Autodata v Gibbons [2000] NSWSC 666

New South Wales Supreme Court

CITATION : Autodata v Gibbons [2000] NSWSC 666 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 1273 of 1998 HEARING DATE(S) : 3 July 2000 JUDGMENT DATE : 13 July 2000

PARTIES : Autodata Products Limited (UK) (Plaintiff) John Gibbons (Defendant) JUDGMENT OF : Windeyer J at 1

COUNSEL : Mr R.J. Colquhoun (Plaintiff) Mr J.T. Johnson (Defendant) SOLICITORS : Hayes Partners (Plaintiff) Chapman & Chapman (Defendant) CATCHWORDS : CONTRACTS - breach of contract - claim for rectification of share register - failure to join company party to contract as a defendant - failure to join company whose register was sought to be rectified as a defendant - no case as claim established against defendant DECISION : See paragraph 12

1 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WINDEYER J

THURSDAY 13 JULY 2000

1273/98 AUTODATA PRODUCTS LIMITED (UK) v JOHN CHRISTOPHER GIBBONS

JUDGMENT 1 The plaintiff company, Autodata Products Limited (Autodata) is a company incorporated in the United Kingdom. It claims that it entered into an agreement with a company in Australia, Pacific Digital Resale Pty Limited (Pacific Digital) to acquire another company in Australia for the purpose of selling equipment acquired from Digital Equipment Corporation (DEC). The shareholding in the new company was to be held as to sixty percent by Autodata and forty percent by Pacific Digital. The shares in Pacific Digital were owned as to fifty percent by Lake East Pty Limited (Lake East) and fifty percent by Computer Resellers International Pty Limited (Computer Resellers). Lake East was company controlled by Mr William Alan, Computer Resellers was controlled by the defendant, John Christopher Gibbons. Facts 2 Autodata was involved in the sale of equipment produced by DEC. Pacific Digital acted as its sales agent in Australia. Profits were shared from this operation fifty/fifty. 3 In 1993 there were discussions between Mr Hall, a director of Autodata, and Messrs Gibbons and Alan, about a new business structure under which a company would be formed or acquired to conduct the Australian business to be owned in equal shares by Autodata and Pacific Digital. There was already a company incorporated in Australia, Autodata Pty Limited. It was agreed to purchase that company from its shareholders. Gibbons told Hall that DEC required that Autodata have control so that the shareholding was to be sixty percent Autodata and forty percent Pacific Digital. It was agreed to go ahead on that basis. 4 A company search of Autodata Products Pty Limited (Products) shows that the original directors and shareholders were Lyn Turner and Terrence Turner. They ceased to be directors on 1 February 1994, on which date Messrs Alan and Gibbons were appointed directors. The search shows that Mr Alan ceased to be a director on 25 May 1995 and Kerrie Gibbons was appointed in his place. There have always been 100 shares issued in Products. Forty of those are now held by Pacific Digital and sixty by the defendant, Gibbons. Documents signed by Gibbons on behalf of Products in March 1994 indicated the company to be owned sixty percent by Autodata and forty percent by Pacific Digital. 5 Autodata made consistent requests for its share certificate and a copy of the Memorandum and Articles of Association. Eventually Gibbons sent a transfer from himself to Autodata for forty shares. Mr Hall of Autodata asked for a transfer for the proper number of shares, namely sixty, and repeated a request for a company of the Articles of Association. Neither was ever supplied. Little, if anything, appears to have happened between the end of 1994 and the commencement of this action in 1998. Messrs. Hall and Turner, directors of Autodata, explained this as being because there was a downturn in the United Kingdom economy and they were required to give their attention to their business in the United Kingdom to ensure its continued existence. Autodata never showed any interest in Products as an asset in its accounts or balance sheet. The directors explained that by saying that the auditors stated that assets should be brought into account when the share certificate was in possession of Autodata. History of procedure and pleadings 6 The action was commenced by summons filed on 2 February 1998. By that summons Autodata sought orders: 1. A declaration that it is entitled to be the Registered shareholder of 60% of the Share holding in Autodata Products Pty Limited (ACN.004 775 473), a company Registered as a proprietary company with The Australian Securities Commission. 2. An order that the Defendant transfer the 60 Shares issued to him in Autodata Products Pty Limited (ACN.004 775 473) to the Plaintiff forthwith. 3. An order that the Defendant do all such things, take all such actions, sign all such Papers or documents as may be necessary to cause the 60 shares issued to him in Autodata Products Pty Limited (ACN.004 775 473) to be transferred to the Plaintiff forthwith. 4. The Defendant do all such things, take all such actions, sign all such documents as may be necessary to cause rectification of the members register in Autodata Products Pty Limited (ACN 004 775 473) and the issue of share certificates to reflect the Share holding in Autodata Products Pty Limited (ACN 004 775 473) as being 60 shares to the Plaintiff and 40 shares to Pacific Digital Resale Pty Limited (ACN 050 038 750) 7 When the matter was before me for pre-trial directions on 6 June I directed that the issues be defined by pleadings. This was so that the defendant and I would understand the basis of the plaintiff's claim. I directed the statement of claim be filed by 20 June. That was not done and the action was relisted before me on 27 June when, after rejecting a totally vexatious draft statement of claim, the statement of claim now before the court was filed. 8 So the claim can be understood I set out the statement of claim in full, apart from the relief sought which follows precisely that sought under the summons: 1. The Plaintiff is and was at all material times a duly incorporated company liable to be sued in and by its corporate name and style. 