Sigma X-ray Flux Pty Ltd v Evans
[2002] WASC 136
SIGMA X-RAY FLUX PTY LTD & ANOR -v- EVANS & ANOR [2002] WASC 136
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 136 | |
| Case No: | COR:427/2001 | 23 MAY 2002 | |
| Coram: | MASTER SANDERSON | 31/05/02 | |
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Application to set aside order made ex parte dismissed | ||
| B | |||
| PDF Version |
| Parties: | SIGMA X-RAY FLUX PTY LTD (ACN 097 789 187) D & G D BROWN NOMINEES PTY LTD (ACN 008 793 299) GRAHAM JUSTIN SHANN EVANS SIGMA CHEMICALS (1986) PTY LTD (ACN 006 550 161) |
Catchwords: | Corporations Act Application to set aside order made allowing member to take action in the name of the company Company register not completed and company taking no steps to issue shares Whether applicant a member of company |
Legislation: | Corporations Act, s 117, s 120(2), s 169, s 236(1)(a)(i), s 237 |
Case References: | Bell Group NV (In Liq) v Aspinall (1998) 19 WAR 561 Re Reid Murray Acceptance Ltd [1964] VR 82 Burton v President of the Shire of Bairnsdale (1908) 7 CLR 76 Forkserve Pty Ltd v Jack [2000] NSWSC 1064 Foss v Harbottle (1843) 67 ER 189 Knight v Bulic (1994) 13 ACSR 553 Michael v Nicholson, unreported; SCt of WA; Library No 950660; 1 December 1995 Thomas A Edison Ltd v Bullock (1913) 15 CLR 679 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
D & G D BROWN NOMINEES PTY LTD (ACN 008 793 299)
Second Plaintiff
AND
GRAHAM JUSTIN SHANN EVANS
First Defendant
SIGMA CHEMICALS (1986) PTY LTD (ACN 006 550 161)
Second Defendant
Catchwords:
Corporations Act - Application to set aside order made allowing member to take action in the name of the company - Company register not completed and company taking no steps to issue shares - Whether applicant a member of company
(Page 2)
Legislation:
Corporations Act, s 117, s 120(2), s 169, s 236(1)(a)(i), s 237
Result:
Application to set aside order made ex parte dismissed
Category: B
Representation:
Counsel:
First Plaintiff : Mr G T Bigmore QC & Mr S K Shepherd
Second Plaintiff : Mr G T Bigmore QC & Mr S K Shepherd
First Defendant : Mr S J Penrose
Second Defendant : Mr S J Penrose
Solicitors:
First Plaintiff : Mallesons Stephen Jaques
Second Plaintiff : Mallesons Stephen Jaques
First Defendant : Tottle Christensen
Second Defendant : Tottle Christensen
Case(s) referred to in judgment(s):
Bell Group NV (In Liq) v Aspinall (1998) 19 WAR 561
Re Reid Murray Acceptance Ltd [1964] VR 82
Case(s) also cited:
Burton v President of the Shire of Bairnsdale (1908) 7 CLR 76
Forkserve Pty Ltd v Jack [2000] NSWSC 1064
Foss v Harbottle (1843) 67 ER 189
Knight v Bulic (1994) 13 ACSR 553
Michael v Nicholson, unreported; SCt of WA; Library No 950660; 1 December 1995
Thomas A Edison Ltd v Bullock (1913) 15 CLR 679
(Page 3)
1 MASTER SANDERSON: This a rather unusual application. To understand the nature of the application, it is necessary to provide some background facts.
2 The second plaintiff, and interests associated with it, and the first defendant and second defendant, and interests associated with them, have been engaged in a long-running dispute in this Court. The precise nature of this dispute is not presently of concern. It is enough if I say that the differences between the parties are deep and the enmity intense. The various actions which have been commenced have given rise to numerous interlocutory applications. At present, an early resolution of the parties' differences looks unlikely.
