Mualim v Dzelme

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.