 of 2002), and its winding up proceeding, were the subject of a deed of settlement entered into between the DCT, ACTA, Global, Mr Lockwood and Mr Sellers, the Mays and another party dated 13 September 2002. This deed provided for payments by Global totalling $1,750,000. The deed also provided that Mr Rathner, the administrator of ACTA at that time, would be at liberty to convene a second meeting of creditors, and that, subject to the proposed deed of company arrangement being in satisfactory form, the DCT would vote in favour of that deed. The DCT's two proceedings were to be adjourned to a date to be fixed.

24 By the middle of September 2002, the condition precedent in the sale deed requiring approval by the Supreme Court had been satisfied, and certain amendments had been made to the sale deed which had been approved by the Court.[11] Payments were made by Asia Infotech pursuant to the sale deed, and by the end of October 2002, those payments totalled $3m.[12]

25 On 26 September 2002, the creditors of ACTA resolved that the company execute a deed of company arrangement. A deed was duly prepared and was executed by Mr Rathner, ACTA, Global and the Mays. It is dated 17 October 2002.

The Provisions of the Deed of Company Arrangement

26 In substance, the deed of company arrangement ("DoCA") provides for the creation of a fund of $3.25m, together with certain other receipts, for the purpose of meeting the claims of the administrator, the deed administrator, priority debts and participating unsecured claims. The DoCA provides that subject to the receivership, control and management of ACTA would revert to the directors upon execution of the deed.

27 Clause 3 of the DoCA provides:

"AGENT OF COMPANY

In exercising the powers conferred by this Deed and carrying out the duties arising under this Deed, the Deed Administrator is taken to act for and on behalf of ACTA as the duly authorised agent of ACTA. This clause 3 constitutes sufficient evidence of the Deed Administrator's appointment as the agent of ACTA for the purposes of this Deed."

"Powers

For the purposes of administering this Deed, the Deed Administrator has and may exercise:

(a) the powers given to an administrator under Part 5.3A of the Act;

(b) the powers specified in clause 2 (but excluding 2(a), (b), (c), (h), (i), (z), (za) and (zb)) of Schedule 8A to the Regulations; and

(c) the powers specified in clauses 6.6 and 6.7."

29 The "Deed Administrator" is Mr Rathner.

30 Further provision is made in relation to Mr Rathner's powers in the following terms:

During the Deed Period and for the purposes of implementing this Deed, the Deed Administrator will have the rights, powers, privileges, authorities and discretions conferred on the directors of ACTA under any Governing Act or otherwise to the exclusion of ACTA's directors provided that nothing herein will derogate from, effect or relieve ACTA's directors from their legal obligations whether under the Act or otherwise.

The Deed Administrator will have the power to compromise any disputes that have or may arise in relation to or are in any way connected with the administration of the Deed, provided that any dispute about amounts of debts claimed and approved are also reviewed by the Committee of Inspection ..."

31 The provision concerning the establishment of the fund (clause 7) originally provided:

"The Fund will be established by the Deed Administrator and will comprise the as [sic] following amounts from the following sources:

(a) the Directors and Global must cause to be paid to the Deed Administrator $3.25 million on or before 28 February 2003, of which a minimum of $2.45 million must be received from the proceeds of the Sale of Shares ..."

32 The "Directors" are the Mays. The "Sale of Shares" was originally defined as being "the sale of the Shares pursuant to the Sale Deed". The "Sale Deed" is defined as the Sale Deed with Asia Infotech dated 27 August 2002. By an order later made by Hansen J, for reasons which will become apparent, the definition of "Sale of Shares" in the DoCA was varied so as to remove the phrase "pursuant to the Sale Deed". Subsequent orders of Hansen J varied the date provided for for the payment of the $3.25m.

33 The DoCA ends upon the third anniversary of the date of its execution unless prior to that date certain events occur, none of which have yet occurred.

34 On 30 November 2002, Mr Sellers resigned as receiver and manager of ACTA. Mr Lockwood continued on alone.

35 By 31 January 2003, all of the conditions precedent in the sale deed had not been satisfied.[13] On 1 February 2003, Mr Lockwood served notice of termination on Asia Infotech. He then filed a summons for directions in the DCT's proceeding no. 6401 of 2002. Asia Infotech issued its own proceeding, no. 4542 of 2003. It was consequent upon these developments that Hansen J made the orders varying the DoCA to which I previously referred.

36 The Asia Infotech proceeding (4542 of 2003) became divided into two parts. One part concerned Asia Infotech's claim for recovery of the $3m which it had paid under the sale deed. This claim was determined against Asia Infotech by Hansen J on 16 December 2003.[14] In the other part of the proceeding, counterclaims were filed by ACTA against parties including Newpage, and Newpage, in turn, filed a counterclaim against ACTA. This part of the proceeding was settled by a deed of settlement of 22 May 2003.[15]

The May 2003 Settlement Deed

37 The parties to the 22 May 2003 settlement deed include ACTA, Newpage, Springwell, Global and Mr Lockwood. Pursuant to the terms of that deed, it was agreed that AEPL would implement a selective capital reduction, whereby a number of the Intermoco shares owned by AEPL would be distributed to ACTA and ACTA's shares in AEPL would be cancelled.

