Westgold Resources NL v Precious Metals Australia Ltd

[2002] WASC 221

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   WESTGOLD RESOURCES NL -v- PRECIOUS METALS AUSTRALIA LTD [2002] WASC 221

CORAM:   EM HEENAN J

HEARD:   20 JUNE 2002

DELIVERED          :   18 SEPTEMBER 2002

FILE NO/S:   COR 56 of 2002

BETWEEN:   WESTGOLD RESOURCES NL (ACN 009 260 306)

Plaintiff

AND

PRECIOUS METALS AUSTRALIA LTD (ACN 009 131 533)
Respondent

FILE NO/S              :COR 82 of 2002

BETWEEN              :PRECIOUS METALS AUSTRALIA LTD (ACN 009 131 533)

Applicant

AND

WESTGOLD RESOURCES NL (ACN 009 260 306)
Respondent

Catchwords:

Corporations - Register of members - Former members - Details to be kept on register - Availability of register for inspection - Use to be made of information derived from register - Proposal to canvass former members to join in class action against directions - Injunction

Legislation:

Corporations Act 2001 (Cth), s 168, s 169, s 173, s 177, s 729, s 995, s 1303

Result:

Order for inspection of register of former shareholders of Precious Metals
Australia Ltd and injunction to prevent Westgold Resources NL from using
information derived from the register for the purposes of communicating with
former shareholders to canvass their support for or participation in class
action as proposed

Category:    B

Representation:

COR 56 of 2002

Counsel:

Plaintiff:     Ms J M Hill

Respondent:     Mr M D Howard

Solicitors:

Plaintiff:     Bennett & Co

Respondent:     Clayton Utz

COR 82 of 2002

Counsel:

Applicant:     Mr M D Howard

Respondent:     Ms J M Hill

Solicitors:

Applicant:     Clayton Utz

Respondent:     Bennett & Co

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

Karam Australia v Australia and New Zealand Banking Group Ltd (2000) 34 ACSR 545

Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87

O'Brien & Ors v Sporting Shooters Association of Australia (Victoria) [1999] 3 VR 231

Re Spargos Mining NL (1990) 3 WAR 166

Case(s) also cited:

Nil

1. EM HEENAN J: At issue in these two separate applications to the Court is the question of whether or not Precious Metals Australia Ltd ("PMA") should provide to Westgold Resources NL ("Westgold") inspection of and a copy of the register of members of PMA kept under s 169 of the Corporations Act 2001 (Cth) and, in particular, the register showing the name and details of each person who stopped being a member of the company within the last seven years (s 169(7)). Westgold is seeking relief to this effect pursuant to s 1303 of the Act whereas PMA is seeking an interlocutory injunction pursuant to s 1324(4) and s 177 of the Act to restrain Westgold from using any information about a person from any register of former members maintained by PMA to contact or send material to such a person for the purpose of inviting that person to express an interest in, or to join Westgold in a class action against the directors of PMA. As framed and as argued, these two applications raise issues about the nature of the information which is required to be kept by a corporation about its former members pursuant to s 169(7) and whether or not s 177 prevents use of such information by a person obtaining it in order to solicit support from former members of the corporation in a proposed class action against its directors.

Background

1. Westgold is a shareholder of PMA, having first acquired shares in that company on 14 April 2000.  On 14 December 2000, Westgold commenced an action in this Court (CIV 2705 of 2000) against PMA and several of its directors seeking damages in respect of alleged breaches of the Corporations Law in respect of a prospectus issued by PMA dated 30 June 2000.  Westgold has alleged that it subscribed for securities in PMA pursuant to that prospectus.  That is the third of three prospectuses issued by PMA during the preceding 12 month period.  The three prospectuses for securities to be issued by PMA are:

   (a)a prospectus dated 26 July 1999, the closing date of which was 6 August 1999;

   (b)a prospectus dated 6 August 1999, the closing date of which was 7 September 1999;

   (c)the prospectus dated 30 June 2000, the closing date of which was 4 August 2000.

