Perera v Reilly
[2006] WASC 200
PERERA -v- REILLY & ANOR [2006] WASC 200
| Link to Appeal : |
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| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 200 | |
| Case No: | COR:22/2005 | 17 MAY 2006 | |
| Coram: | MURRAY J | 7/09/06 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Judgment for plaintiff Declaration that special resolution invalid | ||
| A | |||
| PDF Version |
| Parties: | RUAN PERERA MARK DAVID REILLY SOUTHERN WINE CORPORATION PTY LTD (IN LIQ) |
Catchwords: | Corporations Managed investment scheme Special resolution to delete voting restriction Validity of resolution Interest of responsible entity as corporation in liquidation Justiciability of validity of resolution Availability of declaration |
Legislation: | Corporations Act 2001 (Cth), s 253E, s 253G, s 601FC, s 601FD |
Case References: | Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334 Fast Scout Ltd v Bergel (2001) 25 WAR 244 McGellin v Mount King Mining NL, unreported; SCt of WA; Library No 980164; 7 April 1998 MTQ Holdings Pty Ltd v RCR Tomlinson Ltd [2006] WASC 96 Project Blue Sky Inc v ABA (1998) 194 CLR 355 Sycotex Pty Ltd v Baseler (1994) 13 ACSR 766 Walker v Wimbourne (1976) 137 CLR 1 A Caveat, In re; Ex parte Canowie Pastoral Co Ltd [1931] SASR 502 Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65 Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 Lancedale Holdings Pty Ltd v Heath Group A/Asia Pty Ltd (1999) 33 ACSR 247 Paul & Gray Ltd; In re 32 SR (NSW) 386 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
MARK DAVID REILLY
First Defendant
SOUTHERN WINE CORPORATION PTY LTD (IN LIQ)
Second Defendant
Catchwords:
Corporations - Managed investment scheme - Special resolution to delete voting restriction - Validity of resolution - Interest of responsible entity as corporation in liquidation - Justiciability of validity of resolution - Availability of declaration
Legislation:
Corporations Act 2001 (Cth), s 253E, s 253G, s 601FC, s 601FD
(Page 2)
Result:
Judgment for plaintiff
Declaration that special resolution invalid
Category: A
Representation:
Counsel:
Plaintiff : Mr M N Solomon
First Defendant : Mr N W McKerracher QC
Second Defendant : Mr N W McKerracher QC
Solicitors:
Plaintiff : Gadens Lawyers
First Defendant : Christensen Vaughan
Second Defendant : Christensen Vaughan
Case(s) referred to in judgment(s):
Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334
Fast Scout Ltd v Bergel (2001) 25 WAR 244
McGellin v Mount King Mining NL, unreported; SCt of WA; Library No 980164; 7 April 1998
MTQ Holdings Pty Ltd v RCR Tomlinson Ltd [2006] WASC 96
Project Blue Sky Inc v ABA (1998) 194 CLR 355
Sycotex Pty Ltd v Baseler (1994) 13 ACSR 766
Walker v Wimbourne (1976) 137 CLR 1
Case(s) also cited:
A Caveat, In re; Ex parte Canowie Pastoral Co Ltd [1931] SASR 502
Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65
(Page 3)
Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592
Lancedale Holdings Pty Ltd v Heath Group A/Asia Pty Ltd (1999) 33 ACSR 247
Paul & Gray Ltd; In re 32 SR (NSW) 386
(Page 4)
1 MURRAY J: The second defendant (SWC) was incorporated on 14 August 1998. On 25 November that year, the Fernvale Unit Trust was created and on that day the Constitution of the Fernvale Unit Trust Managed Investment Scheme (FUTMIS) was executed by SWC, which became the responsible entity. Mr Perera, the plaintiff, is a unit holder in the FUTMIS. The first defendant, Mr Reilly, is the liquidator of SWC, which holds 56 per cent of the units in FUTMIS. It is FUTMIS which effectively owns the land occupied by the Preston Vale Vineyard.
