Company
Accounts
Accounts — Inspection of accounts — Good faith and proper purpose: Vinciguerra v MG Corrosion Consultants Pty Ltd [2007] FCA 503
Administration
Inspection of books — Right to inspection: Boulos v Carter; Re TARBS World TV Australia Pty Ltd [2005] NSWSC 891
Remuneration of administrator — Creditors passed resolution for remuneration of administrator on time basis in accordance with plaintiff’s firm’s guide to hourly rates, subject to monetary cap: Gidley Re Aliance Motor Body Pty Ltd (2006) 24 ACLC 232, [2006] FCA 102
Agency
The rule in Turquand’s Case – persons dealing with a company in good faith may assume that acts within its constitution and powers have been duly performed and are not bound to inquire whether acts of internal management have been regular: per Mason CJ in Northside Developments v Reg-Gen 93 ALR 385 at 388
Whether all directors consented to use of common seal – whether facts of affixation creates a presumption of assent – validity of instrument – presumption of authorised execution does not operate in favour of company Rule in Turquand’s case: Poignand v NZI Securities 120 ALR 237
Company secretary acting without authority of the board – whether act can subsequently be ratified where to do so would adversely affect proprietary rights of third parties: NM Superannuation v Baker 7 ACSR 105
Demand signed by solicitors not creditor – whether necessary to prove that authority to sign given to the solicitors – implied authority – assertion of agency: Dennis Hanger v Kanambra 106 ALR 544
Validity of Instrument – Seal regularly fixed without authority – apparent authority – indoor management rule: Northside Developments v Reg-Gen 93 ALR 385
Whether bank “ought to know” of lack of authority of person purporting to bind company in a guarantee case: BNZ v Fiberi Pty Ltd 14 ACSR 736
Corporate personality — Agency — Control — Application for determination of preliminary issue — Issue whether company acted as agent for defendant group of companies: ACN 007 528 207 Pty Ltd (in liq) v Bird Cameron [2005] SASC 204
Arrangement
Whether or not arrangement amounted to a proposed arrangement between creditors: Playcorp v Venture Stores 7 ACSR 193
Deed of company arrangement — Termination — Application for orders terminating winding up of company and variation of deed of company arrangement — Applicant major creditor Forrest Nursery Pty Ltd v Lopez [2006] FCA 935
ASC
ASC investigation – objection to examinees lawyer – whether inspector entitled to exclude lawyer from examination – right of legal representation Bell v ASC 103 ALR 689
Form of notice to attend investigation – notice to state general nature of matter – meaning of matter ASC v Graco 29 FCR 491; Johns v Connor 107 ALR 465
Circumstances in which receiver will be appointed pending ASC investigation: ASC v Farmer Johnston 6 ACSR 219
Notices served by ASC requiring production of solicitors files – whether documents privileged from production: v Dalleaglces Pty Ltd v ASC 6 ACSR 498; 4 WAR 325; Walsh v Permanent Trustee (1994) 14 ASCR 653
Proof required that Commission not acting reasonably or bona fide – whether insufficient reason to suspect contravention: Little River Goldfields v Moulds 6 ACSR 299
Role of commission in proceedings under Corp Law: BTR v Westinghouse Brake 7 ACSR 122
Whether “”without prejudice”” communications must be produced if required at an examination under s 597: Re BPTC 7 ACSR 551
Whether scope of ASC investigation limited to particular contravention suspected: ASC v Lucas 7 ACSR 676
ASC authorisation to apply for court orders under section 597(2) – whether reviewable by AAT: Hong Kong Bank v ASC 108 ALR 70
Notice requiring production of books – whether notice valid: ASC v Lord (1991) 33 FCR 144.
Documents filed with ASC – assumption that matters stated therein are true – company estopped from asserting otherwise if it contributed to the assumption: Northside Developments v Reg-Gen 93 ALR 385 per Gaudron J at 434
Notice to produce – Validity of notice to produce: MacDonald v. Australian Securities Commission 116 ALR 514.