38 One of the still pending proceedings, to which I referred earlier, concerns the validity, or the continuing validity, of this 22 May 2003 deed of settlement. Issues concerning the May 2003 settlement are also raised by the defence of the fifth to ninth defendants in this proceeding. At the request of all represented parties, I made an order at the commencement of this trial deferring the trial of those issues. The reason this matter was deferred is because the agreement entered into by Mr Lindholm, Mr Georges and others on 16 June 2005 would, if it were to become effective, resolve the proceeding concerning the May 2003 settlement. Before me all represented parties submitted that it was undesirable to agitate those issues in this proceeding until there had been a determination of whether Mr Rathner should fail to obtain the relief he seeks for reasons other than reasons related to the May 2003 settlement.

39 Mr Rathner is not a party to the May 2003 settlement. On the hearing of this proceeding, his counsel advised that Mr Rathner accepts that he is bound by whatever valid and subsisting obligations ACTA is under pursuant to the May 2003 settlement deed, without making any concession as to what those obligations (if any) might be.

Proceedings by Mr Rathner against Global and the Mays

40 On 10 September 2003, Mr Rathner filed a summons seeking a direction in relation to a proposal that he enter into a litigation funding agreement for the purpose of suing Global and the Mays for default in their obligation pursuant to clause 7(a) of the DoCA, whereby they had agreed to cause to be paid to Mr Rathner the sum of $3.25m. The provision had originally required that payment be made by 28 February 2003. Orders made by Hansen J had extended the date to 4 July 2003. By 10 September 2003, the payment had not been made. The directions application concerning the proposed proceeding against Global and the Mays was opposed by Global and the Mays. Hansen J gave judgment in that matter on 15 October 2003.[16] The foreshadowed defence to the proposed proceeding was that the DoCA did not reflect the true agreement that had been made, as set out in the summary of the proposed terms upon which creditors had voted, in that it was never intended that Global and the Mays would undertake personal liability to make the payment. It was foreshadowed that rectification of the DoCA would be sought. Hansen J gave the direction that Mr Rathner sought.

41 On 14 November 2003, Mr Rathner commenced Supreme Court proceeding no. 8822 of 2003 against Global and the Mays, claiming against each of them payment of the sum of $3.25m.

42 On 5 April 2004, Global revoked the appointment of Mr Lockwood as receiver and manager of ACTA, and on 14 April 2004 Mr Roger May was appointed "Managing Controller" of ACTA. The material before me does not indicate whether Mr Roger May was appointed as a receiver or as an agent for the mortgagee.

43 Mr Rathner's proceeding against Global and the Mays was fixed for hearing on 17 August 2004. On the morning of the hearing, a settlement deed was entered into between Mr Rathner, Global and the Mays. On the hearing before me, I was told that the solicitors for Global and the Mays had withdrawn shortly prior to the trial and that the deed of settlement was drawn by Mr Rathner's solicitor.

The Deed of Settlement of 17 August 2004

44 The deed of settlement recites Mr Rathner's appointment as administrator, execution of the DoCA and the provisions of clause 7(a), Mr Rathner's commencement of the proceeding against Global and the Mays, Mr Roger May's appointment as "Managing Controller", and finally recites:

"J. Pursuant to the Charge, Global has agreed to assign the AEPL Shares to Rathner, and the parties have otherwise agreed to settle the Proceeding on the terms and conditions specified in this Deed."

45 There is a definitions section. Two of the definitions are as follows:

"ACTA's Intermoco Shares means the shares in Intermoco to which ACTA is beneficially entitled in its capacity as owner of the AEPL shares."

"AEPL Shares means the 1150 shares in AEPL held by ACTA which comprise 57.5% of the issued share capital of AEPL."

46 The definition of "ACTA's Intermoco Shares" appears misconceived, but its terms are perhaps explicable by the terms of the May 2003 settlement deed, providing, as it did, for a selective capital reduction resulting in the cancellation of ACTA's shares in AEPL and the distribution to ACTA of Intermoco shares owned by AEPL.

47 It is necessary to set out certain provisions of the settlement deed in full.

48 Clause 2 provides:

2.1 In consideration for Rathner's agreement to settle the Proceeding and to enter into this deed, Global in its capacity as mortgagee in possession of the AEPL Shares and acting pursuant to the Charge agrees to assign the AEPL Shares to Rathner subject at all times to clause 3.

2.2 The parties acknowledge and agree that as the owner of the AEPL Shares Rathner will be entitled to ACTA's Intermoco Shares, and the parties must do all things necessary to enable Rathner to take possession of ACTA's Intermoco Shares by 17 February 2005.

2.3 If Rathner has not taken possession of ACTA's Intermoco Shares by 17 February 2005 clause 8 will apply."

"3.1 Rathner must assign and deliver to Global any of ACTA's Intermoco Shares in excess of 75 million shares (subject at all times to Rathner's right to retain any such shares to meet any tax or charge relating to or arising out of his realisation of 75 million of ACTA's Intermoco Shares)."