2 On 15 December 1998 the SWC Managed Investment, of which the responsible entity is the Frankland River Oliver Company, was registered. This is the framework under which the vineyard is operated. It is now known as the Preston Vale MIS.
3 Under the trust deed which is incorporated into the Constitution of the FUTMIS, cl 11, unit holders may require the trustee to transfer all or any of the units they hold. By cl 11.3:
"No transfer other than a transfer to or by the Initial Unit Holder shall be permitted which shall have the effect of increasing the interest of any Person (together with any other Persons who, in the opinion of the Trustee, are associates of such Person as defined in the Corporations Law) in Units to greater than 5% of issued Units."
4 SWC wishes to sell its holding of 56 per cent of the issued units in the FUTMIS to a third party, but it is prevented from doing so by cl 11.3. It has, in fact, entered into an agreement for the sale of the units conditional upon the removal of the restriction on the transfer of more than 5 per cent of the units. It is accepted that if the trust deed is to be amended, it can only be by special resolution passed at a duly convened general meeting of the unit holders. A special resolution is one defined in the deed, cl 1.1, as one passed by a three-quarters majority of the votes cast by those present in person or by proxy, and voting on the resolution.
5 The necessary general meeting was convened by a notice dated 18 November 2004. The special resolution proposed was, relevantly, to amend the deed by deleting cl 11.3. The notice was originally for a meeting to be held on 15 December 2004, but it was then adjourned to 22 December 2004 and was held on that date. The notice was under the hand of Mr Reilly as the liquidator of SWC which, of course, holds 56 per cent of the issued units, a total of, 3,030 out of 4,658 issued units.
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6 At the general meeting, the special resolution was passed. The required 75 per cent of those present in person or by proxy and voting on the resolution was achieved. The result in favour was 75.12 per cent. The total issued units is 4,658. 75 per cent of that number is just under 3,494. The total units voted in favour of the resolution was 3,499. On my calculation, the margin was therefore five of the units voted, with 1,159 units being voted against the resolution. If SWC had not voted its unit holding in favour of the resolution, but had abstained, then the remaining units which were voted on the resolution would be 1,628, of which, as I have said, 1,159 were voted against the resolution. It would have been resoundingly defeated.
7 Mr Reilly chaired the meeting and, as liquidator, voted SWC's 56 per cent unit holding in favour of the special resolution.
8 The notice of meeting was accompanied by an explanatory memorandum which referred to the contract which had been entered into for the purchase of the units of SWC subject to the restriction imposed by cl 11.3 being removed. It was asserted that the restriction on a person acquiring more than 5 per cent of the issued units was included to benefit the initial unit holder from whom SWC acquired its 3,030 units. I note that the prohibition upon the transfer of the units having the effect of increasing a holding to more than 5 per cent of the issued units, does not apply to transfers to or by the initial unit holder, but it appears that SWC acquired all of the units held by the initial unit holder.
9 The explanatory memorandum offers as the principal reason for the proposal to amend cl 11 that:
" … this restriction severely impairs the liquidity of the Units and improves the position of the creditors of Southern Wine Corporation Ltd (In liquidation) (SWC'). If this restriction were removed, it is far more likely that there would be an increase in the number of persons who would be interested in offering to buy Units from Unit Holders."
- One can understand the proposition that the liquidity of the units is improved if they may be freely traded and, of course, it was not being put that the restriction improved the position of the creditors of SWC, but that the removal of the restriction would improve their position by enabling the sale to take effect.
10 However, this case is not about whether, in the final analysis, the unit holders generally would be in a better position if cl 11.3 did not exist or
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- whether arguments in favour of the resolution lacked commercial merit for other than the creditors and possibly, ultimately, the members of SWC, which, without its unit holding, would continue to be the responsible entity for the FUTMIS.