ASC notice requiring production of books – function and powers of ASC under s.1292 of Corporations Law: Coopers & Lybrand v ASC (1994) 53 FCR 599; (1994) 126 ALR 465; (1994) 15 ACSR 383;
Authority of lawyers to act for company
Authority of lawyers to act for corporation in administration – receivership — whether third party entitled to instruct lawyers to act for corporation in administration and under receivership: Ipex ITG Pty Ltd v Melbourne Water Corporation (No 4) [2008] VSC 497
Books
What documents are admissible under this provision: Manning v Cory [1974] WAR 60 at 62; Residues Treatment v Southern Resources (1989) 7 ACLC 608; Van Reesma v Flavel (1992) 7 ACSR 225 at 229; R v Connell (1996) 14 ACLC 32
Admission of trust balance sheet under s.69 of Evidence Act (Cth) and profit and loss account under s1305 of Corporations Law: Valoutin Pty Ltd v Furst 154 ALR 119
Most documents held by ASIC and which form basis for any register will be admissible in evidence under common law principles of admissibility of public documents: R v Halpin [1975] QB 907 at 913
Meaning of “proper books of account”: Manning v Cory [1974] WAR 60 [62] (Burt J); Argyle Holdings Pty Ltd v Marvelle Investments Pty Ltd [2008] WASC 7
Barnes v Addy type liability of company
Whether defendant company controlled by director liable under the rule in Barnes v Addy or as accessory to statutory contravention: Re-Engine Pty Ltd v Fergusson and Ors [2007] VSC 57
Compositions and other schemes of arrangement
Whether transaction may be treated as void or otherwise set aside on the ground that it involves a fraud on creditors who have entered into a composition: Scuderi v Morris (2001) 4 VR 125; (2001) 39 ACSR 592; [2001] VSCA 190;
Corporate Veil – piercing of
See article “Piercing the corporate veil on sham transactions and companies” Robert Baxt (2006) 24 C&SLJ 436
Declarations
Application for judicial advice and declarations—Whether appropriate to make declaration about manner of distribution of funds held by administrators/liquidators of corporation: Shepard v Sports Mondial of Australia Pty Ltd (in liq) 53 ACSR 746
Deeds – Execution by company
Execution not in accordance with articles of association — Sole director had no authority to bind company — Bank aware of irregularity: Perkins v National Australia Bank [1999] SASC 280
Derivative actions
So-called “5th exception” Biala Pty Ltd v Mallina Holdings Ltd (1990) WAR 371; Aloridge Pty Ltd v West Australian Gem Explorers 127 ALR 410; Cope v Butcher 20 ACSR 37
Whether there is a fifth exception – whether a derivative action can be pursued where there is no minority but a deadlock: Ruralcorp Consulting Pty Ltd v Pynery Pty Ltd 21 ACSR 161
Application for leave to bring proceedings on behalf of company – factors relevant to grant of leave – status of rule in Foss & Harbottle: Chapman v E-sports Club 35 ACSR 462
Shares and shareholders — Derivative actions — Claim of company: Power v Ekstein [2009] NSWSC 130
General
Corporate plaintiff dissolved – entitlement of defendant to recover monies paid into court: Hydronic Industries v Taylor [1992] 2 QdR 116.
