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[2014] VSC 193
Supreme Court of Victoria
2014-05-06
RANDALL AsJ
Original judgment source is linked above.
CORPORATIONS - Section 468A of Corporations Act 2001 (Cth) - Registration of transfer of shares in company in liquidation - Transfer received by transferee after liquidation and after death of transferor - Whether share transfer signed by the transferor - If signed, whether a perfected gift - Whether in the best interests of the company's creditors as a whole as referred to in s 468A(4).
CORPORATIONS - Standing to prosecute Corporations Act claims against liquidator dependent upon entitlement to be registered as a shareholder.
SUMMARY JUDGMENT - Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd test - Whether real prospect of success given the failure to obtain an order to register share transfer.
CORPORATIONS - Company reinstatement - Person aggrieved - Entitlement to registration of share transfer.
1 The two principal proceedings brought by originating process are:
(a) S CI 2012 04125 filed by Mr Georges in his capacity as liquidator of Mactry Pty Ltd ('Mactry') and Allston Homes Pty Ltd ('Allston') in which he seeks orders for the reinstatement and liquidation of Ludon Pty Ltd (deregistered); and
(b) S CI 2012 05298 filed by Mr Rosen in which he seeks various relief including the termination of the winding up of Allston and Mactry, to review certain decisions of Mr Georges, and for an inquiry into the conduct of Mr Georges ('Rosen proceeding').
2 There were two interlocutory processes for hearing before me:
(a) an interlocutory process dated 26 October 2012, filed by Mr Georges in the Rosen proceeding, which was aimed at, in effect, seeking summary judgment in favour of Mr Georges. The platform for the summary dismissal of Mr Rosen's originating process is that Mr Jonathen Rosen does not have standing to prosecute his originating process filed in September 2012, or as amended on 24 January 2013. If Mr Rosen's interlocutory process were successful, the resistance to Mr Rosen's originating process would fall by the way.
(b) an interlocutory process dated 12 November 2012, filed on behalf of Mr Rosen and Adam Wilson Barr, seeking the following orders:
1. leave pursuant to r 9.06 or r 9.02 of the Supreme Court (General Civil Procedure) Rules 2005 to add Mr Barr as a plaintiff to the proceeding;
2. an order authorising the transfer of all shares in Allston to Mr Rosen; and
3. leave to amend the originating process in the proceeding by adding the following paragraph to the relief claimed:
3A. Alternatively to paragraph 3 hereof, an order pursuant to s 1321(d) of the Act reversing the Defendant's acceptance of the proofs of debt lodged by the ATO in relation to both Allston Homes Pty Ltd and Mactry Pty Ltd.
3 At the commencement of the hearing, counsel for Mr Rosen announced to the Court that certain provisions of the originating process filed 18 September 2012 would not be pursued and amendments were sought. Those amendments were as follows:
(a) Excising s 536 of the Corporations Act as a section relied upon in the originating process;
(b) Excising reference to both companies in paragraphs 1 and 2 of the orders sought so only the termination of the liquidation of Allston was sought;
(c) Excising Order 3 in its entirety so that no claim would be made for the filing of amended company tax returns;
(d) Excising paragraph 4 in its entirety so that no claim for an inquiry into the conduct of the liquidator was claimed;
(e) Excising paragraph 5, which sought the forfeiture of the remuneration charged by the liquidator, in its entirety; and
(f) Excising paragraph 7, which sought the removal of the liquidator.
4 Counsel for Mr Georges consented to those amendments and I allowed the same.
5 However, during the course of the proceeding, counsel for Mr Rosen sought to reinstate paragraph 7 in the following terms:
Alternatively to paragraph 1 hereof, an order for the removal of the liquidator of Allston Homes Pty Ltd.
6 Although Mr Rosen had not nominated an alternative liquidator, and although counsel for Mr Georges objected to the reinstatement of paragraph 7 on the basis that Mr Rosen was approbating and reprobating, I allowed the amendment. This was because Mr Georges was not prejudiced by the reinstatement of claim to remove the liquidator and the originating process in the Rosen proceeding was not before me, save to the extent that Mr Georges sought summary judgment in relation to that proceeding.
7 The issues arising for determination are as follows:
(a) Should Ludon Nominees Pty Ltd ('Ludon') be reinstated to the Register of Companies? As it transpired the parties were in heated agreement that the registration of Ludon should be reinstated. Australian Securities and Investments Commission ('ASIC') does not object, subject to what I would describe as the normal conditions. I have excused ASIC from the hearing and have permitted ASIC to outline the proposed conditions once a determination has been made;
(b) Is Mr Rosen entitled to be registered as a shareholder of Allston?
(d) Should Ludon be wound up under s 461(1)(k) upon it being reinstated to the Register of Companies?
8 Allston was registered on 5 May 1998. At the date of appointment of Mr Georges as liquidator on 14 April 2008, Mr Barr was recorded as the company director. The two issued shares were held by Gloria Margaret Wright, who is now deceased. She passed away in February 2012.
9 Mrs Wright had been a director of Allston from 30 September 1988 to 27 September 2005. Mr Rosen's father, Leon Rosen ('Mr Rosen Snr'), had also been a director of Allston from 21 February 1989 to 30 September 1998. The two issued shares in Allston were not held by Mrs Wright beneficially at the date of Allston's winding up. I will say more about this later.
10 Mactry was registered on 30 December 1996. At the time of the appointment of Mr Georges as liquidator on 14 April 2008, Mr Barr was the sole director. Mrs Wright had been a director from 26 August 2002 to 29 September 2005. The one ordinary issued share is held by Mr Barr. The ASIC current and historical company extract records that he holds that share beneficially.
11 Ludon was registered on 26 October 1998, and was deregistered on 5 July 2005. Mrs Wright had been the sole director of Ludon from 26 August 2002 to the date of deregistration. She held the one ordinary issued share. The ASIC historical company extract records that she did not hold that share beneficially.
12 On appointment as liquidator of each of Mactry and Allston, Mr Georges determined that those two companies, together with Ludon, had borrowed money from National Australia Bank ('NAB') for the purposes of purchasing a number of adjacent parcels of land located at 125 Ormond Road, Elwood.
13 On 30 August 2002 Mactry, Allston and Ludon had entered into a 'Business Secured Combination Loan - Interest Only/Instalment Loan' with NAB ('NAB loan').
14 The amount of the loan was $1 million, for which NAB opened a 'Commercial Mortgage Combination Loan account'. The statements were addressed to all three companies. The statement ending 15 April 2003 records that the loan was drawn down on 17 October 2002.
15 Each of Mactry, Allston and Ludon provided a mortgage over the respective parcels of land purchased and to be registered in each company's name.
16 The NAB loan was further supported by a co-guarantee and indemnity given by the three companies and by Mr Barr, then the director of Allston and Mactry. Mr Rosen disputes that there was cross-collateralisation of the securities and guarantees. The dispute is based upon not being satisfied that each of the relevant documents were appropriated executed.
17 Three properties had been purchased from Manastene Pty Ltd ('Manastene'), which was deregistered before transfers in favour of the companies were registered with the Land Titles Office. Upon deregistration of Manestene, the parcels of land vested in ASIC. Mr Georges treated with ASIC and was able to obtain replacement transfers in favour of each of the companies.
18 As transfers in favour of the companies were not registered until after September 2008, the mortgages granted in favour of NAB also could not be registered.
19 On 10 July 2009 Mr Georges in his capacity as liquidator of Mactry and Allston sold those properties owned by Mactry and Allston. The NAB loan was repaid. The liquidator's account for Mactry shows that the sum of $662,081 was transferred on 20 November 2009, leaving a credit balance of $22,270.79. The liquidator's account for Allston shows that the sum of $662,081.01 was transferred on 20 November 2009, leaving a balance of $249,295.75.
20 In February 2011 Mr Georges called for proofs of debt to be submitted in the liquidation of Mactry.
21 Mr Georges had previously corresponded with the Australian Taxation Office ('ATO') in relation to the Mactry liquidation. On 17 March 2010, the ATO wrote to Mr Georges in relation to Mactry and, inter alia, set out:
The extent of the company's liability has not been fully determined. The company has outstanding lodgment obligations, and these are shown in the attached table.
22 The table attached to that correspondence shows that income tax returns for the year ended 30 June 2002 through to the year ended 30 June 2006 had not been filed.