11 The plaintiff, by his originating process, seeks a declaration pursuant to the inherent jurisdiction of the Court that the special resolution passed at the general meeting of 22 December 2004 is invalid, and a declaration pursuant to the inherent jurisdiction of the Court that any sale of units in FUTMIS in reliance upon the special resolution is invalid and/or unlawful. An injunction is sought under s 1234 of the Corporations Act 2001 (Cth), restraining any sale of units pursuant to the special resolution and requiring the records to be rectified. In the trial before me, which proceeded upon affidavit evidence, and which threw up no issue of disputed fact, the cases of the respective parties were put in documents of points of claim and defence.
12 To understand the plaintiff's argument and the answer made to it by the defendants, it is as well to start with the provisions of the Corporations Act dealing with managed investment schemes. The term "managed investment scheme" is defined:
"'managed investment scheme' means:
(a) a scheme that has the following features:
(i) people contribute money or money's worth as consideration to acquire rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not);
(ii) any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders);
(iii) the members do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions); or
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- (b) a time-sharing scheme; "
13 The word "interest", as used in par (a)(i) of the definition of a managed investment scheme, under s 9 of the Act bears the following meaning:
"'interest' in a managed investment scheme means a right to benefits produced by the scheme (whether the right is actual, prospective or contingent and whether it is enforceable or not)."
14 So here the members of the FUTMIS have an interest in the scheme, the right to participate in the financial benefits of the scheme, which benefits relevantly include rights or interests in the property, the Preston Vale Vineyard which the FUTMIS owns, upon which the associated Preston Vale MIS conducts the business of viticulture for the profit of the unit holders.
15 This is a scheme registered with ASIC, the Australian Securities and Investments Commission. It is governed by Ch 5C of the Corporations Act. Under s 601FA there must be a responsible entity authorised to operate the scheme. That has been and remains SWC, although it is in liquidation.
16 Section 601FC provides the duties of the responsible entity. Relevantly, under s 601FC(1)(c) it must:
"act in the best interests of the members and, if there is a conflict between the members' interests and its own interests, give priority to the members' interests;"
- This reflects the fact that the responsible entity, which need not be itself a member of the managed investment scheme, is there to operate the scheme in the best interests of the investors who are its members, protecting and preserving their property and advancing their interests in preference to its own in a case of conflict.
17 Section 601FD(1)(c) imposes on an officer of the responsible entity, a duty in precisely the same terms as that imposed upon the responsible entity itself. The liquidator of a corporation is an "officer" of that entity by par (f) of the definition of "officer" in s 9.
18 By s 601FC(5) and by s 601FD(3), a responsible entity or an officer of a responsible entity who contravenes or is involved in a contravention of the provisions of the Act imposing this duty contravenes the section, and under s 1317E(1) those contraventions are civil penalty provisions.
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- The consequence may be that under s 1317G, a court declaring that the contravention has occurred may go on to order the payment to the Commonwealth of a pecuniary penalty to a maximum amount of $200,000 for an individual or $1M for a body corporate.
19 As to the interests of the responsible entity, s 601FG(1) provides:
"[Acquisition of interest] The responsible entity of a registered scheme may acquire and hold an interest in the scheme, but it must only do so:
(a) for not less than the consideration that would be payable if the interest were acquired by another person; and
(b) subject to terms and conditions that would not disadvantage other members.
Note: If the responsible entity holds an interest in the scheme, it does so subject to section 253E (certain members cannot vote or be counted)."
- The Note is, of course, a matter of some significance in this case.
20 The Constitution of a registered scheme may, under s 601GC(1), be changed or repealed and replaced with a new Constitution by special resolution of the members of the scheme, or by the responsible entity, "if the responsible entity reasonably considers the change will not adversely affect members' rights". Here, as has been seen, the change was proposed by a special resolution of the members of the scheme.
