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Irish v Delta Service Station Pty Ltd [1963] PGSC 38 (29 April 1963)

IN THE SUPREME COURT
OF THE TERRITORY OF
PAPUA AND NEW GUINEA

Coram: Mann C.J.
Monday, 29^th April, 1968

BETWEEN:

KEITH ALLAN IRISH and
MORTON WILLIAM BREWSTER
Plaintiffs

AND

DELTA SERVICE STATION PTY. LTD.
DELTA EARTHMOVING PTY. LTD.
DELTA INDUSTRIES (N.G.) PTY. LTD.
NEW GUINEA MOTORS PTY. LTD.
DONALD ARTHUR PTY. LTD.
JOHN ALBERT MARTIN.
Defendants

1963,
April 23, 24, 26 and 29.
PT MORESBY

JUDGEMENT

At this stage of the proceedings I am considering a number of objections raised on behalf of the defendants and a general submission that at the close of the plaintiffs' case, there is no case for the defendants to answer.

These proceedings were first brought before the Court on Motion and the relevant file number is MP.19 of 1968. During the preliminary stages I expressed the view that the plaintiffs could not bring proceedings of this nature on behalf of the public otherwise than by joining the officer carrying out in the Territory the functions of Attorney General, and that unless there were some express statutory provision provided for such a summary proceeding, a Notice of Motion was not an appropriate originating process. If the applicants relied on a personal right to bring proceedings, then, in the absence of some statutory provision for summary trial, a writ would have to be issued.

During the adjournments a wait was issued on behalf of the present plaintiffs and Notice of Motion for an interlocutory injunction was served.

The plaintiffs relied on Order LVII, Rule 2, to enable them to obtain the full relief sought in the action at this interlocutory stage. The defendants have not as yet adduced any evidence but have relied on objections and questions of law to establish that the plaintiffs are not entitled to the relief sought.

Objection was taken to a number of words and phrases in the affidavits upon which the plaintiffs relied. These objections are well founded, but they do not affect the substance of the matter and make little or no difference to the weight of the evidence. Nevertheless, they should not be overlooked. I allow the objections and, if necessary, would be prepared to afford the plaintiffs an opportunity to supplement the evidence by further affidavits to the same effect but confining the text to matters of fact which the deponents are able to verify from their own knowledge.

Objections were taken to the form in which certain notices published in the Government Gazette were expressed. I think that these objections had substance when considered as criticism of the established practice but, in my view, do not go to the validity of the notices in questions. I was invited to read the specific requirements of the Companies Ordinance, 1963-66 strictly, having regard to the somewhat arbitrary nature of the proceedings specified in Division 4 of Part VI of the Ordinance. In the light of the decisions in Testro Bros. Pty. Ltd. v. Tait.^[1] and Reg. v. Coppel, ex parte Viney Industries Pty. Ltd., (^[2]), explaining the extent of the special powers conferred on inspectors appointed as special investigators of companies, I should have strict regard for any condition precedent to the exercise of powers of this kind. Since, by virtue of Section 172 of the Ordinance, (as amended by Ordinance No. 22/1966), the Administrator must not make a declaration unless satisfied of certain things which are specified, it is most desirable that notices published in the Gazette should contain recitals to the effect that the Administrator is so satisfied. Such a recital would show on the face of the notice that these conditions of the exercise of the power had not been overlooked and that the power, being one which is not examinable by the Court, was, in fact, properly exercised.

This last point does not go to the validity of the notice because there is no express requirement for such recitals, but the criticism of the form used was advanced as an argument in favour of the view that the strictest compliance with the statutory conditions was called for. It was argued that in this statutory context the declaration under Section 172(1) was invalid because that sub-section specifically requires such a declaration to be made "under this section". The declaration appearing in the Gazette refers only in broad terms to the Companies Ordinance, 1963-66 and to Division 4 of Part VI.

The short answer to this contention is that sub-section (1) of Section 172 is a definition provision and that it is sub-section (2) which confers in express terms the power itself, including the mode of exercise of that power. Sub-section (2) does not require, either expressly or by implication, that the declaration should use the expression "under this section". Sub-section (3), which again does use that expression, does not carry the matter any further, because it is a negative provision imposing restrictions on the exercise of the power conferred by Section 172. In both places where the expression is used in Section 172, the context is fully satisfied by attaching to the words used the meaning that the declaration in question is one which is in fact made under the provisions of Section 172, although there is no express requirement that in the making of the declaration the authority of that section must be cited.

