Qiao, Qi v Chen, Yuan Feng

[1997] FCA 1580

FEDERAL COURT OF AUSTRALIA

CORPORATIONS LAW  - strike out application - statement of claim - whether applicant has standing - respondent must show applicant’s claim is manifestly untenable - whether person who holds share certificate but not entered on register is a “member”

Federal Court Rules O 16 r 11
Corporations Law s 260

Re Independent Quarries Pty Limited (1994) 12 ACLC 159 followed
Titlow v Intercapital Group (Australia) Pty Limited (1996) 20 ACSR 201 cited

QI QIAO v CHEN & ORS
NO. VG 138 of 1997

JUDGE:        HEEREY J
DATE:          4 DECEMBER 1997
PLACE:        MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	VG 138  OF   1997

BETWEEN:

QI QIAO
APPLICANT

AND:

YUAN FANG CHEN
FIRST RESPONDENT

CAO YI
SECOND RESPONDENT

NATIONAL AUSTRALIA BANK LIMITED
THIRD RESPONDENT

HONG KONG BANK OF AUSTRALIA LIMITED
FOURTH RESPONDENT

CHB (AUSTRALIA) PTY LTD
FIFTH RESPONDENT

ZHANG GUO CUN
SIXTH RESPONDENT

CHINA TIAN CHENG (TIANJIN) METALS AND MINERALS CO LTD
SEVENTH RESPONDENT

JUDGE:

HEEREY J

DATE OF ORDER:

4 DECEMBER 1997

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1. The application be dismissed.

2. The first and second respondents pay the applicant’s costs of the strikeout application.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court

Rules

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	VG 138 OF 1997

BETWEEN:

QI QIAO
APPLICANT

AND:

YUAN FANG CHEN
FIRST RESPONDENT

CAO YI
SECOND RESPONDENT

NATIONAL AUSTRALIA BANK LIMITED
THIRD RESPONDENT

HONG KONG BANK OF AUSTRALIA LIMITED
FOURTH RESPONDENT

CHB (AUSTRALIA) PTY LTD
FIFTH RESPONDENT

ZHANG GUO CUN
SIXTH RESPONDENT

CHINA TIAN CHENG (TIANJIN) METALS AND MINERALS CO LTD
SEVENTH RESPONDENT

JUDGE:	HEEREY J
DATE:	4 DECEMBER 1997
PLACE:	HOBART

REASONS FOR JUDGMENT

This is an application brought under O 16, r 11, to strike out those parts of the statement of claim which seek relief under s 260 of the Corporations Law.  The basis of the strike-out application is that the applicant is said to have no standing because he is not a member of the Company CHB Australia Pty Limited.  For the purpose of this application, it is common ground that the relevant respondents have to show that the applicant's claim is so manifestly untenable that it cannot succeed.  The authorities are too well known to need citing.

It is common ground that the applicant's name does not appear on a share register of the Company; however there is clearly evidence which could enable a Court at trial to conclude that a share certificate in his name for the shares claimed had been sealed by the Company and given to him.  I refer to his affidavit to that effect, to the circumstance that the other three initial shareholders have produced similar certificates, and in particular to the scrip certificate counterfoil recording the issue of a share certificate in the applicant's name.

Reliance was placed on Re Independent Quarries Pty Limited (1994) 12 ACLC 159, where Williams J of the Supreme Court of Queensland held in quite similar circumstances that a person to whom a certificate under the seal of the Company had been issued, and who had paid for shares, had the standing to bring an application under s 260 notwithstanding that the person was not on the company's register. Now, it may be that that was something of a special case; see the later comments of Lehane J in Titlow v Intercapital Group (Australia) Pty Limited (1996) 20 ACSR 201 at 204. Nevertheless, for the purposes of this summary application, the applicant has in his favour a decision of a judge of a superior Court which, at the very least, supports him in circumstances which are closely analogous. The applicant does not suggest here that he paid cash for the shares, rather that they were issued in consideration of services provided for the Company and monies paid on its behalf. That is consistent with the minutes of the meeting at which the shares were issued. The minutes of the meeting, which was held on 18 January 1997, include the following:

“Applications for additional shares were tabled and the meeting resolved that additional shares in the capital of the Company be and are hereby allotted as paid for $1 per share as following.”

The four shareholders, including the applicant, are then each recorded as being allotted 40,000 shares.  Counsel for the respondents pointed out that there was some lateness in the assertion of this agreement by the applicant in the affidavit material he filed.  That, I think, is a matter that may go to the merits on the hearing of the matter, but is not sufficient to show that the claim is untenable as a matter of fact.  Nor do I think the fact that he pleads, obviously as an alternative, a claim that the Company is indebted to him for various monies expended on its behalf is sufficient to render untenable his primary assertion that he is a member of the Company.

So for those reasons, the application will be dismissed.

I think the respondents have failed and the costs should follow the event.  The affidavit setting out the details about the payment may have been late, but nevertheless it was filed and served as long ago as 18 October, and the respondents nevertheless persisted in pursuing this application.  I might say also that the counterfoil scrip certificate book which has been available with the former solicitors for the Company is, on the face of it, the record designed for the very purpose of recording shareholding in a company and is entirely consistent with the applicant's case. To pursue a summary judgment application in the face of the applicant's sworn evidence and the evidence of the scrip certificate book was conduct which put the respondents at the obvious risk of paying costs if they did not succeed.  So there will be an order that the first and second respondents pay the costs of the applicant of this application.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey

Associate:

Dated:             22 April 1998

Counsel for the Applicant:	P J Marzella
Solicitor for the Applicant:	Chua Tan & Associates
Counsel for the First and Second Respondents:	Richard Kendall
Solicitor for the First and Second Respondents:	Herbert Geer & Rundle
Date of Hearing:	4 December 1997
Date of Judgment:	4 December 1997