23 On 23 February 2011, Mr Georges wrote to the ATO in relation to both liquidations and, inter alia, set out:
There are currently insufficient funds available to allow dividend to be distributed however my investigations have revealed that both Allston and Mactry may have a cause of action against a related company, Ludon...for funds paid to satisfy a joint and several debt owed to [NAB]. This action may result in funds being available for distribution to creditors.
...
To assist in evaluating whether I should pursue the claim against Ludon for the benefit of Mactry creditors and considering that there are currently no debts recorded in the liquidation, I have called for creditors to submit a formal proof of debt.
24 Subsequently, the ATO submitted a formal proof of debt in the Mactry liquidation. Mr Georges wrote to Mr Rosen Snr on 27 May 2011. That letter relevantly set out:
I advise that the Australian Taxation Office has submitted a formal proof of debt to the amount of $42,436. This claim represents an outstanding income tax liability for the period 1 July 2002 to 30 June 2007 calculated as follows:
Rental income received (1 July 2002 to 22 November 2006) ($)
...
I have no reason to reject this proof of debt based on the information currently available to me.
Should you dispute any part of this claim, please provide a full written explanation detailing your objection together with any relevant supporting documents by close of business on Friday, 10 June 2011.
25 Mr Rosen Snr responded to that letter by letter of 10 June 2011. That letter set out, inter alia:
I am surprised that you have no reason not to accept this figure when you would be well aware that there would be expenses incurred during the relevant years, in particular, interest charges to the National Australia Bank, rates, taxes, insurances, body corporate levies etc. all of which are deductable items against rental received.
26 Mr Rosen Snr made a complaint about Mr Georges and his staff and sought the internet banking statements for the NAB loan:
Consequently, without the past bank statements, I cannot provide you with details of deductable expenses. However with your experience you would be aware that there would be deductable expenses for the relevant years, including those referred to above.
In the circumstances, I can only reiterate that the income tax liability of $42,436 is absolutely disputed.
27 Mr Georges subsequently rejected part of the ATO's proof of debt and, subject to any further information being provided, has admitted the ATO's claim for $14,972. I note that that is a substantial reduction and I assume that it takes into account Mr Georges' best estimate as to likely expenses that might have properly been deductible.
28 Mr Rosen Snr also claimed that he or an entity under his control was a creditor of Allston and Mactry. Mr Rosen was requested to lodge a formal proof of debt. He did not respond.
29 There appears to be no creditors of Mactry apart from the ATO. The only asset remaining in Mactry is the right of contribution against Ludon.
30 Mr Georges calculated that the right of contribution as against Ludon in the sum of $220,693.67 in favour of Allston and $220,693.66 in favour of Mactry. If Ludon were reinstated, each of Mactry and Allston would either prosecute an action against Ludon or prove as creditors in any winding up of Ludon. Mactry can then pay a dividend to the ATO in respect of its claim in the Mactry liquidation.
31 On 17 August 2012 Mr Jonathen Rosen affirmed an affidavit setting out as follows:
1. I have an equitable interest in the single issued share in Ludon...
32 Exhibit JJR-1 to Mr Rosen's affidavit produces two share transfer forms. The first is with respect to Ludon and bears the date 31 December 2002. The second is with respect to Allston and also bears the same date. Apart from the signatures, each of the share transfers has been completed by word-processing.
33 Exhibit 'JJR 4' is a letter from Mr Rosen's solicitors to Mr George's solicitors dated 16 August 2012. It deals with various topics. The contentions put by Mr Rosen's solicitors are as follows:
Failure to carry out any or any proper enquiry into the liability his appointer - the National Australia Bank - asserted Allston Homes and Mactry owed to it. [The contention is that each of the companies had borrowed individually and there was no cross-collateralisation. This contention is put notwithstanding the letter of offer from the National Australia Bank to all three companies. The NAB guarantee and indemnity provided by Barr, Ludon, Mactry and Allston.]
...
Negligent preparation of Mactry and Allston Homes Tax Returns resulting in far higher assessments than were accurate. [This contention was put notwithstanding that Mr Georges had not prepared any tax returns and notwithstanding that each of those companies together with Ludon had not filed any tax returns since 2002, if at all.]
...
NEW MATTERS RESPONDING TO YOUR CORRESPONDENCE OF 15 AUGUST 2012 AND 16 AUGUST 2012
The writer has received information from Mr Leon Rosen. The persons whose interests are effected by your client's application are Mr Adam Wilson Barr and Mr Jonathen Jeremy Rosen. Mr Leon Rosen is the Power of Attorney for Adam Wilson Barr. I am instructed Mr Jonathen Jeremy Rosen holds a transfer of all of the issued shares in Allston Homes Pty Ltd (In Liq) and Ludon Nominees Pty Ltd (Deregistered).
34 Mr Georges swore a further affidavit on 31 August 2012. That affidavit dealt with the allegation that Jonathen Rosen was the shareholder of Allston and Ludon. That had not been put to him at any stage prior to 17 August 2012. Mr Georges then put various matters in support of the contention that Mr Rosen was not the shareholder. He had held a meeting with Mr Andrews of Slater & Gordon Lawyers, who had acted on behalf of Allston and Mactry in the winding up proceedings. Mr Andrews informed him that Mr Rosen Snr held powers of attorney for each of Mactry, Allston and Mr Barr, and controlled the affairs of Allston and Mactry, and that all correspondence should be addressed to him.
35 On 19 May 2008, Mr Georges had a meeting with Mr Rosen Snr in relation to the liquidations of each of Allston and Mactry. Mr Rosen Snr produced various books, excluding the Allston share transfer, which Mr Georges viewed as a record of the company.
36 On 24 October 2005 Allston lodged a Form 484 (update of company details) in respect of the company's registered office, principal place of business and company office holders. No update was lodged with ASIC in respect of the Allston share transfer. Further, two Form 484s were lodged on 19 October 2006 and 28 March 2008 respectively. None of those documents dealt with a share transfer.
37 On 17 March 2003 Ludon lodged its annual return for 2002. Mrs Wright was listed as the sole shareholder.
38 From 1 July 2003 ASIC annual returns were replaced with annual statements issued by ASIC annually from the date of the company's registration. It was up to the company to correct those annual statements. The share transfers were not noted.
39 By faxed letter dated 30 November 2009, Mrs Wright wrote to Mr Georges with respect to Allston. That letter set out:
As the registered holder of the shares and contributory in the above company, I hereby appoint Mr Leon Rosen as my agent for the purposes of Section 531 of the Corporations Act 2001 in respect to the above company in liquidation.
I also additionally hereby appoint Mr John Brown as my agent for the purposes of Section 531 of the Corporations Act 2001 in respect to the above company in liquidation.
40 From about November 2010 Mr Georges commenced negotiations with respect to a deed of release. Mrs Wright was party to the deed in her capacity as the sole shareholder of Allston. On 1 December 2010 Mr Rosen Snr telephoned a request for a draft of the deed to be provided to him. He advised that he would distribute the same to Mrs Wright and Mr Barr. Mr Rosen Snr was involved in discussions about the deed on 16 December 2011.
41 On 22 February 2012 Mr Georges' solicitors received a letter from Mr Rosen's solicitors advising that she was instructed by Mr Rosen Snr. Negotiations with respect to the deed ceased in April 2012. It was not until 16 August 2012 that Mr Rosen Jr's solicitor advised that she was acting on behalf of the holder of 'a transfer of all the issued shares in Allston Homes...and Ludon...(deregistered)'.
42 Mr Rosen affirmed a further affidavit on 14 September 2012. He deposed that he was 'unaware that the transfer was made in [his] favour until in or about August 2012'.
43 Mr Rosen Snr swore an affidavit on 19 September 2012, which set out the following:
44 After dealing with the share transfer, Mr Rosen in his affidavit refers to the history of dealing with the liquidator at least from 19 May 2008 through to November 2011. The affidavit contains references to:
45 It is significant that Mr Rosen Snr dealt with the liquidator, his staff and solicitors on behalf of Mrs Wright for a period of some three years without mentioning the purported transfer of shares or contending that his son was entitled to be registered as transferee. With respect to liquidator's allegations that Mr Rosen Snr had not provided the liquidator with all books and records pertaining to either Allston or Mactry, Mr Rosen Snr disputed that contention and further set out:
I refer to paragraph [12] of the Georges Affidavit[1] and say the Allston Share Transfer was not a company record and was not in my possession at the commencement of the Liquidation and say further that the Allston share transfer, until lodged with the company, is not a company record.