"At Settlement:

(a) the parties must exchange executed parts of this deed; and

(b) RM and Global must deliver to Rathner an executed share transfer form in favour of Rathner, and forthwith thereafter the share certificates in relation to the AEPL Shares."

"RM" is Mr Roger May.

51 Clauses 5.4 and 6.1 of the deed provide that the parties agree to vary clause 7(a) of the DoCA so as to "provide for the establishment of the Fund in the manner contemplated by this deed."

52 Clause 8.1 of the deed provides:

"If:

(a) RM, JM or Global default in their obligations under this deed; or

(b) Rathner has not obtained possession of ACTA's Intermoco Shares by 17 February 2005

each of RM, JM and Global consent to judgment being entered against each of them by Rathner for

(i) $3.25m (three million two hundred and fifty thousand dollars); ...

[together with certain specified costs and interests]."

53 Mr Roger May did execute and deliver to Mr Rathner a share transfer form. The form names the transferor as:

"Global Communications Technologies Pty Ltd as mortgagee in possession of the securities pursuant to a debenture charge dated 21 December 2001."

"Gideon Isaac Rathner in his capacity as deed administrator of the deed of company arrangement of Advanced Communications Technologies (Australia) Pty Ltd dated 17 October 2002."

55 Global has affixed its common seal to the form as transferor, and this seal is attested to by Mr Roger May. Mr Rathner has executed as transferee "in accordance with s 127 of the Corporations Act." The reference to s 127 suggests that Mr Rathner's execution was on behalf of a company, although no company is specified. If his execution was on behalf of a company, it could only be on behalf of ACTA.

Steps Consequent Upon Settlement

56 Mr Rathner attempted to have the transfer registered by forwarding the executed transfer form to the secretary of AEPL. In the covering letter he described the transfer as being to him "in my capacity as Deed Administrator of Advanced Communications Technologies (Australia) Pty Ltd." Mr Rathner did not have the share certificate or certificates. This is because they are held by Mr Lockwood's then firm, Horwath Chartered Accountants. Horwath's solicitors asserted an equitable lien over the assets of ACTA and a possessory lien over the share script for unpaid remuneration and expenses incurred by Mr Lockwood in the course of the receivership. Horwath's solicitors insisted that the transfer not be registered. It never has been registered.

Appointment of Mr Lindholm and Mr Georges and the Agreement of 16 June 2005

57 By a deed of appointment dated 13 December 2004, Global appointed Mr Lindholm and Mr Georges, of the firm Ferrier Hodgson, as receivers and managers of the assets charged under the Global charge.

58 In that capacity, and in spite of the protestations of Mr Rathner, they proceeded to engage in negotiations with Newpage and Springwell and various other parties with a view to settling the disputes and claims which concern those parties. One of those disputes concerns the continuing validity of the settlement deed of 22 May 2003 providing for the selective capital reduction.

59 On 16 June 2005, Mr Lindholm and Mr Georges entered into an agreement with the other defendants to this proceeding, to which Mr Rathner is not a party. Amongst other things that agreement purports to deal (subject to court approval) with ACTA's shares in AEPL. Mr Rathner contends that Mr Lindholm and Mr Georges had no power to deal in any way with ACTA's shares in AEPL given his rights under the settlement deed of 17 August 2004.

The Claims Made and the Defences Raised

60 The plaintiff's pleading alleges a "trust in respect of the Intermoco shares in favour of the Plaintiff" by virtue of the provisions of the DoCA and the principles set out in Dean-Willcocks v ACG Engineering Pty Ltd (in liq).[17] It also alleges that, as a consequence of the settlement deed of 17 August 2004, ACTA's shares in AEPL have been "released from the operation of the Charge and/or are impressed with a trust in favour of Rathner in his capacity as administrator of the DoCA". In the particulars, reference is again made to the Dean-Willcocks v ACG Engineering Pty Ltd (in liq) decision.

61 In submissions it was not contended by Mr Rathner's counsel that the DoCA itself created a trust. Mr Sifris SC described the DoCA as creating the "infrastructure" for the eventual creation of a trust, which he submitted arose as a result of the settlement deed. The submission was as follows:

1. As a matter of contract, Global agreed to pass over control of ACTA's shares in AEPL to Rathner as agent for ACTA.

2. In doing that, a trust was created over the equitable interest in ACTA's shares in AEPL which Global held. The trustee is Rathner in his capacity as deed administrator and agent for ACTA and the beneficiaries are the deed creditors.

The plaintiff submitted that there was no "assignment" as the shares remained at all times with ACTA; all that happened was that control changed from ACTA's mortgagee to ACTA's agent, the deed administrator.