2. Between about June 1993 and about February 1994 it was agreed between the Plaintiff (hereinafter called Autodata (UK)), Pacific Digital Resale Pty Limited (Pacific Digital), William Alan and the Defendant, John Christopher Gibbons to acquire a company (new company) to inter alia sell "Digital Equipment" and other compatible equipment in Australia. 3. In the alternative, the Agreement referred to in paragraph 1 above was between Autodata (UK) and Pacific Digital. 4. It was a term of the Agreement referred to in paragraphs 1 and 2 above (the Agreement) that the shareholding in the new company would be 60% Autodata (UK), 40% Pacific Digital. 5. It was a further term of the Agreement that John Christopher Gibbons, the Defendant, would do administrative work in relation to the new company and inter alia do work which included issuing shares in the company as agreed above. 6. Pursuant to the agreement the Defendant took steps for the acquisition of a company and completed several forms in relation to changes of the company's particulars including shareholding and office bearers and requested Autodata Limited (UK) pay for 60% of the company. 7. The Plaintiff forwarded to the Defendant a sum representing 60% of the company as requested. 8. In early 1994 the new company was known as Autodata Pty Limited. 9. In February 1994, pursuant to resolution it passed on 16 February 1994 Autodata Pty Limited changed its name to Autodata Products Pty Limited (ACN 004 775 473) (Autodata Products). 10. In 1994 the Defendant arranged for the shareholding in Autodata Products to be issued as to himself John Christopher Gibbons 60 shares and Pacific Digital 40 shares. 11. The issue of such shares was in breach of the Agreement. 9 By his defence the defendant admitted that there were discussions between himself for Pacific Digital and Mr Hall for Autodata on the proposed agreement, but said the discussions came to an end in May 1994. He admitted that he asked for payment from Autodata and he admitted "executing forms in relation to the transfer of ownership of" Products. He denied he arranged the "issue" of the shares. 10 When the matter was before me on 27 June I made some reference to the question of amendment. I did this particularly because I knew that at least two witnesses were coming from England for the hearing and I did not want there to be any problems which might delay the hearing such as amendments to pleadings or parties. I specifically referred to the fact that Products was not a defendant, yet rectification was sought of its register and that Pacific Digital was not a defendant, yet, at least under paragraph 3 of the statement of claim, the contract claimed to have been breached was a contract between it and Autodata. Counsel for the plaintiff said that there was no intention to join any additional defendants. I am left, I think, in the unfortunate position that I must determine the issues before me when I have a very clear feeling that this will not bring justice to the plaintiff. There is no claim for specific performance, nor any claim for damages alleging the claim is for breach of contract. There is no claim that the defendant holds the shares on trust for the plaintiff; there is no specific allegation that the defendant organised transfers of the sixty shares to himself; there is no evidence of the company's books or registers to explain how the transfer came about; there is no evidence of the financial position of Products, although there is some evidence that it has entered into a charge over its assets, no details of which were in evidence. Autodata through its directors has no idea of the activities of Products from 1994 until the present time. How the matter could have been left to go to trial with the present parties and with the evidence adduced is beyond me. 11 I am of the clear view that it is impossible to order rectification unless the company, whose share register is sought to be rectified, is joined as a party. That of course would not prevent an order being made against Gibbons requiring him to do everything necessary on his part to bring about transfer of the shares held by him to the plaintiff, if such an order could be made. Evidence was given of a contract between Autodata and Digital Pacific; it was not a contract between Autodata and Gibbons. If any payment were made, which was never properly proved, it was to Pacific Digital, not Gibbons. 12 The pleaded claim is a claim for breach of contract. It is almost certain that there was a contract between Autodata and Pacific Digital, the terms of which have not been carried out. Had Pacific Digital been joined then damages could have been ordered for breach. There is no claim in conversion, and no claim based on trust, or breach of fiduciary duty. How the shares which the plaintiff probably quite rightly claims should be held by it, came to be held by Gibbons, is not established. Gibbons gave no evidence, saying that no case as claimed was established against him. I consider that is correct. The only argument which counsel for the plaintiff continually put forward, was that Gibbons had property, namely the shares, which belonged to the plaintiff and that therefore he was required to transfer those shares to the plaintiff. The difficulty is that the basis for that statement, although it may well be correct, was not established. Although not covered by the pleadings, it might have been possible to argue that Gibbons was agent for Autodata and Pacific Digital to bring the proposed arrangements to fruition; in those circumstances he owed a fiduciary duty to both parties to bring this about; and that he breached his duty making him liable to restitution or equitable compensation. No such argument was put forward, even when I mentioned the possibility of a trust claim. In those unfortunate circumstances the statement of claim should be dismissed and there will be a judgment for the defendant with costs.