It is established practice elsewhere to cite the specific statutory provision, and this is always of assistance to laymen. Whilst the adoption of such a practice naturally increases the risk of misquoting a specific provision, it seems to me to be a desirable practice and one which should be commended. Nevertheless, in the present context it does not go to validity, and I hold the declarations and appointments published in the Gazette to be valid in the absence of any express conditions as to form.

It was contended for the defendants that the plaintiffs have no right to come to the Court under the present proceedings. These submissions may be tabulated as follows:

(1) The Ordinance is designed to protect the public interest and not to create private rights which would support an action for an injunction.

(2) Since Section 171 itself provides expressly for a summary procedure designed to bring disputes before the Court, the general rule to the effect that no alternative cause of action or procedure is available, applies.

(3) Having regard to the provisions of Section 379 the Ordinance should be regarded as creating an offence which is punishable by fine only, without imprisonment and the Court should not, without express words, add to this penalty the pains and sanctions of proceedings for contempt of Court to enforce an injunction.

(4) The plaintiffs have failed to establish that the defendant companies comprise a group of "related" companies as defined by Section 6, sub-section 5 of the Ordinance.

As to the first submission tabulated above, it must be borne in mind that proceedings to enforce a public right, such as may be brought only by the Attorney-General, are of a different character from proceedings brought to enforce a personal individual right by those persons who are directly affected. The existence or non-existence of one of these is not of itself any indication that the other does or does not also exist. Typical examples often arise in cases of nuisance where the same situation may or may not give rise to both a public and a private remedy, each existing or not existing independently of the other.

Thus, in the present case, it may well be that action could be brought on behalf of the public to enforce the general observance of statutes in force, but the present proceedings do not raise this question and are not affected by it, whatever the answer might be.

The question which does arise is whether the two plaintiffs, who are clearly the individuals most closely concerned in the matter, have an interest of such a character that the Court will protect that interest by the grant of an injunction. It is argued that such an interest must be of a property nature, but this seems to me to be begging the question. Since equity operates in personam and is concerned with questions of behaviour according to "good conscience", it might be said that equity is never concerned with property as such. Yet the expression "equitable interest" or "equitable property" is sanctioned by long use in the profession, and it is a good definition to say that equitable property comprises anything that the Court of Equity will recognise and protect, because the mere existence of such a cause of action involves a valuable right.

It is necessary to look for precedents illustrating whether the Courts of Equity have recognised and protected the class of rights for which the plaintiffs contend.

For the plaintiffs reliance was placed upon Halsbury, Third Edition, Vol. 21, p.403, and the Attorney General v. Wimbledon House(^[3]). These references apply to cases where the Attorney General did bring the proceedings and established that the Attorney General had a clear claim on behalf of the public in cases of breach of duty imposed by the statute. It does not follow from this that in similar circumstances private rights to protection also arise as a matter of course.

The case of Collier Garland (Properties) Pty. Ltd. v. O'Hair and Ors. (^[4]), is a decision of the Supreme Court of New South Wales dealing with a situation which obtained before legislation corresponding to the amending Ordinance No. 22 of 1966 came into force, giving inspectors power to take possession of a company's books. The point with which we are at present concerned is that in the Collier Garland case (^[5]) an injunction was granted to the company. The equitable remedies of injunctions were granted notwithstanding that the company might well have had an action at Common Law in detinue. The equitable remedy was granted upon the footing that current books of account of the plaintiff company are essential to the conduct of the plaintiff-is business. The decision, therefore, was not based on mere ownership of property for, on that question, the Common Law remedy would have been adequate. Thus, the special importance and character of the company's books which justified the granting of an injunction might equally support and justify the plaintiffs' claim in the present case, notwithstanding that the plaintiffs are in no sense owners of the property in question. This case, although the converse of the situation at present before me, gives some support for the plaintiffs' claim.

The plaintiffs also relied on the case of the Council of the Shire of Hornsby v. Dang1ade and Anor. (^[6]) There a Municipal Council was granted an injunction to restrain breaches of building ordinances made for general public purposes and in the interests of general public health and decency. Harvey C.J. in Equity held that in the circumstances of that case the Attorney General would have been entitled to sue on behalf of the community at large, but that no one individual could sue to enforce the statutory obligation unless he could show special damage to himself. By express statutory provision in force in New South vales the Council was placed in the position of the Attorney-General in "enforcing or securing the observance of any provision made by or under this Act" in any case "in which the Attorney General might take proceedings on the relation or on behalf or for the benefit of the Council". This case, therefore, does not carry the plaintiffs' argument any further.