62 The represented defendants contended that the settlement deed of 17 August 2004 did not confer on Mr Rathner any relevant or subsisting interest in, or control over, ACTA's shares in AEPL. They contended that this was so because the settlement deed purported to do something which simply could not be done by either party. Mr Roger May and Global could not "assign" ACTA's shares in AEPL to Mr Rathner because they did not have the share script, it being held by Mr Lockwood's firm under the asserted lien, and because any such assignment would breach the transfer provisions of the constitution and the shareholders' agreement, and would be inconsistent with the 22 May 2003 settlement deed. This latter issue was deferred. They also submitted that Mr Rathner had no power under the DoCA to enter into a transaction under which he took an assignment of ACTA's shares in AEPL. They referred to the specific exclusions in clause 4.1(b) of the DoCA.

63 The represented defendants submitted that the plaintiff was attempting to re-write the settlement deed by characterising it as a "change of control" rather than as a purported assignment. They submitted that the words used were words of assignment. They suggested that the plaintiff now characterised the transaction as a change in control to avoid the inevitable consequence that an assignment would be inconsistent with the terms of the constitution and the shareholders' agreement.

64 The represented defendants also submitted that in the event of non-compliance with the settlement deed, the only remedy Mr Rathner had was that provided for in clause 8. They submitted that when 17 February 2005 passed without Mr Rathner obtaining possession of ACTA's Intermoco shares, his only right was to seek judgment relying upon the consent to judgment contained in clause 8.

65 Other matters were also raised in detailed written and oral submissions.

Issues of Power, Construction of the Settlement Deed, and Other Defences

66 Some of the objections raised in answer to Mr Rathner's claims can be dealt with briefly.

67 It seems to me that there is nothing in the submission that Mr Rathner did not have power to enter into the settlement deed of 17 August 2004. The powers provided to him in clause 4.1(a), and in clause 4.1(c) incorporating clauses 6.6 and 6.7, are very wide. In my view, he was empowered to take proceedings to enforce the provisions of the DoCA, and it was not suggested before Hansen J, when that proposed proceeding was the subject of the contested directions application, that there was no power to take enforcement proceedings. Mr Rathner was also, in my view, empowered to compromise those proceedings. The fact that as a result of the compromise, amendment of the DoCA was envisaged and perhaps required, does not seem to me to mean that he had no power to seek to enforce the DoCA's terms and to then settle the dispute which arose in consequence.

68 I also reject the suggestion that Mr Rathner's only remedy is to rely on clause 8 of the settlement deed. Whilst it is true that clause 2.3 provides that if he has not taken possession of ACTA's Intermoco shares by 17 February 2005 "clause 8 will apply", all clause 8 does is to provide for a consent to judgment. It does not impose upon Mr Rathner an obligation to seek that judgment in preference to any other course that might commend itself to him. Further, the language of clause 2.1 is present and immediate. I cannot see that clause 8, constituting a consent to judgment, has the effect of abrogating clause 2.1 (whatever its effect) once 17 February 2005 passes.

69 It was suggested that this construction creates an anomaly in that Mr Rathner might obtain both ACTA's shares in AEPL, under clause 2.1, and a judgment for $3.25m plus interest and costs, under clause 8.1. It does not seem to me that this is a result so anomalous as to require a construction of clause 2.1 which is inconsistent with its express terms. It may be that if Mr Rathner recovered in excess of $3.25m in total there would be some obligation to account in equity. It is unnecessary to decide that issue; Mr Rathner has not sought judgment and has not obtained judgment. He does seek to enforce the rights which he says he obtained pursuant to clause 2.1.

70 Clause 2.1 is expressed to be "subject at all times to clause 3". Clause 3 requires Mr Rathner to return any of ACTA's Intermoco shares in excess of 75 million which he receives. It was suggested in argument on behalf of Mr Lindholm and Mr Georges that this indicated that clause 2.1 was not intended to have immediate operation. I do not agree. Clause 3 is a claw-back provision consequent upon the prior operation of clause 2.1.

71 Finally, I do not consider that there is any substance in the objection based upon the fact that the firm Horwath holds the share certificates and are claiming a lien. On no basis could it be concluded that there has been an assignment at law to Mr Rathner which is effective. There is no reason why an equitable assignment cannot occur, and be given effect to, subject to an existing lien.[18]

"Change in Control" or "Assignment"

72 Clause 2.1 of the settlement deed of 17 August 2004 is expressed as an agreement to assign. The assignment is expressed to be to Mr Rathner. Clause 2.2 addresses the position of Mr Rathner "as the owner of the AEPL Shares". Clause 4.1(b) requires Mr Roger May and Global to deliver to Mr Rather an executed share transfer form "in favour of Rathner", together with the share certificates in relation to ACTA's shares in AEPL.

73 The transaction so provided for, however it might be characterised, is not "transmission", nor is it merely providing for a position such as arises as the ordinary consequence of corporate liquidation, as discussed above.

74 Counsel for Mr Rathner submitted that as Mr Rathner was at all times acting as agent for ACTA, under clause 3 of the DoCA, and was dealing with ACTA's mortgagee, under the Global charge, what was agreed was no more than a "change in control". Mr Rathner's counsel submitted that use of the term "assign" was not a good choice of words.

