Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd - [2012] WASC 460

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: TRAFALGAR WEST INVESTMENTS PTY LTD -v- SUPERIOR LAWNS AUSTRALIA PTY LTD [2012] WASC 460

CORAM: KENNETH MARTIN J

HEARD: 4 SEPTEMBER 2012

DELIVERED : 30 NOVEMBER 2012

FILE NO/S: COR 105 of 2012

MATTER :SUPERIOR LAWNS AUSTRALIA PTY LTD

BETWEEN: TRAFALGAR WEST INVESTMENTS PTY LTD as trustee for TRAFALGAR WEST INVESTMENTS TRUST
Plaintiff
AND
SUPERIOR LAWNS AUSTRALIA PTY LTD
Defendant

Catchwords:

Corporations - Shares held by trustee - Vesting order - Transmission

Corporations - Shares held by trustee - Vesting order - Transfer to co-trustee - Discretion - Just cause - Futility - Insolvency - Turns on own facts

Legislation:

Trustees Act 1962 (WA), s 78, s 85
Corporations Act 2001 (Cth), s 1071F

Result:

Transfer of shares to be registered pursuant to s 1071F(2)(a) of the Corporations Act 2001 (Cth)

Category: B

Representation:

Counsel:

Plaintiff: Mr S Penglis
Defendant: Mr M L Bennett

Solicitors:

Plaintiff: Karp Steedman Ross-Adjie
Defendant: Bennett & Co

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

Andco Nominees Pty Ltd v Lestato Pty Ltd (1995) 126 FLR 404
Beck v Tuckey [2007] NSWSC 1065; (2007) 213 FLR 152
Netbush Pty Ltd v RW Roberts Pty Ltd [2004] WASC 247
Re Kenzler [1983] 2 Qd R 281
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169

KENNETH MARTIN J: The plaintiff, Trafalgar West Investments Pty Ltd (Trafalgar), which describes itself in the action heading as trustee for the Trafalgar West Investments Trust (the Trust), brings this originating process of 5 July 2012, seeking an order that:
[T]he share transfers dated 5 June 2012 lodged by the plaintiff as trustee for the Trafalgar West Investments Trust, evidencing the transmission of shares from the former trustee to the present trustee, be registered by the defendant.
That relief is sought by reference to s 78 of the Trustees Act 1962 (WA) or, in the alternative, under s 1071F of the Corporations Act 2001 (Cth).
Background to this originating process can be found in my reasons for decision delivered 29 May 2012 in Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169. As I explained in those reasons, Trafalgar had been corporate trustee of the Trust until 26 October 2011. That day, Mr Patrick Jebb, as appointor under the Trust, appointed himself as the new trustee, replacing Trafalgar. However, that replacement generated problems in subsisting litigation, COR 59 of 2011 (commenced 24 March 2011), in which Trafalgar advanced a statutory oppression action against the defendant, Superior Lawns Australia Pty Ltd (Superior Lawns), in circumstances where Trafalgar had been a 30% minority shareholder in Superior Lawns.
My reasons in [2012] WASC 169 canvassed some considerable difficulties caused by Trafalgar's replacement as trustee of the Trust by Mr Jebb, given the pending statutory oppression action. Ultimately, I refused to substitute Mr Jebb for Trafalgar as the sole plaintiff in that litigation, or add Mr Jebb as a co‑plaintiff with Trafalgar. I concluded:
I refuse both the substitution and the joinder applications. Furthermore, COR 59 of 2011 should be temporarily stayed at least until Trafalgar gets back the Superior Lawns shares currently held by Mr Jebb [75].
This new action by Trafalgar arises out of further developments in the aftermath of those reasons.

