Yellow Rock Resources Pty Ltd v Valentino
[2014] WASCA 166
•4 SEPTEMBER 2014
YELLOW ROCK RESOURCES PTY LTD -v- VALENTINO [2014] WASCA 166
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASCA 166 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:143/2013 | 23 JULY 2014 | |
| Coram: | McLURE P NEWNES JA MURPHY JA | 4/09/14 | |
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | YELLOW ROCK RESOURCES PTY LTD DAVID PETER VALENTINO |
Catchwords: | Corporations Prospectus Issue of partly-paid shares Maximum amount of call per annum No call made for two years Whether call for maximum amount can be made for those years in subsequent year Construction of prospectus Turns on own facts |
Legislation: | Nil |
Case References: | Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : YELLOW ROCK RESOURCES PTY LTD -v- VALENTINO [2014] WASCA 166 CORAM : McLURE P
- NEWNES JA
MURPHY JA
- Appellant
AND
DAVID PETER VALENTINO
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
Citation : YELLOW ROCK RESOURCES LTD -v- VALENTINO [2013] WASC 436
File No : CIV 2004 of 2013
Catchwords:
Corporations - Prospectus - Issue of partly-paid shares - Maximum amount of call per annum - No call made for two years - Whether call for maximum amount can be made for those years in subsequent year - Construction of prospectus - Turns on own facts
Legislation:
Nil
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant : Mr M F Holler
Respondent : Mr S Vandongen SC & Ms M Chaar
Solicitors:
Appellant : AustAsia Legal Pty Ltd
Respondent : Tottle Partners
Case(s) referred to in judgment(s):
Nil
1 McLURE P: I agree with Newnes JA.
2 NEWNES JA: This is an appeal from a decision of Master Sanderson dismissing an application for summary judgment by the appellant and, on the respondent's counter-application for summary judgment, dismissing the appellant's claim. The master's decision turned on a short question of construction of a prospectus issued by the appellant.
Background
3 The appellant issued a prospectus dated 9 November 2009, offering (relevantly) up to 80,000,000 shares in the appellant at a purchase price of $0.039, partly paid to $0.0001. The respondent applied for 15 million partly paid shares. On 10 December 2009, he was allotted those shares.
4 The critical provision for present purposes is cl 7.3 of the prospectus, which relates to the terms of issue of the shares and is in the following terms:
The Partly Paid Shares will be issued at an issue price of $0.0001 each and convertible to ordinary fully paid shares in the capital of the company on payment of a further $0.0389 per partly paid share.
In addition to the rights and liabilities conferred on holders of Partly Paid Shares as detailed in section 7.1, the following additional rights and liabilities attach to a Partly Paid Share pursuant to the Constitution of the Company:
(a) The Company shall not make a call on the Partly Paid Shares for a period of 12 months from the date of issue.
(b) Subject to (a), the maximum call per annum from date of issue shall be $0.005 per Partly Paid Share.
(c) A holder of Partly Paid Shares may make full payment of any uncalled amount, at their sole discretion, at any time, subject to a minimum conversion of 500,000 Partly Paid Shares or such lesser number where the balance held is less than 500,000 Partly Paid Shares.
(d) Subject to the Corporations Act and the terms on which the Partly Paid Shares are issued, the Directors may make a call on the holders of the partly paid shares for any money unpaid on them.
(e) The Partly Paid Shares are freely transferrable.
(f) The Company must comply with the Corporations Act and the ASX Listing Rules in relation to the dispatch and content of notices to members on whom a call is made and a member to whom notice of a call is given must pay to the Company the amount called in accordance with the notice.
(g) If an amount called is not paid on or before the due date, the person liable to pay the amount must also pay interest on the amount from the due date to the time of actual payment and all expenses incurred by the Company as a consequence of the non-payment.
(h) To the extent permitted by the ASX Listing Rules, the Company has a first and paramount lien on every partly paid share which is presently payable to the Company.
(i) The Directors may at any time after a call becomes due and payable and remains unpaid serve a notice on the member to pay the unpaid amount, interest and all expenses accrued.
(j) If a member does not comply with a notice served then any or all of the partly paid shares in respect of which the notice was given may be forfeited. On forfeiture, shares become the property of the Company and forfeited shares must be, if the ASX Listing Rules permit sold, disposed of, or cancelled on terms determined by the Directors or offered by public auction.
(k) The interest of a person who held shares which are forfeited is extinguished but subject to the ASX Listing Rules remains liable to pay all money that was payable at the date of forfeiture.
(l) Subject to the terms on which a partly paid share is on issue, the net proceeds of any sale made to enforce a lien or on forfeiture will be applied in the following order; in payment of the costs of sale; in payment of all amounts secured by the lien or all money that was payable in respect of the forfeited share; and where the share was forfeited, in payment of any surplus to the former member whose share was sold.
