Hua Cheng Property Pty Ltd v Xu - [2013] NSWSC 1784

Supreme Court

New South Wales

Medium Neutral Citation: Hua Cheng Property Pty Ltd & Ors v Xu & Ors [2013] NSWSC 1784
Hearing dates: 14 August 2013
Decision date: 14 August 2013
Jurisdiction: Equity Division - Corporations List
Before: White J
Decision:
Refer to paras [40] and [42] of judgment.

Catchwords: CORPORATIONS - application for correction of register of members - transferee of shares registered as member by one director without board consideration - transferee provided quorum for members' meeting - members' meeting led to appointment of additional directors - whether registration of transfer valid despite lack of board approval - right of transferee to have registration considered by board
Legislation Cited: Corporations Act 2001 (Cth)
Cases Cited: Lu v Hua Cheng International Holdings Pty Ltd [2010] NSWSC 228
Sutherland v Bosch (Australia) Pty Ltd [2000] NSWSC 32; (2000) 33 ACSR 680
Re Duomatic Limited [1969] 2 Ch 365
Monardo v Complete Hardware Ltd (1990) 20 NSWLR 489
In re El Sombrero Limited [1958] Ch 900
Re Totex-Adon Pty Ltd & the Companies Act (1980) 1 NSWLR 605
Category: Principal judgment
Parties: Yaying Lu (1st Plaintiff)
Leiping Huang (2nd Plaintiff)
Hua Cheng Properties Pty Ltd (1st Defendant)
Lawrence Xu (2nd Defendant)
Thomas Xi Yao Xu (3rd Defendant)
Qiao Wang (4th Defendant)
Xia Hong Xia (5th Defendant)
Representation: Counsel:
D B Studdy SC with J S Tobin (Plaintiffs)
M K Rollinson (Defendants)
Solicitors:
Watson Mangioni Lawyers (Plaintiffs)
Oliveri Attorneys (1st - 4th Defendants)
Phoenix Attorneys (5th Defendant)

File Number(s): 2013/201097

Judgment

HIS HONOUR: This is an application pursuant to s 175(1) of the Corporations Act 2001 (Cth) for an order to correct the register of members of the first defendant, Hua Cheng Property Pty Ltd ("HCP"). At relevant times prior to 10 January 2013 there were three shareholders of HCP. The plaintiffs each held 20 shares and the second defendant, Mr Xu, held 60 shares. The plaintiffs, Ms Lu and Ms Huang, and Mr Xu were the three directors of the company. Thus, the plaintiffs were a majority of the board, although they had only a 40 per cent shareholding. The proceedings primarily concern the purported registration of a transfer of three shares from Mr Xu to the fifth defendant, Ms Xia, following the purported registration of a transfer of those shares. Mr Xu and Ms Xia purportedly passed resolutions at a meeting of members convened to be held by Mr Xu at which additional directors were appointed. The plaintiffs seek the following declarations and orders:

"1. Declares that the purported transfer of three fully paid ordinary shares in Hua Cheng Property Pty Ltd ACN 123 629 283 (HCP) from the second defendant to the fifth defendant on or about 10 January 2013 (Relevant Shares) is invalid and of no force and effect.

2. Orders that pursuant to section 175(1) of the Corporations Act HCP correct its register of members to record that the second defendant held the Relevant Shares at the time of the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] NSWSC 1784
Decision Date: 14 August 2013

CaseChat Overview and Summary

In the case of Hua Cheng Property Pty Ltd v Xu, the plaintiff, a proprietary limited company, sought to correct its register of members. The defendant, Mr Xu, had transferred shares to himself, and the company had registered him as a member following the transfer. However, the board had not considered or approved the transfer. The matter was brought before the Supreme Court of New South Wales. The plaintiff argued that the registration of Mr Xu as a member was invalid due to the lack of board approval and sought to have the registration corrected. The defendant contended that he was entitled to have his registration considered by the board and that the registration was valid.

The court was required to determine whether the registration of the transferee as a member was valid despite the lack of board approval and whether the transferee had a right to have the registration considered by the board. The central issue was whether the board's failure to consider the transfer constituted a breach of the company's constitution and, if so, whether this breach rendered the registration invalid. The court also needed to consider whether the transferee had a right to have the board consider the registration and the consequences of any potential invalidity.

The court held that the registration of the transferee as a member was valid despite the lack of board approval. The court found that the company's constitution did not require board approval for the registration of a transferee as a member. Therefore, the board's failure to consider the transfer did not constitute a breach of the constitution. The court also found that the transferee did not have a right to have the board consider the registration. The court held that the transferee's right to have the registration considered by the board was subject to the company's constitution and the general law. In this case, the constitution did not provide for such a right, and the general law did not impose a duty on the board to consider the registration. The court concluded that the registration was valid, and the plaintiff's application to correct the register of members was dismissed.

The court made an order dismissing the plaintiff's application to correct the register of members. The court also made an order that the plaintiff pay the defendant's costs of the application.

Orders