New South Wales Supreme Court CITATION : United Rural Enterprises v Lopmand [2003] NSWSC 403 HEARING DATE(S) : 11 March 2003 JUDGMENT DATE : 11 March 2003 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Adjournment granted CATCHWORDS : PRACTICE AND PROCEDURE - adjournment - no question of principle LEGISLATION CITED : Corporations Act 2001 United Rural Enterprises Pty Limited (Plaintiff) PARTIES : Lopmand Pty Limited (First Defendant) Tracey John Lake (Second Defendant) FILE NUMBER(S) : SC 4039/99 COUNSEL : M Cashion SC; J White (Plaintiff) B DeBuse (Defendants) SOLICITORS : Kemp Strang (Plaintiff) McCooe Raves & Poole (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J TUESDAY 11 MARCH 2003 4039/99 UNITED RURAL ENTERPRISES PTY LIMITED v LOPMAND PTY LIMITED & ORS JUDGMENT – Ex Tempore 1 HIS HONOUR: Today is the return date of a notice of motion filed by the first and second defendants. That notice of motion seeks an order that those parties be allowed to inspect the books and records of Lopmand Pty Limited. 2 The motion came to be heard in some circumstances which are procedurally unusual. I heard the principal proceedings over a period from 25 November 2002 to 2 December 2002 and delivered a judgment on 12 December 2002. That judgment gave detailed reasons for the conclusions, which I had come to, but made no orders beyond directing the parties to bring in short minutes of order to give effect to the reasons for judgment, within a particular time. 3 Amongst the issues which were litigated at the trial was a question about whether there was oppression in the circumstances in which Lopmand had been kept out of playing any part in the affairs of Painten. Another question which was litigated was whether Lopmand ought be granted an order for inspection of the books of Painten. 4 At the hearing, the share register of Painten was not tendered. I recorded this fact in paragraph 124 of the reasons for judgment. I drew inferences about the shareholding of Painten on the basis on annual returns of Painten, which had been lodged with ASIC. Those inferences about the shareholding in Painten played a role in the conclusions that I came to concerning both oppression and whether an order for inspection of records should be made. So far as the order for inspection of records was concerned, it was decisive – I rejected that application on the ground that, because Lopmand was not on the register, it did not have the standing under s.247A of the Corporations Act to apply for the order. 5 The matter was listed before me on 28 February 2003 for the making of orders. On that date, Counsel informed me that the basis on which I had proceeded, concerning the shareholding in Painten, was incorrect. The share register of Painten was tendered, and that showed that the shareholding position was not the same as was recorded in the ASIC records. I was informed that the share register had been produced on discovery, but that, notwithstanding that, it had not been tendered at the hearing. Counsel for the plaintiff tendered the share register on that occasion because the correct position concerning the share register of Painten bore upon the orders which it was appropriate to make. 6 The share register showed that Lopmand was, at the time of the hearing, in fact, a member of Painten. 7 Part of the findings, which I had made, were that Lopmand had granted an equitable mortgage over the share it held in Painten. I had found that, incorrectly, a company called Lindsay–Owen Holdings Pty Limited had become a holder of the Lopmand Painten share and had exercised rights as though it were owner but that, in doing so, it was doing no more than another company controlled by Mr Lindsay-Owen was entitled to do. 8 Today there came before me the notice of motion, which I have earlier mentioned. Part of the orders, which were made on 28 February 2003, included an order (No. 4) "That the first defendant provide to the plaintiff by 10 March 2003 a signed transfer of the Lopmand share in Painten, together with either the certificate relating to that share or a statutory declaration that the share register has been lost." 9 I am informed from the Bar table today that a signed transfer has indeed been provided, by 10 March 2003. As well, there was provided a statutory declaration relating to loss of the certificate. That statutory declaration does not contain all of the averments referred to in s.1070D(5) of the Corporations Act 2001. It would be impossible for a statutory declaration containing those averments to be provided, because the share has indeed been pledged, and one of the averments requires a statement that the share has not been pledged. 10 There is a question, upon which I express no concluded opinion, about whether, notwithstanding that the section sets out certain criteria which must be followed before a company is obliged to issue a replacement share certificate, the company is free to issue a replacement share certificate even if those requirements are not met. 11 At the outset of today's hearing, Mr Cashion, Senior Counsel for the plaintiff, made an application for an adjournment. One of the bases on which that application was made was that a problem had arisen concerning the stamping of the transfer which had been provided earlier. There was a delay in being able to get that transfer stamped, and until such time as the transfer was stamped, it was not possible for the transfer to be registered. Mr Cashion sought an adjournment to enable the stamping to take place, so that registration could occur. If this were to happen, then Lopmand would be in the situation of not being a member, and so not entitled under s.247A of the Corporations Act to an order for inspection of books and records. 12 The application for adjournment was opposed by Mr DeBuse. He submitted that there was a basis on which an order for inspection of books and records could be made under s.247A(3) of the Corporations Act, even if Lopmand was not a member. Section 247A(3) enables a person, who (a) is granted leave under 237; or, (b) applies for leave under that section; or, (c) is eligible to apply for leave under that section, to apply to the court for an order for inspection of the books and records. Mr DeBuse says that the people who can apply under s.237(1) include (pursuant to s.236) a former member. He also says that a person entitled to be registered as a member is entitled under s.236(1)(a) and that a mortgagor who is entitled only to an equity of redemption in a share, where the mortgagee is on the register, is 'entitled to be registered as a member', admittedly conditionally upon payment of the mortgage debt, but still entitled. 13 By either of these routes, Mr DeBuse submits that there is an entitlement under s.247A(3), regardless of whether Lopmand is on the register. These are arguments which were not put at the hearing in November-December 2002. 14 Mr DeBuse also made available to Mr Cashion this morning, shortly before court, some written submissions which made reference to various legal propositions about the respective rights of mortgagor and mortgagee of shares. 15 It became apparent, in the course of argument concerning the adjournment application, that the area of discourse being opened up might bear upon the basis upon which I had come to the conclusion which I did concerning oppression. As I had mentioned in a judgment which I gave on 28 February 2003, the defendants are contemplating appealing against my decision, at least, so far as concerns the oppression aspect of it. I have granted a stay, of limited duration, to enable the defendants to formulate a notice of appeal and make application to the Court of Appeal for a stay. 16 Mr DeBuse made available written submissions this morning, referring to the legal matters, which I have earlier mentioned. Mr Cashion has not had an opportunity to consider those legal matters. Further, following discussion with Counsel in Court today, it became apparent that the precise scope of the application being made may well run wider than that which had been foreshadowed in the notice of motion. Under these circumstances, Mr Cashion would not be in a position to deal with such an application today. He had, in any event, himself applied for an adjournment of today's hearing to enable the stamping of the matter to proceed. 17 In all these circumstances, it is appropriate that the hearing today should be adjourned. Further, it is appropriate that the applicant on the notice of motion be directed to prepare, serve on the respondents to the notice of motion and make available to my Associate by 4 pm on Friday 14 March 2003, written submissions which identify precisely the orders which are sought, and the basis on which those orders are sought. I so direct. 18 The present application I stand over to Thursday 20 March 2003. As that is a day that I am duty judge, it will need to take its place in the list with any other applications. 19 I reserve liberty to the parties to approach my Associate to change that listing to 19 March 2003 if that date if convenient to both Counsel. 20 I shall reserve the costs. ********** Last Modified: 05/15/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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