Tang v Bongreen

[2003] NSWSC 824

Reported Decision: 47 ACSR 400

Supreme Court

CITATION:	TANG v BONGREEN [2003] NSWSC 824 revised - 15/09/2003
HEARING DATE(S):	1 September 2003
JUDGMENT DATE:	10 September 2003
JUDGMENT OF:	McDougall J at 1
DECISION:	(1) Order that the originating process filed 8 August 2003 be dismissed. (2) Order the second and third defendants to pay the plaintiff's costs of that originating process.
CATCHWORDS:	CORPORATIONS - injunctions - right of shareholder to request general meeting under s249D Corporations Act - whether shareholding is a "sham" - whether restraint would change rather than preserve status quo - effect of applicants' complicity in alleged "sham" on "clean hands" - whether binding agreement that plantiff would not intervene in management of the company - whether applicants should have relief under s 1322(4)(d)
LEGISLATION CITED:	Corporations Act 2001
CASES CITED:	Paringa Mining and Exploration Co plc v North Flinders Mines Ltd & Ors (1988) 14 ACLR 587 Carr Boyd Minerals Limited v Ashton Mining Limited (1989) 15 ACLR 599 Esanda Limited v Burgess (1984) 2 NSWLR 139 Boydell v James (1936) 36 SR (NSW) 620 Perpetual Trustee Co [Ltd] v Bligh (1940) 41 SR (NSW) 33 Hawke v Edwards (1947) 48 SR (NSW) 21 Thomas Brown & Sons Limited v Fazal Deen (1962) 108 CLR 391 Carney v Herbert (1984) 3 NSWLR 85 Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184 Black Uhlans Inc v NSW Crime Commission [2002] NSW SC 1060
PARTIES :	Sau-Ying Tang (Plaintiff) Bongreen Pty Ltd (Defendant 1) Tom (Shao Tang) Liu (Defendant 2) Xiao Ming Liu (Defendant 3)
FILE NUMBER(S):	SC 2307/03
COUNSEL:	Plaintiff - J M White Second and Third Defendants - M Broun QC
SOLICITORS:	Plaintiff - Rutland's Law Firm Second and Third Defendants - William Chan and Co

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

Mc Dougall J

10 September 2003

2307/2003 SAU-YIM TANG v BONGREEN PTY LTD & ORS

JUDGMENT

HIS HONOUR

Introduction

1 The plaintiff and the second and third defendants are the registered holders of all the issued shares in the capital, and the directors, of the first defendant.

2 The plaintiff holds 200,000, or about 87%, of the issued shares in the first defendant. They were allotted to her, in consideration of the payment of $200,000, in October 1995. The second and third defendants say that the plaintiff’s shareholding is a “sham”.

3 On 5 August 2003 the plaintiff gave to the first defendant and to each of the second and third defendants a notice under s 249D of the Corporations Act 2001. That notice required the second and third defendants “to call and arrange a General Meeting of” the first defendant and stated the plaintiff’s intention to propose the following special resolutions:

“(1) That Mr Xiao Ming Liu [the third defendant] be removed as a Director of the Company;
(2) That Mr Shao Tang Liu [the second defendant] be removed as a Director of the Company;
(3) That Mr Hugo Cheung be appointed a Director of the company”.

4 The notice concluded:

“I place you on notice that, if the Directors of the company fail to call and hold the General Meeting in accordance with this request I will rely upon my statutory right as member to call and arrange to hold a General Meeting”.

5 The second and third defendants have not called, either within the time required by s 249D or at all, a meeting of the first defendant. They claim that they are not required to do so because the plaintiff’s shareholding is a “sham”. Instead, the second and third defendants have filed interlocutory process seeking relief restraining the plaintiff from proposing to a General Meeting of the first defendant any motion in terms of those foreshadowed by the s 249D notice, and from voting in favour of any such motions. The second and third defendants further seek an order restraining the plaintiff “from taking any step to affect the present directorships, or structure of the Company or the shareholding of the Company”.