Submissions and Trafalgar's minute

This action proceeded to an expedited hearing on 4 September 2012. For the plaintiff, three affidavits of Mr Patrick Jebb were read. These were sworn and filed on 5 July 2012, 27 July 2012 and 16 August 2012, respectively. The defendant relied upon one affidavit, sworn by Mr Kingsley Craig Flugge on 10 August 2012.
The four affidavits comprise all the evidentiary material upon which Trafalgar's application was argued.
To facilitate the hearing, each side filed a written outline of submissions. Trafalgar's outline of submissions was received on 31 August 2012. It is signed by Mr Penglis, who appeared pro bono as counsel for Trafalgar. Mr Jebb is not a party to this action.
Superior Lawns' written submissions were filed on 27 August 2012. As is apparent, it was agreed that the defendant would file submissions first, on the basis that it opposed the relief sought by Trafalgar under s 78 of the Trustees Act or under s 1071F of the Corporations Act.
Mr Penglis and Mr Bennett (who appeared on behalf of Superior Lawns) then addressed their materials by oral submission.
During the hearing, I requested that Trafalgar file a minute of the precise orders it actually sought. A minute was received the following day. It is convenient to begin with the terms of that minute:
1A.Pursuant to s 78 of the Trustees Act 1962 (WA), all property of the Trafalgar West Investment Trust held by or in the name of Patrick Gerard Gladwyn Jebb, is hereby vested in the plaintiff.
1B.Alternatively to 1A, pursuant to s 78 of the Trustees Act 1962 (WA), the 345 ordinary shares and 1 Class D share in the defendant presently registered in the name of Patrick Gerard Gladwyn Jebb are hereby vested in the plaintiff.
2A.It is hereby declared that the Constitution of the defendant does not give to its directors a discretion not to register any transfer of shares that [gives] effect to Order 1 above.
2B.Alternatively to [2A], pursuant to s 1071F of the Corporations Act 2001 (Cth), it is ordered that the defendant do register the two share transfers, copies of which are annexed to the affidavit herein of Patrick Gerard Gladwyn Jebb sworn 5 July 2012 (and comprising part of annexure 'PJG1').
2C.Alternatively to 2A and 2B, pursuant to s [1071F] of the Corporations Act 2001 (Cth), it is ordered that the defendant do register any share transfers delivered to it that give effect to order 1 above.
3.The defendant to pay the plaintiff's costs of the action, including reserved costs, to be taxed. (footnotes omitted)
The minute contains five footnotes which explain the nature of the relief sought under either the Trustees Act or the Corporations Act.
I turn to consider the evidence submitted by the parties on the application.

