FEDERAL COURT OF AUSTRALIA

Bux Global Limited v Hooke [2018] FCA 882

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal the decision of the primary judge, made on 17 May 2018 in WAD644/2017, be dismissed.

2.    The application for a stay of the proceedings in WAD644/2017 be dismissed.

3.    The applicant pay the costs of the respondents to be assessed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

REVISED FROM THE TRANSCRIPT

MCKERRACHER J:

1    By an application for leave to appeal filed on 31 May 2018, Bux Global Limited ACN 613 313 616 (the company) urgently seeks leave to appeal from the judgment of a judge of this Court who refused to summarily dismiss an application for winding up brought by the respondents. The basis for the summary dismissal application was that the respondents (being the plaintiffs in WAD644/2017) were neither members nor contributories and, therefore, ineligible to commence a winding up application. The company says that the decision of the primary judge is attended by sufficient doubt to warrant it being reconsidered by a Full Court and substantial injustice to the company will result if leave is not granted, supposing the decision to be wrong.

2    There is also an application for a stay of the proceedings, but as I perceive it, a stay would be granted if leave were granted, and a stay would be refused if leave were refused.

3    A comprehensive draft notice of appeal was lodged together with the application and sets out the grounds of the draft notice as follows:

Construction error

1.    The primary judge erred in holding at paragraph [25] of the reasons for judgment that the defendant’s application for summary judgment did not turn solely upon the construction of ‘contributory’ in section 462(2)(c) of the Corporations Act 2001 (Cth).

2.    The primary judge erred in failing to hold that a person who is not a member of a company (which is not a no liability company) cannot be a ‘contributory’ in relation to the company within sub-paragraph (a)(ii) of the meaning of ‘contributory’ in section 9 of the Corporations Act.

3.    The primary judge erred in failing to hold that a person who is not alleged to be, or alleged to have been, a member of a company (which is not a no liability company) cannot be a ‘contributory’ in relation to the company within sub-paragraph (a)(iii) of the meaning of ‘contributory’ in section 9 of the Corporations Act.

4.    The primary judge erred in failing to hold that, given the plaintiffs’ admission that none of them is or has been a member of the defendant, none of the plaintiffs was or is a ‘contributory’ in relation to the defendant within:

(a)    paragraph (a) of the meaning of ‘contributory’ in section 9 of the Corporations Act; or

(b)    the meaning of section 462(2)(c) of the Corporations Act.

5.    The primary judge erred in failing to hold that, by reason of section 462(5) of the Corporations Act, none of the plaintiffs is entitled to apply for an order to wind up the defendant.

Evidentiary error

6.    Further and in any event, the primary judge erred in treating as evidence before him affidavit material filed in the Court that was neither read nor tendered by or on behalf of any party.

Result of the primary judge’s construction error

7.    By reason of the primary judge’s construction error, referred to in paragraphs 1 – 5 above and the primary judge's evidentiary error, referred to in paragraph 6 above:

(a)    the primary judge erred in failing to give judgment for the defendant against the plaintiffs, pursuant to section 31A of the Federal Court Act 1976 (Cth), in relation to the whole of the proceeding on the ground that none of the plaintiffs has any reasonable prospect of successfully prosecuting the proceeding;

(b)    further and alternatively, the primary judge erred in failing to make an order pursuant to rule 26.01(1)(a) of the Federal Court Rules 2011:

(i)    giving judgment for the defendant against the plaintiffs; or

(ii)    dismissing the whole of the proceeding,

on the ground that none of the plaintiffs has any reasonable prospect of successfully prosecuting the proceeding;

(c)    further and alternatively, the primary judge erred in failing to make an order pursuant to rule 22.07 of the Federal Court Rules:

(i)    giving judgment for the defendant against the plaintiffs; or

(ii)    dismissing the whole of the proceeding,

on the ground that the plaintiffs have made admissions that have the consequence that, by reason of section 462(5) of the Corporations Act, none of the plaintiffs is entitled to apply for an order to wind up the defendant.

‘Obviously disputed and equivocal standing’ error

8.    Further and alternatively, the primary judge erred in deciding, contrary to s462(5) of the Corporations Act, to allow the plaintiffs’ application for an order to wind up the defendant to proceed despite the plaintiffs’ claimed standing being ‘obviously disputed and equivocal’.

