TS & Associates Pty Ltd v Left Bank Restaurant Pty Ltd
[1999] QSC 141
•30 June 1999
IN THE SUPREME COURT
OF QUEENSLAND No. 5804 of 1999
Brisbane
[TS & Associates Pty Ltd v Left Bank Restaurant Pty Ltd]
BETWEEN:
TS & ASSOCIATES PTY LTD ACN 064 760 069 as Trustee for the TS & ASSOCIATES TRUST
Plaintiff
AND:
LEFT BANK RESTAURANT PTY LTD ACN 078 464 687
Defendant
REASONS FOR JUDGMENT - HELMAN J.
Judgment delivered 30 June 1999
CATCHWORDS: CORPORATIONS - rectification of register - application for summary order for rectification of register.
Mr D. D. Bates for the plaintiff
Mr H. C. Fong for the defendant
Solicitors:Mullins & Mullins for the plaintiff
HCF Lawyers for the defendant
Hearing Date: 25 June 1999
IN THE SUPREME COURT
OF QUEENSLAND No. 5804 of 1999
Brisbane
BETWEEN:
TS & ASSOCIATES PTY LTD ACN 064 760 069 as Trustee for the TS & ASSOCIATES TRUST
Plaintiff
AND:
LEFT BANK RESTAURANT PTY LTD ACN 078 464 687
Defendant
REASONS FOR JUDGMENT - HELMAN J.
Judgment delivered 30 June 1999
By an amended notice of motion which came before me last Friday, 25 June, the plaintiff applies for summary judgment in an action in which the writ was issued on 22 June last. At the beginning of the hearing I gave leave to the plaintiff to amend the writ and to file and read the amended notice of motion. No objection to either course was taken by Mr Fong who appeared for the defendant.
The plaintiff seeks:
1.a declaration that the Plaintiff is the holder of 25 ordinary $1.00 shares in the Defendant;
2.a declaration that the Plaintiff is entitled to be registered as the holder of 25 ordinary $1.00 shares in the Defendant with the Australian Securities & Investments Commission;
3.an order requiring the Defendant, its directors and officers, to forthwith execute and lodge a Notification of Allotment of Shares (Form 207) with the Australian Securities & Investment Commission recording that the Plaintiff was allotted and issued 25 ordinary $1.00 shares in the Defendant on 7th May, 1997;
4.an order requiring the Defendant, its directors and officers, to forthwith issue the Plaintiff with a share certificate recording the allotment and issue of 25 ordinary $1.00 shares to the Plaintiff;
4A.an order that the Defendant correct its register of members to record the Plaintiff as the shareholder of 25 ordinary $1.00 shares in the Defendant allotted and issued on 7th May, 1997;
4B.an order that the Defendant lodge a notice of correction of its list of members with the Australian Securities & Investment Commission to record the Plaintiff as the shareholder of 25 ordinary $1.00 shares in the Defendant allotted and issued on 7th May, 1997;
5.further or other relief as the Court deems appropriate;
6.the Defendant pay the Plaintiff’s costs of and incidental to the action and the motion, to be taxed.
The evidence before me shows that the defendant was registered on 7 May 1997 in Queensland. According to Mr Shane Tassell, a director of the plaintiff, the defendant was incorporated for the purpose of carrying on a restaurant called Left Bank in Alice Street, Brisbane, and it has done so. Mr Tassell and the other director of the plaintiff, Mr Timothy Stouter, were appointed directors of the defendant on 7 May 1997. The registered office of the defendant has been Hoiberg & Co, Suite 1 Collins Place, Duporth Avenue, Maroochydore, Queensland since 15 May 1997. On 15 May 1997 a notification of allotment of shares dated 7 May 1997 and signed by Mr Mark McKay as company director was lodged with the Australian Securities Commission. It showed that ninety-nine ordinary shares with a nominal value of $1.00 each had been allotted for cash and that $1.00 had been paid for each share: seventy-four to Mark E. Mark Holdings Pty Ltd as trustee for McKay Gordon Discretionary Trust and twenty-five to the plaintiff as trustee for TS & Associates Trust.
A dispute arose between the plaintiff and Mark E. Mark Holdings as a result of which the plaintiff began an action in the District Court at Brisbane on 25 June 1997 against Mark E. Mark Holdings and Messrs Mark McKay and Mark Gordon, who were directors and shareholders of that company, and Mr Alexander McKay, who was a shareholder of it.
On 11 July 1997 Messrs Tassell and Stouter resigned as directors of the defendant.
On 15 August 1997 Ms Patricia Hanly, then the solicitor for the plaintiff, sent this letter to Mr Kevin Hoiberg of Hoiberg & Co:
I refer to my recent telephone conversation with Mr Hoiberg, and note that I have not as yet received the necessary documentation to remove my clients as shareholders from the company.