That statement does not sit well with his statement that seemed to suggest that he was handed the transfers in 2002.
46 Given Mr Rosen's concession made by his solicitors - that he did not receive the Allston share transfer from his father until August 2012 at which time he signed the same - he was not called for cross-examination. August 2012 was after the death of Mrs Wright.
47 On behalf of Mr Georges, it was put that the signature on the two share transfers in Allston and Ludon did not contain the signature of Mrs Wright as transferor. It was also put that the general power of attorney purportedly given by Mr Barr to Mr Rosen Snr was also not validly executed.
48 Neil Holland was called to be cross-examined upon his report dated 8 November 2012. Mr Holland's instructions were constituted mainly by an email dated 15 October 2012 from Mr Georges' solicitors. The relevant parts of the instructions are:
Share Transfer Forms
We are seeking to identify the age and authenticity of the share transfer documents. In particular, we would like to ascertain an approximate date each signature was laid to paper and also the age of the word processing and printing of the form itself. We would also like to know if the "transferee details" on the share transfer documents were entered at a different time from when the transferor details were prepared and if so, if you're able to give an indication of when/how recently the information was entered.
Power of Attorney
Mr Leon Rosen asserts that he holds a Power of Attorney for Mr Adam Barr, an individual who cannot be found. We attach what we have been told is the original Power of Attorney although from our review of the document it seems to be the original only in so far as the certification is concerned - ie it appears to us to be a photocopy with an "original" certification. Again we are interested in both the age and authenticity of this document. We also note that our client had previously been provided with a Power of Attorney held by Mr Leon Rosen for the same Adam Barr however this Power is dated 15 March 2001 (please see last page of the third attachment) whereas the other is dated 15 March 1999.
(a) Could not establish when the two 'share transfer forms' were prepared.
(b) Questioned the 'G.M. Wright' signatures written on the two 'share transfer form' documents ... are by the one writer; and opined that:
(c) The two questioned "G.M. Wright" signatures written on the two questioned "share transfer form" documents have not been written by the writer of the "G.M. Wright" signature standards.
(d) The general Power of Attorney is a photocopy document including signatures of "A. Wilson Barr" and "Leon Rosen" and that the "A. Wilson Barr" signature imaged onto that Power of Attorney and another Power of Attorney are identical and establishes that those two signatures have been copied from the same source as a 'Wilson Barr' signature.
50 Trevor Joyce was engaged by Mr Rosen's solicitors to give evidence. He was cross-examined on his report dated 20 December 2012. The instructions given to Mr Joyce were contained in a letter of 22 November 2012. That set out, inter alia, that:
You are requested to -
(a) repeat the test conducted by Scientific Document Services Pty Ltd [Mr Holland] as outlined in their report
(b) comment on any variation and conclusion you might reach after conducting the same tests as Scientific Document Services
(c) with respect to the signatures of George Georges, comment on the variability in an adult when signing their name - particularly with the letter "G" (as one of the contested signatures also commences with "G"[)].
...
51 Mr Joyce also had regard to the instructions given to Mr Holland by Mr George's solicitors. Mr Joyce examined the same documents as put to Mr Holland. Mr Joyce, in his statement of evidence, set out:
The poor quality copy nature of the majority of the Known signatures of Gloria WRIGHT (with the only original ink signatures relating to a period some EIGHT years after the purported date of construction of Q1 and Q2) has presented a limitation to this examination.
The submission of such poor quality reference signatures has precluded the accurate observation of pen control, fluency and signature construction.
52 At the conclusion provision of his report, Mr Joyce sets out:
6.17 The above observations are such that a number of points of potential variation exist between the Questioned Gloria WRIGHT signatures written on the documents Q1 and Q2 to the Known signatures of this writer.
I use the term potential here in reference to primarily the fluency observations, as observation of this aspect of the Known signatures at K5, K11 and K12 is simply not possible. Any examination of these signatures is limited to gross construction behaviour.
Some construction differences similarly potentially exist, however again the quality of the reference material has been a limitation in accurately assessing the significance of these observations.
Simply put, the Known documents K5, K11 and K12 are unsuitable for this examination and whilst the documents K9 and K10 are original in nature, the usefulness of these given the lack of contemporaneousness is dismissed.
6.18 As such, I am not prepared to neither identify nor exclude Gloria WRIGHT as the writer of the Questioned signatures at Q1 and Q2 in this same name until the deficiencies in the examination are rectified.
This is an inconclusive conclusion. No conclusion can be rendered until suitable and appropriate comparison material is made available.
53 In relation to the power of attorney purportedly given by Mr Barr, Mr Joyce effectively agreed with the observations of Mr Holland.
54 Mr Rosen Snr was a witness of truth, but his evidence was unreliable. He readily conceded that he had cognitive problems in September and November of 2012. Mr Rosen Snr had affirmed an affidavit on 14 November 2012 in support of an application to adjourn this hearing. After setting out his condition and various prescriptions, he set out in the following:
I do not have clear thinking. At all times I feel drowsy and fatigued. There are times when I simply forget the balance of my train of thought. I believe that is the operation of the medications. My hearing has also been affected...
55 Mr Rosen Snr rejected the suggestion that the signature on the two relevant transfers was not Mrs Wright's. He had deposed that the transfers were handed to him by Mrs Wright.[2] The natural inference thereby arises that by handing a document bearing a signature of the person handing the document over, there is either a tacit acknowledgement that the signature is genuine or an adoption of that signature as being genuine.
56 However, Mr Rosen Snr in cross-examination conceded that there were a number of transfers done at the same time:
the bunch of transfers and what-not that we were attending to and the documents that we were attending to at that time. Of course this was just not two documents, this was a number of things we were dealing with.
57 The authority to complete the transfer is in favour of any person that Mr Rosen Snr determines. Notwithstanding that, Mr Rosen Snr could not remember who engrossed the word processing on the transfers. It would be fair to say that Mr Rosen Snr could not recall whether the share transfers were engrossed with his son's name as transferee or whether those details were added at a later date. It was put to Mr Rosen Snr that he couldn't explain how and when his son's name appeared on both of the transfer as transferee. Mr Rosen Snr agreed that to be the case. He responded:
No, I'm sorry, that would be to - you could be getting other company not connected with this matter and ask me the same question and I wouldn't be able to pinpoint - that's one of a number.
58 I pointed out to Mr Rosen the tension between what he was saying about the transfer perhaps being completed, and what had been set out in his earlier affidavit that he had been given authority to complete the share transfer. Mr Rosen agreed with the conflict and confirmed that he could not recall completing the transfer to nominate any particular person.
59 Mr Rosen Snr had not turned his mind to whether the power of attorney reportedly given by Mr Barr was genuine. He just accepted it as such. Mr Rosen Snr, in cross-examination on whether the authority was 'now lost', said that the Barr transfers had been lost as well, an event which was 'related, of course, to the bunch of transfers and what-not that we were attending to and the documents that we were attending to at that time'.
60 Mr Georges was cross-examined at length with respect to his dealings with Mr Rosen. It was put to him that Mr Georges knew that Mr Rosen Snr:
at all times...appeared to control the interest and affairs of the company not in a disinterested way for someone else but for his own benefit or the benefit of those whom he chose...
61 The suggestion was that the beneficial owner of the share had provided the deposit and the inference from the cross-examination was that Mr Rosen Snr had provided the deposit. However, at no stage was any evidence adduced to demonstrate how the property was purchased, apart from the lending by NAB. Nor was any evidence led as to whom might have had the ultimate beneficial interest in the company.
62 Further, at no stage was there any explanation given as to why Mrs Wright would have entered into the arrangement to transfer the shares, why there was no temporal limit put on the same, what was to happen to the rents and profits from the three investment companies, why no effort was made to complete the transfers, why no tax returns had been filed, and why there was no accounting for outgoings provided to Mr Georges.
63 The inescapable inference is that someone was sitting back collecting the rental without servicing the NAB debt, without paying tax and, not being satisfied with the proposal put up by Mr Georges in the deed he sought to negotiate, saw this as an opportunity to regain control of Ludon.
64 Mr Georges said that Mr Rosen Snr had provided a power of attorney given in his favour by Mrs Wright with respect to Allston. Mr Georges was asked to produce the same and he responded that 'I don't have it physically here obviously if I do have it'. However, I note that Mr Andrews had advised him of the power of attorney.