Erroneous departure from a decision of an intermediate appellate court

9.    Further and alternatively, the primary judge erred in departing from the applicable principle stated by the Supreme Court of New South Wales Court of Appeal in Treadtel International Pty Ltd v Cocco (2016) 117 ACSR 176 (Gleeson and Leeming JJA and Barrett AJA) that an application for an order to wind up a company should not be allowed to proceed ‘despite the plaintiff[s’] obviously disputed and equivocal standing’.

Result of the primary judge’s ‘obviously disputed and equivocal standing error’ and erroneous departure from applicable principle

10.    Further and alternatively, by reason of the primary judge’s:

(a)    standing error, referred to in paragraph 8 above; and or

(b)    erroneous departure from the applicable principle stated by the Supreme Court of New South Wales Court of Appeal, referred to in paragraph 9 above:

the primary judge erred in deciding to allow the plaintiffs’ application for an order to wind up the defendant to proceed despite the plaintiffs’ ‘obviously disputed and equivocal standing’.

4    Two affidavits in support have been filed, as well as extensive submissions.

THE PRIMARY JUDGMENT

5    I will now refer to the decision of the primary judge in a little more detail than usual because there has been some debate about the terms and effect of the judgment (even though the appeal if any, would be from the orders, not the reasons).

6    In the primary judge’s reasons, delivered on 17 May 2018, his Honour noted that the respondents (being the plaintiffs in that proceeding, WAD644/2017) claimed they were added to the register of shareholders and issued with holding certificates. Despite that, the company claims that the respondents are not members of the company, and the respondents themselves admit that they did not have the opportunity to consent to their names being inserted on the shareholding. It would therefore appear that they could not satisfy the requirements of s 231(b) of the Corporations Act 2001 (Cth) for membership of the company. (But that may not be an end to the matter.)

7    The primary judge noted that the respondents sought a winding up order pursuant to s 461 of the Corporations Act, and noted, of course, that only those persons specified under s 462 of the Corporations Act may be permitted to apply to wind up a company. The question was whether the (respondents), fell into that category of persons. A possibility was foreshadowed before by the primary judge that they may seek to apply as creditors of the company. I do not propose addressing that possible future development. It was not addressed by the primary judge, nor has it been addressed by the respondents in submissions today, but the company has dealt with that possibility in written submissions. As I say, it is unnecessary to consider that possibility.

8    The question is whether the respondents can satisfy the definition in s 9 of the Corporations Act as contributories. The primary judge set out the relevant part of s 9, noting that reliance was placed in particular by the plaintiffs as being holders of fully paid shares in the company and therefore contributions. That section relevantly provides:

contributory means:

(a)    in relation to a company (other than a no liability company):

(i)    a person liable as a member or past member to contribute to the property of the company if it is wound up; and

(ii)    for a company with share capital – a holder of fully paid shares in the company; and

(iii)    before the final determination of the persons who are contributors because of subparagraphs (i) and (ii) – a person alleged to be such a contributory; and

…

9    His Honour noted that the term ‘member’ is defined in the Corporations Act, as I have mentioned, but the term ‘holder’ is not. His Honour noted that the plaintiffs say that the share register of the company is, without evidence to the contrary, proof that the plaintiffs are the holders of fully paid shares in the company and, therefore, contributories. They have been issued and hold shares, and they submit that the company cannot be heard now to say that they are not contributories when it has previously issued holding certificates to them, entered their names on the register of members and otherwise treated them as members.

10    The primary judge identified what he regarded as being the key issue before him in [9] of his Honour’s reasons as follows:

In my view, the key issue in relation to the claim of standing based upon being a contributory lies in the meaning of the words 'a holder of fully paid shares' as used in para (a)(ii) of that definition, and, in particular, whether it is to be read as meaning a member who is a holder of fully paid shares. I should say that, in expressing the issue in those terms, I do not believe that the construction advanced for [the company] is one which requires a reading in of those words; it is merely a question of what is meant by the phrase 'a holder of fully paid shares'.

11    His Honour also noted that the application for winding up orders was listed for hearing for four days in, what was then (two weeks ago) eight weeks’ time. The interlocutory application for summary judgment had been filed the week before the primary judge heard the application, notwithstanding that the proceedings had been on foot since the end of 2017.