2. On 15 February 2002, Westgold communicated with the share registry of PMA and requested copies of the share registers for PMA on the following dates:

   •6 August 1999

   •17 August 1999

   •8 September 1999

   •11 July 2000

   •21 August 2000

   and offered to pay the cost of providing copies of those registers.  As is obvious, these requests related to the state of the PMA register at dates some 6 months to 24 months before the date of the request.  Further consideration of the dates for which copies of the register were requested suggests some proximity  with, both before and after, the dates of the three prospectuses.  The course of correspondence between the solicitors for Westgold, the share registry service company for PMA and then the solicitors from PMA, discloses that, by 20 February 2002, PMA was prepared to provide Westgold, on payment of the reasonable fees for the service, with the listings of shareholders in PMA on each of the three historical dates requested, but advised that the listings would contain the shareholders' names and the balances of the shareholdings at the particular dates only and not the addresses of the shareholders on the register at those various dates.  This prompted a further demand by Westgold asserting that PMA was obliged to provide all the details on the historical records of shareholders including the addresses of the shareholders.

3. On 6 March 2002, Westgold commenced application COR 56 of 2002 against PMA seeking declarations that the historical registers required to be kept under s 169 are required to include the name, address and share details of each person who stopped being a member of the company within the last seven years and sought orders pursuant to s 1303 and s 173 of the Corporations Act requiring PMA to provide Westgold with a copy of the share registers of the latter company, which included the names and addresses of shareholders at each of the five past dates requested.

4. On Wednesday 13 March 2002, Westgold advertised in the business pages of "The West Australian" newspaper, inviting expressions of interest from persons or companies who then were, or had been, shareholders in PMA from April 1999 and who had subscribed for shares in PMA in response to any of the three prospectuses mentioned.  The advertisement invited shareholders to contact Westgold in respect of a contemplated class action against the directors of PMA for alleged breaches of the Corporations Act.  The advertisement was under a heading bearing the names of the parties in the action between Westgold and PMA and the three directors of PMA against whom the claim for damages had been instituted.  It also included a statement that Westgold had been obliged to advertise in this way because PMA had refused to provide to Westgold any address for shareholders other than current shareholders.  Westgold contended in the advertisement that this refusal was in breach of the Corporations Act and stated that it had commenced proceedings (these proceedings) for "appropriate relief".

5. On 20 March 2002, PMA commenced proceedings in this Court (COR 82 of 2002). It made application under s 1324(1) of the Corporations Act seeking a declaration that Westgold's use of information about persons from the share registers of PMA to contact such persons and invite expressions of interest from them about joining a class action against the directors of PMA, would constitute a contravention of s 177(1) of the Act and it also sought an injunction restraining PMA from using any information about a person from any register maintained by PMA in order to contact or send material to such a person for the purpose of inviting expressions of interest from those persons about joining a class action against the directors of PMA. That application was accompanied by a contemporaneous application for interlocutory relief in the form of an injunction against PMA to restrain it from using any information about a person from any register maintained by PMA to contact or send material to such a person for the purpose of inviting those persons to express an interest in, or to join the proposed class action. The adjourned application for interlocutory relief by PMA was heard before me at the same time as the application by Westgold for orders for disclosure of the addresses of shareholders on the historical registers kept by PMA.

Register of members - statutory right of access

1. An example of resort by members of a corporation to the register of members, which the corporation is required to keep, for purposes associated with the corporation, is provided by the decision of O'Brien & Ors v Sporting Shooters Association of Australia (Victoria) [1999] 3 VR 231 where Byrne J discussed the relevant principles and upheld a claim by candidates for election to the Executive Council of an Association to have access to the Association's membership details in order to canvass the members for votes at the Association's forthcoming annual meeting.

2. It is necessary to identify the statutory provisions which apply in the present case in order to consider the arguments which have been put forward by counsel for Westgold and for PMA on these present applications.

3. By s 168 a company must set up and maintain a register of members and, where it grants options over unissued shares or interests, a register of option holders and, if the company issues debentures, a register of debenture holders. The requirements for a register of members are set out fully in s 169, parts of which are as follows:

   "169  (1)   General Requirements    The register of members must contain the following information about each member:

   (a)the member's name and address

   (b)the date on which the entry of the member's name in the register is made.