65 It was further put to him that at all times Mr Rosen Snr acted 'as if he were in total control of the company, including holding the beneficial interest or controlling the beneficial interest in the company'.
66 Mr Georges did not agree with that and said that Mr Rosen Snr went to great lengths to say that he was not behind the company - he was only helping out some friends. One of the general powers of attorney given to Mr Rosen Snr was a general power of attorney from Allston, which purported to have been signed by Mr Barr as sole director and sole company secretary.
67 Pursuant to my ruling the cross-examination of Mr Georges and Mr Rosen was limited to the question of standing.
68 It would be fair to say that Mr Holland was not persuaded during the cross-examination that he ought to depart from his conclusions expressed in his report annexed to the Order 44 statement.
69 Mr Joyce remained committed to his opinion that there was insufficient evidence to support a conclusion. He conceded that there were inconsistencies, but he could not positively be satisfied of forgery. During the cross-examination what became readily apparent was that although Mr Joyce refrained from expressing a positive opinion one way or another, he did not disagree with most of the conclusions arrived at by Mr Holland. Save for one or two minor variations, most of the observations were common to both experts.
70 Further, the instructions given to Mr Joyce were not, in essence, to arrive at an opinion as to the authenticity of the signature. Mr Joyce was directed to review (and criticise) the methodology adopted by Mr Holland, rather than address whether the signatures on the transfers were those of Mrs Wright. By reason of the conclusions I have reached in this judgment, nothing turns on Mr Joyce's approach. However, in general terms, such an approach is undesirable and the role of an expert is to assist the Court rather than embarking on the task of undermining another expert whose services had been retained to assist the Court.
71 In Roads Corporation v Love [2010] VSC 253, Vickery J said:
[29] The problem of lack of objectivity in expert evidence is not new. The following lament was expressed by a judge over a hundred years ago:
Undoubtedly there is a natural bias to do something serviceable for those who employ you and adequately remunerate you. It is very natural, and it is so effectual that we constantly see persons, instead of considering themselves witnesses, rather consider themselves as the paid agents of the person who employs them.[3]
[30] The obligations and duties of an expert witness were prescribed in common law by Creswell J in National Justice Cia Naviera SA v Prudential Assurance Co Ltd ('The Ikarian Reefer').[10] The first three principles stated by his Honour are pertinent:
72 In Expert Evidence: Law, Practice, Procedure and Advocacy, the authors refer to the following:
He must not be a protagonist of the party [by whom he has been called] but he is a protagonist of the opinion he expresses for he has come to support it and must seek to do so as long as he believes in it.[5]
73 Given the instructions to Mr Joyce it is difficult to depart from the view that he was retained to be a 'protagonist' for Mr Rosen rather than to assist the Court. But for the general agreement with most of Mr Holland's observations upon which his opinion was based, I would have been inclined to discount the opinion expressed in Mr Joyce's report.
74 I will put aside the submissions prepared on behalf of Mr Georges, as they were prepared at a time when the relief sought on behalf of Mr Rosen was far-ranging. It was only at the eleventh hour (during the course of opening) that various facets were abandoned by Mr Rosen.
75 The summary of submissions put on behalf of Mr Rosen in the interlocutory process filed on his behalf is as follows:
(a) The liquidator seeks to avoid a hearing of the claim on the merits by asserting that the present plaintiff (Mr Rosen) lacks standing. The estate of Mrs Wright does not make a claim in this matter.
(b) Mr Barr, as a member of Mactry and having appeared in Mr Georges' proceeding, ought to be joined as plaintiff in Mr Rosen's proceeding. This application was abandoned at the opening and I query whether the appearance filed 16 August 2012 was appropriately authorised, given that Mr Barr is not contactable.
(c) Mr Rosen seeks authorisation of the share transfer from the late Mrs Wright to him, or an order that Mr Georges register him on the share register of Allston as its sole member by reason of his equitable entitlement to be registered as owner. Registration of Mr Rosen as the owner of two issued shares in Allston is in the best interests of the 'company creditors' as a whole because the only 'creditor' remaining in the liquidation of Allston is Mr Rosen, as the transferee of the share held as nominee by Mrs Wright.
(d) The two other creditors of Allston together with the liquidator's expenses and the liquidator's remuneration to that date, were paid in August 2010, when there was also a $57,000 surplus to be distributed to the sole member of Allston.
(e) Mrs Wright completed a document evidencing a present transfer of the donor's beneficial interest many years ago. Ownership of the past shares passed through her hands to Mr Rosen Snr many years ago when she signed the transfer and delivered it out of her power.
(f) Once all of Allston's creditors were paid the liquidator was duty bound to conduct the administration for the benefit of the owner of the shares in the company, the true owner being Mr Rosen.
76 Further submissions were put in reply on behalf of both Messrs Rosen and Barr. Those submissions were put on behalf of Mr Barr as though instructions had been given. It is apparent that it is not the case. The submissions amplified what had been put in the first submission and in relation to the transfer upon which Mr Rosen relied:
(a) Counsel cited the following statement by Dixon J in Brunker v Perpetual Trustee Co (Ltd)[6]:
...the donee must obtain property in the piece of paper itself and property in the paper could pass only by...If property in the transfer remained in the transferor, his power of recalling it must also remain. For he would be entitled to possession of the paper, he could refuse to present it for registration, and he could destroy it.[7]
(b) It was put that Dixon J's statement did not intend to change the well-earned established position that the transfers were effective when signed and delivered out of the power of the transferor.
At paragraph 131 in [Ku v Song [2007] FCA 1189] Graham J acknowledges in terms that a transfer will be effective not only if delivered to the transferee but also if delivered to "another person on his behalf".
77 As the transfer from Mrs Wright is effective, Mr Rosen is entitled to be registered as owner. The estate of Mrs Wright holds the shares in Allston on trust for Mr Rosen and as 'equity deems done that which ought to be done' the Court should authorise and direct the registration of the transfer. All the creditors having long since been paid in full, it is in their best interest that the affairs of the company be conducted regularly and the transfer registered.
78 As to the conduct of the liquidator and the summary dismissal application, the further submissions for Messrs Rosen and Barr also put that:
(a) Mr Georges has never taken out any steps to acknowledge the surplus in Allston. He sought an appropriate release (which the shareholder readily agreed to provide) from pursuing a claim against Ludon with the sole shareholder as Allston. Norton Rose's letter dated 25 November 2010 sought the agreement of the shareholders of Allston and Mactry to 'execute a Deed of Release, releasing Mr Georges from any obligation to seek repayment of debts owed to Allston and Mactry by Ludon and Mr Barr.
(b) The shareholders agreed to enter a Deed of Release for that purpose. They remained and remain willing to enter a Deed of Release for that purpose. The Defendant subsequently sought a wider release and then threatened to commence proceedings detrimental to the interest of the shareholder, the very person for whose benefit he was then bound to conduct the liquidation, unless that person agreed to give a wider release than required to achieve the agreed purpose. The commencement of the proceeding concerning Ludon in those circumstances constitutes misconduct on the part of the liquidator. The loss to the shareholder arising from that misconduct is substantial.
(c) Mr Georges failed to exercise due care in his dealings with the ATO, creating a misconception on behalf of Mr Rosen that he had filed company tax returns relating to the period prior to his appointment. Mr Georges' failure to have regard to deductions applicable to all property investments, such as rates, has caused loss to the shareholder.
(d) The remuneration charged by Mr Georges relating to the steps referred to in the proceeding sub-paragraphs has added to the loss suffered by the shareholder.
...following the nomination, not only did Mr Leon Rosen control the purchase, he facilitated completion of the purchase on behalf of Allston and Mactry by contributing the necessary funds to complete the transaction. So at that point money is going into the company; money is going into the company not from Mrs Wright but it is going into the company 1 from Mr Rosen. In those circumstances if Mr Rosen had been putting money into the company, knowing that Mrs Wright had the beneficial as well as the legal interest, he would effectively be making a substantial gift to her.
80 Mr Sandbach, in closing submissions, also said, '...what was put was that Mr Rosen Snr had put the money in - not as a gift to Mrs Wright but for the benefit of his family for who the beneficial interest in the shares was held...in respect '.
81 Section 601AH(2) of the Corporations Act provides:
The Court may make an order that ASIC reinstate the registration of the company if:
(a) application for reinstatement is made by the Court by:
(i) a person aggrieved by the deregistration; or
(ii) former liquidator of the company; and
(b) the Court is satisfied that it is just that the companies registration be reinstated.
