Re Mogul Stud Pty Ltd

[2012] NSWSC 1639

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Mogul Stud Pty Limited [2012] NSWSC 1639
Hearing dates:	12 November 2012
Decision date:	12 November 2012
Jurisdiction:	Equity Division - Corporations List
Before:	Black J
Decision:	Orders made for rectification of share register.
Catchwords:	CORPORATIONS - Application for rectification of share register under Corporations Act 2001 (Cth) s 175(1) - Discretionary character of power to order rectification of the register - Whether position as recorded in company's register records the intentions of the parties
Legislation Cited:	- Corporations Act 2001 (Cth) s 175(1)
Cases Cited:	- Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 - Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1 - Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1966) 20 ACSR 553; (1996) 14 ACLC 1089
Category:	Principal judgment
Parties:	Mogul Stud Pty Limited (Plaintiff) Barney Richard Arthur Scheinberg (First Defendant) Deborah Catherine Susan Redelman (Second Defendant) George Jim Leslie Jacobs (Third Defendant) Jolistare Pty Limited (Fourth Defendant) Redbell Nominees Pty Limited (Fifth Defendant) Gisella Scheinberg (Sixth Defendant)
Representation:	Counsel: A.S. Bell SC/D.F.C. Thomas (Plaintiff) Solicitors: Johnson Winter Slattery (Plaintiff)
File Number(s):	2012/296610

Judgment - Ex tempore

1. By originating process filed 24 September 2012 the plaintiff, Mogul Stud Pty Limited ("Company") applies for rectification of the share register kept by Mogul Stud such that the number of "B" class shares recorded as having been issued to the third defendant, Dr George Jacobs, on 26 June 1980 be amended from 200 to 100.

1. The application is supported by each of the Company's individual shareholders and its directors and each of them has given evidence. A former director and current shareholder, Ms Gisella Scheinberg, has also given evidence. The Court has been assisted by comprehensive submissions by counsel for the Company, Dr Bell SC and Mr Thomas.

1. In summary, 100 class B shares, carrying dividend rights, were issued to Mr and Mrs Scheinberg as trustee for two of their then minor children, Mr Barney Scheinberg and Ms Deborah Redelman in 1967. At the same time, shares described as "preference shares" were issued to Dr Jacobs. Subsequent share issues took place, including the additional issue of further B class shares to Dr Jacobs in June 1980 and to Mr Scheinberg and Ms Redelman in January 1981. On 1 July 1982, the 100 preference shares issued to Dr Jacobs in 1967 converted to B class shares. The effect of these series of transactions was that, for reasons that are not now understood, Dr Jacobs came to hold 300 B class shares in the Company while each of Mr Scheinberg and Ms Redelman held 200 B class preference shares. The possibility of error in this process is apparent, given the period of time over which it occurred and the fact that it occurred in several steps.

1. Ms Gisella Scheinberg gives evidence of conversations with her late husband that contemplated that a farm that is held through Mogul Stud was to be left to the three children equally and of conversations with each of the children to the same effect. Dr Jacobs, whose B class shareholding would be reduced by this application, fairly gives evidence that the present position does not reflect the children's understanding, including his own, that they held an equal shareholding in the company. Ms Redelman and Mr Barney Scheinberg give evidence to the same effect.

1. There is evidence that dividends paid for several years were paid in equal amounts, although in one year they were paid in unequal amounts where a resolution was passed for a distribution "pro rata" to the B class shares on issue which would, where the number of shares on issue were unequal, have the result that the dividend would then be unequal. There is further evidence of an intent of equal holding, namely, that the children together operate a partnership that holds land adjacent to the farm in equal shares and their evidence is that that arrangement reflected their understanding of the shareholding in the Company.

1. In this case, there is no direct evidence of how an error came to occur in respect to the allocation of the shares, although, as I have noted, the possibility of error was plainly open given the number of steps by which that issue took place over an extended period of time. There is, however, compelling evidence that an error has in fact occurred, so far as all those persons who are now alive give evidence that the result is contrary to their understanding of the parties' intention. This is the only evidence that could now reasonably be led in circumstances that each of the late Mr Scheinberg and the accountant who handled the company's affairs have died.

1. The Company relies on s 175(1) of the Corporations Act 2001 (Cth) which provides that a company may apply to the Court to have a register kept by the company under the relevant part of the Act corrected. That section does not itself confer a power to create a register, but assumes that the Court already has such a power at general law: Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1966) 20 ACSR 553; (1996) 14 ACLC 1089 at 1094. In the well known decision of Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1 at 51, Fullagar J pointed to the discretionary character of the power to order rectification of the register and to the fact that in equity warranty rectification would prima facie be established if a person's name was wrongly included or omitted from the register; the same principle is plainly applicable where, rather than the person's name being omitted, the number of shares attributed to that person is incorrectly recorded, so as to impose a disadvantage on that person or on other shareholders. The principles of rectification at general law are relevant, and those draw attention to where the position as recorded in a document reflects the common subjective intention of the parties: Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 at [444]ff.

1. I have referred above to the evidence which indicates that in this case, the present position as recorded in the Company's register does not record the intentions of the parties, relevantly the then directors of the Company, Mr and Mrs Scheinberg, who voted in respect of the resolution for the issue of the relevant securities, as described in Ms Scheinberg's conversations with her late husband and with each of the children as referred to in her and the children's evidence.

1. In these circumstances, I am satisfied that I should make the orders sought by the Company in this application. I make orders in accordance with the short minutes of order initialled by me and placed in the file.

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Decision last updated: 21 March 2013