6 In the course of the hearing before me, the second and third defendants sought and were granted leave to amend their interlocutory process by adding a prayer for relief under s 1322(4)(d) of the Corporations Act to extend the time for holding the meeting up until the determination of these proceedings or the further order of the Court.

Factual background

7 It is common ground that in about October 1995, the plaintiff paid $200,000 for the allocation of 200,000 shares in the first defendant. That money was banked into the account of the first defendant. A share certificate has been issued showing the plaintiff as holder of the shares in question, and I proceed on the basis that, as the second and third defendants concede, the share register of the first defendant likewise shows the plaintiff’s shareholding.

8 The second and third defendants say that the plaintiff, who was a resident of Hong Kong and, presumably, a citizen of the People’s Republic of China, sought the shareholding in the first defendant to assist her with an application for Australian residence. The plaintiff denies this and says that the second defendant contacted her and asked her to consider migrating to Australia and investing in the first defendant. However, even on the plaintiff’s evidence, it is clear that she understood that the proposed investment in the first defendant was something that needed to be put in place before she could apply for the relevant visa.

9 The second and third defendants say that, a couple of days after the plaintiff had paid for her shareholding, she requested the return of the money to assist her husband who had “some problems with his business in [sic] overseas”. According to the second defendant, the plaintiff said that she had been advised by an immigration agent that she must not use her name to take the money because she had to be able to show that she still had an investment in an Australian company. She therefore (it is said) requested that the third defendant “use his name to get the money out for me”. The plaintiff denies that she made this request.

10 The second and third defendants say that, after the plaintiff made the alleged request for return of the money that she had paid, they withdrew $200,000 from the first defendant’s bank account and paid that sum into the bank account of the third defendant and his wife. Thereafter, they say, the money was paid, in three instalments, to or at the direction of the plaintiff. The plaintiff denies that any of these events, in so far as they are said to have involved her, occurred.

11 The second and third defendants say that, in about late 1997, there were conversations with the plaintiff in which the plaintiff was requested to repay the $200,000 or to “resign and get out of the company”, and that the plaintiff said that once her permanent residence application was finalised, she would leave the company. The plaintiff denies this.

12 The plaintiff has obtained certain of the records of the first defendant. Those records purport to show that, between 2 November 1995 and 27 April 2000, amounts totalling $310,000 were paid to her out of the funds of the first defendant. The plaintiff denies that she received any of those funds.

13 The second defendant has given evidence that the first defendant “at the present time is not engaged in undertaking any new work in view of these ... proceedings”. However, he says, “there are about four or five of our completed building contracts which are still in their guarantee period and where our clients may be entitled to call on the company under its guarantee for some years yet to come”.

14 There is no evidence as to when those contracts were completed or as to the time that the guarantees have to run. Nor is there any evidence that would enable me to form any assessment whatsoever of the likelihood that the first defendant may be called upon to perform work under those guarantees or, if it is, the nature, extent or cost of that work.

The case for injunctive relief

15 The second and third defendants submit that the plaintiff should be restrained, in substance, from exercising any rights given to her by s 249E. They say that:

(1) for almost 8 years, the plaintiff has not been involved in the day-to-day affairs of the first defendant;

(2) the plaintiff has not said why it is that she wishes to change the directors, so that the Court cannot understand what is to be achieved by the proposed change;

(3) there is no evidence as to why, after the “8 years of relative inactivity”, the plaintiff now needs to remove the defendants as directors and to appoint another director who, it is said, will be “sympathetic” to her;

(4) “the present situation should not be permitted to become more complex by a change of the directorship of the company in the course of litigation”;

(5) on their case, because (by hypothesis) the plaintiff’s shareholding is a “sham”, it would be “unjust” if she were enabled to take over the management of the first defendant.

