New South Wales Supreme Court CITATION : Bon McArthur Transport v Lange [2007] NSWSC 1371 HEARING DATE(S) : 26 November 2007 JUDGMENT DATE : 26 November 2007 JURISDICTION : Equity JUDGMENT OF : Austin J EX TEMPORE JUDGMENT DATE : 26 November 2007 DECISION : Orders made, rectifying register of members CATCHWORDS : CORPORATIONS - rectification of register of members - standing of applicant - discretionary factors where deed of company arrangement is conditional on rectification order LEGISLATION CITED : Corporations Act 2001 (Cth), ss 175, 440D CASES CITED : Grant v John Grant & Sons (1950) 82 CLR 2 Bon McArthur Transport Pty Ltd (in liq) (Receivers & Managers Appointed) ACN 084 480 786 (P1) Paul Andrew Billingham and Trevor Mark Pogroske (in their capacity as joint receivers and managers of Bon McArthur Transport Pty Ltd) (in liq) (Receivers & Managers Appointed)(P2) PARTIES : Reginal Christopher Lange (D1) Robyn Yvonne Lange (D2) Lange Transport Pty Ltd (Voluntary Administrator Appointed)(D3) FILE NUMBER(S) : SC 5413/07 COUNSEL : Mr T M Thawley (P) Henry Davis York (P) SOLICITORS : CowellClark (D1, D2) Gadens (D3) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST AUSTIN J MONDAY 26 NOVEMBER 2007 5413/07 BON MCARTHUR TRANSPORT PTY LTD (IN LIQ) (REC & MGRS APPTD) ACN 084 480 786 & ANOR V REGINAL CHRISTOPHER LANGE & ORS JUDGMENT (Ex tempore; revised 27 November 2007) 1 HIS HONOUR: Bon McArthur Transport Pty Ltd (in liquidation) (receivers and managers appointed) ("BMT"), by its receivers, has filed an originating process on 6 November 2007 seeking an order under s 175 of the Corporations Act 2001 (Cth) that the share register of Lange Transport Pty Ltd (voluntary administrator appointed) ("Lange Transport") be corrected. The correction that is sought will record BMT as the holder of two issued shares in Lange Transport and remove the first and second defendants (Mr and Mrs Lange) as the holders of those shares. 2 The plaintiffs base their application on the following claims: (i) by a share sale agreement made between BMT and Mr and Mrs Lange on 23 June 2006, Mr and Mrs Lange agreed to sell to BMT, and BMT agreed to purchase from Mr and Mrs Lange, their two shares in Lange Transport for $2.5 million; (ii) the share sale has been completed and Mr and Mrs .Lange have been paid in full for their shares; (iii) nonetheless the share register of Lange Transport still records Mr and Mrs Lange as the only shareholders; (iv) Mr and Mrs Lange consent to the orders sought. Facts 3 On 24 September 2007 the directors of BMT resolved to appoint administrators to that company. On the same day Westpac Banking Corporation appointed the second plaintiffs as receivers and managers of BMT, pursuant to a charge given by BMT to Westpac on 15 August 2006. Also on 24 September 2007 the sole director of Lange Transport resolved to appoint a voluntary administrator to that company. 4 The share capital of Lange Transport comprises two ordinary shares. On 23 June 2006 Mr Reginal Lange held one of those shares and his wife, Mrs Robyn Lange, held the other. By a share sale agreement made between BMT and Mr and Mrs Lange on 23 June 2006 Mr and Mrs Lange agreed to sell their two shares in Lange Transport to BMT. There were terms of the share sale agreement to the effect that: · the consideration would be the lesser of the "net assets of the company" as defined in the agreement and $2.5 million; · $1.5 million of that consideration would be paid on completion, with the balance to be paid by instalments over a two-year period; · payment of the outstanding balance would be secured by a charge by BMT over the shares and a charge by Lange Transport over book debts, trading stock, goodwill, plant and equipment; · completion would take place on 1 July 2006. 5 Completion took place on 1 July 2006 and a share transfer was executed by BMT and by Mr and Mrs Lange bearing that date. Mr and Mrs Lange resigned as directors on 3 July 2007 after the appointment of another person as sole director. As required by the share sale agreement BMT paid Mr and Mrs Lange $1.5 million at settlement. The balance of the purchase price was paid by instalments between 16 January and 30 May 2007. 6 When the matter was first before the Court for hearing there was some confusion as to the evidence of payment of the purchase price, and I adjourned the matter part heard until today so that clarifying evidence could be filed and served. As a result of that clarifying evidence, I am satisfied that full payment has been made, in the manner that I have explained, by BMT to Mr and Mrs Lange. 