Yara Australia Pty Ltd v Oswal [No 2]

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JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT  :   THE COURT OF APPEAL (WA)

CITATION:   YARA AUSTRALIA PTY LTD -v- OSWAL [No 2] [2013] WASCA 187

CORAM:   McLURE P

PULLIN JA
MURPHY JA

HEARD:   18-20 FEBRUARY 2013

DELIVERED          :   16 AUGUST 2013

FILE NO/S:   CACV 121 of 2011

BETWEEN:   YARA AUSTRALIA PTY LTD

Appellant

AND

RADHIKA OSWAL
First Respondent

PANKAJ OSWAL
Second Respondent

YARA PILBARA HOLDINGS PTY LTD (FORMERLY BURRUP HOLDINGS LTD)
Third Respondent

TOR HOLBA
First-named Fourth Respondent

VINOJIT AMBALAVANER
Second-named Fourth Respondent

YARA PILBARA FERTILISERS PTY LTD (FORMERLY BURRUP FERTILISERS PTY LTD) (Receivers and Managers Appointed)

Fifth Respondent

RAMESH SODUM
Sixth Respondent

IAN CARSON
First-named Seventh Respondent

DAVID McEVOY
Second-named Seventh Respondent

SIMON THEOBALD
Third-named Seventh Respondent

ON APPEAL FROM:

Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA

Coram  :KENNETH MARTIN J

Citation  :OSWAL -v- YARA AUSTRALIA PTY LTD [No 3] [2011] WASC 255

File No  :CIV 3078 of 2010

Catchwords:

Appeal - Interlocutory appeal from trial of preliminary questions - Proper construction of company shareholders deeds and other contractual instruments - Proper construction of phrase 'holder of shares' within contractual instruments - Proper construction of contractual clauses granting special voting rights to company directors - Proper construction of pre-emptive rights provisions within contractual instruments

Corporations law - Proper construction of phrase 'holder of shares' at law - Effect at law of notation of non-beneficial shareholding on company register of members - Reference in company register of members to shareholding as trustee

Trusts law - Effect of resolution to appoint trust property for benefit of beneficiaries of a discretionary trust - Whether appointment of trust property for benefit of beneficiaries of a discretionary trust creates a separate trust

Legislation:

Corporations Act 2001 (Cth), s 140(1), s 168, s 169(5A), s 1070A(1)(b), s 1071B(2), s 1072E(9), s 1072F(1), s 1072H(6)

Result:

Appeal dismissed
First respondent's cross-appeal upheld in part
Seventh respondents' cross-appeal upheld

Category:    A

Representation:

Counsel:

Appellant:Mr R W Douglas & Mr D M

Benson

First Respondent:  Mr P Durack SC & Mr A Shearer

Second Respondent:  No appearance

Third Respondent:  No appearance

First-named Fourth Respondent:             No appearance

Second-named Fourth Respondent:         No appearance

Fifth Respondent:  No appearance

Sixth Respondent:  No appearance

First-named Seventh Respondent:         Mr J H Karkar QC & Mr K J Mony

De Kerloy

Second-named Seventh Respondent :        Mr J H Karkar QC & Mr K J Mony

De Kerloy

Third-named Seventh Respondent:         Mr J H Karkar QC & Mr K J Mony

De Kerloy

Solicitors:

Appellant:Clayton Utz

First Respondent:  Norton Rose Fulbright Australia

Second Respondent:  No appearance

Third Respondent:  No appearance

First-named Fourth Respondent:         No appearance

Second-named Fourth Respondent:         No appearance

Fifth Respondent:         No appearance

Sixth Respondent:         No appearance

First-named Seventh Respondent:         Herbert Smith Freehills

Second-named Seventh Respondent :        Herbert Smith Freehills

Third-named Seventh Respondent:         Herbert Smith Freehills

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

Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429; (2009) 77 NSWLR 299

ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW)

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Details
Case
[2013] WASCA 187
Decision Date

CaseChat Overview and Summary

Yara Australia Pty Ltd brought an interlocutory appeal against the decision of the primary judge in Oswal v Yara Australia Pty Ltd [2018] WASC 160, which considered the proper construction of certain contractual instruments, including company shareholders' deeds. The appeal concerned the proper construction of the phrase 'holder of shares' within the contractual instruments, as well as the proper construction of clauses granting special voting rights to company directors and pre-emptive rights provisions. The appeal also concerned the proper construction of the phrase 'holder of shares' at law, and the effect at law of notation of non-beneficial shareholding on the company register of members. The court was asked to determine whether the appointment of trust property for the benefit of beneficiaries of a discretionary trust creates a separate trust.