82 Section 601AH(3) empowers the Court, in the event that an order is made under subsection 2, to make any order it considers appropriate.
83 As I have already referred to, all the parties before me are in heated agreement that the registration of Ludon be reinstated. ASIC does not object provided that conditions are imposed. I assume that one of the conditions will be that the company not be reinstated unless it be wound up or returned to the control of an appropriate officer. I will not seek to second guess the condition which might sought to be imposed.
84 The liquidator has, pursuant to s 601AH(2)(A)(ii), standing to apply for the reinstatement. Jonathen Rosen, albeit that he does not object to reinstatement seeks that Ludon be returned to its officers rather than being wound up. However, he can only seek that the court exercise its powers in that manner if he has standing as 'a person aggrieved'.
85 In Re Newfront Pty Ltd (Deregistered), Gray J said:
The expression "person aggrieved" is an expression of wide import and is to be construed liberally. It has been recognised that a person aggrieved may be a person who has been damaged or injured in a legal sense - that is, a person who has a legal grievance. The test is satisfied if an applicant's legal rights have been affected by the deregistration, and if it has a genuine grievance that the dissolution has affected its interests.[8]
86 In Re James Hardie Australia Finance Pty Ltd (Deregistered),[9] Lindgren J said:
It has been said that the expression "a person aggrieved by the deregistration" should not be narrowly construed: see Re Proserpine Pty Ltd [1980] 1 NSWLR 745 at [15]; Pacanowski v Australian Securities Commission [1995] FCA 1259; (1995) 57 FCR 173 at 175. In Pacanowski v Australian Securities Commission, Moore J held that the it does not matter that the person's interest in the decision to deregister arose after the deregistration.[10]
87 In Arnold World Trading Pty Ltd v ACN 133 427 335 Pty Ltd,[11] Barrett J said:
The question whether an applicant under s 601AH(2) is "a person aggrieved by the deregistration" is considered by reference to legal rights and legal interests. It must be seen that the applicant has a genuine grievance that the dissolution of the company affected his or her interests because, for example, a right of some value or potential value has gone out of existence: Australian Competition and Consumer Commission v Australian Securities and Investments Commission [2000] NSWSC 316; (2000); 174 ALR 688 (at [24]-[26]). Under analogous English legislation, the applicant was expected to have "an interest of a proprietary or pecuniary nature in resuscitating the company": Re Wood & Martin (Bricklaying Contractors) Ltd [1971] 1 WLR 293; and see Re GA & RJ Elliott Pty Ltd (1978) 3 ACLR 523.[12]
88 In Re Waldcourt Investment Co Pty Ltd, Olney J said:
I do not think that either a shareholder or director as such must necessarily be aggrieved by the cancellation of the registration of a company. An applicant must, in my opinion, show that his interests have been or are likely to be prejudicially affected by the cancellation of registration.[13]
89 In Casali v Crisp[14] Young CJ in Eq, referring to the statement by Olney J, said:
The mere fact that a person is a shareholder or a director of a deregistered company is insufficient to establish that that person is a person aggrieved within s601AH...
That prejudice might be shown by the shareholder showing that he or she was also a creditor of the company or that there might well be a surplus of assets if the company were reinstated and certain events occurred.[15]
90 It is reasonably clear from the material in support of Mr Georges' application that if he were successful in prosecuting a claim that Allston and Mactry were entitled to be indemnified by Ludon with respect to Ludon share of the debt owed to NAB and discharged by Allston and Mactry, there is more likely than not to be a surplus available for distribution to the shareholder of Ludon. Accordingly, putting to one side the question of standing, it would be just to reinstate the registration of Ludon.
91 Section 231 provides:
(a) are a member of the company on its registration; or
(b) agree to become a member of the company after its registration and their name is entered on the register of members; or
...
92 Section 468A provides:
(1) A transfer of shares in a company that is made after the commencement of the winding up by the Court is void except if:
(a) both:
(i) the liquidator gives written consent to the transfer; and
(ii) that consent is unconditional; or
(b) all of the following subparagraphs apply:
(i) the liquidator gives written consent to the transfer;
(ii) that consent is subject to one or more specified conditions;
(iii) those conditions have been satisfied; or
(c) the Court makes an order under subsection (4) authorising the transfer.
(2) The liquidator may only give consent under paragraph (1)(a) or (b) if he or she is satisfied that the transfer is in the best interests of the company's creditors as a whole.
(3) If the liquidator refuses to give consent under paragraph (1)(a) or (b) to a transfer of shares in the company:
(a) the prospective transferor; or
(b) the prospective transferee; or
(c) a creditor of the company;
May apply to the Court for an order authorising the transfer.
(4) If the Court is satisfied, on an application under subsection (3), that the transfer is in the best interests of the company's creditors as a whole, the Court may, by order, authorise the transfer.
93 In Leaney v Olmstead Pty Ltd,[16] an application was made pursuant to s 260 of the Corporations Law as it then was. Section 260 was the oppression provisions. The applicant had not pleaded that he had agreed to become a member of the company or that his name had been entered on the company's register. He argued that the modern approach was to remove procedural bars to the invoking of s 260 and that a person with a beneficial interest in shares was a member within the meaning of s 260. In that regard I note the submission was consistent with the approach I adopted in Essendon Apartment Developments Pty Ltd v Shaw[17] where, notwithstanding a lack of formality, I held that a transferee was entitled to be registered without adherence to the company's constitution.
In Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87 White J, with whom Mohr and Millhouse JJ agreed, held that only a person whose name was entered in a company's register of members was capable of being a member of that company within the meaning of s 320 of the Companies (South Australia) Code. A person who enjoyed no more than an equitable interest as a transferee under an unregistered transfer, his Honour held not to be a member within the meaning of s 320. I am not able to distinguish s 260 of the Corporations Law from s 320 of the Companies (South Australia) Code in this regard - nor was I invited by counsel to do so.
Mr Lunn for the applicant, however, did invite me to distinguish or decline to follow the Niord decision, and so far as it may be necessary, the decision of Jacobs J in Panfida Ltd v Hartogen Energy (1988) 51 SASR 404 . He suggested that the modern approach was to remove procedural bars to the invoking of s 260 and that I should conclude that it was reasonably arguable that a person who had a beneficial interest only in shares was a member of the company in which such shares had been issued within the meaning of s 260 of the Corporations Law. Although s 260 is in broader terms than its predecessor I am not able to discern any Parliamentary intention to relax the requirements as to standing to seek relief.[18]
95 Niord[19] was a decision of a full court of the Supreme Court of South Australia. White J with whom Mohr and Millhouse JJ agreed had considered whether the purchaser of shares was a member for the purposes of s 320 of the Companies (South Australia) Code ('Companies Code') and also in relation to s 45 of the Companies (Acquisition of Shares) (SA) Code. The full court held that until registration on the company register, the purchaser of shares was merely the equitable owner of the shares in the company.
96 The Full Court held that N Co was not a 'person aggrieved' within the meaning of s 42 of the Securities Industry (SA) Code because it was not a member of A Co at the time when the notice of general meeting was issued to the shareholders of A Co. The lack of status of a member of A Co was fatal to N Co's application for relief under s 320 of the Companies Code.
The court has a discretion: it is not bound to take one course rather than the other. If the plaintiff's claim to have a locus standi is merely colourable, and can easily be exploded, the court will no doubt proceed immediately to decide the question of standing and, having decided it against the plaintiff, will dismiss the action.[22]
The Securities Industry (SA) Code provides specifically for standing as arising out of membership of a company, even in the case of 'a person aggrieved'.