7 The evidence of Mr and Mrs Lange's consent to the making of orders under s 175 was, at the first hearing, an undated e-mail from Mr Lange to a solicitor and a letter dated 13 November 2007 from the solicitors for Mr and Mrs Lange to the solicitors for the plaintiffs. That evidence is now supplemented by direct affidavit evidence from Mr and Mrs Lange which puts the evidence of the consent of Mr and Mrs Lange beyond doubt, in my view. 8 The register of members of Lange Transport continues to show Mr and Mrs Lange as shareholders of the company. The plaintiffs' submission is that the register has not been updated to reflect BMT's status as current shareholder through an oversight. I am not sure that the evidence establishes that there was an oversight. There is no explanation that I can see for the failure of the register to reflect the transaction to which I have referred. The register is, in my view, now clearly wrong. 9 On 8 November 2007 the creditors of Lange Transport resolved to execute a deed of company arrangement. The deed provides that the assets of Lange Transport be realised and distributed to participating creditors, excluding BMT, and that the surplus will be paid to BMT "as owner of 100% of the issued share capital of [Lange Transport]". It is a condition for the continued operation of the deed that the plaintiffs obtain the relief now sought under s 175. Leave under s 440D 10 Section 440D of the Corporations Act states that during the administration of a company a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with except with the administrator's written consent or with the leave of the Court. The attitude of the administrator of Lange Transport is that he neither consents to, nor opposes the present application. However, he has provided some useful assistance to the Court by appearing, by legal representatives, and by providing an affidavit. 11 The proceedings before me are proceedings against the company and therefore it appears that they cannot be begun or proceeded with without the Court's leave. However, in circumstances where it has been established to my satisfaction that the register of members of the company, Lange Transport, is incorrect and that the incorrect register is an impediment to the effectuation of a deed of company arrangement that has been approved by the company's creditors, it seems to me appropriate that leave be granted, and be granted nunc pro tunc so that beginning, as well as proceeding with, the present proceedings is covered by the leave. The court's discretion under s 175 12 Section 175(1) of the Corporations Act is relevantly as follows: "A company ... or a person aggrieved may apply to the Court to have a register kept by the company ... under this Part corrected." 13 BMT is an "aggrieved person" within the meaning of s 175 because it is, on the evidence before me, the equitable owner of the two issued shares in Lange Transport, but it has not been recorded as the registered owner in the share register, although clearly entitled to be registered as the company's sole member. 14 The Court's discretion was described by Fullagar J in Grant v John Grant & Sons (1950) 82 CLR 2 at 51 as follows: "The power to order rectification of the register must clearly, I think, be in all cases discretionary. The person claiming rectification must show that he has some equity which the court will protect. If he is a shareholder, then prima facie he shows such an equity if he establishes that a name is wrongly included in or omitted from the register of his company. Some definite reason must be shown, I would think, for refusing rectification before rectification will be refused. But there may be circumstances which justify, or even compel, refusal." 15 In the present case no reason has been advanced, and the evidence identifies no reason, to refuse to correct the share register. On the contrary, it is proper both in the interests of BMT and in the creditors of Lange Transport that the register be rectified forthwith. 16 The plaintiffs seek an order that the receiver's costs of the proceedings be an expense in the receivership of the first plaintiff. It seems to me that is an appropriate course to take. 17 Accordingly, I shall make the orders sought by the plaintiffs in the originating process. ********** 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.