Farmers' Mercantile Union and Chaff Mills Limited v Coade

The Farmers' Mercantile Union and Chaff Mills Limited (the company) appealed to the High Court of Australia from a decision of the Supreme Court of Western Australia, which had affirmed a judgment of the Local Court. The dispute concerned the liability of Edward James Coade and Robert Tindale (the respondents) as shareholders in the company. The respondents had applied for a share, paid a deposit, but received no notice of allotment for nearly two and a half years, at which point they received notices of calls. Subsequently, the company resolved to wind up voluntarily, and the respondents' names were included on the list of contributories. The company sought to recover the balance of the application money and calls, but the lower courts had dismissed the claim.

The central legal issues before the High Court were whether the respondents had agreed to become members of the company, thereby making them liable as shareholders, and whether the company's delay in notifying the allotment and its acceptance of the application on terms different from those offered constituted a valid agreement. Specifically, the court had to determine if the respondents' conduct, particularly their inaction upon receiving notices of calls after a significant delay, amounted to an acceptance of membership, and if the company's actions were consistent with its articles of association and the respondents' application.

The majority of the High Court, comprising Knox C.J. and Higgins J., held that the proper inference from the undisputed facts was that the respondents had agreed to become members of the company and that the company had accepted them as such. They reasoned that the respondents' names being on the register, coupled with their failure to repudiate their membership upon receiving notices of calls after a considerable delay, indicated their consent to be members. This inaction was considered sufficient evidence of agreement, particularly in light of the company's voluntary winding up, which introduced the interests of creditors. Starke J., dissenting, found that the company had not proven its acceptance of the respondents' offer and that the respondents were entitled to assume their offer had lapsed due to the unreasonable delay.

The High Court allowed the appeal, setting aside the judgments of the lower courts. The company was awarded judgment for the amount claimed, with costs.