New South Wales Supreme Court CITATION : Sunrise Nominees Services & Ors v Westpac & Ors [2006] NSWSC 1326 HEARING DATE(S) : 29/09/06 JURISDICTION : Equity Division JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 09/29/2006 DECISION : Order for determination of separate question – Declaration that third defendant is not and has not at relevant times been director secretary shareholder or agent of plaintiffs CATCHWORDS : CORPORATIONS - Meetings – purported notification to ASIC of change of directors, change of registered office, transfer and allotment of shares – no meeting convened – claim to have acted under power of attorney from sole shareholder – no triable defence Sunrise Nominees Services Pty Ltd ACN 106 590 872 (P1) Sunrise 9 Vine Street Pty Ltd ACN 113 630 336 (P2) Westpac Banking Corporation ACN 007 457 141 (D1) Bendigo Bank Ltd ACN 068 0490178 (D2) Stuart Ashley Davies (D3) Montage Development and Constructions (Australia) Pty Ltd ACN 116 831 415 (D4) Mark John Paradiso (D5) David Goman, Partner as representing himself and all other partners of the firm practising as "BDO Chartered Accountants and Advisers" (D6) Suncorp-Metway Ltd ACN 010 831 722 (D7) PARTIES : Wj Calcott, Mj Gatehouse, DM Geer, L Gorr, GA Hodgkinson, RV Large, H Lassen, AH May, RJ Mole & Others trading as Herbert Geer & Rundle, Lawyers ABN 21 228 101 686 (D8) Australian Securities and Investments Commission Ltd ACN 768 265 615 (D9) National Bank Australia Ltd ACN 004 044 937 (D10) Christopher Raoul Henry Jensen (D11) Chandel Pty Ltd ACN 007 777 264 (D12) Daedalus Strategies Pty Ltd ACN 104 863 943 (D13) Emma Helen Bainbridge (D14) Dean Frederick Bainbridge (D15) Chandele Pty Ltd ACN 081 995 002 (D16) Giam Swiegers as representing himself and all other partners of the firm practising as "Deloitte" as at 2 August 2006 (D17) FILE NUMBER(S) : SC 4202/06 COUNSEL : V Gray (Plaintiffs) G Carolan (D3 & D13) SOLICITORS : Gye Associates Lawyers (Plaintiffs) Marsdens Law Group (D3 & D13) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRERETON J Friday 29 September 2006 4202/06 Sunrise Nominees Services Pty Limited & Ors v Westpac Banking Corporation Limited & Ors JUDGMENT (Ex tempore) 1 HIS HONOUR: The first plaintiff Sunrise Nominees Services Pty Limited is engaged in the development of retirement villages in New South Wales and Victoria. According to the records of the Australian Securities and Investment Commission, until 2 August 2006 its directors were Tibor Paul Singer and Timothy Christopher Humphreys, and its secretaries Mr Humphreys and William Edward Turner. Until 8 August, its registered office was recorded as Level 24, 201 Elizabeth Street Sydney, and until 1 August, its principal place of business was recorded as Suite 1501, Kindersley House, 33 Bligh Street, Sydney. Its sole shareholder was AAA Retirement Pty Limited, of which Mr Humphreys was a director and the sole shareholder. 2 Until 1 August 2006, the records of ASIC in respect of the second plaintiff Sunrise 9 Vine Street Pty Limited recorded that its directors were Mr Singer and Simon Jasper Bell, its only shareholder was the first plaintiff Sunrise Nominees, and its principal place of business was Suite 1501, Kindersley House. Its registered office was recorded, until 8 August 2006, as Level 24, 201 Elizabeth Street. 3 In early August 2006, Sunrise Nominees was in the course of negotiating for finance for retirement village developments, for which purpose it was seeking accommodation of in the order of $85 million. Close to $35 million of that has now been approved, albeit belatedly, but negotiations for the other $50 million remain on foot. 4 As a result of documents lodged with ASIC by the third defendant, Stuart Ashley Davies, purported changes to the company particulars of Sunrise Nominees and Vine Street were recorded – including, in respect of Sunrise Nominees, the removal of the directors and secretaries and their replacement by Mr Davies as sole director and secretary, and the creation of a new class of ordinary shares, called "A Ordinary Shares", and the allotment of 500,000 such shares to Mr Davies. In addition, the principal place of business and registered office were changed, to an address in Nellie Bay, Queensland, which appears to be the address of Mr Davies; at least, it is recorded as his address in the ASIC records, although his affidavit filed today gives him a Victorian address. 5 Contemporaneously, so far as Vine Street was concerned, its former directors were removed and replaced by Mr Davies. The principal place of business and the registered office were changed to the Nellie Bay address. As Sunrise Nominees is the sole shareholder in Vine Street, there was no change to the shareholdings in Vine Street. 6 On 2 August, Mr Davies attended on Sunrise's bankers, Westpac, and, purporting to be the sole director and secretary, closed Sunrise's accounts - in which there were funds of almost $2 million - and removed those funds. Since these proceedings have commenced, all those funds have been returned. 7 Sunrise commenced proceedings on 10 August 2006, and interlocutory orders in aid of the recovery of funds and restoration of the position have been made from time to time since then. On 21 August, orders were made for the rectification of ASIC's register by restoring the position to that which obtained before the disputed changes. 