HIGH COURT OF SOLOMON
ISLANDS
Civil Case No. 037 of 2000
WAYNE FREDERICK MORRIS
AND
BENJAMIN OF GILES PRICE
(AS SPECIAL MANAGERS OF REX
FERA, RECEIVER
AND SPECIAL MANAGERS
APPOINTED)
v
p class="MsoNormal" align="center" style="text-align: centecenter; margin-top: 1; margin-bottom: 1">
CLEMENT TORI, JACK WALE,
BRADLY BOENI,
FERRIS FOLI AND EDNA
JEOFFREY AND OTHERS
High Court of Solomon Isl/span>
Before: F.O. Kabui, J
Civil Case No: 037 of 2000
Hearing 17th May
2001
Judgment: 23rd May
2001
J. Sullivan for the Plaintiff
C. Ashley for the 1st
2nd 3rd & 4th Defendanpan>
an lang="EN-GB" style="font-size: 12.0pt">John Hauirae for the 5th
6tsup>th Defendants
JUDGMENT
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(Kabui, J):
By a Specially Indorsed Writ of t of Summons filed on 19th March 2001,
the Plaintiffs claim against the Defendants the relief sought at pages 7-8
of the Plaintiffs� Statement of
Claim. The relief sought is itemised in
these terms �
�(1) A declaration that each
of the said transactions is void a no effect.
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(2) A consequential
declaration that-
(a) &nbssp; tsp; the issued
capital inal in the second defendant is held as to -
(i) & &nnsp;&&nbp;;&nbp; &nbp; &n p;
9,900 ordinardinary shares by Fera;
>
(ii) ; &nnsp;&&nsp;;&nbp; &nbp;
/s
langGB" s"font-size: 12.0pt">(ii) 100 ordinaares the fifth defendefendant;dant;
>
(b) the directors of
second defendant are are Fera and the fifth defendant;
(c) the secretary of the
ond defendant is Fera.
(3) A consequenti l
ec datiaration that -an>
(a) the issued capital in
the third defendant is held as to -
(i) 9,900 ordinary shares by
Fera;
(ii) 100 ordinary shares by
the sixth defendant;
(b) the directors of the
third defendae Fera and the sixth defendefendant;
(c) the secretary of the
thefendant is Fera.
<
(4) &nbsconseial
l
det detion that-
/p>
(a) the issued capital in
the fourth defendant is held as to -
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(i) 9,900 ordinary shares by
the third defendant;
(ii) 100 ordinary shares by
Fera
(b) the directors of the
ond defendant are Fera and third defendant
/p>
class="Mss="MsoNormal" style="margin-left: 72.0pt; margin-top: 1; margin-bottom: 1">
(c) the secretary of t third defendant is Fera
(5) p; A quential
de de declaration that the plaintiffs are lawfully in possession of the said
shares and many
exercise aghts attaching thereto in the name of and on
behalf of Fera.
(6) &nA conntial
l
ord order that the plaintiff enff ensure that the statutory register of the second,
third and
fourth defendants are in accord with the above declarations and
that the said registers to be rectified to the extend necessary
to give
effect to the said declarations, or, if there be no statutory register the
case of any of those defendants, then
the plaintiffs shall create the
necessary register to accord with such declarations.
/p>
(7) Anr tha
the p plaintiaintiffs may convene an extraordinary general meeting of each of the
second , third and fourth
defendants for the purpose of the solder aping new directors, removing directors oors or conr continuitinuing their appointment
as the shareholders may think fit.
(8) .
>
(9) &nburtheother
er
re relief�.
 an>
The Solicitors for the 1st,
2nd , 3rd and 4th Defendants is Mr Ashley
of A & A Legal Service whilst the Solicitor for the 5th and 6th
Defendants is Mr Hauirae of A & H Lawyers. Each Solicitor had duly filed a
Memorandum of Appearance in the usual
manner. In the meantime, the
Plaintiffs by Summons filed on 20th April 2001, seek the
following orders -
�1.   plaentiff�s
have leave, pursuant to Order 14, to enter judgment for the relief claimed
in the
statement of Claim filed herein on 19 March 2001.
2. &nbssp;&nnbsp; bsp; The Defendants
tpay the cohe costs of and incidental to this application.