12    The primary judge expressly noted the decision of the Court of Appeal of New South Wales in Treadtel International Pty Ltd v Cocco (2016) 316 FLR 318 in which, at first instance, a judge had allowed a matter on a winding up petition to proceed and the Court of Appeal reversed that decision. The primary judge set out [102] of Treadtel (at [19]):

A case in which an issue of disputed standing surfaces at the final hearing is, however, to be distinguished from one such as the present in which a question about the course the litigation should take is raised for decision by the court and involves potentially difficult questions of standing depending for their resolution on matters of evidence and, potentially, issues of credibility (on the material currently available, it seems that four persons were present at the meeting in Milan on 12 February 2012) [being a reference to the extent of the possible evidentiary issues]. Even allowing for the principle of just, quick and cheap resolution of the real issues in proceedings that … must be applied in every matter of procedure and case management, the decision in this case … to proceed towards a final hearing … despite obviously disputed and equivocal standing is one that cannot stand.

13    His Honour took the view (at [20]) that the Court of Appeal was not stating a general proposition that where there was an issue about standing, it was not appropriate to allow the application for winding up to proceed to a hearing; rather, the Court was describing the view that it took in the particular circumstances of that case, where there was what was an ‘obviously disputed and equivocal standing’.

14    The primary judge said that if it is clear that a party lacks standing on an application for winding up, or it is appropriate that the standing issue be determined separately having regard to the concerns for a company that arise where a pending application for winding up is presented, then those are matters which mean that the question of standing should not be left for determination at some later time.

15    His Honour also set out (at [21]) the factors taken into account in the circumstances of this particular case and noted the unusual nature of them (at [22]). The primary judge observed that they are not circumstances of a kind where the Court has considered their consequences for concluding whether a party is a contributory. The evidential factors were:

(1)    shares in Bux.com were owned by Shampagne Ltd;

(2)    Shampagne held the shares in Bux.com as bare trustee for parties including the plaintiffs;

(3)    shares in Bux.com were transferred to Bux by Shampagne;

(4)    the share register of Bux shows the plaintiffs as holders of shares in Bux;

(5)    holding statements have been issued to the plaintiff[s] showing that they hold shares in Bux;

(6)    the plaintiffs did not agree to the issue to them of shares in Bux;

(7)    the issue of the shares to Bux was arranged by Shampagne as part of a rollover transaction whereby all the shares in Bux.com were transferred to Bux in return for shares in Bux; and

(8)    Shampagne as bare trustee had no authority from the plaintiffs to participate in the rollover by transferring to Bux the shares it held in Bux.com on behalf of the plaintiffs.

16    The primary judge discussed the competing arguments (to which I will refer below) and took the view that the arguments, as presented to him, demonstrated that the position adopted by the plaintiffs in relation to being contributories was one that was arguable and the resolution of which position is correct may depend on the evidence of the matters already recited above. On that basis, the primary judge considered that the application for summary judgment should be dismissed because the application before his Honour was arguable. It did not, in his Honour’s view, turn solely on the question of construction of the provision in the manner contended for by senior counsel for the company, Mr Young QC.

THE LEAVE PRINCIPLES

17    In the detailed submissions filed in support of this application, there are, amongst other things, references to the relevant principles concerning the circumstances in which leave to appeal from interlocutory decisions of a judge of this Court should be granted. It is common ground, as submitted by Mr Young QC, that:

(1)    The Court has jurisdiction to hear and determine an appeal from the primary judge’s decision to dismiss the company’s application for summary judgment: s 24(1)(a) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act).

(2)    The primary judge’s decision to dismiss the company’s summary judgment application is taken to be an interlocutory judgment for the purpose of s 24(1A) of the Federal Court Act: s 24(1D)(b) of the Federal Court Act.

(3)    The company may not appeal from the primary judge’s decision to dismiss the application for summary judgment unless the Court or a judge gives it leave to appeal: s 24(1A) of the Federal Court Act.

(4)    In Décor Corp Pty Ltd v Dart Industries Inc (1991) 33 FCR 397, a Full Court of this Court (Sheppard, Burchett and Heerey JJ) said (399) that the considerations derived from Neimann v Electronic Industries Ltd [1978] VR 431 ‘provide an appropriate litmus test for the general run of cases in which leave to appeal from an interlocutory decision is sought’. That ‘litmus test’ is:

(a)    whether the decision of the primary judge is attended by sufficient doubt to warrant it being reconsidered on appeal by the Full Court; and

(b)    whether substantial injustice would be caused to the applicant if leave were refused.