21 The term "special resolution" is defined in s 9. In relation to a registered scheme, it is a resolution of which the required notice has been given and "that has been passed by at least 75% of the votes cast by members entitled to vote on the resolution". The provision in the trust deed may be regarded as being written consistently with that definition and with s 601GC(1). It is therefore not a special resolution of all members of the scheme, but one passed by at least 75 per cent of those members who are entitled to vote on the resolution. This is where, as the Note to s 601FG(1) provides, s 253E comes into play.
22 Section 253E provides:
"The responsible entity of a registered scheme and its associates are not entitled to vote their interest on a resolution at a meeting of the scheme’s members if they have an interest in the
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- resolution or matter other than as a member. However, if the scheme is listed, the responsible entity and its associates are entitled to vote their interest on resolutions to remove the responsible entity and choose a new responsible entity."
23 In my opinion, it is abundantly clear that SWC has an interest in the subject of the resolution other than as a member. Its interest arises out of its liquidation. Upon its insolvency it has entered upon a process designed to ensure the orderly winding up of SWC. That is, of course, the responsibility of the liquidator, Mr Reilly. The process involves getting in the property of SWC, generally speaking converting it into liquid assets, and rateably meeting the claims, according to law, of creditors and ultimately, if anything remains, its members.
24 The interest of SWC in its insolvency and Mr Reilly, as its liquidator, are very much identified in insolvency with its creditors. In Walker v Wimbourne (1976) 137 CLR 1, at 7, Mason J, in a case in which a transaction was sought to be supported on the basis that it was for the overall benefit of a group of companies, made the point that it was the interest of the particular company subject to the transaction which was paramount and could not be subordinated to the interests of the group as a whole. He said:
"In this respect it should be emphasised that the directors of a company, in discharging their duty to the company, must take account of the interests of its shareholders and its creditors. Any failure by the director to take into account the interests of the creditors will have adverse consequences for the company as well as for them. The creditor of a company, whether it be a member of a 'group' of companies in the accepted sense of that term or not, must look to that company for payment. His interests may be prejudiced by the movement of funds between companies in the event that the companies become insolvent."
25 The same point was made by Gummow J in Sycotex Pty Ltd v Baseler (1994) 13 ACSR 766, at 785, when his Honour said:
"It is clear that the duty to take into account the interests of creditors is merely a restriction on the right of shareholders to ratify breaches of the duty owed to the company. The restriction is similar to that found in cases involving fraud on the minority. Where the company is insolvent or nearing insolvency, the creditors are to be seen as having a direct
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- interest in the company and that interest cannot be overridden by the shareholders."
- His Honour went on to observe that the creditors' capacity to protect that imperfect right was by the conduct of the company acting of itself or through a liquidator.
26 In this case, the simple fact is that SWC was a member holding units in the FUTMIS. It was also the responsible entity. It was not seeking to terminate its interest as the responsible entity, but it was seeking to vacate its status as a member as part of a liquidation process. It sought to amend the Constitution of the FUTMIS so that it could make the sale to the purchaser with which it had entered into a contract - one sale to one purchaser who would then acquire all of SWC's 56 per cent interest. It had an interest in the resolution as a company in liquidation seeking to recover value by the sale of its unit holding, particularly in the interests of its creditors.
27 It seems to me that s 253E is worded as it is for the purpose of ensuring that there can be no possible conflict of interest arising out of the process of voting on a resolution at a meeting of the scheme's members. In the explanatory memorandum, the liquidator and SWC argue that, properly understood, the special resolution would be for the benefit of all the unit holders because it would increase the attractiveness of a proposal to buy units as an investment if they could be bought in substantial numbers, greater than 5 per cent of the total issued units. What was described as the liquidity of the units, it was said, would be improved, and for the defendants it is argued that in the sale proposed there is nothing to suggest that there would, in fact, be a detriment to the continuing members. The argument is summarised in this way:
"Of course, there was nothing to prevent a sale of the units (56 per cent) in, say, twelve multiples of 4 or 5 per cent by the liquidator - no resolution would have been required and there could have been no complaint. It is equally evident from this fact that the plaintiff's complaint lacks merit. The resolution to sell all the units in one lot achieves cost effectiveness and efficiency of sale. Clearly, the liquidator has to sell the units to discharge his duty. Clearly there is no detriment to members in either the resolution or the sale."