3 In late January of 2001, the parties commenced settlement negotiations. In or about May of that year, some form of settlement may or may not have been reached. The second plaintiff and its associates take the view that a settlement was concluded. The defendants take the opposite view. This dispute - that is to say the dispute as to whether or not settlement was in fact reached - is now the subject of further proceedings. I need say nothing more about that particular issue.
4 A key element of any settlement between the parties was the formation of a company which was to operate a joint venture between the second plaintiff and its associated interests and the defendants. Whether or not the parties settled their differences they at least got to the point of registering the joint venture company. That company is the first plaintiff in these proceedings. There is no doubt that the first plaintiff is a registered company and that it was registered on 14 May 2001.
5 As I have indicated above, the second plaintiff maintains that all its disputes with the defendants and their associated interests have been settled. Further, they say as part of that settlement agreement the first plaintiff was to operate a joint venture between the parties. Consequent upon the defendants' denial of that alleged agreement, the second plaintiff says that the first plaintiff has suffered loss and damage. In broad terms, it is alleged that if effect had been given to the agreement, the first plaintiff would have conducted the joint venture from which it would have made a profit. It is said that the breach of the settlement agreement by the defendants has consequently led to loss and damage on the part of the first plaintiff.
6 Against that background, the second defendant applied for leave pursuant to s 237 of the Corporations Act to commence proceedings in the
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- name of the first plaintiff. It is not in dispute between the parties that the application was made on the basis that the second plaintiff was a member of the first plaintiff and therefore an eligible applicant under the provisions of s 236(1)(a)(i). The application was supported by an affidavit of David Brown, sworn 16 October 2001. On 1 November, I made orders granting leave largely in terms of the present second plaintiff's application. These orders were made ex parte. That is the usual basis upon which such orders are made. There is no suggestion that the making of orders ex parte was inappropriate or that it runs counter to the provisions of the Corporations Act.
7 These proceedings were then commenced. During the course of the proceedings, the defendants had cause to consider the books and records of the first plaintiff. What they found was that no directors' or shareholders' meetings had ever been held and, save for one exception, none of the other documents anticipated by s 117 of the Corporations Act had been completed. For instance, although an application for shares in the first plaintiff had been prepared showing the second plaintiff as the applicant, the application had never been signed and the shares had never been issued by the company. The only document which has been completed by anyone is a consent by David Brown to act as a director. That document is dated 14 May 2001 and appears as annexure "D" to the affidavit of Graham Justin Shann Evans, sworn 22 February 2002.
8 Although it is not strictly necessary for the resolution of this application, it is perhaps worthwhile setting out the events which led to the present position. After discussions between David Brown and the first defendant, a Mr Lance Bannister-Jones, an accountant associated with the defendants, was instructed to arrange for the registration of a company to be called "Sigma X-Ray Flux Pty Ltd". Mr Bannister-Jones, in turn, contacted BH Shelf Companies Pty Ltd which, as the name suggests, is a provider of shelf companies. Mr Bannister-Jones provided Mr Robert Harvey, a director of BH Shelf Companies Pty Ltd, with the information necessary to allow the company to be registered. BH Shelf Companies took the necessary steps to register the first plaintiff and forwarded the corporate file it created to Mr Bannister-Jones. Subsequent to receiving the corporate file, Mr Bannister-Jones was contacted by the first defendant. He was asked to make the file available for collection. That he did and the file passed into the possession of the first defendant. It appears that nothing further was done by the first defendant or anyone else to complete the company's records and satisfy the requirements of the Corporations Act.
(Page 5)
9 The defendants, by this application, now seek to have the action brought by the first plaintiff dismissed. They say that the second plaintiff was never a member of the first plaintiff and therefore was not in a position to apply for leave under s 237. In the absence of such leave, no proceedings can be initiated by the second plaintiff in the name of the first plaintiff and the action should be dismissed.
10 Properly considered, what the defendants are seeking is to set aside the order made ex parte granting leave to the second plaintiff to bring proceedings in the name of the first plaintiff. To that extent, an application made in these proceedings is misconceived. When this matter was raised during the course of submissions, counsel for the plaintiffs, while acknowledging that, strictly speaking, the application ought to have been brought in action COR 370/01 (the proceedings in which leave was granted), he nonetheless indicated he was content for the issues to be resolved in these proceedings. In the light of that concession, I have approached the matter on the basis that the defendants seek to set aside the order granting leave to bring proceedings.
