Gambotto & Anor v WCP Limited

[1993] HCATrans 381

~ ~

· .... ~·.C'.Jl

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S61 of 1993

B e t w e e n -

GIANCARLO GAMBOTTO and

ELIANA SANDRI

Applicants

and

WCP LIMITED

First Respondent

ACMEX INVESTMENTS (NO.4)

PTY LIMITED

Second Respondent

Application for special leave

to appeal

BRENNAN J

Gambotto 1 10/12/93

DEANE J

MCHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON _FRIDAY, 10 DECEMBER 1993, AT 3.18 PM

Copyright in the High Court of Australia

MR G. GAMBOTTO in person.

MR A.R. EMMETT, OC: If it please the Court, I appear with

my friend, MR M.A. WIGNEY, for the respondents.

(instructed by Norton Smith & Co.

BRENNAN J: Mr Gambotto, sit at the bar table. You are

desirous of presenting this application in person,

is that so? You are not legally represented?

MR GAMBOTTO:  I am sorry, Your Honour, yes, I sent an

application - - -

BRENNAN J: Yes. Yes, thank you, Mr Gambotto. Mr Gambotto,

do I take it that your application is now contained

in the white book that you have handed up?

MR GAMBOTTO: Exactly, Your Honour.

BRENNAN J:  And that is what you wish to put forward in

support?

MR GAMBOTTO: Apart from answering Your Honours' questions,

yes.

BRENNAN J:  Yes. Thank you, Mr Gambotto. We will grant you

leave to appear, Mr Gambotto. Mr Emmett.

MR EMMETT:  Your Honour, it is probably a matter for

Your Honours as to whether - if Your Honours

granted leave to appear - - -

BRENNAN J:	We have granted him leave to appear.
MR EMMETT:	Yes, and Your Honour does not want to hear from

him in relation to the application for leave. Is

that what Your Honour is saying?

BRENNAN J:  We have the white book which is his application.

MR EMMETT:  I am sorry, the white book is the application

for leave to appear.

BRENNAN J: Leave to appear.

McHUGH J:  And we have read the judgments and we want to

call on you.

BRENNAN J: Call on you.

MR EMMETT:  I am sorry, as long as I understand what

Your Honours are saying. Your Honours, there are

two reasons, in our submission, why leave should

not be granted. One of them is a matter which has

not yet known to Your Honours. Might I, first of

Gambotto 10/12/93

all, hand to Your Honours a chronology as to what

has happened in these proceedings - - -

BRENNAN J:	-Does Mr Gambotto have a copy of this?
MR EMMETT:	He has now, but I have to say he did not get it

until shortly before lunchtime, and some of the

material he did not get until after lunch. That

may cause a difficulty, and if he says it causes a

difficulty, we will have to deal with that.

BRENNAN J: Yes.

MR EMMETT:  Could I just indicate generally the problem.

Your Honours will be aware that the article

provided, in effect, for compulsory acquisition of

shares of what might be called dissenting

shareholders. There was a mechanism laid down in

the new article that was adopted. The effect of

that was that by 30 June 1992 notice had to be

given if the rights were to be exercised.

Mr Justice McClelland gave his judgment declaring

the article invalid shortly before the time

expired. In order to preserve its rights, notices

were given in accordance with the article. The

Court of Appeal, of course, unanimously overruled

what was said by Mr Justice McClelland. The

company therefore was bound by the terms of the

article that was then validated by the declaration

made by the Court of Appeal, as a result of the

appeal. The company was therefore bound to comply

with the notice, and it therefore notified

shareholders and registered the transfer that had been given pursuant to the mechanism. It was not

until after that had occurred that an application

was made by Mr Gambotto, not for a stay of the

declaration and orders made by the Court of Appeal, but simply for an injunction to restrain a transfer of the shares which had previously been registered

in his name.

The consequence is that the mechanism

contemplated by the article has now been put in
place. All of the shares of all dissenting
shareholders have now been registered in the name

of the company which is now the second respondent.

The relief which is sought on the appeal is a

declaration that the article was invalid. The

effect of the appeal succeeding would be that the

article would be declared invalid and there would

have to be an awful lot of undoing in order to put

all of the parties, including non-parties to this

litigation, back into the position that they would

have been if there had been a stay after the

Court of Appeal's judgment.

Gambotto 10/12/93

That set of ~ircumstances, in our submission,

makes this an inappropriate vehicle for determining

the questions that would otherwise be thrown up by

the judgment of the Court of Appeal.

DEANE J: But if the article is invalid, that is your

problem, is it not? The interest you represent

have invalidly obtained an amendment to the

articles and taken advantage of it. Now, if that

amendment is oppressive in the relevant sense, the

fact that you are going to be in difficulties does

not strike me as some reason why we should refuse

leave.

