Titlow, James John v Intercapital Group (Australia) Pty Ltd

[1996] FCA 374

CATCHWORDS

Corporations - application under s 260 of the Law - whether the applicant had standing to bring proceedings at the date when the application was filed - whether the applicant was a member of the company when the application was filed - whether someone whose name was entered in the register but has subsequently been removed and who maintains a claim for restoration may be regarded as a member for the purposes of s 260 of the Law

Practice and procedure - motion seeking summary dismissal of application

Corporations Law s 184, s 260

Federal Court Rules O 20

Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (1995) 13 ACLC 991 at 1004, 1005 applied
Niord Pty Ltd v Adelaide Petroleum NL (1990) 8 ACLC 684 at 697, 698 applied
Leaney v Olmstead Pty Ltd (1994) 51 FCR 240 referred
Re Independent Quarries Pty Ltd (1994) 12 ACLC 159 considered

JAMES JOHN TITLOW v INTERCAPITAL GROUP (AUSTRALIA) PTY LIMITED & ANOR
No. NG3100 of 1996

CORAM:Lehane J

PLACE:Sydney

DATE:  12 April 1996

IN THE FEDERAL COURT OF AUSTRALIA  )
NEW SOUTH WALES DISTRICT REGISTRY  )
GENERAL DIVISION  )          No. NG3100 of 1996

BETWEEN:JAMES JOHN TITLOW

Applicant

AND:INTERCAPITAL GROUP

(AUSTRALIA) PTY LIMITED

First Respondent

INTERCAPITAL GROUP LIMITED

Second Respondent

CORAM:Lehane J

PLACE:Sydney

DATE:12 April 1996

MINUTE OF ORDERS

THE COURT ORDERS:

1. THAT the application is dismissed with costs.

NOTE:           Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA  )
NEW SOUTH WALES DISTRICT REGISTRY  )
GENERAL DIVISION  )          No. NG3100 of 1996

BETWEEN:JAMES JOHN TITLOW

Applicant

AND:INTERCAPITAL GROUP

(AUSTRALIA) PTY LIMITED

First Respondent

INTERCAPITAL GROUP LIMITED

Second Respondent

CORAM:Lehane J

PLACE:Sydney

DATE:12 April 1996

EXTEMPORE REASONS FOR JUDGMENT

LEHANE J: This is an application under s 260 of the Corporations Law seeking an order for purchase of the applicant's shares in the first respondent, an order for the winding up of the first respondent, or alternatively an order that the respondents pay damages to the applicant.  Certain interlocutory relief is claimed but that claim is not pursued.  The respondents have moved for what is in effect summary dismissal of the application, and in the alternative for an order either that the application be stayed or that it be stood out of the list.

The short but not perhaps entirely easy point raised by the respondents' motion is whether the applicant had, at the date when the application was filed, standing to bring proceedings under s 260 of the Corporations Law.  Apart from the Australian Securities Commission, the only person who can bring an application for relief under
s 260 in relation to a company is a member of the company. The question thus is, was the applicant at least arguably a member of the first respondent on the date when the application was filed, that is to say, 20 February 1996?

The factual background can be stated quite briefly.  The applicant was at an earlier time a member of the first respondent.  He was also an employee of the first respondent.  There are provisions in the articles of association of the first respondent which enable it to compel certain employees, whose employment by the first respondent comes to an end, to sell any shares the employee may hold in the first respondent on terms and in accordance with a procedure for which the articles provide. 

It is accepted by the applicant, and there seems to be no good reason to doubt the propriety of his acceptance, that if one assumes the validity and enforceability of the articles concerned, the procedures under them were properly followed upon the applicant ceasing to be an employee of the first respondent.  As a result, the applicant's shares were transferred and a consequential entry was made in the first respondent's register of members, so that the applicant ceased to be recorded as a member of the first respondent.

The applicant has commenced proceedings in the Industrial Court of New South Wales.  In those proceedings he seeks relief against certain parties, among them the second respondent, including orders declaring void certain agreements.  I am told that
the articles of association in question were adopted pursuant to the agreements in relation to which those orders are sought.  Consequently, the applicant claims that the relevant articles of association are at least capable of avoidance at his instance and that, accordingly, he may be entitled to avoid the transfer of the shares which he held and may be entitled to have his name restored to the first respondent's register of members.

It is, however, significant to notice that, first, no relief is sought in the Industrial Court proceedings in relation to the articles of association, the transfer or the register (probably such relief could not be sought in that Court) and, secondly, that there is no claim in these proceedings in relation to the articles of association or for rectification (now described in the Corporations Law as "correction") of the register of members.  The application is simply for the relief which I have stated and is necessarily founded on the claim of the applicant to have been a member of the first respondent on 20 February 1996: that is, on a date when as a matter of fact his name had already been removed from the register of members.