Whether careless payment of debt not due is ultra vires the corporation – liability of executive officer – liability of recipient of payment – waiver estoppel: Government Employees Superannuation Board v Martin 19 WAR 224
Indoor Management Rule
See Martin CJ’s judgment in Esperance Cattle Company Pty Ltd v Granite Hill Pty Ltd [2014] WASC 279 at [386] – [435] [Appeal Pending]
Inspection of books
Right to inspection — Application for order allowing inspection of books and financial records of company — Order sought against receivers and managers of assets and undertakings for corporation: Boulos v Carter; Re TARBS World TV Australia Pty Ltd [2005] NSWSC 891
Good faith and proper purpose — Application for orders to inspect books of respondent company under (CTH) Corporations Act 2001 (Act) s 247A: Vinciguerra v MG Corrosion Consultants Pty Ltd [2007] FCA 503
Shareholders rights to inspect books: Re Augold NL (1986) 11 ACLR 362; Unity APA Ltd v Humes Ltd (1987) 11 ACLR 641; Bride v Commissioner for Corporate Affairs (1989) 1 ACSR 36; and Re Claremont Petroleum NL (1989) 1 ACSR 494 and, on appeal, the same volume at 504. See also articles at (1987) 61 ALJ 657 and 8 CSLJ 69
Books in possession of 3rd party – personal benefit not a proper purpose – rule in Foss & Harbottle: Bride v Com for Corp Affairs 1 ACSR 36
Categories of books and documents for which inspection is authorised: Re Claremont Petroleum NL 1 ACSR 494 and 2 ACSR 84
Failure to produce books: Hopfner v Flavel 2 ACSR 295
Good faith and proper purpose – applicant’s special purpose – whether shared by other shareholders: Biala Pty Ltd v Mallina Holdings Ltd (1990) WAR 371
Order for inspection of records – principles on which made: Re Claremont Petroleum (1990) 2 Qd R 310
Circumstances in which court will require board to allow inspection of co books: Cescastle Pty Ltd v Renak Hldgs 6 ACSR 115
Meetings
“You cannot make a meeting by writing on a piece of paper that there was a meeting.” per Windeyer J in Equity Noms v Tucker (1967) 116 CLR 518 at 525
Notice – duty of directors to give full and adequate information to shareholders – interlocutory injunction – balance of convenience: TNT Australia Pty Ltd v Poseidon Ltd 52 SASR 379
Informal – whether intention to hold a meeting – whether intention to approve share transfers – whether transfers valid – whether procedural irregularity – whether irregularity caused substantial injustice: Poliwkav Heven Hldgs 7 ACSR 85
Notice of meeting – no time prescribed – fair and reasonable notice: Toole v Flexhire 6 AC
Meetings — Validity — Application for determination that shareholder vote invalid: MTQ Holdings Pty Ltd v RCR Tomlinson Ltd [2006] WASC 96
Oppression
The leading case on oppression is the High Court’s judgment in Wayde v NSW Rugby League Ltd (1985) 61 ALR 225. The following is from the headnote:
“Section 320 [now s.232 of the Corporations Act 2001] required proof of oppression or unfairness. If the directors exercised a power, albeit in good faith and for a purpose within the power, so as to impose a disadvantage, disability or burden on a member that, according to ordinary standards of reasonableness and fair dealing, was unfair, the court could intervene under s 320. There was nothing to suggest unfairness save the inevitable prejudice to and discrimination against Wests, but that was insufficient by itself to show that reasonable directors with the special qualities possessed by experienced administrators would have decided that it was unfair to exercise their power in the way the League’s directors did.”
Fraud on the minority – no basis for derivative action where directors act bona fide and do not control the general meeting: Shears v Chisholm 9 ASCR 691
Family company – Inadequate dividends paid – Financial arrangements with family partnership disadvantageous to company – Whether discriminatory and prejudicial conduct against ordinary shareholder – Whether issue of shares for improper purposes: Reid v Bagot Well Pastoral Co Pty Ltd 12 ACSR 197; [1993] 61 SASR 165
Appropriate remedies – appointment of new board – court orders change to articles: Re Spargos Mining 3 ACSR 1
Proof of oppression: Thomas Jewellers v Royal Arcade Pty Ltd 14 ACSR 352
Whether commercial unfairness – fair value of shareholding: Dynasty Pty Ltd v Coombs 138 ALR 64
Application for order restraining first defendant from moving or seconding or voting upon proposed resolution — Resolution to remove director from directorship of various companies: Remrose Pty Ltd v Allsilver Holdings Pty Ltd [2005] WASC 251
Order that majority shareholder purchase shares of minority shareholder — Valuation of shares: MT Associates Pty Ltd v Aqua-Max Pty Ltd [2000] VSC 78
Winding up by oppressed shareholder: Morgan v 45 Flers Avenue Pty Ltd 10 ACLR 692
Reinstatement of deregistered companies
Application for reinstatement of deregistered company — Applicant a contingent creditor of company: Nour Pty Ltd v ASIC [2004] VSC 179
Application under (CTH) Corporations Act 2001 s 601AH(2)(a)(i) for order that ASIC reinstate registration of applicant’s company — Company deregistered because review fee not paid in full twelve months after due date: Piccoli Tesori Pty Ltd (Deregistered); Ex parte Bertuol [2006] FCA 462