/p>
3. &nbbsp; Such fuch further or
other order as to this Honourable Court may seem meet.�
0pt"> 
By Summons filed on 4th
May 2001, the first, 2nd , 3rd and 4th
Defendants, in response seeks the following orders -
1. That urported
appointment of the plaintiffs, Wayne Fredricedrick Morris and Benjamin St Giles
Prince over the Estate
of Rex Fera is void ab anitio or be revoked forthwith
for reason that the said appointments contravene the provisions of the
Bankruptcy Act, in particular, sections 13 and 75 of the said Act, in that-
/p>
(a) &nsp; There was no
Official Recl Receiver appointed over the Estate of Rex Fera; or
span "EN-Gyle="font-size: 12.0pt2.0pt">&nb"> /p>
(b) & Asp;rnatevelyi at
t the date of appointment, the person deemed to be the Official Receiver was
not a legal
practer inmon Is; orn>
(c) p;&nbbsp; The Ofhe Ofhe Official
Receiver did not act under the general authority and direction of the
Minister
in ppointment of the plaintiffs as Special Managers.
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3. &nIsp; e thnt veat
t the Court refuses to grant Orders 1 and/or 2 as sought, any Order of the
Court that
amounts to restraining any of the 1sd, 3r 4th Defes in busibe dischaischarged rged forthforthwith,with, and
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4. That the
Pl Plainsiff summons be dismissed and the 1st, 2nd, 3rd and 4th Defendants file
their Defence within
7 days.
5. ;&nbssp; The
e
Plaintiff piff pay the 1the 1st, 2nd, 3rd and 4th Defendants
Costs.
1">
lass="Mss="MsoNormal" style="margin-left: 36.0pt; margin-top: 1; margin-bottom: 1">
6. ;&nspp; Asy further or
other Order the Cour Court deems fit and just to make".
The Bound
ass="MsoNoMsoNormal" style="margin-top: 1; margin-bottom: 1">
On 24th November
2000, I made a number of orders, one of which was that the Official Receiver
be appointed as interim receiver
of the property of the Debtor under section
13 of the Bankruptcy Act (Cap.3). I also made the Receiving Order under
section 5 of the Bankruptcy Act and appointed the Plaintiffs as Special
Managers on 13th December 2000 under section 15 of the Bankruptcy
Act above. The Orders I made were so made upon the application of Mobil Oil
Australia Limited (the Judgment Creditor) against Rex
Fera, the Judgment
Debtor. They were the only parties in he Bankruptcy Petition No. 177 of
2000. In this case, the 2nd, 3rd, 4th, 5th
and 6th Defendants are challenging the validity of the orders I
made on 24th November 2000 and 13th December 2000.
The 2nd Defendant
was incorporated on 9th November 19ts nominal capital was
$10,000 divided into ordinary shares of $1.00 each. Mr. Fera took up 9,900
shares
whilst the 5th Defendant took up 100 shares. The Directors were Mr.
Fera and the 5th Defendant. The Company Secretary was Mr Fera.
The 3rd Defendant was incorporated on 20th December
1999. Its nominal capital was also $10,000 divided into ordinary shares of
$1.00 each. Mr Fera held 9,900 shares
whilst the 6th Defendant
held 100 shares. The Directors were the 6th Defendant and Mr Fera.
The Company Secretary was also Mr. Fera. The 4th Defendant was
incorporated on 3rd May 2000. Its nominal capital was also
$10,000 divided into ordinary shares of $1.00 each. The 3rd
Defendant held 9,900 shares whilst Mr. Fera held 100 shares. The 3rd
Defendant was the sole Director. The Secretary was Mr. Fera. All in all, Mr.
Fera controlled the 2nd, 3rd and 4th
Defendants in terms of holding majority shares in them. Then on 30th
June 2000, Mr. Fera purported to change his position as majority shareholder
in 2nd, 3rd and 4th Defendants. By virtue
of Special Resolutions dated 30th June 2000, it was resolved that
the 10,000 shares held by Mr. Fera and Martha Maofalifaga in the 2nd
Defendants be transferred to the 1st Defendants and that the
shares be equally divided between them. The shares were paid for in cash.
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It was also ved that Mr.
Fera and Martha Maofalifaga resign as Directors and that the new
s shareholders be appointed
as new Directors. Edna Jeofrey was appointed the
Secretary.
