Bathurst CJ at [1] Gleeson JA at [2] Brereton JA at [192]
Decision:
(1) Appeal allowed.
(2) Set aside the orders of the primary judge made on 11 September 2020.
(3) In lieu, make the following orders:
(a) Declare that the allotment of 1,800 fully paid ordinary shares of $1.00 each in the capital of Pacific Springs Pty Ltd ACN 093 846 309 made on 16 March 2004 was invalid;
(b) Order pursuant to s 175 of the Corporations Act 2001 (Cth) that the register of members of Pacific Springs Pty Ltd ACN 093 846 309 be rectified by the expungement of all entries made purportedly recording the allotment of shares referred to in Order (a) above;
(c) Declare that the first respondent, Ricards Dzelme, is not a director or secretary of the second respondent; and
(d) Defendants to pay the plaintiffs’ costs.
(4) Respondents to pay the appellants’ costs in this Court.
(5) Grant liberty to the appellants to apply on three days’ notice for consequential relief in relation to monies paid into court by the appellants as security for costs of the proceedings below and the appeal, if the parties cannot agree on orders for payment out of court of such monies.
Catchwords:
CORPORATIONS – shares – exercise of power to allot shares – where director of family company allotted shares to himself – where effect of allotment was to confer control of company on the director – where hearsay evidence that director provided paperwork concerning allotment to shareholders – where no evidence of paperwork or content of paperwork – whether shareholders gave fully informed consent to allotment – whether share allotment should be set aside
EQUITY – defences – laches – knowledge of the wrong – where impugned share allotment occurred in 2004 – where director of company has since passed away – where appellants reside in Indonesia and speak minimal English – whether appellants had means of knowledge of the wrong – whether respondents pleaded that appellants could have searched public records and ran that defence below
EVIDENCE – expert evidence – whether letter from overseas lawyers in the nature of an investigative report was expert evidence – whether the primary judge erred in rejecting the tender of the evidence – whether the primary judge should have waived the rules of evidence – Evidence Act 1995 (NSW), s 190
Ampol Petroleum Ltd v R W Miller (Holdings) Ltd [1972] 2 NSWLR…
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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AGLC
Mualim v Dzelme [2021] NSWCA 199
Case
[2021] NSWCA 199
Decision Date
CaseChat Overview and Summary
The appeal in *Mualim v Dzelme* concerned a dispute over the allotment of shares in Pacific Springs Pty Ltd. The appellants, shareholders of the company, sought to set aside a share allotment made by a director to himself in 2004, which had the effect of conferring control of the company on him. The respondents included the director who made the allotment and the company. The matter was heard in the Court of Appeal of New South Wales, with Bathurst CJ, Gleeson, and Brereton JJA presiding.
The central legal issues before the Court of Appeal were whether the shareholders had given fully informed consent to the share allotment, whether the defence of laches was applicable given the delay in challenging the allotment and the circumstances of the appellants, and whether the primary judge had erred in rejecting certain evidence tendered by the appellants. Specifically, the court considered whether the hearsay evidence regarding the director providing paperwork concerning the allotment to shareholders was sufficient to establish informed consent, and whether a letter from overseas lawyers constituted expert evidence that should have been admitted.
The Court of Appeal found that the primary judge had erred in rejecting the tendered evidence and in applying the defence of laches. The court reasoned that there was insufficient evidence to establish that the shareholders had provided fully informed consent to the share allotment, particularly given the hearsay nature of the evidence presented by the director. Furthermore, the court held that the defence of laches was not made out, as the appellants, who resided in Indonesia and had limited English proficiency, did not have the means of knowledge of the impugned allotment at the time it occurred, and the respondents had not properly pleaded the defence of constructive knowledge through public records.
Consequently, the Court of Appeal allowed the appeal, set aside the orders of the primary judge, and declared the allotment of 1,800 shares made on 16 March 2004 to be invalid. The court ordered rectification of the company's register of members to expunge the entries relating to this allotment, declared that the first respondent was not a director or secretary of the company, and ordered the defendants to pay the plaintiffs' costs in both the primary proceedings and the appeal. Liberty was granted to the appellants to apply for consequential relief regarding monies paid into court as security for costs.
Orders
Orders of the court
(1) Appeal allowed.
(2) Set aside the orders of the primary judge made on 11 September 2020.
(3) In lieu, make the following orders:
(a) Declare that the allotment of 1,800 fully paid ordinary shares of $1.00 each in the capital of Pacific Springs Pty Ltd ACN 093 846 309 made on 16 March 2004 was invalid;
(b) Order pursuant to s 175 of the Corporations Act 2001 (Cth) that the register of members of Pacific Springs Pty Ltd ACN 093 846 309 be rectified by the expungement of all entries made purportedly recording the allotment of shares referred to in Order (a) above;
(c) Declare that the first respondent, Ricards Dzelme, is not a director or secretary of the second respondent; and
(d) Defendants to pay the plaintiffs’ costs.
(4) Respondents to pay the appellants’ costs in this Court.
(5) Grant liberty to the appellants to apply on three days’ notice for consequential relief in relation to monies paid into court by the appellants as security for costs of the proceedings below and the appeal, if the parties cannot agree on orders for payment out of court of such monies.