Resource Equities Limited v Western Ventures Pty Ltd - [2004] WASCA 242

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: RESOURCE EQUITIES LIMITED -v- WESTERN VENTURES PTY LTD & ORS [2004] WASCA 242

CORAM: MCLURE J
SIMMONDS J

HEARD: 15 SEPTEMBER 2004

DELIVERED : 27 OCTOBER 2004

FILE NO/S: FUL 69 of 2004

BETWEEN: RESOURCE EQUITIES LIMITED (ACN 067 748 109)
Appellant
AND
WESTERN VENTURES PTY LTD (ACN 079 681 342)
ATKINSON COOPER SECURITIES LTD
GARDE NOMINEES LIMITED
CASTLETON PTY LTD (ACN 009 210 664)
FERSDON LIMITED
AILEENDONAN INVESTMENTS PTY LTD (ACN 008 682 773)
ANTHONY LOW-BEER
ROBERT BROWN
STANLEY BROWN
TUNG HI LIMITED
DAVID HESKETH
ROBERT ALLEN
STRATEGYSEARCH CONSULTING SERVICES PTY LTD (ACN 053 207 088)
NEIL MACAULEY
JANICE MACAULEY
COLIN McCAVANA
JOHN UDOROVIC
KALFAX HOLDINGS PTY LTD (ACN 009 143 891)
JOHN BRODNIAK PTY LTD (ACN 009 275 487)
Respondents

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram   :MASTER SANDERSON
Citation Number      : [2004] WASC 78
File Number            :  COR 6 of 2004

Catchwords:

Practice and procedure - Application to amend - Failure to join necessary party - Leave under s 237 of Corporations Act 2001 claimed as relief in oppression application - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 175, s 233, s 236, s 237, s 1322

Supreme Court Rules, O 18 r 6

Result:

Leave to appeal granted and appeal upheld

Category: B

Representation:

Counsel:

Appellant: Mr K L Christensen
Respondents : Mr M L Bennett

Solicitors:

Appellant: Christensen Vaughan
Respondents : Bennett & Co

Case(s) referred to in judgment(s):

Morgan v 45 Flers Avenue Pty Ltd (1987) 5 ACLC 222
News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410

Case(s) also cited:

Charlton v Baber (2003) 47 ACSR 31
JN Taylor Holdings Ltd (In Liquidation) v Bond (1993) 59 SASR 432
Re Multi-Tech Services Pty Ltd (In Liquidation) (1982) 30 SASR 218
Shum Yip Properties Development Ltd v Chatswood Investment and Development Co Pty Ltd (2002) 40 ACSR 619
Western Australia v Bond Corporation Holdings Pty Ltd (1991) 5 WAR 40

MCLURE J: The applicant (first defendant) seeks leave to appeal from orders made by Master Sanderson on 4 May 2004 giving leave to amend the application and joining three of the applicant's directors.
In its original application, the then sole but now first‑named respondent (plaintiff) (Western Ventures Pty Ltd), applied under s 233 of the Corporations Act 2001 (Cth) for the winding up of the applicant or, alternatively, the appointment of a receiver on the ground of the alleged oppressive conduct of the affairs of the applicant ("oppression application"). Other members of the applicant have now been joined as plaintiffs (respondents).
By the orders the subject of this leave application, the Master joined three directors of the applicant (Messrs Carr, Thomas and Purves) as second, third and fourth defendants respectively and gave leave to amend the application to make further claims and seek additional relief. The further claims are made in the following terms:
"

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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Details

Case: [2004] WASCA 242
Decision Date: 27 OCTOBER 2004

CaseChat Overview and Summary

Resource Equities Limited brought an application for relief under the oppression provisions of the Corporations Act 2001, seeking the winding up of the company or the appointment of a receiver. Western Ventures Pty Ltd applied to amend the relief sought in the application to include claims against three directors of Resource Equities Limited and to seek additional relief, including the invalidity of a share allotment to Glamont Pty Ltd and rectification of the shareholder register. The dispute centred on whether the court should grant leave to amend the application and join the directors as defendants, and whether Glamont Pty Ltd, as a necessary party, should also be joined in the proceeding.