11 Order 58 r 23 gives a court discretion to set aside any order made ex parte. The principles upon which ex parte orders will be set aside was considered in detail by the Full Court in Bell Group NV (In Liq) v Aspinall (1998) 19 WAR 561. However, the application under consideration in that case was different from this application. Properly considered, what the defendants say here is that the order made ex parte was made without jurisdiction. They say that the second plaintiff was not a member of the first plaintiff and therefore could not apply under s 237. That stands in contrast to the Bell Group decision where the argument was as to whether or not material non-disclosure on the part of an applicant obtaining an ex parte order could lead to the order being set aside. In the Bell Group decision, the Court did refer to the prospect of an order made ex parte being set aside on the grounds that there was no jurisdiction to make the order: see page 569. The Court referred to the decision of Re Reid Murray Acceptance Ltd [1964] VR 82. In fact, that decision was based on a conclusion by the Court that the order which was made ex parte should, in fact, only have been made inter partes. Adam J found that this procedural irregularity was sufficient to set aside the ex parte order. Nonetheless, it seems clear that if a procedural irregularity is such as to warrant an order granted ex parte being set aside, then a lack of jurisdiction such as is alleged in this case could also lead to an order being set aside. Counsel for the plaintiffs did not argue to the contrary.
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12 The central question, then, is whether, at the time the order granting leave was made, the second plaintiff was a member of the first plaintiff. This requires an analysis of the legislative provisions found in Pt 2A.2 of the Corporations Act. Under s 119 of the Act, a company comes into existence on the day on which it is registered. It is interesting to note that the reference in the section is to the company coming "into existence". It is not said that the company is actually incorporated. Be that as it may, there is no doubt that once ASIC registers the company, it exists from that day.
13 As a necessary precursor to registration, a person must lodge an application for registration: s 117(1). The application must contain matters set out in s 117(2). Pursuant to s 117(2)(c), the application "must state" the name and address of each person who consents to become a member. Under s 117(5), an applicant must have the consents required by subs (2) when the application is lodged. Although it is not an express requirement of s 117(5), it would appear that the consents must be in writing. That implication arises as the applicant for registration must, after registration, "give the consents … to the company". It is difficult to see how this could be done unless the consents were in writing. Nonetheless, a failure to comply with the requirement that any consent be in writing does not appear to invalidate the application for registration or the registration itself. In this case, there is no doubt that the second defendant consented to becoming a member of the first plaintiff. It simply did not do so in writing. It would appear, then, that the applicant for registration, BH Shelf Companies Pty Ltd, may have contravened the Corporations Act. But the first plaintiff is in existence because it has been registered.
14 As a consequence of registration and the company coming into existence, certain consequences flow. For present purposes, s 120(2) of the Corporations Act is relevant. It reads as follows:
"The shares to be taken up by the members specified in the application are taken to be issued to the members on registration of the company."
15 It would not seem to matter, then, whether any written consent has been provided by the shareholders or whether the company itself has taken any steps to put its registers in order. If a party is specified in the application as being a member, then the shares are taken to be issued on registration. In other words, in this case although the first plaintiff itself had done nothing to regularise its affairs, the fact of registration and the
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- fact that the second plaintiff was nominated as a member of the company mean that it is the holder of shares in the company. Pursuant to s 169, the company is required to keep a register of members and to enter each member's name and address on that register. This has not been done and the first plaintiff may well be in breach of its obligations under the Act. But that does not alter the fact that, as at the date the order granting leave was made, the second plaintiff was a member of the first plaintiff. It was therefore entitled to make the application and there is no basis upon which the order can be set aside.
16 I would dismiss the applicants' (defendants') application. The applicants (defendants) should pay the respondents' (plaintiffs') costs of the application, including the reserved costs.
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