98 In Re Fernlake Pty Ltd[23] Lee J was dealing with a company which had resolved to wind up. A purchaser of shares had complained that he had not received any notice at the meeting at which the resolution passed. Lee J held that the unregistered 'purchaser, as the beneficial owner of the shares, has the right to direct the vendors as to how those votes are to be cast'.[24] His Honour further held that even though the vendor-purchaser relationship might create rights and obligations between them, it did not create rights and obligations between the purchaser and the company.[25] That is, the company was not obliged to give notice of meeting to an unregistered purchaser.[26]
99 Another example of the status of a person who maintains he or she is a member but not registered as the same, is found in Titlow v Intercapital Group (Australia) Pty Ltd.[27] Lehane J held that a person is not a member of a company within the meaning of s 260 of the Corporations Act 2001 (Cth) if his or her name has, in accordance with the terms of the company's articles of association, been removed from the register but who nevertheless maintains a claim whether on equitable or statutory grounds for restoration of his or her name to it.[28] An application under s 260 can only be brought by a person whose name is entered in the register.[29]
100 I have been unable to find any cases that deal with s 468A and I was not referred to any by Counsel. Relevant equivalent sections are found at s 493A(1) (in the context of a voluntary winding up) and s 437F (in the context of administration). Section 468(1) which had prevailed until repealed and replaced by s 468(A), provided as follows:
Any Disposition a property of the company, other than an exempt disposition, and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the Court, is unless the Court otherwise orders void.
101 In Carringbush Corporation Pty Ltd the Australian Securities and Investment Commission,[30] Greenwood J said:
[23] There are many authorities that deal with the principles guiding the exercise of the discretion under s 468(1) both as to a disposition of property of the company made after the commencement of the winding up and any transfer of shares made after the commencement of the winding up, although the circumstances of any case or group of cases are not to be treated as prescriptive of the discretion which is conferred in broad terms and is 'at large'. However, ordinarily the discretion will not be exercised in favour of an order unless the Court is satisfied that the order serves either the interests of the company or its creditors.
102 In enunciating the principles that might apply to the transfer of shares, Greenwood J said this:
[26] As between the parties to a transfer and as regards the liability of one to the other, (that is, the inter-parties position) the transaction is not affected by [the section]...The transfer is void 'so far as regards any effect to be given to it by the company'...The parties might choose to make a contract and it 'may be good as between themselves, though if either of them desires that any effect should be given to it by the company, the Act does apply'...When the question is one of transfer of the shares after the commencement of the winding up, the question is 'would it be beneficial to the company'...and would it 'benefit the creditors'...The general scheme of the provision is that 'as the tree falls so it must lie, unless the Court chooses to alter the existing state of things'...The Court will do so if it 'would be of some benefit to the company or those interested in its assets, and that it (the Court) would not so exercise its discretion unless for very strong reasons'...Although Kay LJ makes reference to a demonstrated benefit to 'those interested in [the company's] assets', it seems clear that the reference is not one to the interest of an investor/shareholder. Kay LJ clearly had in mind a reference to the creditors of the company when using that phrase...In that particular case, no benefit arose out of the proposed transfer of shares to a buyer in favour of either the company or its creditors as a result of which the Court refused to exercise the discretion to avoid the transfer being rendered void.
[27] The section confers upon the Court a 'wide general discretion which is not to be limited by any attempted classification of those cases which do, and those which do not, fall within them'...The discretion is 'entirely at large'...
....
[29] It seems to me that in assessing the merits of the approval of a transfer of shares, the Court should also adopt an inquiry that is 'essentially a commercial or economic one' although the interests affected will not just be the company or the creditors. In assessing the net gains and losses from the perspective of the company and the creditors, there is no prejudice or loss to either, nor any benefit, by reason of the disposal on 26 May 1993. The position is, in that sense, neutral. If the disposal of the shares has occurred with no prejudice to the company or the creditors, why should the vendor of the shares be deprived of the validity of a transfer of shares to a buyer? If the prohibition upon transfer is a prohibition inter-parties upon a valid disposal, why should a vendor be deprived of a valid disposition when no prejudice is suffered by the company or the creditors?
103 In the matter of Tucker-Barlow-Gerrard Pty Ltd,[31] Goldberg J said:
104 Section 437F is the equivalent of s 436A in so far as it applies to administration rather than winding up.
105 In Perth Freight Lines Pty Ltd v BM2008 Pty Ltd (in liq),[33] the Court of Appeal was considering an offsetting claim in relation to a statutory demand. One of the issues was whether the offsetting claim was constituted by rights arising from the transfer of the equitable interest in the shares of a creditor company. The Court of Appeal considered the operation of s 493A(1) which is the equivalent of s 468A in so far as the replies to a voluntary winding up. Kyrou AJA said:
[37] A share is a chose in action. As with other types of property, it is possible to have both a legal and an equitable interest in a share and for those interests to be owned separately and to be transferred separately. A legal interest in a share is transferred to a person upon his or her name being entered on the company's share register as the proprietor of the share. Although an equitable interest can arise in various ways, it cannot arise pursuant to a transfer that is legally void. Nor can it arise pursuant to a contractual obligation to transfer a share where any transfer that is executed would be legally void.
[38] Section 493A(1) of the Act unambiguously states that a transfer of shares that is made after the passing of a resolution for a member's winding up is void unless the requirements of the section are satisfied. A transfer of shares that is void is without any legal effect. It follows that a transfer of shares that is void cannot effect a change in the equitable title to the shares.
[39] It may be accepted that s 493A(1) does not render void any personal rights that the parties to a contract for the sale of shares may have as between themselves. For example, a transferee could enforce a contractual obligation owed by the transferor to pay to him or her any amounts that the transferor receives from the company in respect of the shares. Such a personal right, however, does not constitute a proprietary interest in the shares.[34]
[59] In National Acceptance Corporation Pty Ltd v Benson,35 Kirby P said this about the meaning of the word "void":
Although that word may, in particular contexts, invite a more limited construction, normally (as it seems to me) it should receive the meaning which ordinarily attaches to it in everyday speech, viz, having no legal effect for any purpose as against the world so that it is as if the transaction which is "void" has not occurred, at least so far as the eye of the law is concerned... This is the starting point. Other considerations may require a more limited meaning to be given to the word. But because Parliament from time to time uses "voidable" in statutes or expressions such as "void as against the liquidator" (see, eg, s 451 of the Code), it should be presumed, at least to begin with, that where Parliament refers to "void" it intends a more radical consequence, both in terms of effect and in respect of the parties affected.
107 Accordingly, the task of the Court is to determine whether or not Mr Jonathen Rosen is entitled to be registered as the shareholder in each of Allston and Ludon. Registration bears on the issue in two ways. First, Mr Jonathen Rosen's interlocutory process seeks an order authorising the transfer of the shares in Allston. Second, registration of the transfer of the share in Ludon confers upon Mr Jonathen Rosen standing to resist the relief sought by Mr Georges in relation to the reinstatement of Ludon. Alternatively, registration of the share in Ludon would give Mr Jonathen Rosen standing to make submissions about whether or not Ludon ought to be wound up upon reinstatement or returned to an officer appointed by him.
108 I am not satisfied that Mr Jonathen Rosen is entitled to be registered as the shareholder of each of Allston and Ludon. First, for the reasons which I will hereafter set out, I am not satisfied that Mrs Wright signed each of the transfers. Second, even if Mrs Wright did sign each of the transfers, I am not satisfied that there has been a perfected gift of the shares. Third, even if Mrs Wright did sign the shares and gifted the same to Mr Jonathen Rosen, I am not satisfied that it is in the best interests of the company's creditors as a whole (as that expression is used in s 468A(4)) that I ought to exercise a discretion to authorise registration of each of the transfers.
109 I am not satisfied that the relevant share transfers were handed by Mrs Wright to Mr Rosen Snr already signed by her. I am not satisfied as:
(i) the relevant share transfers were two of several which had been dealt with by Mr Rosen Snr over the years;
(ii) all but the two relevant share transfers have been lost;
(iii) the authority to complete has been lost so I am unable to peruse its terms;
(iv) Mr Rosen Snr readily conceded that his cognitive skills and memory have been taxed and cannot recall if the typing appeared on the relevant share transfers when he obtained the same or whether he completed the same pursuant to the lost authority and cannot say how and when the typed words appeared on each of the relevant share transfers. Further, albeit that he seemed to suggest that the transfers were provided in 2002, his statement that they were not in his possession at the commencement of the winding up of Allston is inconsistent.
(v) Mr Holland's opinion was that the signature of Mrs Wright on each of the share transfers was not written by Mrs Wright;
(vi) Mr Joyce declined to proffer an opinion on the basis that the sampling was insufficient. It might be said that his opinion was inconclusive. However, when pressed, Mr Joyce agreed with the majority of Mr Holland's observations upon which Mr Holland based his opinion;
(vii) with respect to the Allston transfer, Mr Jonathan Rosen bears the onus of the proof;
(viii) pointing to the 2003 return does not assist Mr Jonathen Rosen. There is simply no evidence to support a finding that the shares were held by Mrs Wright for Mr Rosen. The 2002 annual return for Allston also records that Mrs Wright did not hold the shares in Allston beneficially. Accordingly, whatever arrangements made with respect to the beneficial ownership of the shares had been put in place prior to December 2002. The annual returns cannot be relied upon to support a proposition that the share transfers dated in December 2002 were intended to dispose of the equitable interest in the shares.