28 When one puts aside the rhetoric in that submission, I think it may be said, not that there was no detriment, but there is not evidence as to whether or not, for the members generally, the removal of the restriction
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- from the Constitution was a commercially desirable thing. But at least so far as the prohibition in s 253E is concerned, as I hope I have made clear, that seems to me to be not the point. SWC was not, by the actions of the first defendant, entitled to vote its interest on the special resolution proposed.
29 As to the question of conflict of interest, by SWC, under s 601FC(1)(c), and by Mr Reilly, as the liquidator of SWC and therefore as an officer of the responsible entity pursuant to s 601FD(1)(c), the plaintiff puts his case, I think, on two bases.
30 The first basis is that encapsulated in the following proposition:
"To exercise SWC's voting power in favour of a resolution that will see a third party assume a majority stake in the FUTMIS in circumstances where the third party will be able to act in its own selfish interest is to prefer SWC's interests over that of the unit holders of the FUTMIS."
- Of course, this relies on the fact that SWC is not only the responsible entity, but is also a member of the FUTMIS.
31 The proposition appears to be that, without regard to whether or not s 253E is breached, SWC, as the responsible entity, and Mr Reilly as its guiding officer, were in breach of their duties to act in the best interests of the members and guilty of not giving priority to the members' interests when they voted SWC's unit holding in favour of the special resolution, which would have the effect of allowing the sale of SWC's units to a third party, because that third party would not, when it became a member of the FUTMIS, be subject to the duties imposed on the responsible entity and its officers under s 601FC and s 601FD.
32 The plaintiff cited no authority in support of that proposition and to my mind it cannot be right. The proposition is that having acquired the majority unit holding, SWC, as responsible entity, was bound to retain it because a new member or members would not be bound by the duties of the responsible entity, and yet SWC would continue as the responsible entity. It and its officers would therefore be subject to the same duties, under s 601FC and s 601FD.
33 I have said that in my opinion the prohibition in s 253E is designed to prevent any possible conflict of interest arising, and I have held that the section was breached, but it is, in my view, a separate question whether the breach of the duties of the responsible entity and its officer, the
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- liquidator, relied upon by the plaintiff, is established. I am not persuaded that for SWC to be caused by Mr Reilly to vote its unit holding so as to enable it to divest itself of its units was necessarily to fail to act in the best interests of the members, or on the ground of conflict of interest, to fail to give priority to the members' interests.
34 As I have said, the plaintiff pursues the claim for breach of these provisions on an alternative basis. Before turning to that I should note that, in the points of claim, the case pleaded against Mr Reilly relies also on s 601FD(1)(e) and (f). I will not deal with these allegations because they were not relied upon in the argument put to me; nor, I think, on the evidence could such allegations be made out.
35 The alternative basis upon which it is said that SWC breached its duties relies on s 601FC(1)(m), which imposes on the responsible entity the duty to, "carry out or comply with any other duty, not inconsistent with this Act, that is conferred on the responsible entity by the scheme's constitution". The argument, as the case is pleaded, is that the trust deed is incorporated into the FUTMIS Constitution. Under cl 10 of the FUTMIS Constitution, meetings of the unit holders, general meetings, must be held in accordance with the provisions of the deed and Pt 2G.4. It is in that part that s 253E is to be found, and so the argument is that SWC was under a duty imposed by the FUTMIS Constitution to comply with s 253E.