MR EMMETT: Well, except, Your Honour, this; that there was

a unanimous decision of the Court of Appeal

declaring that the article was valid - - -

DEANE J:  And there was an even more emphatic decision by a

very experienced trial judge declaring that it was

not valid.

MR EMMETT: With respect, there was no reasoning in the

trial judge's judgment, as Mr Justice Meagher

points out, that indicates - - -

DEANE J:  I did not have any difficulty in understanding

what the trial judge was saying, and I would have

thought equity judges for many, many years would

have expressed the view the trial judge expressed

in very much similar language.

MR EMMETT:  Be that as it may, but just in terms of what the

Court of Appeal did, though, is really what the

question is. The company was entitled to rely on

what an appellate court had said unanimously was a

valid article. Bearing in mind -

DEANE J: Is the application for leave out of time?

MR EMMETT:  The application for leave to -

DEANE J: Leave to appeal to this Court out of time?

MR EMMETT:	No, Your Honour.
BRENNAN J:	What is the difficulty?
MR EMMETT:	The difficulty is, Your Honour, that there are

third parties to these proceedings who were

entitled, under the article, to be paid, some of

whom have now been paid, and who regard themselves

as no longer shareholders, and no longer having

anything to do with the company.

McHUGH J: That is a matter for them. I mean, they may be

happy to leave the matter as it is, or they may

Gambotto 4 10/12/93

want to take advantage of what happens if

Mr Gambotto is correct.

MR EMMETT:  They can~ot. They have no option, Your Honour.

If the article is invalid, then one cannot just

undo a little bit of it.	The whole exercise would
have to be undone.	The procedure was that the

majority shareholder delivered one transfer of all
of the outstanding shares. If the appellant

succeeds, then all of that has to be undone. The

whole of the register would have to be rectified.

Shareholders out there who have, in the meantime, regarded themselves as being entitled to a payment,

will no longer be entitled to the payment. That

itself may raise questions of recovery of moneys

that have already been paid, but the concern that

we advance is that there are other shareholders who

are affected by the relief that is sought. It is

not just an argument between these parties.

McHUGH J:  I understand that, but I must say it strikes me

as an extraordinary proposition that somebody who,

by hypothesis, has been wrongly deprived of his

shares, is to be sent packing from this Court,

simply because you have acted on the

Court of Appeal's judgment.	Why should the
applicant suffer injustice?

MR EMMETT:  Because the mechanism is there to preserve the

status quo. It is always the position at first

instance, if you do not move to obtain

interlocutory relief to preserve the status quo,

then it may well be that it is too late to

intervene. The same position, in our submission,

would apply on appeal where the court has declared

the position. It would have been a simple matter

for the present applicant to move the Court of

Appeal for a stay to preserve the status quo, in

which case, the injunction ordered by

Mr Justice McClelland would have preserved the

status quo.

BRENNAN J:  As between you and your putative member, the

present applicant, you have simply removed his

shares from your register.	He is seeking to have
you put them back.	Now, if that is so, what

concern is it of yours as to what has happened to

other shares?

MR EMMETT:  Because the mechanism whereby he becomes

entitled to put them back must be a declaration

that the resolution was invalid.

BRENNAN J: Then I take it you will put everybody back.

MR EMMETT: Indeed, but that is the problem; that other

people have now been -

Gambotto	10/12/93
BRENNAN J:	What is the problem to you in that?
MR EMMETT:	Because the other shareholders have been told

that they are no longer shareholders and payments

have been made.

BRENNAN J:  Well, they will be told the contrary. They are

shareholders again.

MR EMMETT:	Yes.
BRENNAN J:	And then?
MR EMMETT:	Then it is a question of endeavouring to recover

from them the moneys - - -

BRENNAN J:	Not by you.
MR EMMETT:	Yes.
BRENNAN J:	Why by you?
MR EMMETT:	Because we have made the payments.  The

mechanism under the article was - - -

BRENNAN J: Are you the transferor or the company?

MR EMMETT:  I am both, now. Before Mr Justice McClelland

and the Court of Appeal I was just the company, and

the declaration was sought against the company that

the article was invalid.

BRENNAN J:	And?
MR EMMETT:	In the Court of Appeal the parties were the

same, but following the judgment and after notice

had been given to the shareholders, Mr Gambotto

moved the Court of Appeal for an injunction and at

the same time for an order joining the transferee

as a defendant.	So that the second respondent did
not in fact become a party to these proceedings
till after the judgment in the Court of Appeal.	We
now appear for both respondents.

BRENNAN J:  I see. I am sorry. I had thought that you were

appearing only for WCP. Yes, I see.

MR EMMETT:  But it is WCP who paid the money, because the

mechanism under the article is that the majority
shareholder who gives the notice must, at the time
of giving the notice to WCP, tender all of the
consideration payable, and the money is then

received by WCP in effect on trust for all of the

shareholders. The article, once it became valid,

pursuant to the declaration, required WCP to act in

paying out the money to those shareholders who had

sent in their share certificates. So that WCP,

Gambotto 6 10/12/93

having received ~he second respondent's money, was

bound by the declaration of the Court of Appeal, in

effect, to pay out that money to the shareholders.