75 Paragraph 25 of the AEPL constitution provides that a member "may not transfer a share" unless the pre-emptive rights provisions have been complied with. The shareholders' agreement prohibits any "Disposal" otherwise than as provided for, which expression is defined to mean "sell, transfer or assign". The restrictions in the shareholders' agreement seem to me to be the applicable restrictions, but it is of no consequence, as if either applied there was contravention.

76 I do not accept Mr Rathner's position on this issue. I reject the submission that the settlement deed merely provides for a "change in control". The word used in clause 2.1 is "assign". The word used in clause 2.2 is "owner". A transfer is required in favour of Mr Rathner under clause 4.1. In my view, the intention of the parties was to assign the entire legal and equitable interest in ACTA's shares in AEPL to Mr Rathner. It is true that he was to hold them in his capacity as deed administrator, and it is true that as such, the DoCA provided that he was acting as ACTA's agent, but if this transaction had proceeded as provided for in the settlement deed, the shareholder of AEPL would have become Mr Rathner himself. What was agreed to be done was an assignment to Mr Rathner, just as the deed says. The assignment and the transfer provided for in the settlement deed contravened the provisions of the constitution and the shareholders' agreement.

77 This is not the end of the matter, however. Generally, the represented defendants proceeded on the basis that any assignment or transfer in contravention of the constitution and the shareholders' agreement was necessarily entirely void. The trend of modern authorities is against that approach.

Status of an Agreement to Transfer in Contravention of Pre-emptive Rights

78 The authority sometimes relied upon in support of the proposition that a purported transfer in contravention of pre-emptive rights is ineffective to transfer any relevant interest to the transferee is the decision of the House of Lords in Hunter v Hunter.[19]

79 Hunter v Hunter is a difficult case. The facts are complicated. At the risk of over-simplifying the issues, I will attempt a summary. The proceeding involved two transactions by a bank holding an equitable mortgage over certain shares which were the subject of pre-emptive rights provisions in the company's articles. In the first transaction, the bank, as mortgagee, had obtained registration of its nominees, which was held to have occurred in contravention of the pre-emption provisions in the articles. In the second transaction, the bank had then sold the relevant shares in circumstances held to have been in compliance with the pre-emption provisions in the articles. There were two proceedings. In one, certain shareholders sought to rectify the register consequent upon the wrongful registration of the bank's nominees. The shareholders succeeded and there was no appeal to the House of Lords. In the second action, the mortgagor claimed to be entitled to redeem notwithstanding the sale by the bank to a purchaser in accordance with the pre-emption provisions. The Court of Appeal ordered that upon the mortgagor being restored to the register, he should execute a declaration of trust in favour of the bank and the bank's purchaser. On appeal, the House of Lords overturned this decision. The judgments are not uniform in their reasoning, but they do support the proposition that in the complex facts of that case no equitable estate passed to the purchaser from the bank. Hunter v Hunter is an authority often distinguished and confined to its own facts.

80 It was distinguished by Vaisey J in 1950 in Hawks v McArthur.[20] In that case, the shareholder, Mr McArthur, had sold his shares to persons named Mr Fraser and Mr Roberts in contravention of pre-emption provisions in the company's articles. Because of the contravention, the transfer was never registered, although Mr Fraser and Mr Roberts paid Mr McArthur the full purchase price. Mr Hawks was a judgment creditor of Mr McArthur. Mr Hawks sought to execute on the shares still registered in Mr McArthur's name. Vaisey J held that he could not have this relief as the equitable title in the shares was in Mr Fraser and Mr Roberts. Vaisey J said:

"On general principles, in such circumstances as those of the present case where a man who has an interest in shares in a company receives something for the sale of those shares and executes under seal a transfer of those shares for that purpose, I cannot bring myself to suppose that Hunter v Hunter constrains me to hold that everything done in that transaction is a complete nullity."[21]

81 As to the nature of the interest held by Mr Roberts and Mr Fraser, Vaisey J said:

"Admittedly, Mr McArthur is still the legal owner of the shares. Admittedly, the plaintiff's rights under this charging order are in the nature of equitable rights. And admittedly, the rights of Mr Roberts and Mr Fraser, if they have any rights, are also equitable rights. As I have come to the conclusion that Mr Roberts and Mr Fraser have some rights and that what they did was not a complete nullity, the question is whose rights should prevail."[22]

82 Vaisey J then held that Mr Roberts and Mr Fraser's rights had to prevail as their equitable rights were first in time. It is worth emphasising that the competition here was not between the purchasers and the shareholders, but between the purchasers and a subsequent judgment creditor of the vendor.

83 Hawks v McArthur was followed in 1978 by Menhennit J in this Court in Coachcraft Ltd v SVP Fruit Co Ltd & Chapman.[23] This case concerned a provision in the articles of a company prohibiting members from holding more than a specified number of shares. The plaintiff entered into arrangements to purchase shares in excess of the specified limit and sought to circumvent the prohibition by relying on powers of attorney which appointed proxies and provided for other matters having the effect of giving to the plaintiff the benefit of the rights attaching to the shares. Menhennit J held that these arrangements did contravene the articles.