(5)    Also in Décor, the Full Court observed (at 399) that the judges who decided Niemann should not be understood to have laid down any rigid rules that, so far as this Court is concerned, would be contrary to the unqualified terms of s 24(1A) of the Federal Court Act that confer on the Court an unfettered discretion to grant leave to appeal from an interlocutory decision.

(6)    Ultimately, in Décor, the Full Court held (at 400) that:

In the present case, the interlocutory decisions in respect of which leave is sought are certainly attended with difficulty, and their correctness is open to dispute. If they are wrong, significant consequences will be suffered by the applicants. We regard this as a clear case for the grant of leave.

(7)    More recently, in Ship “Sam Hawk” v Reiter Petroleum Inc (2016) 246 FCR 337, Kenny and Besanko JJ, who were members of a Full Court (of five members) of this Court to whom an application was made for leave to appeal from a decision of the primary judge to dismiss a respondent’s summary judgment application, said (at [222]):

It is clear that the application for leave to appeal seeks to raise, on appeal, important and unresolved questions ... For this reason, we consider that the judgment of the primary judge, although supported by careful analysis, is attended by sufficient doubt to warrant reconsideration by an appellate court; and, plainly enough, substantial injustice would result if leave were refused, supposing the decision to be wrong: Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-400; and Re CSR Ltd (2010) 183 FCR 358 at [5].

(8)    To similar effect, more recently still, in Jones v Thompson [2017] FCA 125, Farrell J said (at [31]-[32]):

31    The principles relevant to the exercise of the discretion to grant leave to appeal are those adopted by the Full Court of this Court in Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397… at 398-400; Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238… at [26]-[30] and Johnson Tiles Pty Ltd v Essa Australia Pty Ltd (2000) 104 FCR 564… at [43]-[44] per French J (as he then was).

32    In summary, the first consideration is whether, in all of the circumstances of the case, the decision of the primary judge is attended by sufficient doubt to warrant it being reconsidered on appeal; and second, whether substantial injustice would result if leave were to be refused, supposing the decision to be wrong.

18    The submissions of the company were also comprehensive as to the relevant principles guiding a grant of leave to appeal from an interlocutory decision where an appeal, if successful, would obviate the need for a trial in the underlying proceeding. The principles, as submitted by Mr Young QC, are as follows:

(1)    In 1999, in Kessey v Golledge (1999) 30 MVR 95, Rolfe AJA (with whom Sheller and Beazley JJA agreed) said (at [40]-[41]), inter alia, that:

[40]    The general considerations in relation to the granting of leave to appeal against interlocutory decisions … are not really in dispute. ...

[41]    The general principles dealing with the grant of leave to appeal against interlocutory decisions would not be offended by a final determination of ... an application in advance of a final hearing, where a conclusion adverse to the plaintiff could mean that the substantive hearing is rendered otiose ...

(2)    In 2000, in Tamworth Base Hospital & Anor v Durant [2000] NSWCA 209, Handley JA said (at [66]), inter alia, that:

An erroneous interlocutory order which allows proceedings to be commenced or continued should, if possible, be corrected before trial, not later.

(3)    In 2002, in Itex Graphix Pty Ltd v Elliott (2002) 54 NSWLR 207, Ipp AJA (with whom Spigelman CJ and Sheller JA agreed) said (at [161]), inter alia, that:

I agree with the remarks of Rolfe A-JA in Kessey v Golledge and Handley JA in Tamworth Base Hospital v Durant insofar as they apply to interlocutory appeals that are capable of disposing of the entire case.

(4)    In 2005, in Gold Peg International Pty Ltd v Kovan Engineering (Aust) Pty Ltd [2005] FCA 1794, Young J said (at [28]-[29], [32], and [34]), inter alia, that:

28    … I am satisfied that sufficient doubt attends Her Honour's judgment to warrant the grant of leave to appeal.

29    I am also satisfied that if leave is not granted, substantial injustice might result. That is primarily because of the consequences in time and cost of the alternative pathway, which would involve a trial of the outstanding issues before any appeal takes place…

…

32    I am satisfied that there would be significant prejudice if leave were not to be granted, and the case were to proceed by way of further particulars, further discovery and a further hearing in relation to the outstanding issues. The time and expense involved in further litigation might be wasted if, on the critical issues that have already been the subject of the judgment, Her Honour's findings were to be varied or overturned.