So that WCP -

BRENNAN J: That is to those who sent in their share

certificates?

MR EMMETT:	Yes.
BRENNAN J:	What about those who did not send in their share

certificates?

MR EMMETT:  I am really giving evidence from the bar table,

but there are a number of shareholders who have not yet sent in their share certificates, and the money is still held by WCP on behalf of those

shareholders.

BRENNAN J:  So that on that basis I take it, Mr Gambotto has

no shares and no money?

MR EMMETT:  I am not sure whether the money has been sent to

him or not.

DEANE J: But he can have his money if he wants it?

MR EMMETT:  The money is there, yes, if he sends in his

share certificate. The article contemplates that

if he sends in his share certificate he will get

his money. But of course, Mr Gambotto does not

want to send in his share certificate, so I suspect

he has not got his money. But, he is entitled to

the money if the Court of Appeal's declaration

stands.

That is the first reason, in our submission,

why, even if it had been an appropriate vehicle to

determine this question, it ceased to be when

Mr Garnbotto failed to move the Court of Appeal for

a stay.	It is not as if the company decided at
its own risk.	The company was bound by the terms

of the article, which had been declared to be

valid, to act in that way. Indeed, the

correspondence which I have included in that

bundle indicates that Mr Garnbotto was told that the

moneys would be paid unless he moved for an

injunction or a stay. He was then subsequently

told that the moneys would not be paid, then a

third letter said the moneys will be paid.

So that, although there was a bit of to-ing

and fro-ing, Mr Gambotto was informed that the

moneys would be paid unless he moved the court to

restrain the company, the reason being that the

company was under an obligation to its shareholders

Garnbotto 10/12/93

to make the payment once the article had been

declared valid.

As I have said, that, in our submission, is

one reason why even if the issues thrown up by the

proceedings were appropriate for leave, this case

ceased to be an appropriate vehicle once that

complication entered on to the arena.

So far as the merits of the matter, we would

simply say that, notwithstanding what Your Honour

Mr Justice Deane put to me, there is no

reasoning - - -

DEANE J: Perhaps I put that a bit strongly, Mr Emmett.

MR EMMETT:  There is no reasoning of the trial judge, and we

would not quarrel with the notion that he is a very

experienced chancery judge, but nevertheless, his

judgment does not have the benefit of the reasoning

of the Court of Appeal, and one has the unanimous
decision of the Court of Appeal which includes

experienced chancery practitioners, or former

chancery practitioners as well, that leads one to

the conclusion that there really is not a

significant doubt about the correctness of the

Court of Appeal that would justify the granting of leave.

So far as the second ground of appeal is

concerned, that is the ground of the construction

of a statute, Mr Justice McClelland did not express

a view about that and, in our submission, the

language of the statute is so clear that there

really is not an arguable case to the contrary.

That matter was dealt with very briefly I think, by the Court of Appeal by Mr Justice Meagher at the

end of his judgment. For those grounds, in our

submission, Your Honours, the application should be

refused.

BRENNAN J:  Yes. Mr Gambotto, you have heard the discussion

that has taken place with Mr Emmett. What do you

have to say, if anything, in reply to those

matters?

MR GAMBOTTO:  I will be very short, Your Honour. First of

all, I point out to you the short minutes of order

at page 10 of the application book, order No 2:

Order that the defendant be restrained from

giving effect to any notice or transfer lodged

with it in purported pursuance of the said

Article 20A, in respect of any shares held by

either of the plaintiffs.

DEANE J: But that went with the Court of Appeal's judgment.

Gambotto 10/12/93

MR GAMBOTTO:  Yes, Your Honour. Mr Emmett said at the

beginning of his submission that the judge had

stopped the implementation of the article because

that said that the article was invalid. The judge

did that in the first instance, but he also
qualified his order by saying that they were to
stop the implementation of the article in respect
of the shares held by the two plaintiffs, not in

respect of all the other shareholders.

BRENNAN J: But you see on page 26 the new orders were

created, and the second of those orders was that

Mr Justice McClelland's declaration and order

should be set aside, and then on page 27 there is a

new declaration made that article 20A is "valid and

effective."

MR GAMBOTTO: That is the appeal that we are trying to shake

from this honourable Court.

Indeed, there is one other matter that I would

like to mention. I am not here to ..... I am sorry

to even be saying these things but I did not know

that I had to say them.

BRENNAN J:  We need not trouble you any further,

Mr Gambotto. There will be a grant of special

leave in this case.

MR GAMBOTTO:  Thank you, Your Honour.

AT 3.38 PM THE MATTER WAS ADJOURNED SINE DIE

Gambotto 9 10/12/93