Two other Special Resolutions
in exactly the same terms were d on 30th June 2une 2000 in
respect of the 3rd and 4th Defendants. That is to say,
in respect of the 3rd Defendant, it as resolved that 10,000
shares held by Mr Fera and Remex Fera be transferred to the same new
shareholders
as in the case of the 2nd Defendant to be equally
divided between the new shareholders. It was also resolved that Mr Fera and
the 6th Defendant resign as Directors and that the new
shareholders be the new Directors. Again, Edna Jeofrey was the Secretary.
Again, in respect of the 4th Defendant, it was resolved that 100
shares held by Mr Fera be transferred to the same new shareholders to be
equally
divided between them. It was also resolved that Mr Fera resign as
Director and that the new shareholders be the new Directors.
Again, Edna
Jeofrey was the Secretary.
The Summons filed by the 1st,
2nd, 3rd th, Defendants
The case for these Defendants
is that the appointment of the Official Receiver and thintiffs as
Special Maal Managers
is invalid ab intio and should be revoked for that reason
because the appointment was made contrary to sections 13 and 75 of
the
Bankruptcy Act. This is the gist of these Defendant's case. The other Orders
sought are more or less supplementary in nature. Sections 13
and 75 of the
Bankruptcy Act are respectively in these terms -
�13. The Court may, if
it is shown to be necessary for the protection of the estate, at any time
after the presentation
of a bankruptcy petition and before a receiving orde is, appthe Official Receiver to be interim recm receivereiver of t of the
property of the debtor or of any part thereof, and direct him to take
immediate possession thereof or of any part thereof.�
�75. - (1) Subject to the
provisions of subsection (2), there mare may be appointed from time to time a fit
and proper
person to be Official Receiver and such number of Deputy Official
Receivers as may be required, and any such appointment shall,
if the person
appointment is to be a public officer, be made in accordance with the
Constitution, but otherwise shall
be made by the Minister.
(2) No person shall be
appointed Official Receiver iver or Deputy Official Receiver, unless at the date
of such appointment,
he is a legal practitioner in Solomon Islands.
(3) The Offireceiver
shall act under the general authority and dind direction of the Minister and
shall also be an officer
of the court.
(4) Every Deputy Official
Receiver have all the powers conferonferred on the Official Receiver under
this Act.
(5) Every Deputy Official
Receiver shall act under the general authority and direction of the Official
Receiver for the
time being, or if there be no Official Receiver for the
time being, under the general authority and direction of the Minister,
and
shall also be an officer of the court�.
In support of their
aption, Messrs Tori, Wale and Boeni filed three affidavits. Mr Tori
filed two affidavitdavits on 4th and 15th May 2001
respectively. In his affidavits, Mr Tori deposed that he was a Director and
shareholder in the 2nd, 3rd and 4th
Defendants. He further deposed that Rex Fera was no longer a Director and
shareholder in the 2nd, 3rd and 4th
Defendants in accordance with the advice of the Office of the Registrar
General and consequently, the 1st Defendants became the new
Shareholders and Directors in the 2nd, 3rd and 4th
Defendants.
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The belief held by Messrs Tori,
Wale, BoFoli and Mrs Edna Jeofrey was the result of the Special
l
Resolutions passed
on 30th June 2000 that they are the new
Shareholders and Directors in the 2nd, 3rd and 4th
Defendants. This belief was further supported by the fact that they made
certain payments in cash on 3rd July 2000 described as allotment
of shares. This being the case, they argue, that the Plaintiffs are not
entitled to
deal with the assets of the 2nd 3rd and 4th
Defendants and in any case, the appointment of the Plaintiffs is defective
and that no Official Receiver has ever been
appointed in terms of section 13
and 75 of the Act. Also, in terms of Order 14, rule 1(a) of the High Court
(Civil Procedure)
Rules 1964, (the High Curt Rules), the materials before
the Court, they say, do disclose a good defence in the merits. They
say, for
this reason, the Plaintiff' s Summons should be dismissed with costs.
The Plaintiffs� Summons
The Plaintiffs application is
straightforward under Order 14, rule of the High Court Rules. Tes. They are
seeking leave
to enter judgment for the relief claimed in their Statement of
Claim. They claim that the purported allocation/transfer of
shares by Rex
Fera to the 1st Defendants is void and is of no effect so that
Rex Fera is still the Director and Shareholder in the 2nd, 3rd
and 4th Defendants and the plaintiffs are entitled to deal with
Rex Fera�s shares in the 2nd, 3rd and 4th
Defendants on that basis.
