Elders Forestry Ltd v BOSI Security Services Ltd

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

ELDERS FORESTRY LTD v BOSI SECURITY SERVICES LTD & ORS

[2010] SASC 223

Judgment of The Honourable Justice Kourakis

21 July 2010

CORPORATIONS - SHARE CAPITAL - SHARES - TRANSFER - ARTICLES RESTRICTING OR AFFECTING TRANSFER

CORPORATIONS - CONSTITUTION AND REPLACEABLE RULES - EFFECT AS CONTRACT

ESTOPPEL - ESTOPPEL BY CONVENTION

MORTGAGES - PRIORITY OF SECURITIES - BETWEEN EQUITABLE INTERESTS

Plaintiff and fourth defendant each owned half of shares of fifth defendant, a joint venture company – fifth defendant’s constitution adopted on incorporation and plaintiff and fourth defendant also entered into shareholders’ deed, which was later amended, to regulate their rights and obligations in the joint venture – in earlier proceedings between plaintiff and fourth defendant, orders were made declaring plaintiff had validly and lawfully exercised option to acquire fourth defendant’s shares in fifth defendant – fourth defendant opposed order for specific performance on grounds of impossibility by reason of first defendant’s interests in shares – fourth defendant had earlier granted first defendant charge over all of its assets, including its shares in fifth defendant – fourth defendant had also granted equitable mortgage over its shares in fifth defendant in favour of first defendant as security – plaintiff brought proceedings against first defendant, both claiming equitable interests in the shares.

Held: Fourth defendant’s rights and obligations under the shareholders’ deed as amended are incidents of the shares over which first defendant holds its securities – first defendant as mortgagee is as bound by the shareholders’ deed as amended, to which the shareholders and the company were parties, as it is by the company’s constitution – first defendant therefore has no greater interest than fourth defendant in the shares – by granting charge to first defendant over the shares, fourth defendant committed a default event pursuant to shareholders’ deed as amended giving rise to plaintiff’s equitable interest in the shares – first defendant is therefore bound by plaintiff’s exercise of option to acquire the shares – plaintiff is entitled to the equitable interest in the shares – fourth defendant should transfer the shares to plaintiff – fifth defendant should register that transfer – on the transfer of the shares, first defendant will have no further interest in or right over the shares.

Corporations Act 2001 (Cth) s 9, s 53, s 107, s 111J, s 134, s 136, s 140, s 233, s 249A, s 249L, s 254D s 1322; Acts Interpretation Act 1915 (SA) s 14B, referred to.
Adelaide Building Co Pty Ltd (in liq) v ABC Investments Pty Ltd and Anor (1990) 8 ACLC 445; Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 65; Australian Associated Motor Insurers Ltd v NRMA Insurance Ltd (2002) 124 FCR 518; Bluebottle UK Limited v Deputy Commissioner of Taxation (2007) 232 CLR 598; Bridge Wholesale Acceptance Corporation (Australia) Ltd v Burnard (1992) 27 NSWLR 415; Carew-Reid v Public Trustee (1996) 20 ACSR 443; Cockell v Taylor (1852) 15 Beav 103;