16 No submission was put that the s249D notice was, formally or otherwise, defective.

17 On the balance of convenience, the second and third defendants repeat their submission that no reason has been shown why (what they say is) the present situation should be changed. Further, they submit that the first defendant has some ongoing contingent liability under guarantees that it has given for projects undertaken and completed by it in the past, and that its ability to perform its obligations under those guarantees would be diminished if they were removed as directors.

18 In essence, the second and third defendants say that they seek “to preserve the status quo until the final hearing”.

19 What I have written in paras 15-18 records the submissions put by the second and third defendants at the hearing. However, in supplementary written submissions filed after the hearing had concluded, and purporting to relate to the second and third defendants’ case for relief under s 1322(4)(d) of the Corporations Act, it was submitted that the second and third defendants “really ultimately raise two questions”. The second of those questions was expressed thus:

“Is [the plaintiff] bound by an agreement that she would not attempt to participate in the management of the company and leave the Defendants in charge in which case the problem is not the holding of a meeting but voting for a resolution to change the Directors”.

The plaintiff’s contentions

20 The plaintiff points to the circumstance that she is agreed to be a member of the first defendant and that, therefore, she has the rights given to her as a member – including, in this case and by virtue of the size of her shareholding, the right given by s 249D to at least 5% of members. In this context, the plaintiff submits that, taking the defendants’ evidence at its highest, the loan back to the plaintiff (which, I repeat, the plaintiff denies) was effected after the shares were issued and paid for, so that at most “the Company may have an action for recovery of a debt against” the plaintiff.

21 Further, the plaintiff submits that the second and third defendants should be denied relief (if otherwise entitled) because they have relevantly unclean hands. This state of affairs arises, so the plaintiff says, because the second and third defendants have failed to perform their obligations under s 249D of the Act, or under cl 63 of the first defendant’s constitution. That submission was expanded, in the course of argument, in the manner dealt with at para [47] below.

22 Clause 63 of the first defendant’s constitution requires that its directors “may whenever they think fit and shall on requisition made by the shareholders in accordance with the provisions of any enactment in that behalf convene an Extraordinary General Meeting”.

23 Further, the plaintiff submits that the balance of convenience lies in her favour. She points in particular to:

(1) her statutory and contractual rights as a member of the first defendant; and

(2) what she says are false entries in the first defendant’s accounts purporting to show that she is indebted to the first defendant in the sum of $310,000.

24 The plaintiff did not address submissions to the submission recorded in para 19 above. In view of the conclusion to which I have come on that submission (see para [45] below), I did not prolong the time taken to give this judgment, and increase the costs, by requiring the plaintiff to put submissions on that issue.

The plaintiff is a member of the first defendant

25 By s 231(b) of the Corporations Act, “[a] person is a member of a company if they ... agree to become a member of the company after its registration and their name is entered on the register of members”. Clause 2 of the first defendant’s constitution reflects this, when it states that ““Shareholders” and “Members” respectively mean and include the holders for the time being of shares in the capital of the Company”.

26 In the course of argument, Mr M D Broun QC, who appeared for the second and third defendants, the applicants for interlocutory relief, conceded that the plaintiff was a member of the first defendant because the register had not been rectified. In his written submissions, Mr Broun had said:

“It is common ground that the records show that the plaintiff ... is both the majority shareholder and a Director of the company as the result of events that occurred in 1995”.

27 In my opinion, it follows inevitably that the plaintiff, as a member of the first defendant holding about 87% of its issued share capital, is in a position, unless restrained, to exercise the rights given by s 249D of the Corporations Act and, if the directors do not comply with her s 249D notice, to exercise the further rights given by s 249E.

The decision in Paringa

28 Mr J M White of Counsel, who appeared for the plaintiff, relied heavily on the decision of the Full Court of the Supreme Court of South Australia in Paringa Mining and Exploration Co plc v North Flinders Mines Ltd & Ors (1988) 14 ACLR 587.