The Pros and Cons in both cases
Counsel for the 1st,
2nd, 3rd and 4th Defendants, Mr , Mr
Ashley, argued very strongly that the appointment of the Plaintiffs was
defective in that there was
no evidence of an appointment of an Official
Receiver under section 75 as read with section 13 of the Act. In other
words,
if there was no appointment made as a matter of fact either by the
JLSC or by the Minister, then it followed that there was
no Official
Receiver in bankruptcy to be appointed as an interim receiver under section
13 of the Act. As argued by Mr
Ashley, section 75 of the Act should have
been complied with first in order for any appointment made under section 13
of the Act to be valid appointment. The evidence produced in Court on this
point is Exhibit 4. This Exhibit was the appointment
letter dated 21st
October 1998 issued by the Office of the Prime Minister confirming the
appointment of Miss Irene Vaukei by the JLSC as
the Registrar General.
Attached to it was the Vacancy Notice No: 30/1997 setting out the job
description of the post
of Registrar General which included, amongst other
things, duties as Official Receiver under the Bankruptcy Act. There is no
doubt that Miss Irene Vaukei was appointed by the JLSC as Registrar General
whose duties were listed in
the Vacancy Notice 30/1997 above. Vacancy Notice
No: 30/1997 above can be misleading indeed. The manner of appointing the
Registrar of Titles under the provisions of the Land and Titles Act (Cap.
133) is not stated in the Act itself and so the appointment would have to be
done under section 116 of the Constitution
by the PSC or the JLSC as in the
case of the post of the Registrar General under section 118 of the
Constitution. The
same applies to the Office of the Registrar of Companies
(Cap. 175). That is to say, the holder of the Office of the Registrar
of
Companies would have to be appointed by the PSC or the JLSC. The Official
Receiver under the provisions of the Companies Act is the Registrar of
Companies. The Registrar of Business Names is the same person appointed as
the Registrar of Companies.
The Registrar of Charitable Trusts (Cap 55) is
also the Registrar of Companies. The Registrar of Bills of Sale is to be
appointed under the Constitution under section 8 of that Act (Cap. 174). The
Registrar of Trade Unions is done under section
3 of that Act (Cap. 76). The
Registrar of the United Kingdom Trade Marks is the Registrar General under
section 2 of
that Act (Cap. 180). The Registrar of Copyright is appointed
under section 32 of that Act (Cap. 138). The Public Trustee is
appointed
under section 3 of the Public Trustee Act (Cap. 31). The Official Receiver
in bankruptcy is appointed under section 75 of that Act. The Office of
Registrar General
appears only twice in the Laws of Solomon Islands (Revised
Edition 1996) being under section 2 of the United Kingdom Trade
Marks Act
(Cap. 180) and under section 12 of the Births, Marriages and Deaths Act
(Cap. 169). These are the only two
Acts which recognise the existence of the
Office of the Registrar General and gives it legal legitimacy. All other
Acts
only speak in terms of the Office of the Registrar per se or of
something etc. So there is bound to be some confusion which
already is the
case. The way to correct the situation may be for the JLSC to appoint the
holder of the Office of Registrar
General and then say that for the purpose
of each relevant provision in each relevant Act, the Registrar General shall
be the Registrar under each of those provisions. In the case of section 75
of the Bankruptcy Act, the appointment of Miss Irene Vaukei as Registrar
General should have said that the Registrar General shall be the Official
Receiver under section 75 of the Act to avoid any doubt whatever that the
holder of the Office of the Registrar General
is also the Official Receiver
in bankruptcy. As of today, the Registrar General is none other than Miss
Irene Vaukei
per se. On this point, I would agree with Mr Ashley�s argument
that no Official Receiver had in fact been appointed under section
75 of the
Bankruptcy Act so that any appointment under sections 5 and 13 of the Act
would have been without any legal basis. However, does this conclusion
matter in this case? In my view, it does not matter if I find that he
purported transfer of shares by Mr Fera on 30th June 2000 was
ineffective in law or that there was no transfer at all as a matter of fact.