   169  (2)   Index to register    If the company or scheme has more than 50 members, the company or scheme must include in the register an up‑to‑date index of members' names.  The index must be convenient to use and allow a member's entry in the register to be readily found.  A separate index need not be included if the register itself is kept in a form that operates effectively as an index.

   169  (3)   Companies with share capital     If the company has a share capital, the register must also show:

   (a)the date on which every allotment of shares takes place; and

   (b)the number of shares in each allotment; and

   (c)the shares held by each member; and

   (d)the class of shares; and

   (e)the share numbers (if any), or share certificate numbers (if any), of the shares; and

   (f)the amount unpaid on the shares (if any).

   169   (4)   [Amount unpaid on shares]    The register does not have to show the amount unpaid on the shares (see paragraph (1)(f) if:

   (a)all of the company's shares were issued before 1 July 1998; and

   (b)the register continues to show the par values of the shares as they were immediately before 1 July 1998.

   169   (5)   [Amount unpaid on shares]    The register does not have to show the amount unpaid on the shares (see paragraph (1)(f) if:

   (a)all of the company's shares were issued before 1 July 1998; and

   (b)the company is not a listed company.

   169   (5A)   Non-beneficial ownership - companies other than listed companies   The register of a company that:

   (a)has a share capital; and

   (b)is neither a listed company (within the meaning of section 603) nor a company covered by an order under section 707;

   must indicate any shares that a member does not hold beneficially.

   169   (6)   [Information contained in notices]   In deciding for the purposes of subsection (5) whether a member holds shares beneficially or non‑beneficially, the company is to have regard only to information in notices given to the company under section 1096A, 672B or 672C.

   …

   169   (7)   Former members    A register of members must also show:

   (a)the name and details of each person who stopped being a member of the company or scheme within the last 7 years; and

   (b)the date on which the person stopped being a member.

   The company or scheme may keep these entries separately from the rest of the register.

   169   (8)   Joint holders    For the purposes of this section:

   (a)2 or more persons who jointly hold shares in the company or interests in the scheme are taken to be a single member of the company or scheme in relation to those shares or interests; and

   (b)2 or more persons who have given a guarantee jointly are taken to be a single member of the company.

   They may also be members of the company or scheme because of shares or interest that they hold, or a guarantee that they have given in their own right or jointly with others."

4. The Act then contains detailed provisions relating to the registers to be kept for option holders and for debenture holders, in each case requiring the company to record the option or debenture holder's name and address, together with other information. 

5. These are all public registers to which any person may have recourse. An express right of inspection and a right to obtain copies of the register on payment of a proper fee are conferred by s 173 as follows:

   "173   (1)   Right to inspect    A company or registered scheme must allow anyone to inspect a register kept under this Chapter.  If the register is not kept on a computer, the person inspects the register itself.  If the register is kept on a computer, the person inspects a hard copy of the information on the register.

   173   (1A)   [Limit to application of subs (1)] The requirement in subsection (1) to allow the person to inspect a hard copy of the information on the register does not apply in relation to a register that is kept on a computer if the person and the company or the responsible entity agree that the person can access the information by computer

   173   (2)   Inspection fees   A member of a company or registered scheme, a registered option holder or a registered debenture holder may inspect a register kept under this Chapter without charge.  Other people may inspect the register only on payment of any fee (up to the prescribed amount) required by the company or scheme.

   173   (3)   Right to get copies   The company or scheme must give a person a copy of the register (or a part of the register) within 7 days if the person:

   (a)asks for the copy; and

   (b)pays any fee (up to the prescribed amount) required by the company or scheme.

   ASIC may allow a longer period to comply with request.  If the register is kept on a computer and the person asks for the data on floppy disk, the company or scheme must give the data to the person on floppy disk.  The data must be readable but the floppy disk need not be formatted for the person's preferred operating system.