29 Paringa was the major shareholder in North Flinders, holding a little under 50% of the issued share capital. The Full Court found that it was in a position from a practical point of view to control decisions at any meeting of shareholders of North Flinders. Paringa sought to challenge decisions made by the Board of North Flinders (which board Paringa did not then control) relating to a proposed takeover and a proposed rights issue. Paringa requisitioned a general meeting to consider resolutions to reconstitute the Board of North Flinders in such a way as to give directors nominated by Paringa control of the Board. This was clearly done in an attempt to ensure that North Flinders did not continue with the takeover and rights issue decisions and (under the control of the proposed new directors) that it would do what could be done to revoke those decisions. An injunction was granted at first instance to restrain the holding of the requisitioned meeting. Paringa appealed to the Full Court from that decision.

30 King CJ, with whom White and O’Loughlin JJ agreed, considered that the first question to be addressed was “what constitutes the status quo in the circumstances”. He said (14 ACLR at 590-1):

”It seems to me that his Honour’s order, having the effect as it does of preventing the shareholders of Paringa [sic: clearly his Honour meant North Flinders] from exercising such rights as shareholders possess at General Meetings to control the affairs of North Flinders and, in particular, to alter the composition of the Board, does not protect or preserve the status quo but rather disturbs it in quite radical respects. The relevant status quo, as it seems to me, includes the right of the shareholders of North Flinders to vote at a lawfully convened General Meeting on any business which is lawfully before it and, in the present circumstances, includes the right of shareholders in North Flinders to vote at the Extraordinary General Meeting which has been requisitioned on the business for which that meeting has been requisitioned, namely the proposed changes in the composition of the Board. To deprive the shareholders of North Flinders and, in particular, the controlling shareholder, Paringa, of that right, seems to me to be not a preservation of the status quo but rather a disturbance of it”.

31 In my respectful opinion, his Honour’s reasoning is correct, and is directly applicable to the present case. The plaintiff is a shareholder in the first defendant. As a shareholder she has present rights, including, as I have already noted, those accruing to her under s 249D of the Corporations Act. That is the status quo. An order that would prevent her exercising those rights does not preserve the status quo. It would change it.

32 The decision in Paringa was considered by the Full Court of the Supreme Court of Western Australia in Carr Boyd Minerals Limited v Ashton Mining Limited (1989) 15 ACLR 599. Malcolm CJ, with whom Brinsden and Walsh JJ agreed, considered that the decision in Paringa could be distinguished because, in Carr Boyd, “there is alleged as the basis of the cause of action an agreement whereby for consideration, Ashton contracted not to exercise its votes in a certain way, or not to exercise its powers as a 30% shareholder with a capacity to control in a certain way” (15 ACLR at 606). However, his Honour did not question the correctness of the reasoning in Paringa; indeed, immediately before the remarks that I have just referred to, he said that “[o]ne can accept everything which appears in the passages cited from King CJ at ACLR 588-592”.

33 In the present case (for the reasons given in paras [40] to [44] below, there is nothing approaching an agreement by the plaintiff not to exercise her rights as a shareholder. If she is to be restrained, it can only be on the basis that her shareholding is, as the second and third defendants submit, a “sham”.

No sham transaction

34 In my opinion, the evidence falls far short of establishing that the plaintiff’s shareholding in the first defendant is a “sham”, even if, which I assume but do not decide, that were a sufficient basis for depriving her of the incidents attaching to her shareholding.

35 Mr Broun did not define what it was that was a “sham”. However, if the doctrine relating to sham transactions is to have any relevance, the case for the second and third defendants must be that the agreement between the plaintiff and the first defendant, whereby the plaintiff subscribed for and was allotted 200,000 shares in the capital of the first defendant, was a sham.

36 The concept of sham transactions has been discussed in a number of cases. Those cases establish that “[f]or an agreement to be found to be a sham it is necessary for both parties to intend to enter into an agreement of a different legal kind and with different incidents from the legal form which they in fact adopt”: Esanda Limited v Burgess (1984) 2 NSWLR 139, 144 (Samuels JA); see also Hutley and Priestley JJA at 146 and 153 respectively; and see also Boydell v James (1936) 36 SR (NSW) 620, 627 (Jordan CJ); Perpetual Trustee Co [Ltd] v Bligh (1940) 41 SR (NSW) 33, 39 (Jordan CJ); Hawke v Edwards (1947) 48 SR (NSW) 21, 23 (Jordan CJ).