Evidence

There was no cross‑examination at the hearing upon any of the affidavits read and relied upon.
Mr Jebb's first affidavit (of the three Trafalgar relied upon) was sworn 5 July 2012. Mr Jebb relates that he is sole director of Trafalgar and a holder of 50% of its issued shares, and that he is authorised to depose on behalf of Trafalgar.
After dealing with history up to the point of the publication of my reasons in [2012] WASC 169 on 29 May 2012, Mr Jebb says:
8.On 30 May 2012 [Trafalgar] was reappointed as Trustee to the Trust.
9.On 5 June I lodged share transfers with [Superior Lawns] evidencing the transmission of the same shares referred to above from me, as Trustee for the Trust in favour of [Trafalgar] as Trustee for the Trust on account of the reappointment of [Trafalgar] as Trustee.
Within PGJ1 to his first affidavit, Mr Jebb attaches a letter of 5 June 2012 sent by him on behalf of Trafalgar to the directors of Superior Lawns. In the letter, he says:
I enclose hereto five duly signed transfer forms in respect to the transfer of 345 ordinary shares, and 1 D class share in Superior Lawns Australia Pty Ltd to Trafalgar West Investments Pty Ltd (Trafalgar) which has been reappointed as a trustee of the Trafalgar West Investments Trust.
As the equitable owner of the shares remains unchanged, and the enclosed transfers seek only to transfer the legal ownership on the reappointment of Trafalgar as trustee, the transfer of these shares are not subject to the pre‑emption rights in cl 27(8)(a) of the constitution.
Two standard transfer forms accompanied the communication. Mr Jebb personally signed each form on 5 June 2012, both as transferor and on behalf of the proposed transferee, Trafalgar, as its company secretary.
On 11 June 2012, Bennett & Co, on behalf of Superior Lawns, made a request to Karp Steedman Ross‑Adjie, as Mr Jebb's solicitors of record, to provide a copy of any document giving effect to the asserted reappointment of Trafalgar as a trustee of the Trust before taking any action with respect to these proposed transfers.
On 21 June 2012, Mr Jebb wrote to Bennett & Co, relevantly concluding:
I have attached the document requested, together with a copy of my resignation as trustee.
The enclosed documents were:
(a)A deed of appointment of a new trustee, the parties to the deed being Trafalgar (as new trustee), Mr Jebb (as existing trustee) and Mr Jebb in his capacity as appointor of the Trust (Mr Jebb's power of appointment being pursuant to cl 16 of the Trust). Recital F to that deed of 30 May 2012 read:
The Appointor desires to appoint the New Trustee as additional trustee of the Trust to join with the Existing Trustee.
The operative provisions of the deed implement that appointment of Trafalgar as a further trustee of the Trust in addition to Mr Jebb as the existing trustee.
(b)A notice of trustee 'resignation' by Mr Jebb of 5 June 2012, expressed in these terms:
Patrick Gerard Gladwyn Jebb hereby resigns as Trustee from the Trafalgar West Investments Trust (the Trust) effective from the date the share transfers dated 5 June 2012 lodged with Superior Lawns Australia (ACN 008 798 007) are registered in the name of Trafalgar West Investments Pty Ltd.
Note that on the effect of the resignation above, Trafalgar West Investments Pty Ltd, the transferee of the share transfers referred to above, becomes the sole Trustee of the Trust.
The notice of trustee resignation of 5 June 2012 carries Mr Jebb's signature.
Mr Jebb's proposed share transfers of 5 June 2012, whilst lodged with Superior Lawns that day, have not yet been actioned. Shares have not yet been registered in the name of Trafalgar.
Accordingly, as I assess Mr Jebb's notice of trustee resignation of 5 June 2012, his resignation as a co‑trustee has not yet become effective. Consequently, he remains even today a co‑trustee of the Trust, along with Trafalgar. That will remain the position until Mr Jebb's registration as a co-trustee becomes 'effective'. Presently it is not.
As will be seen, this gives rise to problems for Mr Jebb on this application. Until his resignation as a co-trustee is effective, Trafalgar is not a new or sole trustee of the Trust. It remains a co‑trustee with Mr Jebb until then.
On 25 June 2012, Bennett & Co, on behalf of Superior Lawns, wrote to Karp Steedman Ross‑Adjie, addressing a number of issues. As regards Mr Jebb's request that his 'transfers' be registered, Mr Jebb's solicitors were now advised:
As you are aware, the directors of a proprietary limited company are not obliged to register any transfer of shares. In accordance with cl 30 of the Company's Constitution, the directors have absolute discretion to decline to register the transfers.
It appears to my client, that:
1.the applicant for registration, Trafalgar West Investments Pty Ltd, is a hopelessly insolvent company;
2.the applicant for registration of the shares, Trafalgar West Investments Pty Ltd is obliged to pay costs to the Company for an as‑yet unascertained amount, but plainly a significant sum in excess of the applicant's financial capacity (the Plaintiff's unsuccessful substitution applications);
3.the purpose of seeking registration appears expressly to be for the applicant, once registered as a shareholder, to maintain legal proceedings against the Company, its directors and all the other shareholders; and
4.the applicant, whilst formerly a shareholder, evinced an intention not to further participate in the Company by declining to take up a rights issue of shares. It appears that the applicant's only purpose in seeking registration as a shareholder is the pursuit of litigation against the Company.
The letter went on to invite Trafalgar to make 'any submission that it wishes to make to the Company as to why it should be registered as the shareholder' and stated that the 'directors will give any such submission due consideration'.