…

34    I do not think it is really an option to grant leave and, in parallel as it were, embark upon further interlocutory processes or even a further hearing in relation to the outstanding issues. That course may involve wasted time, effort and expense…

(5)    To similar effect, in 2011, in Moskios v Splendid Developments Pty Ltd [2011] NSWCA 210, Campbell JA (with whom MacFarlan and Whealy JJA agreed) said (at [19]), inter alia, that:

This court is often ready to grant leave to appeal from an interlocutory decision if the appeal has substantial prospects of success and if, if the appeal were to be successful, the parties would be spared the time and trouble of a trial…

(6)    “Sam Hawk” is an example of an interlocutory appeal in this Court that had the potential to (and did, in fact) dispose of the underlying proceeding entirely.

19    The detailed submissions on behalf of the company also addressed circumstances in which leave to appeal from an interlocutory decision would give rise to important issues (as was submitted to arise in this matter) as to the orderly progress of particular litigation and the due administration of the corporations legislation. It was noted that in Treadtel, the Court of Appeal heard an application for leave to appeal (concurrently with an appeal) from a decision of a primary judge to grant a plaintiff leave to file and serve an amended statement of claim that raised questions of locus standi to sue for certain statutory relief under the Corporations Act (at [9]). Mr Young QC submitted that the questions before the Court of Appeal included those that arise in this matter. As to whether leave to appeal was warranted, Barrett AJA said (at [32]).

[A]lthough care must be taken in deciding whether to entertain interlocutory appeals, the central issues presented by this case are of importance not only to the orderly progress of the particular litigation but also to the due administration of the corporations legislation. For that reason, they merit the attention of this Court and leave to appeal should be granted.

(Citations omitted.)

Submissions on a ‘Contributory’

20    The company reiterates the provisions of the Corporations Act which I have mentioned, namely, ss 461, 462 and 231, and, of course, emphasises that the plaintiffs themselves have made it clear that they never agreed to become a member, which is a requirement of s 231(b) of the Corporations Act. Mr Young QC has also set out the history of s 231 and the considerations leading to the provision’s present terms and its construction.

21    The company refers to the speech of Lord Westbury in Reese River Silver Mining Co v Smith (1869) LR 4 HL 64 (at 77) and the discussion of the High Court of Australia in Maddocks v DJE Constructions Pty Ltd (1982) 148 CLR 104 per Stephen, Mason, Murphy, Aickin and Brennan JJ (at 117).

22    Mr Young QC submits that s 231(b) of the Corporations Act could not possibly be satisfied in light of the concession that no consent was given, a concession made repeatedly by the respondents, as Mr Young QC points out, in the concise statement, in oral submissions and in supplementary submissions.

23    That would lead, it is said, to a clear conclusion that the respondents cannot satisfy the requirements of being a member of the company and, thus, cannot satisfy the requirements of being a contributory of the company for the purpose of s 9 of the Corporations Act. It is said, therefore, that having regard to the concessions, none of the respondents is a member of the company, a contributory of the company or entitled to apply as a contributory of the company and, therefore, under s 31A(2)(b) of the Federal Court Act, the proceedings ought to have been summarily dismissed.

24    The arguments advanced for the company place particular reliance upon the decision of the Court of Appeal in Treadtel. I have already referred, as the primary judge did, to [102] from Treadtel. Underlying the reasons why the Court of Appeal expressed the view that, in a case in which there was a cogent argument as to the standing, the standing or jurisdictional question should be determined in advance so that a company is not required to have a winding up petition hanging over its head.

25    The company also contends that it is manifestly clear that substantial injustice would result if leave to appeal were refused, supposing the decision of the primary judge to be wrong, and relies upon a number of, again, Court of Appeal New South Wales judgments, but also a decision Young J in Gold Peg (at [28]-[35]). The company contends that supposing the decision of the primary judge to be wrong, if leave to appeal were refused, the company would suffer substantial injustice because it would be compelled to prepare for, conduct and pay for the trial of a proceeding that none of the respondents has standing to commence or prosecute or ought otherwise be permitted to maintain.

