In the matter of Pacific Springs Pty Limited [2020] NSWSC 1240
Hearing dates:
14, 15, 16, 17 July 2020
Date of orders:
11 September 2020
Decision date:
11 September 2020
Jurisdiction:
Equity - Corporations List
Before:
Rees J
Decision:
Refuse application under s 175 Corporations Act to correct share register.
Order under s 1322(4) Corporations Act that appointment and acts of director and secretary not invalid.
Catchwords:
CORPORATIONS – parents lend $800,000 to son to buy ice cream business in Australia – parents live overseas – company formed – parents are shareholders and son is director – son runs business – son repays half of loan – son allotted 1,800 shares and becomes majority shareholder – son repays loan – son dies leaving shares to defacto husband – parents seek to correct register 14 years after shares allotted.
SHARE ISSUE – power to allot shares – principles at [115]-[126] – allotment with knowledge and consent of parents.
DIRECTORS – power to appoint director – whether director had power to appoint replacement director by a Will – cannot ‘hand down’ a directorship – power to appoint director ceased on death, at [154]-[159] – s201F Corporations Act 2001 at [170]-[171].
PROBATE – whether executor can exercise power to take appointment as director prior to grant of probate, considering Lockrey v Barnard James Fussell [2019] NSWCA 299 at [163]-[167] – appointment ineffective in any event – section 44 Probate and Administration Act does not cure invalid acts.
CORPORATIONS – s 1322 Corporations Act – “just and equitable” at [176] – “substantial injustice” at [178].
EVIDENCE – events 16 to 20 years ago – reliance on what deceased said at [7] – forgery – onus and standard of proof at [8]-[9] – comparison of handwriting at [82] – Jones v Dunkel inference from failure to produce documents at [138]
EQUITY – laches at [181]-[194] – estoppel at [195]-[199] – plaintiffs’ silence did not amount to a representation as no duty to inform the defacto husband
Legislation Cited:
Companies Act 1961 (NSW), reg 68 of Table A in the Fourth Schedule
[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
In the matter of Pacific Springs Pty Limited [2020] NSWSC 1240
Case
[2020] NSWSC 1240
Decision Date
CaseChat Overview and Summary
Re Pacific Springs Pty Ltd was a case in the Supreme Court of New South Wales where the parents, who were shareholders, sought to correct the company's share register to reflect their entitlement. Their son had been the director and majority shareholder of the company, which was initially formed to operate an ice cream business in Australia. The son had borrowed money from his parents to purchase the business, repaying half of the loan before being allotted 1,800 shares, thereby becoming the majority shareholder. Following the full repayment of the loan, the son died, leaving the shares to his de facto husband. The parents sought to correct the register 14 years after the shares were allotted.
The primary legal issues in this case were whether the company's directors had the authority to allot the shares without the parents' knowledge and consent, whether the son had the power to appoint a replacement director by his will, and whether the parents' delay in taking action constituted an inequitable bar to their claim. The court had to consider the principles governing the allotment of shares, the appointment and cessation of directors, and the equitable doctrines of laches and estoppel.
The court found that the parents had not been aware of the share allotment and did not consent to it, which was against the principles outlined in the case law. The court also ruled that the son did not have the power to appoint a replacement director through his will, and this power ceased upon his death. The court further held that the parents' delay in taking action constituted an inequitable bar to their claim under the doctrine of laches, and their silence did not amount to a representation as they had no duty to inform the de facto husband. Consequently, the court denied the parents' application to correct the share register.
The court's final order was that the parents' application to correct the share register was dismissed, and the de facto husband remained the registered holder of the shares.