The next day, 26 June 2012, Mr Jebb responded (presumably on his own behalf and on behalf of Trafalgar) directly to Bennett & Co in these terms:
I do not agree that your clients have any discretion to refuse to register the share transfers, let alone an 'absolute discretion' as you claim.
Trafalgar West Investments Pty Ltd (Trafalgar) has a right to apply for a vesting order pursuant to s 78 of the Trustees Act 1962. Any such order operates by way of transmission, not of transfer (see Andco Nominees Pty Ltd v Lestato Pty Ltd 26 FLR 404; 17 ACSR 239).
The discretion not to register a transfer of shares contained in the Company's constitution at cl 30 has no application to such a transmission.
In addition Trafalgar has a right to apply under s 1071F of the Corporations Act for the registration of the shares on the basis that the directors' refusal was without just cause.
…
In light of the above I request the board register the transfers within 7 days of this letter so as to avoid the need for Trafalgar to make application under the Trustees Act for vesting orders as described above.
On 2 July 2012, Bennett & Co, on behalf of Superior Lawns, advised Karp Steedman Ross‑Adjie, for Mr Jebb and Trafalgar, that:
[T]he Directors of [Superior Lawns] will not presently be registering Mr Jebb's transfer of shares (unless otherwise ordered by the Court) and will oppose any vesting orders sought by Mr Jebb for the reasons set out in our letter of 25 June 2012.
On 3 July 2012, Mr Jebb responded to Bennett & Co's communication of 2 July 2012. Trafalgar's originating process was issued on 5 July 2012.
Mr Jebb's second affidavit, sworn 27 July 2012, annexes more correspondence passing between Bennett & Co and Karp Steedman Ross‑Adjie, plus Mr Jebb's direct correspondence to Bennett & Co, between 5 July and 25 July 2012.
Superior Lawns' amended Constitution is to be found between pages 10 and 28 of this affidavit. It can be seen that the Constitution was amended by special resolution on 22 November 2000, pursuant to s 136(2) of the Corporations Law, at a time when Superior Lawns was known as Mullingar Farms Pty Ltd.
Clause 7 of Superior Lawn's Constitution relates to shares which are held in trust. It contains orthodox provisions as to the (non) recognition by Superior Lawns of interests less than an absolute right of ownership in a registered shareholder.
Clauses 20 to 31 of the Constitution appear under the heading 'Forfeiture of shares'. Clause 27, in part, reads:
Subject to the provisions of this Constitution and except as provided by Sub‑Clause (8) of this Clause no shares in the Company shall be transferred unless and until the rights of pre-emption conferred by Sub‑Clauses (1) to (7) inclusive of this Clause have been exhausted -
…
(8)The foregoing provisions of this Clause 27 shall not apply to any transfer of share or shares -
(a)merely for the purpose of effectuating the appointment of a new Trustee;
…
PROVIDED that it is proved to the satisfaction of the Directors that the transfer bona fide falls within one of these exceptions.
Clause 28(3) of the Constitution provides:
A transferor of a share or shares remains the holder of the share or shares transferred until the transfer is registered and the name of the transferee is entered in the register of members in respect of such shares or shares.
Clause 30 provides:
The Directors may decline to register any transfer of shares, without giving any reason therefor.
Clauses 32 to 34 of Superior Lawns' Constitution appear under the heading 'Transmission of shares'. Clause 32 deals with 'transmission' in the context of the death of a member. Clause 33 deals with 'transmission' in the contexts of death, bankruptcy and mental incapacity, as does cl 34.
On behalf of Superior Lawns as defendant, there is just Mr Kingsley Flugge's affidavit of 10 August 2012.
The affidavit, sworn by Mr Flugge as a director of Superior Lawns, mainly deals with the circumstances supporting a contention that Trafalgar is presently insolvent. I refer to attachment KCF4, Mr Jebb's letter of 16 July 2012, advising Trafalgar does not have funds to pay $27,686.20 in respect of an amount claimed on a bill of costs submitted by Superior Lawns. Mr Jebb states:
As I have exhausted my financial resources supporting the plaintiff's applications, and was forced to sell my home earlier this year as I could no longer afford the mortgage repayments, I am also not in a position to satisfy such a claim without relying on further loans from my family and friends.
Mr Jebb's third affidavit, sworn 16 August 2012, is directed to Trafalgar's financial position. He attaches financial reports for Trafalgar completed for the financial year ended 30 June 2011 (annexure PGJ1).
Mr Jebb signed a director's declaration of 9 August 2012, seen at page 6 of the Trafalgar accounts. Trafalgar's surplus of assets over liabilities as reflected in those accounts is in the amount of $337,281. But this is dependent on the reliable value of an asset referred to as a 'trade and other receivable' in the amount of $339,055. This item is explained at note 3 of the accounts as 'current beneficial entitlement pre‑16 December 2009'. No further details are given. Trafalgar's income for that financial year was $29. It was exceeded by accounting expenses of $250.
At par 5 of his third affidavit, Mr Jebb refers very briefly to arrangements between himself and his brother, Brian, under which Brian has provided a loan 'to ensure [Trafalgar] can pay any amount that the taxing officer decides is reasonable' pending certain developments concerning Trafalgar's claim for costs in COR 138 of 2010 and COR 76 of 2011.