CONSIDERATION

26    In considering those arguments, it is well established that an application for leave will be successful if the decision in question is attended with sufficient doubt to warrant the grant of leave and substantial injustice would result from a refusal of the leave to appeal. Any number of cases can be cited, but the case cited was Décor per Sheppard, Burchett and Heerey JJ (398-400). It is not sufficient that the order is clearly wrong. It must also effect a substantial injustice: Neimann per Murphy J (at 441).

Sufficient doubt to warrant the grant of leave to appeal

27    I propose dealing, first, with the Treadtel question and that is whether Treadtel is binding authority for the proposition essentially asserted that in each case where an argument is raised as to standing or jurisdiction, that argument ought be determined before the petition is allowed to proceed. Treadtel needs to be understood on the facts of that case. In Treadtel, it was clear that there was an entirely discrete issue on standing and jurisdiction. In that case, the proposed petitioner was not on the register of members of the company at all, unlike this case, and indeed, in Treadtel, the Court of Appeal placed particular emphasis on registration, as the respondents do in this case.

28    That is evident from the observations of Barrett AJA in Treadtel (at [68]), where his Honour referred to cases such as Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87, Re Independent Quarries Pty Ltd (1993) 12 ACSR 188 and Titlow v Intercapital Group (Australia) Pty Ltd (1996) 65 FCR 449 at which it was observed that a person was a member ‘only if their name appeared in the register of members’. The petitioner failed in that case because he had not pleaded any matters establishing his present and immediate standing as a member of the company: Treadtel per Barrett AJA at [10]. Reference was also made (at [98]) to a decision of the Supreme Court of England and Wales in Enviroco Ltd v Farstad Supply A/S [2011] 1 WLR 921 and the observations of Lord Collins who said (at [38]):

Ever since the Companies Clauses Consolidation Act 1845 and the Companies Act 1862 membership has been determined by entry on the register of members. The companies legislation proceeds on that basis and would be unworkable if that were not so. …

29    The petitioner’s argument in Treadtel was particularly weak and, arguably, self-contradictory. Further, and perhaps more importantly, and unlike Treadtel, the very issue raised by the respondents is the circumstances under which the they came to be on the company’s register. In this case, their claims all pertain to the conduct of those representing the company in this regard. It is the conduct in registering the respondents without their consent and the consequences of that conduct which underlie the claim for winding up on (amongst other grounds) a just and equitable basis. The two issues of standing and potential entitlement to relief are inextricably bound together.

30    Of course, the company disputes much of what the respondents assert, but the assertions in this case go not only to standing, but also to the entitlement to relief. It follows that there is no discrete standing issue which should properly be determined before the substantive issue in the case. This issue was recognised by the primary judge in the passage to which I have referred. In my view, this case is quite distinguishable from Treadtel on the two bases to which I have identified. In saying that, there was no doubt on the part of the primary judge, nor any doubt on my own part, that Treadtel should be followed in a case where there is a distinct issue on standing as there was in Treadtel.

31    As to the question of whether or not the respondents are contributories, in this particular case, the submissions contended for by the applicant, in my view, do turn squarely on the admission that there was no acceptance of membership of the company. But, that acceptance by the respondents of the fact that they did not satisfy requirements of s 231(b) of the Corporations Act is relatively confined. It is at least arguable, as the respondents contend, that they may otherwise satisfy the requirements of s 9 of the definition of contributory. It is also at least arguable that there are broader definitions of membership of a company than that which depends upon acceptance as set out in s 231(b) of the Corporations Act.

32    That does not need to be determined at this stage, but there is authority in support of the conclusion that s 231 is not an exhaustive definition of the circumstances in which a person will be a member. To adopt the language of Jacobson J in Re Nine Entertainment Group Ltd (No 1) (2012) 211 FCR 439 (at [50]):

There is nothing in s 231 to suggest that it is an exhaustive definition of the circumstances in which a person is a member. Authorities of over 100 years standing, including a decision of the High Court of Australia, suggest otherwise.

33    The respondents proceed on the premise that the different limbs of s 9 are alternative despite the use of ‘and’ after (i). That approach is reflected by the fact that the features of (i) and (ii) may be mutually exclusive, for example, there will be no liability to contribute for (i) if the registered shareholder’s shares are fully paid up for (ii) therefore addressing different situations in which persons may satisfy s 9. While it is unclear whether the company accepts this construction, its main point is that contributories are normally company members and the mere fact that someone accidentally or otherwise registered the plaintiffs does not make that person a member if he or she did not consent to be a member. The company would say that lack of consent to membership could not be cured by a non-consensual registration. The respondents, however, place particular focus on the limb of s 9 of the Corporations Act (para (ii)) which deals with the holder of fully paid shares in the company.