I am instructed that the restaurant is scheduled to commence trading next Tuesday, 19 August, 1997. My clients are therefore most anxious to have the aforementioned documentation completed prior to that date. Please forward same as a matter of urgency.
Mr Tassell has sworn that that letter was sent following the breakdown in the business relationship between the parties, as a result of which the plaintiff considered transferring its shareholding in the defendant. The plaintiff, according to Mr Tassell, instructed Ms Hanly in relation to the proposed transfer of shares, which did not, however, take place.
Pleading in the District Court action proceeded. An entry of appearance, defence and counterclaim of Mark E. Mark Holdings and Messrs Mark McKay and Mark Gordon is dated 5 September 1997, and an entry of appearance and defence of the fourth defendant is dated the same day. A reply and answer of the plaintiff was dated 30 September 1997. In the plaint the plaintiff sought damages against all defendants for misleading and deceptive conduct and negligence and, in addition against Mark E. Mark Holdings, repayment of $68,012.00 as moneys had and received by Mark E. Mark Holdings to the use of the plaintiff, or alternatively moneys by which Mark E. Mark Holdings was unjustly enriched at the expense of the plaintiff. All of the plaintiff’s claims arose out of dealings concerning the restaurant between the plaintiff and the defendants to that action. The $68,012.00 was the sum of a number of payments allegedly made by the plaintiff in connexion with establishing the restaurant. In their defence Mark E. Mark Holdings and Messrs Mark McKay and Mark Gordon denied that the plaintiff was entitled to the relief claimed or any relief, and in paragraph 6(a) of their counterclaim they alleged that in about April 1997 an oral agreement was made between, as I understand the pleading, the plaintiff and Mark E. Mark Holdings, material terms of which were that the plaintiff would ‘provide’ to the latter ‘finance in the sum of $150,000.00’ and the latter would issue the plaintiff ‘a 25% shareholding in the company Left Bank Pty Ltd [which I take to be a reference to the defendant]’. It was further alleged in paragraph 6(c) that, pursuant to the agreement, Mark E. Mark Holdings provided to the plaintiff ‘25% of the company Left Bank Pty Ltd’. In the plaintiff’s answer to the counter-claim it denied the agreement and did not admit the allegations of fact in paragraph 6(c). Mr Alexander McKay in his defence denied that the plaintiff was entitled to the relief claimed against him or any relief. Even though the defendant in this action was not a party to that action, those pleadings are, I think, relevant as putting Ms Hanly’s letter in context.
The defendant’s annual return for 1997 did not record any shareholding by the plaintiff in the defendant. It showed the members to be Mark E. Mark Holdings with forty shares, Messrs John and Alexander McKay with twenty each, and Ms Dorothy McKay with twenty.
No step has been taken by any party in the District Court action since April 1998.
There was correspondence between the plaintiff’s solicitors and the defendants solicitors, then Jones King Lawyers, beginning on 11 September 1998 and ending on 21 September 1998. The plaintiff’s solicitors asserted throughout that the plaintiff was entitled to be registered as the holder of the twenty-five ordinary shares referred to in the notification of allotment. They referred as well to the annual return for 1997.
On 14 September the defendant’s solicitors made this response:
We have been advised by our client’s accountant that he recalls receiving share transfer documentation from your client’s accountant and that such documentation was executed and lodged with the ASC.
As soon as we are able to take further instructions relating to the shares we will immediately advise your office of same.
Then on 15 September the defendant’s solicitors wrote:
We have this morning heard from our client’s account [sic] who advised that Ms Patricia Hanly requested that he prepare the relevant documentation for the transfer of the shares held by TS & Associates Pty Ltd, have such documentation executed by Mark McKay and Mark Gordon and then forward same to her.
Such documentation was prepared and forwarded to Ms Hanly.
Our client’s accountant also advised that Ms Hanly expressly requested that the lodgement and stamping of the share transfer documentation be left to her client as she did not believe that Mr McKay or Mr Gordon would attend to the proper registration and notification of the documentation and that her client’s [sic] would then be open to some degree of liability as directors/ shareholder/unit holder.
The annual return reflects Ms Hanly’s undertaking to have the documentation registered.
We respectfully request that you contact Ms Hanly and obtain her advice as to the transfer of the shares.
Please advise if we can be of any further assistance in this matter.
Finally, on 21 September the defendant’s solicitors wrote:
We refer to your facsimile received by our office on Thursday and advise that our client’s accountant is still attempting to locate documentation relating to the share transfers. Such documentation includes correspondence from Patricia Hanly and file notes of telephone conversations between the accountant, Ms Hanly and the accountant for TS & Associates Pty Ltd. As soon as we receive a copy of this documentation we will be able to take our client’s further instructions.