Legislation

First, I will set out the relevant provisions of the Trustees Act and Corporations Act relied upon by Trafalgar.
Section 78 of the Trustees Act 1962 relevantly provides:
(1)The Court may make an order, in this Act called a vesting order, that has effect as provided in section 85.
(2)A vesting order may be made in any of the following cases, namely ‑
(a)where the Court appoints or has appointed a new trustee; or
(b)where a new trustee has been appointed out of Court under any statutory or express power; or
(c)where a trustee retires or has retired; or
…
(3)Where the provisions of subsection (2) are applicable, they extend to a trustee entitled to, or possessed of, any property either solely or jointly with any other person and whether by way of mortgage or otherwise.
Via s 78(1), Trafalgar relies as well upon s 85 of the Trustees Act, particularly s 85(6), which provides:
The person, in whom the right to transfer or call for the transfer of any property or security is vested by an order of the Court under this Act, may transfer the property or security to himself or to any other person in accordance with the order; and all banks, corporations, companies, societies, associations and persons shall give effect to the transfer or comply with any direction or request to transfer the property or security given or made in accordance with the order.
Next, invoked by Trafalgar in the alternative, is s 1071F of the Corporations Act, which provides:
(1)If a relevant authority in relation to a company:
(a)refuses or fails to register; or
(b)refuses or fails to give its consent or approval to the registration of;
a transfer or transmission of securities of the company, the transferee or transmittee may apply to the Court for an order under this section.
(2)If the Court is satisfied on the application that the refusal or failure was without just cause, the Court may:
(a)order that the transfer or transmission be registered; or
(b)make such other order as it thinks just and reasonable, including:
(i)in the case of a transfer or transmission of shares ‑ an order providing for the purchase of the shares by a specified member of the company or by the company; and
(ii)in the case of a purchase by the company ‑ an order providing for the reduction accordingly of the capital of the company.

Section 1071F(3) provides a definition for the term 'relevant authority' in relation to a company. For present purposes, Superior Lawns is a body within (a) of that definition, one which has 'authority to register a transfer or transmission of securities of [Superior Lawns]'.

The parties' conceptual divide: transfer v transmission

Trafalgar's stance, apparent from its written submissions and re‑emphasised at the hearing by pro bono counsel, is that its right to once again be registered as a Superior Lawns shareholder in respect of the 345 ordinary shares and one class D share is, correctly understood, a scenario of transmission (by law), rather than of a transfer of the shares. From that premise, Trafalgar's argument runs that cl 30 of Superior Lawns' Constitution, which confers discretion on the directors to decline to register any transfer of shares without any reason therefor, is irrelevant to the present circumstances.
Provisions of Superior Lawns' Constitution dealing with transmissions of shares address only scenarios of death, bankruptcy, and mental incapacity. They are otherwise silent concerning a transmission that would be effected by law upon the appointment of a new trustee by the operation of statute.
And even in the context of transfer (not transmission), cl 27(8) of Superior Lawns' Constitution expressly identifies the circumstances of an appointment of a new trustee as being an exception from the general applicability of pre‑emptive rights granted to other Superior Lawns shareholders. Hence it is put that cl 27(8) of Superior Lawns' Constitution recognises the exceptional character of the circumstance where a new trustee is appointed, and, in some circumstances, denies pre‑emptive rights even in a transfer context.
For Superior Lawns, Mr Bennett accepted that the provisions in its Constitution as to transmission were limited to death, insolvency and mental incapacity. But he said, as regards s 78, that the making of a vesting order, for example under s 78(2)(b), if a new trustee has been appointed under express power, still remained subject to an overriding discretion of the court to condition as appropriate the making of any particular vesting order (by force of the word 'may' used in s 78(2)). As a general proposition towards discretion, I accept that submission.
Superior Lawns' chief contention, from there, manifested at a number of levels. It is essentially that returning to Trafalgar the shares it had previously held was a wholly futile exercise, as regards the statutory oppression action. The proposition is expressed this way in Superior Lawns' written submissions (par 3.1):
[T]he 'vesting orders' application proceeds on a false premise ‑ that [Trafalgar] still has a cause of action against [Superior Lawns], that is capable of revival having ceased to be a shareholder.
That futility premise is the edifice of a further submission by Superior Lawns that a reappointment of Trafalgar as a trustee of the Trust would be 'a fraud on the power of the appointor (Mr Jebb)'. The fraud on the power argument, on examination, distils to the same futility argument - see par 7 of Superior Lawns' submissions:
This is a case where Mr Jebb has exercised the power of appointment with a purpose or intention beyond the scope or not justified by the instrument ‑ to 'maintain' hopeless litigation against [Superior Lawns] and its directors in COR 59 of 2012.