37 In the present case, it is clear that the parties intended that the plaintiff should subscribe for and be allotted shares in the capital of the first defendant. That is so whether the purpose was one of investment (as the plaintiff contends) or of facilitating her application for permanent residency (as the second and third defendants contend). There is no evidence to suggest that, at the time it was made and performed, the agreement was not intended to have legal effect according to its terms. Even on the case for the second and third defendants, it was not until some time after the plaintiff had subscribed for her shares that (as they say) she asked to take the money out. There is no evidence that this was even in contemplation, let alone agreed, at the time the agreement for subscription and allotment was made.

38 It might be otherwise if (for example) the parties never intended that the first defendant should have the benefit of the money subscribed by the plaintiff. However, there is no evidence to support such a conclusion.

39 In my opinion, therefore, there is no basis upon which it can be said that the agreement for the plaintiff to subscribe for and be allotted shares in the capital of the first defendant was a sham. It must follow, as the case for the second and third defendants was put at the hearing, that there is no basis made out for the grant of injunctive relief as sought.

Alleged agreement not to participate in management

40 As I have said, this submission by the second and third defendants was not put at the hearing but was raised, almost as an afterthought, in supplementary written submissions dealing with s 1322(4)(d). It may have been inspired by consideration of the decision in Carr Boyd.

41 If the substance of the submission were made out as a matter of fact, it might afford a ground for relief. However, as a matter of fact, it must fail. There is no evidence, in either of the affidavits of the second defendant that were read before me, of any agreement to which the plaintiff was a party that she would not attempt to participate in the management of the first defendant, or that she would leave the second and third defendants in charge. The highest that the evidence goes is that, according to the second defendant, the plaintiff on one occasion said words to the effect that she would not be involved in the daily operation of the first defendant and would not want any share of the profits. According to the second defendant, this was said on the occasion when, after the plaintiff had paid her money and had received the allocation of shares, she asked for the money back. As I have noted, the plaintiff denies that she asked for the money back and denies that she said at any time that she would not be involved in the daily operation of the first defendant and that she would not want any share of profits.

42 I am not in a position to reconcile this dispute in the evidence. However, for present purposes, it does not seem to me to be possible to construct the remark alleged by the second defendant to have been uttered into an agreement of the kind now, belatedly, referred to by the second and third defendants in their submissions.

43 On their face, the words attributed by the second defendant to the plaintiff do not seem to be promissory in nature, nor (on the second defendant’s account of the conversation) do they seem to have been regarded as promissory. They seem to me to be too vague and general to be regarded as possessing promissory effect, so as to be capable, upon acceptance, of leading to a binding contract. At most, they might be regarded as some statement of present intention.

44 Even if the words be regarded as promissory, it would not be thought that the plaintiff was binding herself never to seek to intervene in the management of the company. The same would apply, to the extent that it is relevant, if the words were treated as representations of intention rather than as being promissory. In other words, whether the words are to be regarded as promissory or whether they are to be regarded as a representation of present intention, they do not seem to me to amount to a commitment on the part of the plaintiff never to seek to intervene in the management of the first defendant.

45 I therefore conclude that there is no basis made out on this ground for the grant of injunctive relief as sought.

Clean hands

46 In view of the conclusions to which I have come, it is not, strictly speaking, necessary for me to consider this issue. However, in case I am wrong in what I have just said, I shall deal with it briefly.

47 There are two aspects to the clean hands’ defence raised by the plaintiff. The first is that the second and third defendants have failed to comply with their obligations under s 249D and under cl 63 of the first defendant’s constitution. The second, which really arose from the way in which the second and third defendants put their case at the hearing, was that if the transactions between the plaintiff and the first defendant were as alleged by the second and third defendants, then the second and third defendants’ knowing complicity in that transaction was sufficient to enliven the doctrine.