The primary legal issues before the court were whether the Master correctly exercised his discretion to allow the amendment of the application and whether the failure to join Glamont Pty Ltd, a necessary party, rendered the claim for relief ineffective. The court had to consider the statutory framework for leave to amend applications under the Corporations Act and the common law principles governing the necessity of joining parties in proceedings. The court also had to evaluate whether the claims for relief in relation to the directors and the share allotment could properly be made in the context of the oppression application.

The court held that the Master had jurisdiction to grant leave to amend the application and join the directors as defendants. However, the failure to join Glamont Pty Ltd, who held the shares issued by Resource Equities Limited, meant that the claim to relief would be defeated. The court found that the relief sought directly affected Glamont's rights, making it a necessary party to the action. The court concluded that the Master had erred in granting leave to amend the application without requiring the joinder of Glamont Pty Ltd. Consequently, the application to amend the relief sought in the oppression application was dismissed to the extent it related to the invalidity of the share allotment and the rectification of the shareholder register.

The court's final orders were that the application to amend the relief sought in the oppression application was dismissed in relation to the claims for invalidity of the share allotment and rectification of the shareholder register. The court did not grant leave to amend in relation to these claims due to the failure to join Glamont Pty Ltd as a necessary party. The application to join the directors as defendants and to amend the relief sought in other respects was allowed.

Orders

Orders of the court

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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

By the orders the subject of this leave application, the Master joined three directors of the applicant (Messrs Carr, Thomas and Purves) as second, third and fourth defendants respectively and gave leave to amend the application to make further claims and seek additional relief. The further claims are made in the following terms:"Section 237 and Sections 1322 and 175 of the Corporations Act The application pursuant to section 237 of the Corporations Act is an application by the [first‑named first respondent] for leave to bring proceedings on behalf of the [applicant] against the Second, Third and Fourth Defendants.The application pursuant to Section 1322 is to declare invalid the purported allotment of 3,000,000 shares in or about May 2003 to Glamont Pty Ltd and pursuant to Section 175 to rectify the register of shareholders." The additional relief sought by the respondent is contained in pars 2, 3 and 4 as follows:"2.alternatively to (1) above, orders pursuant to section 237 of the Corporations Act that the [first‑named respondent] be authorised to institute and prosecute proceedings on behalf of the [applicant] against … Carr, … Thomas and … Purves, directors of the [applicant], for breach of their common law duties as directors and of sections 180 and 181 of the Corporations Act … ; 3.a declaration pursuant to Section 1322 that the issue of 3,000,000 shares by the [applicant] in or about May 2003 to Glamont Pty Ltd was invalid and void; 4.rectification of the register of members of the [applicant] pursuant to section 175 whereby the issue of 3,000,000 shares in the [applicant] in or about May 2003 to Glamont Pty Ltd is cancelled." Paragraph 1 claims relief under s 233 for the winding up of the applicant or the appointment of a receiver. At the hearing before the Master, counsel for the applicant contended that the proposed relief in par 2 was inconsistent with order 1, although no such inconsistency was claimed in relation to the relief sought in pars 3 and 4. In effect, the applicant conceded that the relief sought in pars 3 and 4 could be made in the oppression application, although the claim is made and relief sought under s 1322 of the Corporations Act which permits an application by "any interested person": s 1322(4). Thus, for the purposes of this application, I assume the respondents have standing, and can obtain a declaration of invalidity, under s 1322 notwithstanding it appears the purpose of that section is to validate actions following an irregularity in procedure. The respondents' claim is pre‑emptive in nature. Based on the concession that the claims for relief in pars 3 and 4 are properly raised in this application, it is clear that the relief sought directly affects Glamont's rights, in which case it is a necessary party to the action: News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 524; Morgan v 45 Flers Avenue Pty Ltd (1987) 5 ACLC 222 at 232. This was conceded by the respondent before the Master and in this Court. However, leave to amend was not conditional on the joinder of Glamont and the respondents have not since applied to join Glamont. The consequence of the failure to join Glamont is that, notwithstanding O 18 r 6(1) of the Supreme Court Rules, the claim to relief will be defeated: News Ltd v Australian Rugby Football League Ltd at 524. Accordingly, the Master erred in granting leave to amend in relation to the s 1322/s 175 matters.