Evaluation: Trustees Act, s 78

In Trafalgar's written submissions it is said (par 29):
Accordingly on the authority of Andco and Netbush, the directors of [Superior Lawns] have no discretion to refuse to register a properly executed transfer of Shares which are simply evidencing the prior transmission on the appointment of a new trustee and the resignation of the former trustee.
I accept that Superior Lawns' Constitution confers no refusal discretion on directors in the circumstance of a transmission by law (there being no textual indication to the contrary, in accord with McPherson J's views: see Re Kenzler [1983] 2 Qd R 281, 285).
But there must first be identified a relevant transmission by law in the present circumstances, if Trafalgar's argument is to proceed.
In Andco Nominees Pty Ltd v Lestato Pty Ltd (1995) 126 FLR 404, Santow J dealt with relatively equivalent provisions in the Trustees Act 1925 (NSW). Section 71 of the New South Wales Act (akin to s 78 of the WA Act) and s 78 of the NSW Act (akin to s 85 of the WA Act) were considered. But a very important difference between Andco and the present is in Andco a vesting order had earlier been made by Young J (Andco (415)). Accordingly, in Andco, Santow J was considering the effect and legal consequences of Young J's earlier vesting order, which had provided, in turn, the basis for the transmission arguments Santow J determined.
In the present case, no vesting order has yet been made under s 78 of the Trustees Act. For such a vesting order to be made, the underlying groundwork to sustain the order first needs to be laid. Unlike in Andco, the transmission groundwork is not yet finalised as regards an incoming replacement trustee in lieu of Mr Jebb.
A change or retirement of a trustee is a basis for a court to make a vesting order under s 78 of the Trustees Act. But until the s 78(2)(b) order is made, there is no transmission.
Paragraph 29 of Trafalgar's written submissions refers to properly executed transfers of shares 'simply evidencing the prior transmission on the appointment of a new trustee and resignation of a former trustee'. The submission suggests the events themselves delivered here the consequence of transmission by law. They did not. They carry only potential for a statutory vesting order to be made by reason of those events. Once made, the order will effect the transmission, as Santow J identified in Andco.
There is an underlying conceptual problem here. There has only been to date an appointment of Trafalgar as a co‑trustee of the Trust, with the conditional future resignation by Mr Jebb as the other trustee, which is not yet operative. Accordingly, what is contended by Trafalgar at par 29 cannot presently be accepted.
In Netbush Pty Ltd v RW Roberts Pty Ltd [2004] WASC 247, there was an application for registration of shares made in conjunction with an application for a vesting order. However, in Netbush, it was clear on the facts the former trustee 'no longer [had] any connection with the Trust', albeit it remained 'the registered holder of the shares' (Netbush [11]). That is not the case here. Mr Jebb remains a co‑trustee at present, so his connection with the Trust has not ended.
In summary, I am of the view, as regards transmission and s 78(2) and s 85(6) of the Trustees Act, that:
(a)The situation that arose after Mr Jebb's appointment of Trafalgar as an additional trustee (with him) of the Trust is one of co‑trusteeship.
(b)Mr Jebb's conditional resignation as a co‑trustee has not yet become effective.
(c)Clause 30 of Superior Lawns' Constitution is inapplicable to scenarios of transmission.
(d)The Court retains an overriding discretion in circumstances where it is asked to make a vesting order pursuant to s 78 of the Trustees Act.
(e)Because Mr Jebb's conditional resignation of 5 June 2012 as co‑trustee of the Trust is not presently effective, there is not yet in existence a scenario of an old trustee being replaced by a new trustee, so as to meet s 78(2)(b), or a retirement of an old trustee, at this point.
(f)Consequently, no basis presently exists for orders under s 78(2)(b) and s 85(6), although there could have been, had Mr Jebb unconditionally resigned or earlier retired as co‑trustee of the Trust.
(g)Accordingly, it is not appropriate to make orders under s 78 of the Trustees Act, vesting in Trafalgar the shares in Superior Lawns.