48 If the second and third defendants had otherwise made out a case for injunctive relief, I would not have refused it simply because they were in contravention of their obligations under s 249D and cl 63. That is because, to make out a case for injunctive relief, the second and third defendants would need to demonstrate at least an arguable case, or a serious question to be tried, that the plaintiff’s entitlement to the shares, being the foundation to her rights under s 249D and cl 63, could be impeached. In those circumstances, having decided that there was an arguable case or serious question to be tried, it would be somewhat inconsistent to say that one should refuse relief because the question might be answered in favour of the plaintiff.

49 However, the second aspect of the clean hands’ defence falls into a different category. If the plaintiff’s title is to be impeached, it would be necessary for the second and third defendants to show, to the requisite degree, an arguable case or serious question that there had been a sham transaction in which (necessarily, on the facts) they were complicit. Further, on their case, that sham transaction would have been entered into with the object of deceiving the immigration authorities and, quite possibly, of contravening, or enabling the plaintiff to contravene, relevant provisions of the Migration Act 1958 (Cth). Even if such a claim did not raise questions of illegality in the strict sense (see, for example, Thomas Brown & Sons Limited v Fazal Deen (1962) 108 CLR 391 and Carney v Herbert (1984) 3 NSWLR 85) it would, in my opinion, demonstrate that the defendants had been guilty of “depravity in a legal as well as in a moral sense” that had an “immediate and necessary relation to the equity sued for” (Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184). See, generally, Black Uhlans Inc v NSW Crime Commission [2002] NSW SC 1060 at [157] to [183] where Campbell J reviews the authorities.

50 As his Honour said at [184], when one applies the unclean hands’ principle, it is necessary first to identify what is the equity which (absent unclean hands) the Court would be prepared to uphold. In the present case, if there is an equity, it is the defendants’ asserted right to have set aside, or to cause the first defendant to have set aside, the allocation of shares to the plaintiff. To prove that equity, the second and third defendants must necessarily prove a sham transaction that, on their case, was entered into for the purposes outlined in the preceding paragraph. On that analysis, in my opinion, if the second and third defendants otherwise succeeded in making out their case, they would necessarily attract the operation of the doctrine and I would therefore refuse injunctive relief.

Balance of convenience

51 Again, having regard to the conclusion expressed in paras [39] and [45] above it is not, strictly speaking, necessary for me to indicate a view on this. Again, in case I am wrong in that conclusion, I shall deal with it briefly.

52 For the second and third defendants, it is said that the plaintiff has shown no urgency – no reason why she should now, after almost 8 years of relative inactivity, wish to take over the conduct of the first defendant’s affairs. Further, it is said that the first defendant has contingent obligations under guarantees, and that if the plaintiff takes over management of the company then the first defendant’s ability to perform those obligations will be, at least, impeded.

53 For the plaintiff, it is said that she has a legal right, based on her shareholding, to requisition a meeting and to put the resolutions that she proposes. Further, she points to the circumstance that the first defendant is not (as the second and third defendants concede) trading, and to the fact that there is no evidence to enable the Court to evaluate either the likelihood that the first defendant will be called upon to perform work under its guarantees or, if that does happen, the nature, extent, and likely cost of that work.

54 Essentially, the argument for the second and third defendants is that the grant of an injunction as sought by them would maintain the status quo. However, as I have sought to show in pars 29 to 32 above, that is not correct. The present position in truth is that the plaintiff is a member of the first defendant and has all the rights of a member including, by virtue of her shareholding, the right to convene a meeting because of the second and third defendants’ failure to do so and the right (or ability) to cause that meeting to pass the resolutions that she proposes. To restrain the plaintiff from so acting would, in my opinion, disturb rather than maintain the status quo.