110 Counsel for Mr Rosen submitted that I should not lightly conclude that Mrs Wright's signature had been forged on the relevant transfers and that I should apply a Briginshaw test.[35] I hold a comfortable satisfaction that Mrs Wright did not sign the relevant transfers for the reasons set out in the previous paragraph and as:
(a) Mr Holland and Mrs Joyce accept that the power of attorney purportedly given in favour of Mr Rosen Snr was not genuinely executed; and
(b) The relevant transfers were produced in an environment where there had been falsity in the execution of the Barr power of attorney, a failure to produce the authority to complete, a failure to produce any of the other transfers, a failure to explain why Jonathen Rosen would be the designated transferee other than at the direction of Mr Rosen Snr, a failure to explain why Mr Rosen Snr would be authorized to complete the transfers in his absolute discretion and, in addition, the matters I set out in the following two paragraphs.
111 First, the annual return preceding the 2003 annual return also recorded Mrs Wright as the non-beneficial owner of the shares. Second, there is no explanation as to why Mrs Wright held the shares non-beneficially. Third, there is no evidence of any declaration of trust or even an implied trust by virtue of transferring the beneficial interest. Fourth, there is no reason why Mrs Wright could not transfer the legal interest independently of the beneficial interest. I am still not enlightened as to whom the beneficial owner of the shares might have been.
112 Mrs Wright's conduct post the commencement of the winding of Allston and Mactry is inconsistent with having disposed of the legal interest in the shares prior to the winding up. By letter dated 30 November 2009, Mrs Wright authorised Mr Rosen Snr to negotiate on her behalf with respect to the proposed deed of settlement between Mr Georges and others.
113 It was put on behalf of Mr Jonathen Rosen that ownership of the share in Allston was transferred when the transferor (Mrs Wright) signs the share transfer and delivers it out of her power to a third person (Mr Rosen Snr) or the transferee (Mr Jonathen Rosen). Knowledge by the transferee of the transferor is not an essential component of the transfer being effective. Mr Jonathen Rosen's counsel also referred me to the statement of Dixon J (as his Honour then was) in Brunker v Perpetual Trustee Co (Ltd):[36]
...the donee must obtain property in the piece of paper itself and property in the paper could pass only by delivery...If property in the transfer remained in the transferor, his power of recalling it must also remain. For he would be entitled to possession of the paper, he could refuse to present it for registration, and he could destroy it.[37]
114 It was put by counsel that that statement did not intend to change the well-established position that transfer is effective when signed and delivered out of the power of the transferor. I was referred to a statement by Graham J in Ku v Song,[38] it was submitted that Graham J acknowledged in terms of the transfer will be effective not only if delivered to the transferee but also 'delivered to...another person on his behalf'.[39]
115 There are many statements that equity will not assist a volunteer. No material was put to me or adduced in evidence to suggest that Mr Jonathen Rosen was anything but a volunteer. That position is contrary to other submissions put on behalf of Mr Rosen Snr with respect to contribution towards the purchase price of the properties which was not explored or expanded upon.
116 In Milroy v Lord[40] Turner LJ said:
I take the law of this Court to be well settled, that, in order to render a voluntary settlement valid and effectual, the settler must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may of course do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for those purposes; and if the property be personal, the trust may, as I apprehend, be declared either in writing or by parol; but, in order to render the settlement binding, one or other of these modes must, as I understand the law of this Court, be resorted to, for there is no equity in this Court to perfect an imperfect gift. The cases I think go further to this extent, that if the settlement is intended to be effectuated by one of the modes to which I have referred, the Court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the Court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust. These are the principles by which, as I conceive, this case must be tried.
117 In Pennington v Wayne,[41] Arden LJ set out as follows:
The cases to which Counsel have referred us do not reveal any, or any consistent single policy consideration behind the rule that the court will not perfect an imperfect gift. The objectives of the rule obviously include ensuring that donors do not by acting voluntarily act unwisely in a way that they may subsequently regret. This objective is furthered by permitting donors to change their minds at any time before it becomes completely constituted. This is a paternalistic objective, which can outweigh the respect to be given to the donor's original intention as gifts are often held by the courts to be incompletely constituted despite the clearest intention of the donor to make the gift. Another valid objective would be to safeguard the position of the donor: suppose, for instance, that (contrary to the fact) it had been discovered after Ada's death that her estate was insolvent, the court would be concerned to ensure that the gift did not defeat the rights of creditors.[42]
119 However, the authorities referred to do not support that proposition. In Pennington, the deceased had proposed to give 400 of her shares in a company to a nephew. She had instructed her accountants to prepare the paperwork. They did so. The deceased signed the transfer and returned it to the accountants. A member of the accountant's staff merely placed the transfer on a file and did nothing further. The share certificates were at all times held by the accountants. The deceased, the majority shareholder, indicated that she wanted her nephew to be appointed as a director. Her nephew signed the necessary form of consent to act. The company's articles required a share qualification to hold the position as a director. The deceased will disposed of her shares in a company other than the 400 shares. The County Court judge held that the gift became effective when Ada executed the transfer. The estate appealed. In the Court of Appeal it was accepted that the accountants held the transfer as Ada's agent and not as agent for the company or the donee.
[80] It is, however, also common ground that a transferee can become the owner of shares in equity without becoming the legal owner for want of registration. ...
...
[83] Moreover, there is, so far as I am aware, no case which is authority for the proposition that an equitable assignment of shares, or perhaps strictly of the shareholder's rights to and under the shares, cannot be effective without delivery of the share certificates or the instrument of transfer. ...
...
[92] The essential question is whether that principle applies where the donor has executed a valid equitable assignment of her beneficial interest in the shares. Mr Weatherill submits that it does because any other solution is circular. He submits that, since the question is whether equity will intervene to perfect the gift, that question cannot be answered by saying that there is an equitable assignment. However, for my part I am not persuaded that that is correct. When Ada executed the stock transfer form she had both a legal and a beneficial interest in the shares. In these circumstances I do not see in principle why she should not divest herself of her equitable interest in them by an appropriate document of assignment. She would then hold the legal interest in the shares on "trust" for Harold, she being the legal owner of the shares until registration in his name and he being beneficially entitled, for example, to any dividends declared on the shares.
121 At [97], Clarke LJ referred to a passage from Jenkins J in Milroy v Lord and Re Fry[45] as follows:
"Those cases, as I understand them, turn on the fact that the deceased donor had not done all in his power, according to the nature of the property given, to vest the legal interest in the property in the donee. In such circumstances, it is, of course, well settled that there is no equity to complete the imperfect gift. If any act remained to be done by the donor to complete the gift at the date of the donor's death the court will not compel his personal representatives to do that act and the gift remains incomplete and fails. In Milroy v Lord the imperfection was due to the fact that the wrong form of transfer was used for the purpose of transferring certain bank shares. The document was not the appropriate document to pass any interest in the property at all."
By the reference to "any interest in the property at all", Jenkins J must have meant any beneficial or legal interest in the property.
122 Arden LJ, after referring to Re Rose, Rose v IRC,[46] said:
[66] ... Even if I am correct in my view that the Court of Appeal took the view in Re Rose... that delivery of the share transfers was there required, it does not follow that delivery cannot in some circumstances be dispensed with. Here, there was a clear finding that Ada intended to make an immediate gift. Harold was informed of it. Moreover, I have already expressed the view that a stage was reached when it would have been unconscionable for Ada to recall the gift. It follows that it would also have been unconscionable for her personal representatives to refuse to hand over the share transfer to Harold after her death. In those circumstances, in my judgment, delivery of the share transfer before her death was unnecessary so far as perfection of the gift was concerned.
