Company law - Call on unpaid share capital - Articles of Association - Resolution made to call on unpaid capital - Notice of call - Whether notice needs to strictly comply with resolution - Questions of construction of Articles - Turns on own facts
Costs - Assignment of cause of action - Court's discretion to award - Whether costs can be awarded for costs incurred by assignee prior to assignment - Costs in favour of nonparties - Wide discretion of court to order costs under Supreme Court Act and Rules of the Supreme Court
STEYTLER P: This appeal against the judgment of a District Court judge, Mazza DCJ, concerns the efficacy of a call on shares. In order to understand the two surviving grounds, it is necessary to set out some background.
Events relevant to 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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AGLC
Naidoo v Williamson [2008] WASCA 179
Case
[2008] WASCA 179
Decision Date
CaseChat Overview and Summary
The case of Naidoo v Williamson involved a dispute over the calling of unpaid share capital, with the central issue being whether the notice given to shareholders complied with the company's Articles of Association. The dispute was heard by the Supreme Court of New South Wales. The primary question the court needed to decide was whether the notice of the call on unpaid capital had to strictly comply with the resolution passed by the company's board. This involved a detailed construction of the Articles of Association and determining whether the notice given was adequate under the specific circumstances.
The court considered two key precedents in reaching its decision. The first was Langton v Forsayth Mineral Exploration NL, which addressed the validity of a call on a no-liability company. The court found that the notice given was insufficient because it did not specify the correct place for payment as required by statute. The second case, Re Cawley, involved the interpretation of the company's Articles to determine whether a valid call had been made. The Supreme Court applied these precedents to the facts of the case, examining whether the resolution and the subsequent notice adhered to the necessary formalities.
In its reasoning, the Supreme Court held that the notice of the call on unpaid capital did not need to strictly comply with the resolution, but rather, the resolution's purpose was to guide the directors in making the call. The court emphasised that the notice had to be sufficient to inform shareholders of the essential details of the call. The court also noted the broad discretion it has in awarding costs under the Supreme Court Act and Rules of the Supreme Court, allowing for costs to be awarded to non-parties in certain circumstances. The appeal was ultimately dismissed.
The final orders of the court were that the appeal was dismissed, and no further orders were made regarding the costs or the call on unpaid capital.
Orders
Orders of the court
Appeal dismissed
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
The first of these is Langton v Forsayth Mineral Exploration NL (1975) 1 ACLR 227. This case concerned the validity of a call made on a no‑liability company. Section 322 of the Companies Act 1961 (NSW) provided that, when a call upon shares in a no‑liability company is made, notice of the amount of the call, the day when it is payable and the place for payment must be published in a daily newspaper and sent by post to each shareholder on whom the call is made. This must be done not less than seven days before the date upon which the amount is payable. The directors of the company had resolved that the call should be made payable 'at either the Registered Office or the Share Registry Processing Office of the Company'. The registered office was in Sydney and the share registry processing office was in Perth. The advertisement that was published specified, as the place for payment, 'the Company's Share Registry'. No mention was made of the registered office and, in any event, there was no suggestion that the 'Share Registry Processing Office' was the same place as the 'Share Registry'. Mahoney JA (with whom Street CJ and Glass JA agreed) held that, if a company specifies either of two places for payment of a call, an advertisement which specifies only one of them does not give notice of 'the place for payment' in accordance with s 322(3) of the Companies Act (233). He also found that the notice was deficient because of the lack of correspondence between the company's share registry and its share registry processing office (234). He said, in the course of his judgment (234):The notice is to be notice of a place. Adequate notice may be given in various ways, eg, by identification according to street and number in the conventional fashion. It may be also sufficient, to constitute such notice, that the place be identified by another description from which its location will be ascertainable. However, I do not think that the nomination of place by reference only to the fact that a particular activity is there being carried on will normally be notice of that particular place for present purposes. However, he considered that non‑compliance with s 322 fell within the scope of the then s 366 of the Companies Act. The matter was remitted to the primary judge so that he could consider the potential application of that section (which dealt with procedural defects, irregularities or deficiencies). The second case relied upon is Re Cawley. This raised the question whether a call that had been made by a company on one of its shareholders had given rise to a debt owed to the company by the shareholder at a particular date. If it did, the directors were justified in declining to register a transfer of the shareholder's shares because money was owing by him in respect of them. The shareholder contended that, under the company's Articles, no valid call was made until the time and place for payment was appointed by the board by resolution. He argued that this had not happened by the time his transfer was lodged for registration. The resolution that had been passed had left the date and place for payment blank.