Evaluation: transmission and Corporations Act, s 1071F

As regards Trafalgar's application made in the alternative under the Corporations Act, the key discretionary question is whether Superior Lawns can demonstrate 'just cause', under s 1071F(2), for declining to register a transfer of the shares in question from Mr Jebb to Trafalgar as trustee. The application was argued before me on the basis that an evidentiary onus of showing 'just cause' for refusal began with Superior Lawns. Discussing this point, Brereton J said in Beck v Tuckey [2007] NSWSC 1065; (2007) 213 FLR 152 [9]:
The purpose of s 1071F was to provide an easier remedy than rectification and to widen the power of the Court to do justice to the parties in the case of a dispute about registration of a transfer (Monardo v Complete Hardware Ltd (1990) 20 NSWLR 489). It reflects the principle that the holder of a share has a prima facie right to transfer it (Roberts v Coussens (1991) 25 NSWLR 171 at 187 ‑ 189). The prevailing view is that the onus of showing an absence of just cause for the purposes of s 1071F remains with the applicant for registration, and that the corporation and the directors do not bear any onus of establishing just cause (Roberts v Coussens; Leaver v Taxi Combined Services (Launceston) Pty Ltd (2002) 10 Tas R 362 at [7]). However, that is not to say that, once it appears objectively that there is no such cause, an evidentiary onus may not easily shift to the directors to raise some cause (Roberts v Coussens); and while failure to give reasons does not of itself vitiate the decision or prove there is no just cause, at least where reasons are not required to be given, nonetheless, the failure to provide reasons may, in the context of the whole of the evidence, assist in the drawing of an inference that there is no good reason.
The conceptual obstacle that presently inhibits a vesting order under s 78(2)(b) is, in my view, also obstructive in this sphere, as regards no relevant transmission having taken effect. Mr Jebb's conditional and currently ineffective resignation is again the problem. In my view, that problem provides 'just cause' for Superior Lawns not to process or register the two share transfers to Trafalgar, while Mr Jebb still remains a co‑trustee of the Trust. For there to be a perfected transmission by law under s 78, there must be an order of the court upon the appointment of a new trustee, or the retirement of an old trustee. No such appointment or retirement has occurred as yet.
There has been no request by Mr Jebb to Trafalgar to transfer the shares into the joint ownership of himself and Trafalgar. Mr Jebb's two transfers of 5 June 2012 envisage on implementation, Mr Jebb not having any holding. That result would have been appropriate had he unconditionally resigned as trustee. But the conditional resignation, predicated upon events that have not yet come to pass, is inconsistent with ascertaining any transmission to a new trustee, effected by law, for which he contends.
Furthermore, Mr Jebb's communications to Superior Lawns are consistent with his proceeding on the basis that he was transferring his legal ownership of the shares to Trafalgar, rather than with those shares having been transmitted by law.
So in the context of s 1071F, I put transmission by law to one side as inapplicable.
But it is also necessary to evaluate whether there has been 'just cause' for Superior Lawns' failure to process requested transfers. To evaluate whether or not there was just cause for Superior Lawns to refuse to transfer the shares to Trafalgar, I first mention cl 30 of the Constitution, which gives directors power to refuse to register a transfer of shares without reason. See also cl 27(8)(a). But by reference to s 1071F, showing 'just cause' requires, in my view, more than a bare invocation of cl 30 to refuse the transfers. Moreover, cl 27(8)(a) does seem to embody a sentiment that a new trustee situation followed by a transfer request, should normally receive favourable consideration.