Reinstatement — Aggrieved person — Appeal from decision dismissing claim for reinstatement of company: Pilarinos v ASIC [2006] VSC 301
Orders made reinstating the company, substituting it as defendant to the plaintiff’s winding up application, appointing a provisional liquidator and ordering him to report to the court, and validating the entry by the company into a lease whilst deregistered: Vukasin v ASIC [2007] NSWSC 1341
Winding up — Deregistration — Reinstatement — Appeal against refusal to set aside order of single judge of New South Wales Supreme Court — Company deregistered by ASIC: Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd [2008] NSWCA 38
Reinstatement of registration — Purpose of reinstatement: Chalker v Clark [2008] VSCA 92
Register of shareholders – rectification of
Fiduciaries — Fiduciary duties — Scope — Claim for damages for breach of fiduciary duty: Price v Powers [2005] WASC 154
Shareholder
Nature of rights of a shareholder: White v Shortall [2006] NSWSC 1379 at [193] ff
Whether authority to incur obligations on behalf of a company may derive from a shareholder which was not a sole or majority shareholder: Envervite Export Pty Ltd v Carsten Pty Ltd 26 ACSR 317
Transformation of one legal entity to another form – status of new entity as shareholder: Sipadd Holdings v Popovic 18 ACSR 436
Dispute between groups of shareholders — Whether injunctions preventing company funds being used for legal expenses incurred in dispute should be granted – yes: Re Carrington Cotton Corporation Ltd (unreported decision QSC 2/6/99 – BC9902880)
Shareholder agreement — Pre-emptive rights — Application for declaration respondent unreasonably withheld approval of share transfer: Allmere Pty Ltd v Burbank Trading Pty Ltd — [2008] VSC 139
Minority shareholder – valuation of shares – court’s discretionary powers – scope of legislation – whether wide enough to encompass “personal entitlements”: Re Bodaibo Pty Ltd 6 ACSR 509
Shares and shareholders — Compulsory acquisition — Minority interests — Appeal from trial judge’s decision approving compulsory acquisition of shares — Trial judge found fair value offered for shares: Winpar Holdings Ltd v Austrim Nylex Ltd [2005] VSCA 211
Shares and shareholders — Compulsory acquisition of shares — Valuation of shares — Appeal against primary judge’s decision approving compulsory acquisition of shares in company — Respondent owned more than 90% of shares in company: Batoka Pty Ltd v Conoco Phillips WA-248 Pty Ltd [2006] WASCA 44.
Re valuation of shares, see also Foody v Horewood [2007] VSCA 130
Shares
Issue of at a discount – confirmation by court: Re Esmeralda Exploration Ltd 105 ALR 239 and 6 ACSR 427
Shares and shareholders — Share register — Rectification — Application for rectification of share register — Rectification sought on basis of mutual mistake: JA Property Pty Ltd v Aherns Holdings Pty Ltd [2002] WASC 65
Shares and shareholders — Ownership — Mortgaged shares — Determination on respondent mortgagors rights in shares: Lift Capital Partners Pty Ltd v Merrill Lynch International [2009] NSWSC 7
Voluntary Administration
Application for voluntary administration — Invalid resolution to appoint administrator — Curative order sought — Relevant criteria for application to set aside resolution to enter into deed of company arrangement: Deputy Commissioner of Taxation v Portinex Pty Ltd [2000] NSWSC 99
SECTIONS OF CORPORATIONS Act 2001
111AC, s 111AD, s 111AE
Chemeq Limited (ACN 009 135 264) v Chemeq Limited (ACN 009 135 264) [2006] FCA 936
180 & 181
Gumala Investments Pty Ltd v Lethbridge [2007] FCA 934
201F
Following from Australian Corporations Law ASIC Releases Information Sheet 73 – The importance of sole company directors/shareholders of having a Will
“Difficulties can arise when an ordinary person dies without leaving a will. Their estate cannot be quickly wrapped up and dependants (widows, children, etc) can be left waiting lengthy periods before either the State or Territory Public Trustee steps in to manage the estate, or letters of administration are granted by the court to someone else to administer it. But when a sole director of a company dies without leaving a will the complications and distress can have an even greater impact. The death will usually leave the company without any person properly authorised to immediately manage the company. Ordinarily, if a director of a company dies, the surviving directors can continue to manage the company and may even make a temporary appointment , pending the appointment of a new director by the members (shareholders) of the company. Equally, if the sole shareholder of a company dies, the directors can continue to manage it until the beneficiaries under the will have the shares transferred to them. Where the sole director is also the sole shareholder, however, the risk of uncertainty is much greater. Section 201F of the Corporations Act 2001 does provide that, in the event of the death of a single member/director of a proprietary company, the executor or other personal representative appointed to administer the deceased’s estate may appoint a new director to the company. The director has all the powers, rights and duties of the deceased director and can keep the company running until shares are transferred to beneficiaries who may then appoint new directors if they wish.