The plaintiffs' claim receives substantial support from the principles discussed in detail in the judgment of the Full Court of Victoria in Attorney-General (ex relatione Lumley), Lumley v. T.S. Gill and Son Pty. Ltd,.(^[7]). This case makes it clear that the enquiry is not so much to ascertain what negative rules might prevent the plaintiffs from obtaining an injunction, but rather the enquiry is whether the interest claimed by the plaintiffs can be shown affirmatively to come within those classes of interest which the Court of Equity will protect. If so, the presence of an alternative remedy, or the presence or absence of a public right or interest, does not necessarily conclude the matter against the plaintiffs. The distinction involves the nature of the right and the persons who may enjoy it.

In the present case the property concerned comprises the books and records of a group of incorporated companies. These are goods having some value, but it is not suggested that on this footing alone the plaintiffs would be entitled to any equitable remedy. It is the very special character of these records and the essential information that they contain that has attracted the attention of the legislature. Without the legislation a company's records would be wholly and solely the property of the company, but for many purposes and in many circumstances other persons might have a right to possession or custody of the books or inspection, and many persons might have special duties in relation to them.

The present legislation confers upon duly appointed inspectors rights, interests and obligations which they alone can exercise and enjoy. It may well be that the legislature was motivated by a concern for the public welfare when this legislation was passed, but what was done by the Ordinance did not create rights or powers exercisable by the public at large, or directly on behalf of the public. In each Case the exercise of powers is of direct value to a group of individuals, who happen to be creditors or shareholders of the company itself or one of a group of companies. Individuals acting in some official capacity may derive advantages by the facilitation of their functions. Amongst the later group are the inspectors themselves, who, in the course of their professional work, exercise the powers in question. I think that these considerations establish a prima facie position that the Court of Equity would recognise the rights and powers involved as interests of a proprietary nature vested in the inspectors on behalf of a group of individuals. Similarly, I think that the Court of Equity would recognise the very special powers involved as amounting to such a restriction upon the companies' rights to possession and use of their own property in the shape of their records, as would constitute a statutory encumbrance upon that property for which the equitable remedy of injunction is specially suited.

As to the second contention to the effect that Section 171 itself provides for a summary procedure so as to exclude other remedies, I think that it is clear upon an examination of the section that this is not the case. Section 171 provides a variety of remedies from which the inspectors may select. Subsection (2) authorises an inspector to require production of records and assistance. Sub-section (3) provides for an examination on oath and again provides for production of records.

On the face of it these two sub-sections give the inspector a choice of procedures. He may, if he wishes, seek production of records with or without further assistance as a first step, or he may prefer to act under sub-section (3) as a first step, by conducting an oral examination, with or without production of the records. The difference between the two procedures is emphasised by sub-section (4), which gives a statutory remedy to the inspector, who may, in the event of failure to comply with a notice, or a refusal to answer a question, bring the matter before the Supreme Court. According to its express terms sub-section (4) attaches this remedy to the procedure taken under sub-section (3) but not to the procedure taken under sub-section (2). It seems clear that in the present case the inspectors have proceeded wholly under sub-section (2), so that there is not a statutory procedure available to the inspectors in the event of non-compliance with a request under sub-section (2). As has been emphasised in Lumley v. Gill (^[8]), it would not necessarily be fatal to the plaintiffs' case if sub-section (4) were to extend to sub-section (2), but on the language it is clear that it does not so extend. There is room for a very slender argument to the effect that the express provision of a particular remedy in relation to only one procedure tends to negative an implied remedy for the alternative procedure, but we are not here dealing with implied procedures.

The introduction of sub-section (3A) by Ordinance No. 22 of 1966 has created a mismatching of language, for sub-section (4) is expressed to apply to notices issued under "the last preceding sub-section", that is sub-section (3). When the new sub-section (3A) is inserted in the specified place in the Ordinance, it would appear on the face of it that "the last preceding sub-section" would become the new one, but the language used clearly negatives this, and I think I should not hesitate to take the view that the amendment was not intended to alter the original meaning and application of sub-section (4).