Evaluation: transfer and Corporations Act s 1071F

Superior Lawns points out that Trafalgar’s intent to once again be registered as owner of these shares is only to shore up its currently exposed position in the statutory oppression action. That may be so. But in my view, Trafalgar’s motive does not give Superior Lawns ‘just cause’ in refusing the transfer request. The refusal, thereby thwarting a potentially meritorious claim, would hardly be just.
That leaves for resolution the two major arguments advanced by Superior Lawns to support its refusal stance, namely futility and insolvency.

Futility

Superior Lawns justifies the refusal to register the shares by reference to what it says is the futility of the statutory oppression proceedings currently the subject of my temporary stay orders of May 2012. But the appropriate time and place for resolution of futility arguments (if necessary) is within the statutory oppression proceedings.
If Trafalgar regains the legal ownership it once held (as trustee of the Trust) of these shares, then it is an open question whether or not Trafalgar's case has been fatally undermined in the oppression proceedings. That is not an appropriate question to resolve now, without full argument in the context of the proceedings themselves. There looks to be minimal direct case precedent upon that issue. If Trafalgar can reacquire the legal ownership of the shares it previously held in Superior Lawns, it should not be closed off now from presenting whatever arguments it can muster in that oppression action, concerning the rehabilitation of its action. With that in mind, I only granted a 'temporary' stay of the oppression proceedings, rather than a permanent stay. Any arguments as to futility must await another day within the oppression proceedings.

Insolvency

As regards Trafalgar's asserted insolvency, it certainly appears to be the case that Trafalgar is not in a very liquid financial position. Financial weakness could suggest Trafalgar is vulnerable to the security for costs application lodged, but still unresolved, within the stayed oppression proceedings. But the registration of these shares would not prejudice Trafalgar's financial position further. Trafalgar's straitened financial circumstances do not constitute just cause for Superior Lawns' present refusal to register a share transfer.
As from 21 June 2012 (when Mr Jebb provided a copy of his conditional resignation as co‑trustee of 5 June 2012), Superior Lawns knew that Mr Jebb's resignation was expressed to become effective upon the processing and registration of the two transfers. I can detect no just cause in Superior Lawns as from then, to support its refusal to process and register the transfers within a reasonable time thereafter.

Concluding observations

It was open to Trafalgar, after its reappointment as a co‑trustee, to voluntarily request Superior Lawns (as it did) to process the transfers back to it of the shares. Such a request was not a scenario of transmission. It was open, by cl 30 of Superior Lawns' Constitution, to Superior Lawns to decline the transfer request without providing reasons for its refusal. But cl 27(8)(a) indicates a change of trustee situation carries more amenability towards implementing a transfer in those circumstances. In the end, the Constitution's provisions must bend, in any event, to the force of s 1071F.
Trafalgar has now sought to obtain a s 78 Trustees Act vesting order under provisions applicable on the appointment of a new trustee or the retirement of a former trustee. Because of a conceptual 'glitch' arising from Mr Jebb's mere conditional resignation as a co‑trustee with Trafalgar, and with that conditional resignation not yet having taken effect, the vesting order provisions of s 78(2)(b) and s 78(2)(c) are not engaged. They would be, once Mr Jebb's resignation as a co‑trustee of the Trust was unconditional and became immediately effective.
But s 1071F(2) of the Corporations Act provides a broader basis for relief in the present context.
Relief can be obtained under s 1071F(2) following a refusal or failure to register a transfer or transmission of shares without 'just cause'.
As regards the refusal to transfer, 'just cause', in my view, has not been demonstrated. That is so, notwithstanding cl 30 of the Superior Lawns' Constitution. Accordingly, I would be inclined to issue orders along the lines of par 2B of Trafalgar's minute. But I will hear the parties about that and as to the costs of this action.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: TRAFALGAR WEST INVESTMENTS PTY LTD -v- SUPERIOR LAWNS AUSTRALIA PTY LTD [2012] WASC 460 (S)

CORAM: KENNETH MARTIN J

HEARD: ON THE PAPERS

DELIVERED : 1 FEBRUARY 2013