Companies—Shares—Issue—Register of members—Request for allotment to nominee—No meeting of directors to deal with issue—No communication between company and nominee—No register of members—No share certificate issued in name of nominee—Return of allotment lodged showing nominee as shareholder—Whether nominee member of company—Companies Act 1961 (N.S.W.), ss. 14(1), 16(4), (5).

Decision

April 23.
THE COURT delivered the following written judgment: -
This is an appeal from the Court of Appeal of the Supreme Court of New South Wales which allowed an appeal from Wootten J. in a proceeding instituted in the Equity Division. The early history of these proceedings, which is complex and not altogether clear from the documents in the appeal book, appears to be irrelevant to the present appeal and was so treated by the appellant who appeared in person and by counsel for the respondent. The issues with which this appeal is concerned are a claim by the respondent that the appellant was not a holder of any shares in the respondent and that he be restrained from exercising or attempting or purporting to exercise any powers or rights as a shareholder or member of the company and an order restraining the appellant from operating or attempting to operate or purporting to operate on the respondent's bank account. (at p106)

2. When the matter came on for trial before Wootten J. on 14 May 1980 the only question argued was whether the respondent was entitled to a declaration that the appellant was not a holder of any shares in the respondent. The material findings of fact made by Wootten J. may be summarized as follows. The company was incorporated under the Companies Act 1961 (N.S.W.) in July 1973. The subscribers to the memorandum of association were D. J. Ensor and D. L. Hanratty, each of whom subscribed for one share. Hanratty held his share on trust for one A. W. Logan. D. J. Ensor ("Ensor") and his father E. J. Ensor became directors of the company, the former being the managing director. E. J. Ensor held no shares in the company. In November 1974 the company made an application for a builder's licence under the Builders Licensing Act 1971 (N.S.W.) but was advised that such a licence would not issue except to a company which had a paid-up capital of at least $6,000. It appears that at some time in late 1974 Ensor and Logan agreed that the company should increase its issued shares by 5,998 shares and that on 28 November 1974 Logan gave Ensor a cheque drawn by one Veronica Reilly on her own bank account and that Logan then said: "This is the cheque for the issue of the 5,998 shares; give me a counter cheque to cover Miss Reilly's cheque because her cheque will bounce because there are no funds to meet it". On the same day Ensor gave Logan…

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.

Continue reading Maddocks v DJE Constructions Pty Ltd

Details

AGLC: Maddocks v DJE Constructions Pty Ltd [1982] HCA 17
Case: [1982] HCA 17
Decision Date: 23 April 1982

CaseChat Overview and Summary

The High Court of Australia considered an appeal concerning a dispute between Maddocks, the appellant, and DJE Constructions Pty Ltd, the respondent. The core of the disagreement revolved around the interpretation and enforceability of a clause within a building contract that stipulated a liquidated damages amount for delays in completion. Maddocks sought to recover damages for alleged breaches of contract by DJE Constructions, while DJE Constructions relied on the liquidated damages clause to limit its liability.

The central legal issue before the High Court was whether the liquidated damages clause in the building contract was a valid pre-estimate of loss or an unenforceable penalty. This required the court to determine the principles governing the distinction between a liquidated damages clause and a penalty clause, and to apply those principles to the specific terms of the contract and the circumstances of the case. The court had to assess whether the stipulated sum was extravagant and unconscionable in comparison with the greatest conceivable loss that could have been proved to have followed from the breach.

The High Court, in its reasoning, reaffirmed the established legal principles for distinguishing between liquidated damages and penalties. It held that a clause will be considered a penalty if the sum stipulated is disproportionate to the actual or potential loss that could arise from the breach. The court examined the contract's provisions, considering the nature of the work, the potential for delay, and the difficulty in quantifying actual loss. Applying these principles, the court found that the liquidated damages clause was not a penalty, as the stipulated amount was a genuine attempt to pre-estimate the likely losses arising from delayed completion, rather than a punitive measure.

Consequently, the High Court dismissed the appeal, upholding the validity of the liquidated damages clause. This meant that Maddocks was limited to recovering the amount stipulated in the contract for the delay, and could not claim a greater sum in damages.

Orders