   …"

6. Counsel for Westgold submitted that s 169(7) required a company to keep, as part of its register of former members, all the "details" which were required to be kept by s 169 when the person concerned had been a member of the company, that is, the member's name and address, the date on which the entry of the member's name in the register was made and, to companies to which it applies, the information required to be kept on the current register by s 169(3). Counsel for PMA, however, submitted that the use of the word "details" in subs 169(7)(a) being a change from the language that had been employed in subs 169(1) and subs 169(3), signified a change in meaning and that, consequently, "details" did not include the address of a former member. I cannot accept this latter submission for I am satisfied that, in its context in subs 169(7)(a), the word "details" is intended to be a compendious description of all the information which the company was required to maintain on its register of current members during the period when the former member was a shareholder or scheme member as the case may be. The nature of those details will, as s 169 itself reveals, vary according to whether the corporation is a company or a registered scheme; and, where a company: if it has a share capital; whether or not the company is listed; whether or not shares were issued before 1 July 1998; and whether or not the company has been notified that the shares are not held by the member beneficially. Whatever data or "details" are required to be kept while the person is a member or shareholder constitute the "details" which are to be kept on the register of former members pursuant to s 169(7).

7. Apart from the clarity of the language used by the statute, all practical considerations point to this same conclusion. If there are occasions in which it is necessary to identify a shareholder or member, or for that matter a former shareholder or former member, these will almost certainly include occasions when it is necessary to communicate with, or attempt to communicate with the member, shareholder or former shareholder. For this, an address is essential and the last known address, as recorded in the register of current members, supplies this need. Accordingly, I conclude that, by virtue of s 169(7) PMA is required to keep a register of its former shareholders and to include upon that register the last known address and other details of the shareholder as recorded when the former shareholder was a member of the company and which were then kept in compliance with the requirements of s 169(1) and(3). Consequently, I consider that when Westgold requested access to and copies of the register of former members of PMA pursuant to s 177, it was entitled to have access to and receive copies of a register of former members which contained their last known names and addresses, the other details which had been kept in relation to those shareholders pursuant to s 169(1) and (3) during the time when they remained shareholders of the company, and the dates upon which those persons stopped being members of the company.

8. Consequently, I consider that Westgold is entitled to a declaration that pursuant to s 169(1) and s 169(7) of the Corporations Act, the share register for PMA is required to include the name, address and share details of each person who stopped being a member of that company within the last seven years. 

9. However, I do not consider that Westgold is entitled to a copy of the share registers of PMA as these stood on any one or more of the five dates which it has requested unless PMA is willing to provide them. The only requirement under s 169(7) is for the register to keep details of former members, as prescribed, and it may keep these entries separate from the rest of the register. It follows that the register of former members will satisfy the requirements of the section if it includes the name and details of each person who stopped being a member of the company within the last seven years, together with the date on which each such person stopped being a member. Whether this information is recorded as part of the general register or as part of a separate register of former members will be for the company to decide, but the legislation does not in my view, require a company to keep extant a register of every member of the company who was a member on any particular day or days during the last seven years, as the demand by Westgold implies. It will be sufficient if all former members during the past period of seven years are included on the one register and the dates upon which each ceased to be a member are also included.

10. For these reasons I consider that Westgold is entitled to an order that PMA should provide it with a list of former members of the company and their addresses covering the seven year period ending when Westgold made the demand for this information, namely 15 February 2002 and I am prepared to make an order or orders to that effect rather than the orders sought by Westgold in par 2 of its application of 5 March.

1. Although any person, including Westgold, may inspect the register of former members of PMA and obtain copies, the use of the information so obtained is restricted by the Corporations Act 2001. The restrictions upon the use of such information are contained in s 177 of the Act which provides as follows:

   "177   (1)   [Restriction on use of information from register]   A person must not:

   (a)use information about a person obtained from a register kept under this Chapter to contact or send material to the person; or

   (b)disclose information of that kind knowing that the information is likely to be used to contact or send material to the person.

   177   (1A)   [Limit to application of subs (1)]   Subsection (1) does not apply if the use or disclosure of the information is:

   (a)relevant to the holding of the interests recorded in the register or the exercise of the rights attaching to them; or

   (b)approved by the company or scheme."