55 However, as against this analysis of the status quo, it must be borne in mind that for the second and third defendants to get to the stage of making out an entitlement to injunctive relief, they must have shown, to the requisite degree, an arguable case or serious question that the plaintiff’s title, and therefore her legal rights that flow from that title, could be impeached. It therefore does not seem to me that this consideration of itself weighs in the plaintiff’s favour.

56 If there were evidence that enabled me to assess both the likelihood that the first defendant would be called upon to honour its guarantees and what would be required, in terms of work and money, to enable it to do so then that might have provided a reason for concluding that the balance of convenience favoured granting injunctive relief. However, in the absence of that evidence, I do not think that this consideration carries any substantial weight. This is particularly so given that it would appear to be feasible for the plaintiff to cause the first defendant to employ the second and third defendants to carry out any rectification work that was required of the first defendant pursuant to those guarantees.

57 The other matter that the plaintiff points to is that the books and records of the first defendant, in so far as she has been able to inspect them, appear to contain false entries. Those (as she says) false entries have the effect that, according to the first defendant, she is a debtor of the company. If there were some evidence that the first defendant might seek to enforce what it claims are its rights against the plaintiff then one could readily understand why the plaintiff would wish to assert control of the first defendant to prevent this from happening. However, there is no evidence of this nor any evidence from the plaintiff that she fears this.

58 On balance, therefore, if I had otherwise been persuaded that it was appropriate to grant injunctive relief, considerations of balance of convenience would not have deterred me from so doing.

Section 1322(4)(d)

59 The second and third defendants submit “that s 1322(4) confers a wide power and a wide discretion as to its use”. They submit further that, although the most common applications of the section will be to remedy what may be described comprehensively as irregularities, errors or mistakes, it is not limited in that way.

60 These submissions may be accepted as correct in principle. However, they do not explain why it is that s 1322(4)(d) should be applied, in the present case, to enable the second and third defendants to put off the holding of the meeting requested by the plaintiff until the hearing of these proceedings. That use of s 1322(4)(d) could not be justified unless, as a minimum, the second and third defendants had established a reasonably arguable case that the plaintiff was not entitled to exercise the rights that, prima facie, flow from her admitted status as a member of the first defendant. For the reasons that I have sought to explain, the second and third defendants have failed to do so.

61 If the second and third defendants had indicated that they would call, within a relatively short time, the meeting of the first defendant requested by the plaintiff, there might have been a case for using s 1322(4)(d) to extend the time fixed by s 249D for compliance with the plaintiff’s request to enable this to happen. However, the defendants have not indicated that they would do so; indeed, their reliance on s 1322(4)(d) is directed to a different purpose: namely, to putting off the meeting until these proceedings are determined.

62 In principle, therefore, there seems to me to be no basis made out for the exercise of power under s 1322(4)(d).

63 Further, it seems to me, there is a positive reason why the power (if otherwise available) should not be exercised. By s 1322(6)(c), the Court must not make an order under s 1322(4)(d) unless it is satisfied “that no substantial injustice has been or is likely to be caused to any person”. In my opinion to grant the second and third defendants relief under s 1322(4)(d) would occasion substantial injustice to the plaintiff, for substantially the same reason as granting injunctive relief would not preserve, but would change, the status quo. That is because the grant of relief under the statute would have the same effect as the grant of injunctive relief by preventing the plaintiff from exercising her accrued statutory right. In the circumstances of this case, particularly where (on the plaintiff’s case) there may be false entries in the records of the first defendant, showing that the plaintiff is a substantial debtor of the first defendant, I could not be satisfied that the grant of the relief sought by the second and third defendants under s 1322(4)(d) would not be likely to cause substantial injustice to the plaintiff.

Conclusion and orders

64 I am therefore of opinion that the second and defendants have failed to make out any case for injunctive relief or for relief under s 1322(4)(d) of the Corporations Act.

65 I therefore order as follows:

(1) Order that the originating process filed 8 August 2003 be dismissed;

(2) Order the second and third defendants to pay the plaintiff’s costs of that originating process.
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Last Modified: 09/17/2003