8 On 7 September 2006, the proceedings came before Palmer J as duty judge, when his Honour by consent made various directions in respect of the proceedings generally. Directions were made for the plaintiffs to file and serve a statement of claim by 15 September, the defendants to serve any defence and cross-claim by 6 October, and the proceedings generally were stood over to 23 October 2006 before the Registrar. In addition, specific directions were made in respect of the plaintiff's application for declaratory relief against Mr Davies; requiring that the plaintiffs file points of claim and affidavits to be relied upon, including one verifying the points of claim and any affidavit as to urgency, by 15 September; that Mr Davies file and serve points of defence and all affidavits to be relied on, including one verifying the points of defence, by 21 September; and that the proceedings stand over to 22 September before the duty judge, in relation to the plaintiffs' application for declaratory relief against the third defendant. The declaratory relief sought against Mr Davies is to the effect that Mr Davies is not and has at no relevant time been an officer or authorised agent of either of the plaintiffs. Mr Carolan, for Mr Davies, informs me, and I accept, that although it does not appear on the record, Palmer J indicated that whether the matter would proceed on 22 September would be a matter for the duty judge that day, who would, no doubt, require to be satisfied of the urgency of the matter. 9 The plaintiffs filed their points of claim dated 15 September 2006 and an affidavit of Simon Jasper Bell of that date, and it was in that condition that the matter came before me as duty judge on 22 September. The third defendant Mr Davies had at that stage filed no points of defence, nor any affidavit to be relied on in connection with the claim for declaratory relief against him. I was informed that this was because he has taken the view that the plaintiff had not made a sufficient case of urgency for the matter to be dealt with as a duty matter. I disagreed, and I think that was a bold and high risk strategy for Mr Davies to adopt. I therefore proceeded to hear the plaintiffs' case on 22 September in those circumstances, adjourning the matter to today on the basis that that would afford an opportunity for Mr Davies file a defence prior to the resumed hearing this morning. Only today were points of defence and an affidavit sworn 28 September filed on his behalf, which I am informed were served at about 7:45 pm last night. 10 The points of defence do not deny the allegations made in the points of claim, nor do they assert that Mr Davies was validly appointed to any of the positions which he once claimed to hold, nor do they assert that he ever had authority to act on behalf of Sunrise. They merely assert that between 2 August and 21 August, he "believed and accepted" that he had been authorised by someone else so to act. Accordingly, the points of defence do not disclose a defence to the matters pleaded in the points of claim. 11 In his affidavit, Mr Davies says that he was informed in late July 2006, by one Mr Jensen, that Mr Jensen was acting for a New Zealand company which held a power of attorney from AAA Retirement, and wished Mr Davies to accept a transfer of its shares in Sunrise pursuant to that power of attorney. Mr Davies says he believed that Mr Jensen had the authority to transfer AAA's shares to him, and he agreed to accept the transfer and consented to being appointed as director of Sunrise. 12 Mr Davies conduct in procuring the issue to himself of 500,000 A Ordinary Shares sits uncomfortably with this. 13 Moreover, before he could be appointed as a director of Sunrise, he would find have to be registered as a shareholder; and before he could be registered as a shareholder, there would have to be a meeting of the exiting directors to approve the registration. The mere fact that he believed that he held a transfer of all the shares did not supervene the necessity that he first become registered, and that a meeting of directors be held for that purpose. The only evidence before me is that there never was a duly convened meeting of the directors or shareholders at which the transfer of shares to him could have been approved, or at which the previous directors could have been removed and replaced. 14 Accordingly, on the evidence presently before me, even if there were a valid power of attorney of the type to which Mr Davies has referred, that would not be an answer to the claim for declaratory relief which the plaintiffs bring in these proceedings. 15 Mr Carolan has submitted that there was no urgency to resolve these issues, and that this aspect of the matter should be allowed to go to trial in due course with the remainder of the case. However, as Mr Gray points out, in circumstances where commercial transactions are pending that involve many millions of dollars, it is legitimate to think that financiers will be loathe to deal with a borrower when there is any doubt attending the status of its office-holders, or any possibility that someone else has incurred liabilities or entered transactions on its behalf between 2 August 2006 and the present. If the material before me disclosed a triable defence, I might nonetheless be inclined to acceded to Mr Carolan's submission. But the combination of the desirability of resolving the commercial position with the absence of any apparent triable defence, persuades me that it is appropriate to resolve this aspect of the case, as a separate question, now. 16 My orders are:- (1). Order that the issues relating to the claims for relief set out in the points of claim dated 15 September 2006 be heard and determined separately and before the other issues in the proceedings. (2). Declarations in accordance with paragraphs 1, 2, 3, 4, 6, 7, 8 and 9 of the points of claim. (3). Order that the third defendant pay the plaintiffs' costs of the separate question, including the proceedings on 22 September 2006 and today. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.