34    In this case, it seems clear that the respondents were registered. They have also received holding statements reflecting their registration. So much does not appear (at least presently) to be in dispute. As such, it is at the very least arguable that the respondents were the ‘holders’ of fully paid shares in the company for the purpose of s 9 of the Corporations Act.

35    In Dalgety Downs Pastoral Co Pty Ltd v Commissioner of Taxation (Cth) (1952) 86 CLR 335 the High Court (Webb, Fullagar and Kitto JJ at [341]) followed a conclusion of Dixon J in Avon Downs Pty Ltd v Commissioner of Taxation (Cth) (1949) 78 CLR 353, that in the terminology of company law, shares are said to be ‘held’ by persons who are registered as a shareholder in respect thereof. Indeed, their Honours said that the verb ‘hold’ and its variants when used in relation to shares in a company normally refers to legal ownership of the shares according to the register of members.

36    Similar sentiments are reflected in a case expressly dealing with winding up. In Natural Extracts Pty Ltd (now called Benchmark Essential Oils Pty Ltd) in liq v Stotter, Glendon & Ors [1998] FCA 1636, Hely J said (at 13) that:

Standing to bring an application under s 461 depends upon the applicant being a “contributory” (s 462(2)(c)). The definition of “contributory” in s 9 includes a “holder” of fully paid shares in the company.

37    Hely J then went on to refer to Dalgety Downs as authority for the proposition that the term ‘holder’ refers to the legal owner of shares according to the register of members.

38    In Maertin v Klaus Maertin Pty Ltd (2006) 233 ALR 358, Barrett J set out similar views in important passages (at [11] and [14]), the latter paragraph making it clear that the definition of ‘member’ is not confined to the definition contained in s 231 of the Corporations Act. Those paragraphs read:

[11]    For present purposes, para (a) is the relevant part of the definition. The essence of the status contemplated by that paragraph in the case of a company limited by shares is membership of the company by virtue of registration as the holder of fully paid shares, with the person's name actually recorded in the register. That is the import of the word “holder” in sub-paragraph (ii) of para (a) of the definition. It is also the interpretation that has been adopted in the case law: see, for example, the decision of Bray CJ in Re Exclusive Master Book-binding & Manufacturing Pty Limited (1977) 2 ACLR 549. There is reference in that case to some very limited exceptions that have been recognised, including the case where an order has been made against the company that it enter the name of the person in the register – where, it was said, equity would regard as done that which ought to have been done by the company to recognise the status of registered member.

…

[14]    An application for relief under s 233, being relief that may be granted in a case within s 232, may be made by among others “a member of the company”. That is the effect of s 234(a). “Member” there has not only the meaning emerging from s.231 (essentially, someone actually recorded in the register of members) but also the extended meaning which comes from the concluding sentence of s 232:

For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.

39    President McLure of the Court of Appeal of the Supreme Court of Western Australia made similar observations more recently in Yara Australia Pty Ltd v Oswal (No 2) [2013] WASCA 187 (at [55]-[63]). Particularly, her Honour noted (at [55]), citing Dalgety Downs, that ‘holder’ in the context of company shares, refers to legal ownership ‘according to the register of members’.

40    Finally, I refer to the following discussion in Ford, Austin & Ramsay’s Principles of Corporation Law (17th ed, LexisNexis, 2018) (at[ 27.090]):

…

•    A contributory. This term is used throughout the legislation on winding up. Ordinary understanding would suggest that "contributory" means a person who is liable to contribute to the assets of a company in the event of its being wound up. That would exclude a holder of shares which are fully paid up. However, “contributory” has long had a special meaning which includes the holder of fully paid shares. This is made explicit by s 9, which declares that it means (among others) a person liable, as a member or past member, to contribute to the property of the company in the event of its being wound up, and that it includes the holder of fully paid shares and, prior to the final determination of the persons who are contributories, any person alleged to be a contributory. The term “holder” refers to the legal owner of shares according to the register of members (Dalgety Downs Pastoral Co Pty Ltd v FCT (Cth) (1952) 86 CLR 335 at 341) and does not include a transferee of shares under an unregistered transfer: Natural Extracts Pty Ltd (now called Benchmark Essential Oils Pty Ltd) (in liq) v Stotter [1998] FCA 1636; Maertin v Klaus Maertin Pty Ltd (2006) 57 ACSR 714; 24 ACLC 676; [2006] NSWSC 588 .