   The section goes on to impose a strict liability offence for breach of these restrictions, together with a right to compensation and other relief for any person who suffers loss or damage because of a contravention.

2. Reliance was placed on s 177 by PMA in its application (COR 82 of 2002) for an injunction to restrain Westgold from using any information about a person from any register of PMA to contact or send material to such a person for the purpose of inviting such person to express an interest, or to join with Westgold, in a class action against the directors of PMA. In O'Brien v Sporting Shooters Association of Australia (Victoria) (supra) it was decided that the interests which members of an incorporated association have in being notified of, and voting at, an election for office‑bearers of their association was a relevant interest which justified a person or persons who had access to the register of members communicating with them in order to canvass their support for those individuals' candidatures for office at an annual general meeting of the association.  This, after all, is a measure designed to facilitate the internal governance of an incorporated association by encouraging members to vote for certain individuals who were seeking election to office of that association. 

3. In the present case, however, very little attention was given by the parties to identifying the interests or potential interests of former members of PMA which might be considered to be relevant in determining whether or not the information containing their names and addresses on the register of former members, could be used or disclosed under the provisions of s 177(1A). Clearly enough, I should infer from the evidence that Westgold desires to communicate with the former members of PMA, or at least those former members who may be thought to have purchased shares in PMA in reliance on information contained in any one or more of the three prospectuses issued in 1999 and 2000, with a view to enlisting the support of such former members in the class action against PMA and its three directors. However, no evidence was put before the court of the nature of the claim or claims which are being advanced, or which are proposed to be advanced in the intended class action nor, more significantly, how any such interests which the former shareholders may have possessed in the past could survive the sale or dispositions of their respective shareholdings.

4. By definition, none of the former members of PMA is presently a shareholder.  The necessity to be a member, or to have acquired rights leading to an entitlement to registration, in order to avail of the previous statutory remedy was recognised in Re Spargos Mining NL (1990) 3 WAR 166, see also Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87. Accordingly, it is necessary to consider whether any such former shareholder is eligible to bring any action on behalf of the company under s 236 or to seek relief from oppressive conduct under s 233. There has been nothing shown or suggested to demonstrate that any one or more of the former members of PMA are persons who ceased to be a member of the company because of oppressive conduct so as to entitle such former member to seek relief under s 233 pursuant to the provisions of s 234(b) or s 234(c). Nor has it been argued or suggested that there is any basis for the court to grant leave to a former member to bring or intervene in proceedings on behalf of the company pursuant to s 236 or s 237. This new statutory form of derivative action, which commenced on 13 March 2000 (Corporate Law Economic Reform Program Act 1999 (Cth)) has abolished the common law right of a person to bring proceedings on behalf of a company - s 236(3) and Karam Australia v Australia and New Zealand Banking Group Ltd (2000) 34 ACSR 545 at 554.

5. The action for relief against oppression under s 233 or the statutory derivative action under s 236 are, essentially, remedies to vindicate an interest of the company as a whole, with consequent benefit to all current shareholders or members, or in the case of the oppression remedy, for current members who are disadvantaged because of the actions of a majority or group who are acting oppressively. A former member may have standing to bring an action for relief against oppressive conduct where it is the influence of that oppressive conduct which relates to the circumstances in which he or she ceased to be a member. Those circumstances should exhibit a clear relationship between an exercise of rights attaching to the former members of the company, because of the interests which they held, and the use of the register of former members as a means of communicating with them in order to consider the possible enforcement or vindication of the interests so attaching. However, in a case like the present, unless a former member can be shown to have, or probably to have, an interest of a kind which may sustain an action by that former member against the company or its directors arising from that membership, I do not consider that the exception in s 177(1A) applies so as to allow communications with such a former member or members by a person or persons who have obtained their details from the register of former members. In short there would not be a sufficient interest possessed by the former members which would justify information in the register being used to approach them with a view to consider proceedings for relief against oppression or for them to bring a statutory derivative action under s 236. On the other hand, if it could be shown that there was an arguable case that a former member or members would have grounds to bring or join in an action against the company for relief against oppression or to bring or intervene in the statutory derivative action, then that would be a sufficient foundation to allow communication with such members, by use of information obtained from the register of former members kept under s 169(7), but not otherwise. In these circumstances, I consider that the proper course for a court to follow is to approach the question of whether or not an order under s 1303 should be made, on the basis that it is for the party seeking disclosure and use of the information to establish that the power to order this without restriction should be exercised - see O'Brien & Ors v Sporting Shooters Association of Australia (Victoria) (supra) at 235.