The question thus resolves itself to this: can somebody whose name does not appear in the register of members of a company be regarded as a member of that company for the purposes of s 260 of the Law? It is clear, I believe, that one cannot become a member until one's name is entered in the register. That follows from s 184 of the Law which provides that a person who agrees to become a member of a company, and whose name is entered in the company's register of members, becomes a member
of the company.  Thus, the person does not become a member until each of those conditions is fulfilled.

What is perhaps rather less clear, at least as a matter of express provision in the Law, is whether a person whose name, with his or her agreement, was entered in the register, and thus became a member, necessarily ceases to be a member if that person's name is removed from the register: or, to put the question rather less generally and more relevantly for present purposes, may a person still be regarded for the purposes of s 260 as a member of a company whose name has, in accordance with the terms of the company's articles of association, been removed from the register but who nevertheless maintains a claim whether on equitable or statutory grounds for restoration of his or her name to it?

That question is not free of authority, which, while not perhaps in all respects precisely in point, is close to the present question and contains statements which bear directly on it.  Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (1995) 13 ACLC 991 (Young J) had to do with circumstances where the plaintiff's name had been removed from the register of members of a company in circumstances where a transfer of his shares was executed in pursuance of a sale of those shares made by a mortgagee in breach of duty and collusively with the company or other shareholders in the company. His Honour dealt with a point similar to that which arises here at pages 1004 and 1005. His clear view was that in order to maintain proceedings under s 320 of the Companies Code, the equivalent and predecessor of s 260 of the Law, a
plaintiff must be a member at the time of initiation of the proceedings and that membership in the relevant sense required that the name of the person claiming to be a member was entered in the register of members.

It is perfectly true, as Mr Golledge for the applicant has pointed out, that the circumstances of that case, where the relief sought was the setting aside of a sale on equitable grounds, differ somewhat from the circumstances here where the applicant is in the Industrial Court seeking to have certain transactions declared void ab initio.  It seems to me, however, that Young J's remarks are equally applicable to the present case.

I was referred also to Niord Pty Ltd v Adelaide Petroleum NL (1990) 8 ACLC 684. That was a decision of the Full Court of the Supreme Court of South Australia in which the judgment of the Court was delivered by White J. That case differed from this in that proceedings were commenced before the plaintiff became registered as a member rather than, as here, at a time after removal of the applicant's name from the register. On the facts, therefore, it may be said that the case is distinguishable because s 184 in terms applies in the case of someone whose name has never been entered in the register, not in the case of someone whose name was entered in the register but has subsequently been removed.

However, White J referred to the consequences of being or not being on the register of members for the purposes of an application under s 260 in strong and general
terms.  The relevant passage may be found at pages 697 and 698.  In particular his Honour said this:

The register evidences the fact of membership of a company.  Only a person or company on the register can bring an action complaining inter alia of oppressive conduct.  It is not possible for Niord (i.e. the plaintiff) now or in the future to convert non-membership into membership by making some further amendment to its already amended statement of claim.

Those last words are perhaps not directly applicable given the form of the application in this case. But there is clear and unqualified authority, albeit to some extent obiter, of the Full Court to the effect that only a person actually on the register can bring an application under s 260.

The other authorities to which I was referred are not, I think, inconsistent with that proposition.  That is certainly so of the decision of Branson J in this Court in Leaney v Olmstead Pty Ltd (1994) 51 FCR 240. Nor is it inconsistent with the judgment of Williams J in the Supreme Court of Queensland in Re Independent Quarries Pty Ltd (1994) 12 ACLC 159. It is certainly true that in the particular circumstances of that case Williams J held that where the plaintiff held share certificates properly sealed in his name, but his name was not entered in the register because the register was controlled by what was described as a rival faction, rectification of the register need not be effected before the person named in the share certificate as the registered holder could lawfully claim to be a member. I do not think, however, that that decision on extremely unusual facts, and where rectification was in fact sought and
granted, is one which should cause me not to apply the very general observations both of Young J and of the Full Court of the Supreme Court of South Australia.

Mr Golledge put to me that the motion is in substance, and Mr Gleeson conceded this for the respondents, an application for summary dismissal under Order 20 of the Federal Court Rules. In addition, he rightly pointed out the high onus that a respondent bears in seeking to obtain such an order. In the end though, it seems to me that the fate of this application depends on a decision on the point of law which I have discussed. In my view, on the authorities I ought to hold that the only person other than the Australian Securities Commission who may bring an application under s 260 of the Law is a member, in the sense of a person whose name is entered in the register of members at the time the application is made.

Accordingly, though otherwise I might think this an appropriate case for a stay, it follows that the primary relief sought in the notice of motion should be granted and the application dismissed.  I think it follows that I should make order 5 as sought, that the applicant pay the respondent's costs.

I certify that this and the preceding 6 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.

Associate:

Dated:  3 April 1996

Heard:  12 April 1996

Place:  Sydney

Decision:  12 April 1996

Appearances:  Parish Patience appeared for the applicant.

Mr J T Gleeson of counsel instructed by Freehill Hollingdale & Page appeared for the respondents.