It is noted that your client has issued a District Court summons for the return of $68,012.00 it alleges to have forwarded to Left Bank Restaurant Pty Ltd being part payment of the $150,000.00 payable for 25 shares.
In relation to the above our client asks whether your client will be continuing its District Court action against Left Bank Restaurant Pty Ltd if it is serious in its request for 25 shares to be transferred to TS & Associates Pty Ltd. If such a transfer did take place our client would require payment of $81,988.00 or alternatively it would make a call on your client for the payment of the balance of the price for the shares, and proceed with its counterclaim for damages incurred as a result of TS & Associates breach of contract.
Alternatively, in accordance with the undertaking given on its behalf, your client can execute the share transfer documentation (if it has not already been executed), forward that documentation to our client’s accountant and then proceed with its action for the return of the $68,012.00 (together with damages). If your client chooses to proceed, our client will of course proceed with its counterclaim.
Our client has requested that we be provided with a copy of the share transfer documentation forwarded to Ms Hanly.
Our client maintains its position that TS & Associates Pty Ltd breached the agreement entered into with Left Bank Restaurant Pty Ltd and that Left Bank Restaurant Pty Ltd has suffered loss and damage as a result of that breach.
As soon as our client’s accountant has located the correspondence from Ms Hanly we will immediately take our client’s further instructions before writing to you further.
The defendant’s annual return for 1998 did not record any shareholding by the plaintiff in the defendant. It again showed the members to be Mark E. Mark Holdings with forty shares, Messrs John and Alexander McKay with twenty each, and Ms Dorothy McKay with twenty.
The question of the twenty-five ordinary shares was revived on 9 June last when the plaintiff’s solicitors wrote to the directors of the defendant asserting that the plaintiff held the shares and that a reported sale of the restaurant was of great concern to the plaintiff. The defendant’s present solicitors replied in a letter dated 11 June saying:
We are instructed that contrary to the assertions made in your letter under reply, your client specifically relinquished any shareholding in our client company and this is reflected in correspondence from Patricia J Hanly, solicitor dated the 15th August 1997.
At the heart of the relief sought by the plaintiff is an order for rectification of the defendant’s register of members. A copy of the register is not before me. Although in a letter dated 24 June 1999 from the plaintiff’s solicitors to the defendant’s solicitors a copy of it was sought, there is nothing showing that that was done.
The power to order rectification of a register of members is discretionary: Grant v. John Grant & Sons Pty Ltd [1950] 82 C.L.R. 1 at p. 51 per Fullagar J. There is also a discretion the court has in deciding whether it will give summary relief or will leave the matter to proceed to the trial of an action: ibid; see also Whitehouse v. Carlton Hotel (1982) 7 A.C.L.R. 329 at p. 331. Mr Fong urged me to refrain from granting summary relief in this case.
Looked at superficially the case does not warrant its proceeding to trial: the notification of allotment of shares shows the shares were allotted to the plaintiff, and the annual returns show that the plaintiff appears to have been omitted from the register.
Mr Tassell sought to explain Ms Hanly’s letter of 15 August 1997 as arising from the plaintiff’s considering transferring its shareholding in the defendant. But there is no reference to transferring the shares in the letter. Necessary documentation ‘to remove my clients as shareholders’ - which I take to be a reference to the plaintiff - is the way it was put. That could possibly be a reference to an agreement that the defendant not proceed to issue the allotted shares to the plaintiff, allotment being only part of the process of issuing shares (Commonwealth Homes and Investment Co. Ltd. v. Smith (1937) 59 C.L.R. 443, at p. 461 per Dixon J.; but see Ford’s Principles of Corporations Law (1995) para. 17.185); or it could be a reference to the plaintiff’s surrendering its shares (see Ford, op. cit., para. 17.320). The latter construction appears to be that which the defendant’s present solicitors were contending for in their letter of 11 June 1999.
Mr Tassell’s assertion concerning a possible transfer of shares is consistent with the references to transfer documents in the defendant’s solicitors letters of 14, 15 and 21 September 1998, but it is difficult to reconcile the plaintiff’s claim that it is entitled to the twenty-five shares with Ms Hanly’s letter and with its delay until September 1998 in asserting its claim and its letting that claim drop after the correspondence in September 1998 until early this month. An application for rectification should be made promptly: Sewell’s case (1868) 3 Ch. App. 131 at p. 138. Those lengthy delays suggest acquiescence in what appears to be the present state of the register.
The matters I have mentioned render this case more complicated than a superficial assessment would indicate. Added to that feature is the absence of evidence relevant to a proper determination of the plaintiff’s claim, including: the details of the conversation between Ms Hanly and Mr Hoiberg referred to in her letter and of the conversations referred to in the correspondence in September 1998, the documents sent to Ms Hanly, and the register itself.
In the result I am not persuaded that this is a case for granting a summary remedy, and so I shall refuse the plaintiff’s motion.
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