6. In the present situation the former members of PMA, whose names and details are recorded in the register of members pursuant to s 169(7), no longer hold their shares in the company, so it could hardly be said that the use of the information obtained from the register is relevant, in any present or future sense, to the shares which those former members once held in the company. Nor, for the same reasons, could it be said that the information is relevant to the exercise of the rights attaching to those interests, in any present or future sense. However, it remains possible to contend that the information may be relevant to past rights held by the former members which might yet be vindicated by either of the two statutory remedies which I have been discussing and the possibility that such an interest may exist in certain circumstances cannot be excluded. In this case, however, there has been no evidence nor any submission to the effect that any such past rights could, or might, be vindicated in either of these ways. In the absence of evidence to support such a claim it should not here be considered further.

7. That still leaves the possibility that the former members of PMA may have personal rights of action against the company or its directors if they had suffered loss or damage which could be proved to have been caused by false, misleading or deceptive statements in any of the three prospectuses which have been identified. Such a loss might, hypothetically, have been caused if shareholders subscribed for securities in PMA on the faith of representations contained in one or more of the prospectuses and, then later sold the shares or securities, suffering a loss in the process, which is attributable to the putative false or misleading statements alleged to have been contained in the prospectus. It must be acknowledged that there is a possibility that, among the former members of PMA who subscribed for securities after one or more of the three prospectuses were issued and then later sold shares at a loss, there may be some who may have a cause of action against the company and the authors of the prospectuses if false or misleading statements can be shown to have been included in the prospectus and relied upon when subscribing for those shares. The question which, therefore, arises is whether or not the use of the information derived from the register of former members maintained under s 169(7) may be used to permit a third person, such as Westgold, to communicate with those former members in order to canvass them for support for, or inclusion in, the proposed class action.

8. Again, it is necessary to resort to s 177(1A) of the Act in order to ascertain whether or not the use or disclosure of the information in the register of former members is relevant to the holding of the interests recorded in the register or the exercise of the rights attaching to them. I consider that the answer to this question is in the negative. In the first place the former members no longer hold the interests which are recorded in the register and for this reason are unable to exercise any rights formerly attaching to them. It is true that the former owners may have an action for damages for losses caused by misleading or deceptive statements contained in the prospectuses, if that could be proved, but such a right for damages appears to me to be independent of, and distinct from, the holding of the interests or the exercise of rights attached to them. The successful recovery of an award of damages as compensation for losses caused by misleading or deceptive statements, does not seem to me to be the enforcement of any interest held as a shareholder of the company or the exercise of the rights of a shareholder. It is a separate and independent action for damages arising because the interests recorded in the register or the rights derived from them were not those which were represented. Especially where those shares have since been sold, the recovery of damages is for a right which is distinct and independent of the rights of a present or former shareholder.

9. For these reasons, therefore, I consider that while Westgold is entitled to inspect and obtain a copy of the register of former members of PMA over the seven year period before its demand for such access was made, it is not entitled to use any of the information so obtained in order to approach or communicate with former shareholders with a view to obtaining their support for a proposed class action.  The situation may be otherwise if some definite connection could be established between the present rights of the former shareholders and the interests which they previously possessed as shareholders or the exercise of the rights attaching to their role as former shareholders.  It is enough to say that nothing of this kind has been demonstrated in the present proceedings.

10. Accordingly, I would be prepared to grant an injunction restraining Westgold from using any information about persons gained from the register of former members of PMA for the purpose of inviting those persons to express an interest in, or to join with Westgold in a class action against the directors of PMA.

11. I will hear counsel as to the form of the orders which should be made to give effect to these conclusions.