(m) In the event of any reorganisation of the issued capital of the Company on or prior to the conversion to an ordinary fully paid share, the rights of a partly paid shareholder will be changed to the extent necessary to comply with the applicable ASX Listing Rules in force at the time of the reorganisation.
5 The constitution of the appellant provided that a call is made when the directors of the appellant resolve to make the call: cl 3.1(e). Notice in writing of a call must be given to shareholders and must specify the amount of the call, the time and place of payment of the call, and the person to whom the call must be paid: cl 3.1(f), (g).
6 By a letter dated 5 June 2012, the appellant made a call on the respondent for payment within seven days of the total sum of $150,000, described as an amount of $0.005 per partly paid share for the 12 month period ending 13 December 2010 and an amount of $0.005 per partly paid share for the 12 month period ending 13 December 2011.
7 The respondent did not make the payment. The appellant claimed that the failure to do so led to an acceleration of the respondent's obligation to make full payment of the sum of $0.0389 per share, leading to a claim of $583,500. The appellant commenced proceedings to recover that sum and applied for summary judgment under O 14 of the Rules of the Supreme Court 1971 (WA). The respondent, in turn, applied for summary judgment under O 16, contending, in effect, that the appellant's claim was without merit. Both applications were heard together.
8 At the commencement of the hearing of the applications, counsel for the appellant conceded that there was a question to be tried as to the appellant's entitlement to the accelerated payment and limited the claim under the application to the sum of $150,000, the total amount of the call.
9 The respondent submitted that on the proper construction of cl 7.3(b) the appellant could only make one call each year and could not aggregate calls for past years. It was not therefore entitled to make the call in question.
10 The appellant, on the other hand, argued that such a construction failed to give any meaning to the words 'from date of issue' in cl 7.3(b). It was submitted that it was clear from the juxtaposition of those words with the words 'maximum call per annum' that cl 7.3(b) simply limited the liability of a shareholder to repayment of an amount of $0.005 per partly paid share for each year from the date of issue. It did not mean that a call must be made for that amount in each year. A call in respect of a particular year, or in respect of particular years, could be made in a subsequent year and the amounts aggregated, as they had been in this case.
11 The master rejected the appellant's argument. He found that the intention was to prevent a call being made in the 12 month period from the date of issue and thereafter to limit the right to make calls to one call per annum of a maximum amount of $0.005 per partly paid share for the year in which the call was made [15] - [16]. The master considered that the words 'from date of issue' were simply a reference to the date from which the right to make calls arose [16].
12 The master found that the call was invalid and dismissed the appellant's application for summary judgment and its action. He gave judgment for the respondent on its counterclaim.
The ground of appeal
13 The sole ground of appeal (omitting the particulars) was as follows:
In holding the [appellant] could only ever make one call per year and not aggregate calls for past uncalled years the learned Master erred in law in failing to give proper effect to the words in the Prospectus 'from the date of issue' in the phrase:
'The maximum call per annum from the date of issue shall be $0.005 [per Partly Paid Share]'.
14 In substance, the submissions put by the parties on the appeal reflected those put to the master. In my view, the construction of cl 7.3(b) contended for by the appellant is simply not open.
15 It is not the case that the holder of partly paid shares accrues a liability to pay an amount of $0.005 per partly paid share in each year. It is clear that the liability of a holder of partly paid shares to make payment in respect of the unpaid portion of the shares arises only upon a call being made for it. The effect of cl 7.3(b) is simply to impose a maximum amount for which a call may be made in any year. Whether in any particular year a call is made and, if so, for what amount up to that limit, is a matter for the appellant.
16 The evident purpose of the stipulation in cl 7.3(b) is to limit the sum a holder of such shares may be required to pay in any one year in respect of the unpaid amount of the shares held. That purpose would clearly be defeated if, unbeknown to the shareholder, unmade calls of unspecified amounts could be accumulated over two or more years and calls then made for those past years in a total amount exceeding, perhaps greatly exceeding, the sum of $0.005 per partly paid share.
17 It is not an answer to say, as the appellant's counsel submitted, that such a construction would be contrary to the 'stated fund-raising purpose' of the prospectus because the time before the shares became fully paid could become unreasonably long if a call were not made in any one or more years. The solution to any such difficulty lies entirely in the hands of the appellant.
18 I also do not accept the appellant's argument that the phrase 'from the date of issue' evinces a different intention. Those words merely stipulate that the commencement date of the annual period referred to in cl 7.3(b) is the date of issue.
Conclusion
19 The appeal should be dismissed.
20 MURPHY JA: I agree with Newnes JA.
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