84 As to the effect of that contravention, Menhennit J said:

"The authorities appear to me to establish that the contravention of an article of association of a company such as article 6 and the implications thereof does not invalidate totally what is done but does no more than invalidate what is done as against the company and, it may be, its directors and members; it does not produce total invalidity as between a shareholder and a purchaser."[24]

85 Menhennit J then referred to the fact that in the case before him there was no formal transfer, but rather a sale without transfer and reliance upon the powers of attorney. He then said:

"Further, the authorities appear to me to establish that, if the sale itself is in contravention of such an article and its implications, the most that is produced is invalidity, as against the company, of the sale and its effects, but not invalidity as between the shareholder and the purchaser."[25]

86 The particular matter which Menhennit J was called upon to decide was the validity of a resolution which had been passed after the chairman of the company had disallowed proxy votes cast by persons associated with the plaintiff relying upon the powers of attorney. Thus, before Menhennit J the position between the selling shareholders and the purchaser did not directly arise. Nevertheless, Menhennit J made the observations quoted and further observed that, in his view, Hawks v McArthur was "direct authority" for the proposition that a transfer in contravention of a pre-emption provision gave the purchaser "beneficial rights to the shares as against third persons".[26] He referred to Hunter v Hunter and to another decision of the House of Lords in Lyle & Scott Ltd v Scott's Trustee,[27] and said that cases about pre-emption provisions could be "sui generis".[28] The provision in Coachcraft was not a pre-emption provision.

87 The issue arose again in the United Kingdom in 1984 before Vinelott J in Tett v Phoenix Property & Investment Co.[29] In that case the executors of the estate of a shareholder sold shares to the plaintiff. It was alleged that in doing so they had contravened pre-emptive rights provided for in the company's articles. A substantive issue at first instance before Vinelott J, and later on appeal, concerned construction of the articles and whether there had been a contravention in the events which occurred. The proceeding was brought by the purchaser, Mr Tett, seeking a declaration that the transfer was valid and seeking an order directing the directors of the company to enter his name on the company's register. One argument put at first instance on behalf of the company and its directors was that a transfer in breach of the articles was wholly void and conferred no rights upon the plaintiff at all. In this respect reliance was placed on Hunter v Hunter. Vinelott J reviewed the judgments in Hunter v Hunter and eventually concluded that in the light of the particular facts of Hunter v Hunter, the decision did not support the defendants' contention. Vinelott J cited with approval Vaisey J's decision in Hawks v McArthur and concluded as follows:

"The true position in my judgment is that the transfer of 26 February 1982 was a complete and effective transfer as between Marjorie's executors and the plaintiff, though to adopt the language of Stirling J in Roots v Williamson (1888) 38 ChD 485 it was inchoate until registered and did not constitute the plaintiff the legal owner of the shares."[30]

88 The matter went on appeal.[31] Vinelott J's conclusions concerning Hunter v Hunter and the effect of the transfer were not challenged on appeal. Nevertheless, Slade LJ referred to them, quoting the above passage, and recording the defendants' abandonment of the point. Slade LJ went further, and, after referring to the executors' entitlement to be registered, said:

"If and when the executors were so to be registered, they would presumably hold the 90 shares as bare trustee for the plaintiff, to whom the beneficial interest in the shares has passed by virtue of his contract of sale and purchase and the payment of the purchase consideration; the plaintiff would be entitled to direct them how to deal for his own benefit with any rights attaching to the shares."[32]

89 Robert Goff LJ referred to the rejection of the argument based on Hunter v Hunter and to the fact that the issue was not pursued.[33] Sir John Megaw did not refer to the matter.

90 Vinelott J's decision in Tett prompted an academic exchange in the Journal of Business Law between Borrowdale and Luxton.[34] The substance of the matter in contention was whether the decision in Tett was consistent with what Borrowdale asserted to be a "test" for the transfer of equitable title in shares that the purchaser must have a claim that would entitle it to specific performance. Submissions were made on behalf of the fifth to ninth defendants before me to the same effect.

91 The first point to be made in relation to the controversy is that the contention that an equitable interest can only pass where specific performance would be granted is not consistent with the authorities. Borrowdale considers that Hawks v McArthur and Tett at first instance were wrongly decided (although he characterises Hawks v McArthur as being vague).

92 It should be noted that Borrowdale does not see the requirement that the transaction be specifically enforceable as meaning that the purchaser obtains no rights at all. At one point he observes:

"Importantly, the finding that the transaction is not invalid for all purposes as between seller and purchaser does not bear the necessary consequence that it is specifically enforceable; rather, it means that the purchaser is not wholly without remedies. In Coachcraft Ltd v SVP Fruit Co Ltd Menhennit J stated the seller would 'be bound to account to [the purchaser] for any payments received in respect of such shares as dividends or a return of capital pursuant to a reduction of capital or a distribution of a company's property among members upon a winding-up.'"[35]

93 Luxton's responding article makes, it seems to me, a cogent case against the proposition put forward by Borrowdale. For present purposes, it is sufficient to observe that the authorities do not support the Borrowdale approach.