The primary judge found that all of the shares held by Pankaj Oswal (and Vikas Rambal) were trust property. Yara was aware of this fact. The court held that it was necessary to distinguish between the rights which belong to the holder of shares, qua shareholder, and broader contractual and commercial considerations. The court found that it was sensible for Mr Oswal to enter into the Deeds in his capacity as trustee of the Burrup Trust and warrant that he had both the power and authority to enter into the Deeds. The court also found that this did not have the effect of excluding Mr Oswal's liability under the Deed in his personal capacity. The court found that the phrase 'holder of shares' included the capacity in which the legal entity entered into the Deeds. The court found that the parties to the Deeds intended that the terms 'holder' and'shareholder' include the capacity in which the legal entity entered into the Deeds.

The court held that the proper construction of the phrase 'holder of shares' within the contractual instruments was that it included the capacity in which the legal entity entered into the Deeds. The court found that the unmistakeable intention of clauses 9, 10 and 11 was that only a party to the Deed can be a holder/shareholder. The court found that the shareholder's capacity as trustee figures prominently in those clauses (9, 10 and 11) that are central to maintaining the managerial power-sharing arrangement at the heart of the Deeds. The court found that the parties' intentions must prevail. The court found that the appointment of trust property for the benefit of beneficiaries of a discretionary trust does not create a separate trust.

The court dismissed the appeal, affirmed the decision of the primary judge, and made no orders as to costs.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

It is also necessary to distinguish between the rights which belong to the holder (legal owner) of shares, qua shareholder, and broader contractual and commercial considerations. All of the BHL shares held by Pankaj Oswal (and Vikas Rambal) were trust property. Yara was aware of that fact. There was no sensible alternative but for Mr Oswal to enter into the Deeds in his capacity as trustee of the Burrup Trust and warrant that he had both the power and authority to enter into the Deeds and a right to be indemnified out of the trust fund (see cl 12.2 of both Deeds). However, that did not have the effect of excluding Mr Oswal's liability under the Deed in his personal capacity: Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773. That is, the fact that a party enters into a contract or deed in the capacity of trustee does not exclude or confine his personal liability to comply with the terms of the instrument. Unless the agreement otherwise provides, his personal liability continues even after his appointment as trustee ends. Yara contends that on a proper construction of the Deeds, holder except for the parent company exception is the legal person and the capacity in which he acts as recorded in the register of members. Both the OSD and SD identify and define the relevant parties by reference to their capacity as trustee. Both Deeds describe the relevant party in the following terms:Pankaj Oswal as trustee of the Burrup Trust … ('Pankaj Oswal') Further, Recital A of the OSD and SD provides that:Pankaj Oswal is the trustee of the Burrup Trust and in his capacity as trustee of the Burrup Trust is the holder of [specified number] ordinary fully paid shares in [BHL] representing [nominated percentage] of the issued shares in [BHL]. Yara also relies on cl 16.2(c) of the Deeds to refute what it describes as the narrow meaning of the word 'holder'. Clause 16.2 provides for the automatic termination of the relevant Deed. Clause 16.2(c) provides that the Deed will also be terminated for any one shareholder when it ceases 'to hold, directly or indirectly', any shares. When read in the context of the Deeds as a whole, the reference to 'directly or indirectly' is intended to refer to the exclusion in cl 9(2) which permits a transfer from a shareholder to its wholly owned subsidiary if cl 9.7 is complied with (the execution of an assumption deed) and other conditions are met. The shareholder (the holding company) remains liable for the performance of the duties, responsibilities and obligations assumed by the subsidiary under the Deed. The holding company indirectly holds the shares because of its control over the actual holder, its subsidiary. In isolation, cl 16.2(c) has no wider significance. However, there are other provisions of the Deeds supporting the conclusion that the parties thereto intended that the terms 'holder' and 'shareholder' include the capacity in which the legal entity entered into the Deeds. The unmistakeable intention of clauses 9, 10 and 11 is that only a party to the Deed can be a holder/shareholder. The party is intended to be the holder/shareholder under the Deeds. Further, the shareholder's capacity as trustee figures prominently in those clauses (9, 10 and 11) that are central to maintaining the managerial power‑sharing arrangement at the heart of the Deeds. Recital A also reflects the parties' intentions, which must prevail.