36 I do not think that is the result achieved. I do not think that breach of s 253E is the failure to comply with a duty (to abstain from voting) which is not inconsistent with the Act but is conferred on the responsible entity by the scheme's Constitution. Section 253E and not the Constitution is the source of the disentitlement to vote. I do not find any relevant breach of s 601FC and s 601FD to be established by the evidence.
37 The civil penalty provisions, s 601FC(5) and s 601FD(3), are not established to have been breached and no occasion arises to make a declaration of contravention under s 1317E, a result which is not and could not be sought by the plaintiff, in any event. Section 1317J(1) gives the power to apply for a declaration of contravention to ASIC.
38 The question of the power or jurisdiction of the Court to grant the relief sought was not the subject of argument at the hearing before me. I therefore gave the parties leave to supplement their submissions in writing in relation to the remedies available if any of the grounds of the plaintiff's claim should be found to be made out.
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39 In the course of his submissions, the plaintiff seeks leave to include an application for relief under s 1321 of the Corporations Act, a matter thus far not expressly raised. That section provides that a person, aggrieved by an act of a liquidator of a company, may appeal to a court in respect of that act, and the court may confirm, reverse or modify the act, and make such orders or give such directions as it thinks fit. I would not grant this application which is opposed by the defendants. I do not think it is necessary, in the interests of justice, to enable the matters truly in controversy between the parties to be ventilated, that the plaintiff should be permitted to amend its points of claim so as to rely upon s 1321.
40 I must say that, without wishing to express my views at any length, the act which is presently relevant is that of the liquidator who chaired the general meeting and voted SWC's unit holding. I suppose what is sought, under s 1321, is that I should reverse that act. Having regard to the views that I have expressed about s 253E, the result might be that the fate of the special resolution would be considered in the context of the votes validly cast. But that is not at all the thrust of the plaintiff's case, and in its supplementary submissions it does not expressly detail the relief which would be sought.
41 In short, to allow this amendment would, at a very late stage, take the case in a quite different direction and, in my opinion, if I were to accede to this application the case would need to be reopened and the defendant given liberty to raise what it foreshadows, a case of estoppel and the like.
42 I have said that the effect of s 253E, in my view, is to disentitle the responsible entity from voting on the resolution. It occurred to me that the matter might be governed by s 253G, which provides:
"A challenge to a right to vote at a meeting of members of a registered scheme:
(a) may only be made at the meeting; and
(b) must be determined by the chair, whose decision is final."
43 If that section has application, it may be that the right to vote at the meeting, no objection having been taken and put before the chairperson for resolution, is simply not justiciable, not subject to challenge in the court. In this case, I agree with the plaintiff that if that is right it would have the odd result that the chairperson would be asked to rule on his decision, acting for SWC, to vote its unit holding.
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44 I note that s 253G speaks of making a challenge to a right to vote. The clear implication is that the section is concerned with cases where there would ordinarily be a right to vote, but for some defect in the process the member may not exercise that right. Such provisions are generally encountered in articles of association. I agree with the defendants that s 253G is designed to ensure that a challenge to the exercise of a right to vote is taken and dealt with at the meeting and when determined by the chairperson the decision is final at that point.
45 The provision is designed to facilitate the despatch of corporate business by decisions taken at meetings. In that context, it has often been held that such a provision will operate as a privative provision, rendering the decision not amenable to judicial review if the power is exercise bona fide, albeit mistakenly: MTQ Holdings Pty Ltd v RCR Tomlinson Ltd [2006] WASC 96 per Le Miere JA at [88] - [91], at least in cases where there has been no error of law: Fast Scout Ltd v Bergel (2001) 25 WAR 244.
46 But in my opinion, s 253E is a provision of a more fundamental character than one concerned with procedural regularity in the exercise of voting power. It disentitles the responsible entity from the exercise of voting rights which the interest, as a member of the scheme would otherwise carry. In the circumstance referred to in the section no voting right exists. The responsible entity does not have the right to vote in relation to the particular resolution, and the chairperson presiding at the meeting could have no power, rightly or wrongly, to confer such a right.