This is because Mr Fera would
still be, as a matter of law, the shareholder
in the 2nd, 3rd and 4th Defendants. The 1st
Defendants are not therefore the new Shareholders and Directors and as such,
what interest do they have in challenging
the appointment of the Official
Receiver and the Plaintiffs as Special Managers? The answer must be that
they lack standing
in challenging the appointment of the Official Receiver
and the Plaintiffs as Special Managers. The other point is the appointment
of the plaintiffs as Special Managers was made upon the application of Mobil
Oil Australia Limited a creditor under section
15 of the Bankruptcy Act and
not by the Official Receiver. Section 15 states-
p class="MsoNoMsoNormal" style="text-indent: -36.0pt; margin-left: 72.0pt; margin-top: 1; margin-bottom: 1">
�(1) The Court may, on
tpe appl application of the Official Receiver or of any creditor or creditors,
and if satisfied
that the nature of the debtor's estate or business or the
interests ofcredigenerrequire the the appoiappointmenntment of a
special
manager of the estate or business other than the Official Receiver, appoint
a manager thereof accordingly to
act until trustee is appointed, and with
such powers (including any of the powers of a receiver) as may be entrusted
to him by the Official Receiver.
(2) nbsp; Thc spe
al manager shallshall give security and account in such manner as the court may
direct.
>
(3) &nbssp; Tsp; The special
ma ager sger shall receiver such remuneration as may be Prescribed�.
 an>
p>
Even if the appointment was
made on the application by the Official Receiver or by a Creditor as in this
case, the issue
of validity of appointment does not arise for the same
reason that the 1st Defendants would have no standing to
challenge the appointment of the Official Receiver and the Plaintiffs as
Special
Mangers. My deciding upon whether or not Mr Fera�s purported
transfer of shares on 30th June 2000 to the 1st
Defendants was valid in law is important in terms of the outcome of this
case. Mr Ashley however did not proceed with
his other point that Miss Irene
Vaukei was not a legal practitioner at the time of her appointment as
Registrar General
as clearly there was evidence that Miss Irene Vaukei was
exempted under the Pacific (Barristers and Solicitors) Order in Council
1913.
Notice of Meeting
Article 13 of the 2nd,
3rd and 4thndants is in the same termsterms as regards
notice of meeting called to pass a special resolution. There must be 21 days
notice. However a shorter notice may do if agreed by all the members having
the right to attend and vote at the meeting
(see Philip Wanga v
Guadalcanal Travel
Service Civil Appeal
No: 4 of 1998). In this case, there were no Minutes of the Meeting on 30th
June 2000. It would appear that the Meeting was for the purpose of ratifying
special resolutions passed at some unknown
previous date. In cross �
examination by Mr Sullivan, Mr Tori said that Rex Fera and the 5th
Defendant were at the Meeting together with the 1st Defendants.
He said they called each other and met. In the case of the 3rd
Defendant, Remex Fera, a minor, did not attend the Meeting on 30th
June 2000. The fact that there was a Meeting on 30th June 2000
meant there must have been a short notice of that meeting. On the balance of
probability, I find that there
was a Meeting of Directors on 30th
June 2000.
Transfer of Shares
ass="Mss="MsoNormal" style="margin-top: 1; margin-bottom: 1">
Mr Ashley�s second strong
argument was that the 1st Defendants alidly acquired Mr
Fe Fera�s shares by reason of the Special Resolutions passed on 30th
June 2000 being Exhibit �DM5� attached to Mr Marahare�s affidavit filed on
20th April 2001. There are no other documents other than Exhibit
�DM5� and receipts dated 3rd July 2000 affecting the transfer of
shares.
ass="MsoNoMsoNormal" style="margin-top: 1; margin-bottom: 1">
In my view ExhibM5�
attached to Mr Marahare�s affidavit is the Record of the Special Resolutions
passed on or before
30th June 2000. They cannot be anything else.
There are no other records. The question here is therefore whether or not
there
was effective transfer of shares. In this respect, I can do no better
than to quote from the Principles of Modern Company Law by L.C.B.
Gower, Third Edition 1969 at pages 394 � 398. There, the learned author
states,
��When shares are bought and
sold at least three entirely distinct inct legal transactions are involved.
First, there
will be a contract for the sale of the shares, a contract
which, if effected through a stockbroker, will be evidenced by his
�bought�
and �sold� notes. This alone, however, will not operate to transfer the
�property� in the shares, for shares
are not like goods and the property in
them does not pass as a result of the contract. In this respect they more
closely
resemble land; just as the contract of sale of land requires to be
completed by a conveyance, so a contract for the sale of
shares requires to
be completed by transfer��
�It is therefore an implied
obligation of the contract that the seller will will deliver to the buyer a
validly executed
document of transfer�
�Often the seller will sign
ransfer leaving blank the date and the name of the transfernsferee. By so
doing he impliedly
authorises the buyer to complete the transfer by
inserting either his own name or that of a nominee for him or of a sub �
purchaser from him�
�The seller will also be
under an obligation to hand over to the buyer his document of title, the
share certificate, for
the company will not normally register the transfer
until it is produced�.