[67] It is not necessary to decide the case simply on that basis. After the share transfers were executed Mr Pennington wrote to Harold on Ada's instructions informing him of the gift and stating that there was no action that he needed to take. I would also decide this appeal in favour of the respondent on this further basis. If I am wrong in the view that delivery of the share transfers to the company or the donee is required and is not dispensed with by reason of the fact that it would be unconscionable for Ada's personal representatives to refuse to hand the transfers over to Harold, the words used by Mr Pennington should be construed as meaning that Ada and, through her, Mr Pennington became agents for Harold for the purpose of submitting the share transfer to the Company. This is an application of the principle of benevolent construction to give effect to Ada's clear wishes. Only in that way could the result "This requires no action on your part" and an effective gift be achieved. Harold did not question this assurance and must be taken to have proceeded to act on the basis that it would be honoured.
As I read his judgment, the judge held that this is not a case in which equity is being asked to complete an imperfect gift, but a case in which there was a valid equitable assignment of Ada's beneficial interest in the 400 shares when she executed the stock transfer form in circumstances which showed that she intended that Harold should thereby become the owner of the shares without at any stage retaining any power to recall the share transfer from Mr Pennington. Mr McGhee submits that he was right so to hold.
124 In Shah, Arden LJ explained their decision in Pennington at some length. Arden LJ said:
However, in my judgment, the principle of benevolent construction is not invoked in this case. The words of the March letter are sufficiently clear to enable the court to reach the conclusion that there is a declaration of trust without the level of doubt which causes it to have recourse in other circumstances to the principle referred to above. In other words, there is no need for benevolent interpretation in this case and thus paragraph [61] of Pennington does not assist.[47]
125 In Shah the declaration of trust was taken from the letter of 11 March 2005 which set out:
This letter is to confirm that out of my shareholding of current 12,500.00 in the above company I am as from today holding 4,000 shares in the above company for you subject to you being responsible for all tax consequences and liabilities [arising] from this declaration and letter.[48]
126 The distinguishing features of this case are that:
(a) Mrs Wright was not free to deal with the equitable interest in the shares;
(b) Mrs Wright did not evince an intention to confer an immediate benefit by way of gift upon Mr Rosen;
(c) At all times up to Mrs Wright's death, Mr Rosen Snr remained the agent of Mrs Wright. To the extent that Mr Rosen Snr's evidence can be accepted, he deposed that he had authority from Mrs Wright (which was lost) to complete the transfer by nominating a transferee. Up until the time he nominated a transferee there was no particular object of any intended gift. There is no evidence that Mr Rosen Snr made any nomination prior to the commencement of winding up of Allston or the deregistration of Ludon or the death of Mrs Wright. He cannot say how the typed words referring to Mr Jonathen Rosen came to be engrossed on the transfers. Upon the death of Mrs Wright, Mr Rosen Snr's authority was terminated.[49]
127 In each of Allston and Ludon there is an expectation that there will be some surplus. In Allston if the contribution/indemnity is pursued and in Ludon after making the payment pursuant to the indemnity and contribution in the event that that company is wound up or after curial proceedings. Clearly, that entitlement is sufficient to constitute the shareholders as creditors for the purposes of s 468A. However, it is difficult to distil how Jonathen Rosen would clearly benefit if I ordered the registration of the transfer in Allston and if there were registration in Ludon pursuant to any future application. The shares sought to be transferred are not beneficially held. Ultimately it would be a matter for the legal owner of the shares to distribute any surplus to the person or persons beneficially entitled. Albeit that Mrs Wright's estate has disclaimed all interest in the shares, that is a matter that will ultimately need to be dealt with by the estate. There is no reason why the estate cannot attend to distribution to the person or persons equitably entitled.
128 I have not permitted the conduct or decision of the liquidator to be agitated on Mr Rosen interlocutory application. However, I note that Mr George's attribution of deductible expenses only to the liquidation of Mactry and apparent unquestioned acceptance that the NAB facility was cross-collaterised raises issues which might call for determination. In contrast I view that the attempt to reach an accord with Mrs Wright and Mr Barr by entry into the deed, was appropriate. That said, if there were issues in either of the existing liquidation or the anticipated liquidation of Ludon, there is no reason why Mr Rosen could not direct upon giving appropriate indemnities, that the estate prosecute any issues in the same way that Lee J observed that the purchaser of shares could direct the vendor as to how a vote should be cast with respect to the shares.
129 I decline to order the transfer of all shares in Allston Homes Pty Ltd (in liq) to Mr Jonathen Rosen. It follows that Mr Rosen does not have standing to bring the interlocutory process or even his originating process. I dismiss the interlocutory process and will hear argument about the disposition of the originating process.
The interlocutory process filed on behalf of Allston and Mactry
130 Applications pursuant to s 63 of the Civil Procedure Act 2010 extend to proceedings commenced by originating process.[50]
131 The test for summary judgment under s 63 of the Civil Procedure Act 2010 has been enunciated by Warren CJ and Nettle JA in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd[51] where Warren CJ, Nettle and Neave JJA said:
(a) the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a "real" as opposed to a "fanciful" chance of success;
...
(c) it should be understood, however, that the test is to some degree a more liberal test than the "hopeless" or "bound to fail" test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent's case is not hopeless or bound to fail, it does not have a real prospect of success;
(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.[52]
132 If I heard the liquidator's interlocutory process in isolation, I would have concluded that Mr Joyce's opinion that the sample size was insufficient might have left the door open to argue that Mr Jonathen Rosen's claim to standing was something more than "fanciful" as that expression was used by Warren CJ and Nettle JA. However, I have declined to authorize the registration of the transfer in Allston. There is an immediate tension between the tests involved in relation to the summary disposal of Mr Jonathen Rosen's application and Mr Georges' interlocutory process. As I have declined to authorize the registration, Mr Jonathen Rosen does not have standing as a shareholder of Allston. There is no application before me in relation to Ludon and nor can there be such an application until the company is restored to the register. Accordingly, Mr Jonathen Rosen does not have standing as a shareholder of Ludon to also appear and resist the relief sought by Mr Georges as liquidator of each of Allston and Matry. It follows from what I have set out in relation to Allston that in the absence of further material, I would have declined any request to register the transfer in relation to Ludon.
133 Accordingly, this is one of the applications where, albeit that having regard to Mr Joyce's opinion, Mr Rosen's resistance may not necessarily be hopeless or bound to fail, given that I have declined to order registration of the transfer, the resistance does not have a real prospect of success.
134 Accordingly, I will make the orders on the interlocutory process filed 12 November 2012. As a consequence, the parties ought to file submissions as to the disposition of each originating process. ASIC should provide submissions with respect to conditions which it may seek to impose with respect to the reinstatement of Ludon given that it would be appropriate to wind up Ludon upon its reinstatement.
[1] A contention that '[t]he Allston Transfer is a company record which was not provided to [the liquidator's] office'.
[2] Paragraph 4 of his affidavit of 19 September 2012.
[5] Ian Freckelton and Hugh Selby_, Expert Evidence: Law, Practice, Procedure and Advocacy_ (Lawbook Co., 5th ed, 2013) 428.
[8] [2008] SASC 127, [10] (citations omitted).
[11] [2010] NSWSC 1369, [43].
[16] (1994) 51 FCR 240 ('Leaney').
[19] Niord Pty Ltd v Adelaide Petroleum NL & Ors (1990) 2 ACSR 347.
[20] Panfida Limited v Hartogen Energy Ltd (1988) 51 SASR 404 ('Panfida').
[22] Robinson at 302; Panfida at 410.
[30] QUD389 of 2007, 10 April 2008 per Greenwood J.
[35] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336.
[41] [2002] EWCA Civ 227 ('Pennington').
[49] The principal's death terminates the agent's authority: Lepard v Vernon [1813] EngR 211; (1813) 35 ER 237; Wallace v Cook (1804) 170 ER 757; Whitehead v Lord [1852] EngR 528; (1852) 155 ER 1126; Farrow v Wilson [1861-73] All ER Rep 846; Phillips v Jones [1900] 1 Ch 209; Watson v King [1814] EngR 180; (1815) 171 ER 420; Kennedy v Thomassen [1928] All ER Rep 525.
[50] See, eg, Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (No 3) [2013] VSC 435, which was commencing by an originating process (namely, an originating motion), and in which summary judgment was sought pursuant to s 63 of the Civil Procedure Act 2010 (Vic).
Rosen
Georges [2014] VSC 193
(1995) 57 FCR 173
(1990) 54 SASR 87
(1988) 51 SASR 404
(1937) 57 CLR 555
(2008) 170 FCR 545
(1994) 51 FCR 240
(1977) 138 CLR 283
(1996) 65 FCR 449
(2003) 133 FCR 83
(1938) 60 CLR 336