As to the third submission dealing with the alternatives remedy provided by Section 379 of the Ordinance, I think that this argument also fails. Section 379 is not a special provision directly to Section 171 so as to afford useful guidance as to the intended meaning of the earlier section when the two are read together. Section 379 is rightly placed under a division of the Ordinance dealing generally with the question of offences. It applies to all breaches of the obligations imposed by the Ordinance, including contraventions large and small. It is a kind of "drag net" clause and affords no assistance in interpreting any particular provision of the Ordinance. The fact that this section imposes a fine only does not indicate that nobody is to be imprisoned, either for some indictable offence or as a civil remedy to enforce an injunction in cases where that remedy would lie. It would be absurd to argue that a person who removed a Director, contrary to the provisions of the Ordinance, by shooting the Director, would have his penalty limited to a fine of £50. The section does not deal expressly or by implication with the equitable jurisdiction.

In dealing with the fourth contention concerning "relationship" of the defendant companies, the fact that they all bear the word "Delta" as part of their registered names must be disregarded. The sole test is whether one company was at the relevant time the holding company or a subsidiary of the other, or was a subsidiary of the holding company of the other company.

From the records produced by the Registrar General it appears that Delta Industries Pty Ltd. owned practically all the share capital of Delta Earthmoving Pty. Ltd. The only other shareholder was Donald Arthur Clamp, to whom seven ordinary shares had been allotted. It appears that Delta Earthmoving Pty. Ltd. was itself the holding company of three of the defendant companies and that, therefore, each of these companies is a co-subsidiary of the others. Delta Earthmoving Pty. Ltd. is the holding company of all of them. Delta Earthmoving Pty. Ltd. was originally incorporated under the name Bradford Bros. Earthmoving Company Limited. When these companies came under the control of Mr. Clamp, Mr. Clamp had these and other companies formed into a group having special powers vested in Mr. Clamp as governing director, and in each case he was the sole personal shareholder. In each case the only other shareholder, holding the vast majority of the shares, is another company in the same group.

It was consequently argued on behalf of the defendants that since all power, including voting power and the right to appoint or remove directors, was vested in Mr. Clamp as an individual, there was no provision in Section 6 which would establish the relationship of a subsidiary or holding company for the purposes of that Section. Sub-section (1) specifies the conditions under which the relationship arises. From the articles of all the companies, it is clear that neither of the first two conditions is satisfied, because control over the Board of Directors and all of the votes is vested in Mr. Clamp. But the plaintiffs relied on Clause a(iii) of sub-section (1) because Delta Earthmoving Pty. Ltd. holds more than one half of the issued share capital of the other companies, except Delta Industries (N.G.) Pty. Ltd. which owns practically the whole of the issued share capital of Delta Earthmoving Pty. Ltd. .

The defendant contended that these companies were excluded from the effect of clause (iii) because the sole control of dividends, including the question of who is to receive what amount of dividend, is vested in Mr. Clamp, and that, therefore, no shareholder has an unqualified right to participate, and can gain no such right except in consequence of action taken by Mr. Clamp. Although this argument has some force in relation to profits, it seems to me that it has no application with reference to capital. There is no provision excluding the normal right to a return of capital and, even though it is possible that Mr. Clamp could arrange matters so as to prevent a return of capital to a shareholder, no such action was taken during the relevant period with which the inspectors are concerned.

The shares held by Delta Earthmoving Pty. Ltd. are designated as "B" class ordinary shares and there is nothing on the record to show what this designation means. At the time that the shares were originally issued there was no requirement applicable to the company that a return of allotments setting out the rights attaching to the shares should be filed with the Registrar General. No evidence has been adduced to negative what would be the normal inference arising from the designation of ordinary shares, that is that they are shares with the general right of participation in both profits and capital without any specified limit.

For the reasons indicated it seems to me that the plaintiffs have established their right to bring these proceedings and a prima facie case for mandatory injunctions as claimed.

Solicitors for the plaintiffs: M. Francis.
Solicitors for the defendants: C. Bayliss.

^[1] (1963) 109 C.L.R. 353
^[2] [1962] VicRp 88; (1962) V.R. 630 at p. 633
^[3] (1904) 2 Ch. D 34 at p.44
^[4] Vol. 80 N.S.W. W.N. p. 768.
^[5] Vol. 80 N.S.W W.N. p. 768.
^[6] (1929) Vol. 45 N.S.W W.N. p. 197.
^[7] (1972) V.L.R. 22
^[8] [1926] ArgusLawRp 96; (1927) V.L.R. 22