As mentioned above, the executor is ordinarily and most efficiently appointed by means of a valid will.
Where there is no will, however, a near relative or other person would have to apply to the local Supreme Court for letters of administration to manage the estate and this could take some time- possibly weeks if not months. Alternatively, in the absence of any immediate relatives or other obvious people to deal with the estate, the Public Trustee may step in and administer the deceased estate but this process can also take months.
During that period when there is no director, the company may be completely unable to operate. With no-one properly authorised to make management decisions or act for the company, it may be unable to trade. Banks and other financial institutions in particular may be unwilling to accept instructions in relation to a company’s trading account if they are not satisfied there is someone properly authorised to act for it. Equally, staff and suppliers may not be able to be paid, which can quickly have a deleterious effect on the reputation and value of the company to the beneficiaries of the estate.
If, on the other hand, a person is willing to purchase the company, they may not be able to do so quickly because there will be no recognised owner of the shares who can authorise their transfer until the testator has been appointed and settled the estate. Even if the final decision is taken to wind up the company so all beneficiaries can be paid out, the delay of possibly several months may mean the value of the company will be much less than it might otherwise have been if it had been able to continue operating in the interim period.”
232
Asic v Vines [2006] NSWSC 760
237
Mhanna v Sovereign Capital Limited [2004] FCA 1300
Malacca Nominees Pty Ltd v Morrone [2006] WASC 226
Ehsman v Nutectime International Pty Ltd [2006] NSWSC 887
Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2007] NSWSC 12
Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52
247A
Vinciguerra v MG Corrosion Consultants Pty Ltd [2007] FCA 503
249A-Z
Gumala Investments Pty Ltd v Lethbridge [2007] FCA 934
420A
Irani v St George Bank Ltd [2007] VSCA 33
505
Gumala Investments Pty Ltd v Lethbridge [2007] FCA 934 SEC 574(5)
588FE, 588FF
Lifestyle Earls Court Pty Ltd (in liq) v Mentone Mansions Pty Ltd
596B
Re Southland Coal Pty Ltd (rec & mgrs apptd) (in liq) [2006] NSWSC 184
601AH(2)
Chalker v Clark [2008] VSCA 92
601EE(2)
Australian Securities and Investments Commission v Mercorella (No 2) [2006] FCA 763
Burton v Arcus (2006) 200 FLR 1
674, 676, 677
Australian Securities and Investments Commission, in the matter of Chemeq Limited (ACN 009 135 264) v Chemeq Limited (ACN 009 135 264) [2006] FCA 93
1317
Asic v Vines [2006] NSWSC 760
Australian Securities and Investments Commission, in the matter of Chemeq Limited (ACN 009 135 264) v Chemeq Limited (ACN 009 135 264) [2006] FCA 936
1322
Mercedes Holdings Pty Ltd v Waters (No 1) [2010] FCA 124
1323
ASIC; In the Matter of Richstar Enterprises Pty Ltd ACN 099 071 968 v Carey (No 12) [2007] FCA 35
ASIC; In the Matter of Richstar Enterprises Pty Ltd ACN 099 071 968 v Carey (No 14) [2007] FCA 310