COMBINED AUCTIONS PTY LTD v GRAY EISDELL TIMMS PTY LTD [1997] NSWCA 72

COMBINED AUCTIONS PTY LTD v GRAY EISDELL TIMMS PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GLEESON CJ, PRIESTLEY and STEIN JJA 22 October 1997, 5 December 1997 [1997] NSWCA 72

EQUITY — REFUSAL TO REGISTER SHARES — CONSTRUCTION OF ARTICLES OF ASSOCIATION — VALIDITY OF SPECIAL RESOLUTION

A member of the appellant company (Ms Berns) executed a transfer of her shares in the appellant in favour of the respondent. The directors of the appellant refused to register the transfer. After the respondent commenced proceedings to obtain the registration of the transfer, an extraordinary general meeting of the appellant was held at which four resolutions were passed. The resolutions conferred upon the managing director of the appellant voting shares sufficient to give him control of the company, limited the number of shares which could otherwise be held by any one member, and, from 1 January onwards restricted membership of the appellant to pawnbrokers. The respondent amended its pleadings seeking additionally that the resolutions be declared void. Young J ordered the appellant to register the transfer and made a declaration that all four resolutions were void.

On appeal

The appellant submitted that:

1. the appellant was justified in refusing to register the transfer as cll1l-cl15 of the appellant's articles of association, which conferred upon the appellant rights of pre-emption, had not been complied with;

2. cll2 of the appellant's articles of association, which conferred upon the directors a general right to refuse to register a transfer, was not subject to the operation of the cll1-cl15; and,

3. Young J's declaration that the special resolution numbered (3) was void should be set aside.

Held:

1. There was no effective transfer notice to set in motion the machinery of cll 1-cl15, and thus Ms Berns was never at liberty to transfer her shares to the respondent.