A fuller understanding of the special meaning appears in ss 515–524. The scheme of the legislation is to provide that "every present and past member is liable to contribute" to the property of the company on the company being wound up and then to qualify that statement by later provisions. A past member can in some circumstances be a contributory.

The effect is that any present member, whether a holder of fully paid shares or not, and any past member who is liable to contribute may apply. But holders of fully paid shares must show that their interest is at stake in some way (Re Chesterfield Catering Co Ltd [1977] Ch 373) notwithstanding s 467(2), introduced in 1908 after Re Crigglestone Coal Co Ltd [1906] 2 Ch 327 but held in Re Kaslo-Slocan Mining and Financial Corp [1910] WN 13 not to have removed the need to demonstrate an interest.

41    In my view, it is not necessary on an application of this nature to reach a concluded view on standing for the reasons that I have indicated, namely, that unlike Treadtel, the very standing issue is inextricably linked with the complaints upon which the plaintiffs contend relief should be granted. Secondly, there is no discrete issue on standing of the nature indicated in Treadtel which would warrant a separate determination in advance. In my view, then the proper approach taken by the primary judge was to determine whether or not the standing point, as contended for by the plaintiffs, was properly arguable. The primary judge did that and reached the view that it was properly arguable without determining that question in advance.

42    It was also particularly relevant for his Honour to take into account, bearing in mind that the proceedings had been on foot since late last year, that the trial was relatively imminent and that the matters which were raised in argument were likely to be determined within a relatively short period of time. That, it seems to me, would be a case management decision to be taken by a docket judge in the exercise of discretion with which an appeal court would be loath, in the absence of clear error of principle, to interfere.

43    It remains only to observe that (for both limbs of the Décor test) the refusal of the application for summary judgment did not determine any substantive rights for all time and, in the approach taken by the Court of Appeal of Queensland in QUYD Pty Ltd v Marvass Pty Ltd [2009] 1 Qd R 41 (at [6]), the arguments, when fully ventilated with the benefit of a proper evidentiary background, are arguments which will be fully preserved. As Fraser JA said (McMurdo P and Philippides J concurring):

Numerous authorities establish that leave to appeal will usually be granted only where there is a reasonable argument that the primary judge erred and an appeal is necessary to correct a substantial injustice to the applicant caused by that error. The refusal of the defendant's application for summary judgement [sic] [in that case] did not determine any substantive rights. The defendant remained free to repeat and elaborate upon its arguments at trial. Accordingly, if the primary judge erred that error was not productive of any substantial injustice. That is a sufficient basis to dispose of the application for leave to appeal against the refusal of the defendant's application for summary judgment. …

(Citations omitted.)

44    The Court went on to say, however, it would refuse the applications further on the basis that the appeal lacked merit.

45    For those reasons, I am not satisfied that the first limb of the Décor test is established on this application.

Substantial injustice

46    The second question is whether substantial injustice or prejudice would result supposing the primary judge’s decision to be wrong. I am not satisfied in this case that there is sufficient or any evidence to support prejudice other than the normal, namely, that the company will be required to incur costs (albeit substantial) in preparing for the hearing. There is no suggestion that should it succeed it will not recover those costs.

47    There is no evidentiary basis advanced for any particular prejudice that the company will sustain, recognising as I do, as the primary judge did, that it is no small matter for a company to be under the cloud of a winding up application. But there is no specific prejudice pointed to in this instance, other than costs.

48    It is clear that there has been a flurry of other activity in relation to the case since it commenced late last year, which the company has been able to participate in and has done so without, at any earlier instance, having brought on an application for summary judgment of the plaintiffs’ application for winding up on the basis that there is no standing. In a case which was urgently listed from the commencement and in which there has been a great deal of activity, were it crucial to proceed with a standing application, that could have been done at an earlier time. But the company has been able to take numerous other steps in the meantime.

49    In those circumstances, I am compelled by authority to refuse the application for leave to appeal. It follows that the application for a stay would also be dismissed. Costs will follow the event.

Associate:

Dated:    12 June 2018