94 An important principle that does emerge from the authorities, and which concerns the position of other shareholders, is highlighted by Luxton where he observes:

"In each case the issue is not whether C [the purchaser] obtains an equitable interest, but whether the interest he acquires is subject to, or has priority over, the interest of B [the other shareholders]. It was this issue of relativity of rights which fell for discussion in Tett v Phoenix Property and Assurance Co Ltd. There Vinelott J took the view that the rights of pre-emption in the articles matured, upon a dealing by a member in breach, into an enforceable option to purchase in equity; a principle consistent, as Borrowdale points out, with recent trends in land law. The issue was thus correctly characterised as one of priority between the rights of the remaining members and the rights of the purchaser."[36]

95 Luxton also observes that it cannot be the case that a vendor who transfers in breach of a pre-emption provision should be at liberty to ignore the agreement he entered into with the purchaser. Whilst the purchaser may rescind, the vendor, by contrast, should be estopped from using the defect in his title to escape from his contract with the purchaser.[37]

96 Whilst this academic exchange was occurring, Needham J, in the Equity Division of the Supreme Court of New South Wales, considered the issue in Belmont Holdings Ltd v Permanent Trustee Co Ltd.[38] In that case, shares had been sold ignoring rights of pre-emption in the articles. The purchaser could not be registered. The shares were then sold pursuant to the articles. Needham J held that the vendor could not re-sell the shares and simply return to the first purchaser that purchaser's purchase money. He held that the vendor was not entitled to terminate the contract with the first purchaser, and that the vendor held the proceeds of the second sale (which was in accordance with the pre-emption provisions) upon trust for the first purchaser.

97 The authorities to which I have referred were considered again in New South Wales, in a different context, by Young CJ in Equity in Hunters Beach Investments Pty Ltd v Braams.[39] That case concerned a unit trust. One issue raised was how certain "investments" made before the trust deed was executed and the unit trust constituted should be characterised. The plaintiff argued that they should be characterised as funds held on the terms of the eventual trust deed. The defendant argued that they were unsecured loans. The plaintiff called in aid the decisions in Hawks v McArthur, Coachcraft and Tett at first instance, and the defendant relied upon Hunter v Hunter. It is not clear to me why these authorities were seen to be relevant. For present purposes I merely note that Young CJ rejected the defendant's argument based on Hunter v Hunter, observing:

"I am of the view that the line of cases commencing with Hawks means that I should not accept this proposition."[40]

98 A similar conclusion to that reached by Needham J in Belmont Holdings has been recently reached in the United Kingdom in Hurst v Crampton Bros (Coopers) Ltd.[41] That case concerned a transfer in breach of the articles. The transferee was referred to as "Harry". Jacob J held that, notwithstanding the transfer in contravention of the articles:

"what Harry got was not an entitlement to the shares but only to the price paid if a right of pre-emption were exercised."[42]

99 Both Halsbury's Laws of Australia[43] and Ford's Principles of Corporations Law[44] cite the decision in Belmont Holdings. Halsbury's Laws of Australia cites Belmont Holdings as establishing the following proposition:

"Where the purchaser is unable to be registered, the member will hold the legal title to the shares on trust for the purchaser. Accordingly, if the member subsequently complies with the pre-emption clause by selling the shares to other members, the member holds the proceeds of those shares on trust for the original purchaser."

100 Ford's Principles of Corporations Law refers to the possibility that the contravening sale might be characterised as being conditional upon a transfer, and then observe, relying on Belmont Holdings:

"In the absence of the condition the seller is a trustee for the original buyer and is accountable to the original buyer for the higher purchase price paid by the later buyer."

101 The applicable principles to be drawn from this review of the relevant authorities and other materials are the following:

1. A sale and transfer in contravention of pre-emption provisions in a company's constitution is not a complete nullity.

2. The purchaser under such a sale and transfer has no rights as against the company.

3. Such a purchaser does have equitable proprietary rights which bind the vendor of the shares. If the vendor receives a higher purchase price as a result of compliance with the pre-emption provisions, or receives dividends, or the proceeds of a capital reduction, it is liable to account to the purchaser.

4. The purchaser's equitable proprietary rights may come into conflict with the rights of shareholders other than the vendor. In so far as such a conflict is between other shareholders wishing to enforce the rights of pre-emption and the purchaser, the equitable rights of the other shareholders will almost inevitably prevail.

102 Many of the submissions put on behalf of the fifth to ninth defendants, whilst couched as reasons why Mr Rathner obtained no interest, are properly part of a case as to why the interests of Newpage and Springwell have priority over Mr Rathner's interest. In this respect, I refer in particular to their submissions as to the effect of Mr Rathner's knowledge of the constitution, the shareholders' agreement and the May 2003 settlement, which knowledge was conceded by Mr Rathner in this proceeding. Just as the company is not bound by, and can ignore, a transfer in breach of pre-emption provisions in its constitution, so too the interests of other shareholders generally cannot be compromised by any such transaction. Shareholders entitled to the benefit of pre-emption provisions can restrain registration of a transfer which contravenes those provisions and can have the register rectified if such a transfer is registered.[45] In all the cases on the issue to which I have referred, there is no instance where the purchaser's interest has prevailed in a competition with the interests of other shareholders. Where the purchaser's interest in such a case will prevail is in a competition with the interests of the vendor shareholder.