47 The inevitable consequence, it seems to me, is that discussed earlier in these reasons. One would simply have to remove from the scales the block of votes wrongly cast in favour of the special resolution. The result in this case must be that the required 75 per cent of the votes of those present in person or by proxy and entitled to vote was not obtained. There was no valid special resolution to change the Constitution of the FUTMIS. I note that the decision to which I have come in this regard is, in my opinion, consistent with the approach I took in relation to the rather different factual circumstances, but similarly worded provision of s 232A of the Corporations Law in McGellin v Mount King Mining NL, unreported; SCt of WA; Library No 980164; 7 April 1998.
48 In my view, the conclusion of invalidity is the inevitable result of the reasoning process outlined above. When the Court asks itself the relevant question, " … whether it was a purpose of the legislation that an act done in breach of the provision should be invalid": Project Blue Sky Inc v
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- ABA (1998) 194 CLR 355, 390 [93], the answer must be in the affirmative, in my opinion.
49 As to what relief, if any, should be granted, I would firstly express my agreement that the question of estoppel referred to in par B of the prayer for relief in the points of claim need not be considered. It is a claim not made in the originating process which delineates the ambit of the plaintiff's claim. The question of estoppel was not addressed in argument and I do not propose to address it further.
50 The principal relief sought is a declaration pursuant to the inherent jurisdiction of the Court that the special resolution passed at the general meeting of 22 December 2004 is invalid. The declaration sought that any sale of units pursuant to or in reliance upon that special resolution is invalid or unlawful, represents the consequence of a failure to pass a valid special resolution. I am not aware that there has been any sale and there is no need, in my opinion, for any such declaration to be made; nor, I think, is there any demonstrated need for a final prohibitory injunction of the kind sought in par (c)(i) of the prayer for relief. As at present advised, I would not, therefore, consider the issue of such an injunction.
51 As to the question of the declaration of invalidity, for the defendants argument was presented which was, in short, I hope without doing violence to the submissions, that the inherent jurisdiction of the Court is limited to the exercise of powers which may be seen as inherent in the grant of jurisdiction expressly to the Court. The Court will have the power which is necessarily ancillary to and to be exercised in aid of the jurisdiction it expressly possesses: Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 5) (1997) 18 WAR 334, 345 - 346. Of course, as was made clear in that case, the notion of the Court's inherent jurisdiction must give way to explicit statutory limitations upon the power of the Court.
52 As to that, the defendants observe that, as has been seen, the Court is given express power to make declarations of contravention of the civil penalty provisions of the Act, under s 1317E, albeit only upon the application of ASIC. And reference is made in the submissions to the Court's power to make orders under s 1325, the exercise of which power would not arise in these proceedings. Therefore, it is argued, the Court ought to take the view that it has no inherent jurisdiction to make a declaration outside the grant of relief expressly authorised by the Corporations Act which, I think it is put, should be regarded as a code in that respect.
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53 In answer to those submissions, the plaintiff refers to Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, where, at 581 - 582, the majority of the High Court referred to the acceptance that superior courts have inherent power to grant declaratory relief, a discretionary power which is, however, limited to the determination of matters which are real questions in dispute and not hypothetical questions on the application of a party having a real interest in the matter at issue. In my opinion, this is such a case.
54 The Supreme Court Act 1935 (WA), s 25(6) provides:
"No action shall be open to objection on the ground that a merely declaratory judgment is sought thereby, and it shall be lawful for the Court to make binding declarations of right without granting consequential relief.":
- This is an "action" within the meaning given to that word by s 4(1) of the Supreme Court Act.
55 I will make the declaration that the special resolution of the members of the FUTMIS passed at the general meeting of 22 December 2004 is invalid. I will hear the parties if any consequential orders are required.
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