Conclusions

103 My conclusions thus far are as follows:

1. The settlement deed of 17 August 2004 provides for an assignment of ACTA's shares in AEPL to Mr Rathner which is in contravention of AEPL's constitution and the shareholders' agreement.

2. Subject to the deferred issues concerning the May 2003 settlement, Mr Rathner does have an equitable proprietary interest in ACTA's shares in AEPL as a consequence of the assignment in the 17 August 2004 settlement deed.

3. In any event, the relief, if any, to which Mr Rathner is entitled in this proceeding cannot be determined until the position of Newpage and Springwell is further considered by reference to the May 2003 settlement, and perhaps the 16 June 2005 agreement as well. That relief will have to adequately reflect not only Mr Rathner's interest as I have found it to be (subject to the outstanding issue), but all of the competing claims.

[1] Bankruptcy Act 1966 (Cth) s 58.

[2] Butterworths, Halsbury's Laws of Australia (online), [395-4000].

[3] [2005] HCA 20.

[4] Ibid [121] per McHugh J, citing Butterworths, Ford's Principles of Corporations Law (looseleaf), vol 2, [27.120]; In re Paul & Gray Ltd (1932) 32 SR (NSW) 386; United Tool & Die Makers Pty Ltd (in liq) v JV Marine Motors Pty Ltd [1992] VicRp 16; [1992] 1 VR 266. The text of [27.120] in Butterworths, Ford's Principles of Corporations Law (online) now incorporates reference, in turn, to Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) [2005] HCA 20.

[5] Butterworths, Ford's Principles of Corporations Law (online), [21.420].

[6] Wood v W & G Dean Pty Ltd [1929] HCA 44; (1929) 43 CLR 77; see also Butterworths, Ford's Principles of Corporations Law (online), [21.422] and Butterworths, Australian Corporation Law Principles & Practice (online), [7.6.0085].

[7] See Butterworths, Ford's Principles of Corporations Law (online), [21.422].

[8] Ibid [21.425]-[21.427].

[9] The sometimes difficult issues which arise in relation to this mode of automatic crystallisation do not need to be considered here.

[10] Butterworths, Australian Corporation Law Principles & Practice (online), [7.6.0085]; Adelaide Building Co Pty Ltd (in liq) v ABC Investments Pty Ltd (1990) 8 ACLC 445, BC900414.

[11] Deputy Commissioner of Taxation of the Commonwealth of Australia v Advanced Communications Technologies (Australia) Pty Ltd [2003] VSC 487, [33] and [36].

[12] Ibid [42].

[13] Ibid [58].

[14] [2003] VSC 487.

[15] See Insolvency Litigation Fund Pty Ltd v Advanced Communications Technologies (Aust) Pty Ltd [2004] VSC 228, [15] and [18].

[16] Rathner v Global Communications Technologies Pty Ltd [2003] VSC 390.

[17] [2003] NSWSC 353; (2003) 45 ACSR 290.

[18] See, for example, Waters v Winmardun Pty Ltd (1990) 3 ACSR 378.

[19] [1936] AC 222.

[20] [1951] 1 All ER 22.

[21] Ibid 27.

[22] Ibid.

[23] [1978] VicRp 66; [1978] VR 706 ("Coachcraft").

[24] Ibid 718.

[25] Ibid.

[26] Ibid 719.

[27] [1959] AC 763.

[28] [1978] VicRp 66; [1978] VR 706, 720.

[29] [1984] BCLC 599 ("Tett").

[30] Ibid 619.

[31] [1986] BCLC 149.

[32] Ibid 156.

[33] Ibid 167.

[34] A Borrowdale, "The Effect of Breach of Share Transfer Restrictions" (1988) Journal of Business Law 307; P Luxton, "Share Transfer Restrictions and the Relative Nature of Property Rights" (1990) Journal of Business Law 14.

[35] A Borrowdale, "The Effect of Breach of Share Transfer Restrictions" (1988) Journal of Business Law 307, 311.

[36] P Luxton, "Share Transfer Restrictions and the Relative Nature of Property Rights" (1990) Journal of Business Law 14, 20.

[37] Ibid 21.

[38] (1989) 7 ACLC 420, BC8902550 ("Belmont Holdings").

[39] [2001] NSWSC 577; (2001) 38 ACSR 701.

[40] Ibid 707.

[41] [2002] EWHC 1375; [2003] 1 BCLC 304.

[42] Ibid 314.

[43] Butterworths, Halsbury's Laws of Australia (online), [120-15845].

[44] Butterworths, Ford's Principles of Corporations Law (online), [21.410].

[45] Grant v John Grant & Sons Pty Ltd [1950] HCA 54; (1950) 82 CLR 1, 29; Carew-Reid v Public Trustee (1996) 20 ACSR 443.