�This normally completes the
transaction so far as eller is concerned; his onls only outstanding
obligation is not to
do anything to prevent the buyer (or his nominee or sub
� purchaser) from becoming registered and obtaining the full benefit
of the
shares. He does not warrant that registration will be effected and if the
directors, having a discretion, refuses
to register, the purchaser cannot
get his money back but the seller will be regarded as holding the shares on
trust for
him�
�But the transaction is
still incomplete as between the buyer and the the company. Before the buyer can
become a member
and shareholder there must be an agreement between him and
the company and he must be entered on the register. To obtain definite
evidence of an agreement the common form of share transfer used to contain a
provision whereby the transferee �agrees
to accept the said shares� and most
articles required that it should be executed as well as the transferor�
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�The above account explains
briefly the normal pure on a sale and purchase hase of shares. When the
transfer is by way
of gift, on an appointment of new trustees, or the like,
there will, of course, be no sale agreement but all that has been
said about
the other steps is equally applicable��
p class="Mss="MsoNormal" style="margin-top: 1; margin-bottom: 1">
In this jurisdiction, sections
71 � 82 of the Companies Act (Cap. 175) deal with, amongst other things, the
transfer of shares. Section 73 of the Act specially requires a proper
instrument of transfer to enable registration by the Company. Article 7 of
each of the 2nd, 3rd and 4th Defendants
requires the instrument of transfer of shares to be signed by the transferor
and the transferee and must be
in writing in such form as may be approved by
the Directors.
In this case, there is no
documentary evidence of a contract for the sale o shares between Rex
F Fera and the 1st Defendants. However, there might have been an
oral contract to this effect but the evidence of any oral contract is scanty
indeed. The return of allocation of shares filed on 16th August
2000 and receipts of payment of shares dated 3rd July 2000 speak
in terms of allocation of shares. There cannot be allocation of new shares
if capital has not been increased.
There is no evidence of increase of
capital in the 2nd, 3rd, and 4th
defendants. There can only be transfer of shares. In this case, a contract
for the sale of the shares can only be assumed
because of the existence of
Exhibit �DM5� and the various receipts of payments of cash on 3rd
July 2000. That is all. The fact is that each of the 2nd, 3rd
and 4th Defendants does not have an Account in the Bank. The
payments in cash made on 3rd July 2000 were simply paid into the
family business. What can be said of course is that there is evidence of the
intention
to transfer shares to the 1st Defendants but the actual
transfer was never effected. In the case of the 3rd Defendants,
there was never an intention to transfer Rex Fera�s shares because the other
shareholder and Director the
6th Defendant was not at the Meeting
on 30th June 2000. There could not have been approval of transfer
of shares by the Directors of the 3rd Defendant. I find that the
purported transfer of Rex Fera�s shares in the 2nd, 3rd
and 4th Defendants on 30th June 2000 has no legal
basis and is therefore ineffective in law. The result is that Rex Fera
remains the shareholder
and Director in the 2nd, 3rd
and 4th Defendants. This means that the 1st, 2nd,
3rd, and 4th Defendants do not have standing to
challenge the validity of the appointment of the Official Receiver the
Plaintiffs
as Special Managers on 13th December 2000. My finding
that the appointment of the Official Receiver was defective is now an
academic issue. It is
useful only in so far as it points out the need to
regularise the appointment of the Registrar General in terms of the other
statutory duties of that office.
Was there a defence under Order
14, rule 1 (a) of the High Court Rules
Counsel for the 1,
2nd, 3rd and 4th Defendants Mr Ashley
ar argued very strongly that there were two defence points that the Court must
consider. Firstly,
he argued that there was a statutory defence in that
Exhibit 4 did not constitute a valid appointment of the Registrar General
as
the Official Receiver under section 75 of the Bankruptcy Act. Secondly, he
argued that there was a contract for the sale of Mr Fera�s shares. Counsel
for the Plaintiffs, Mr Sullivan,
argued strongly the opposite.
p class="MsoNoMsoNormal" style="margin-top: 1; margin-bottom: 1">
The show cause procedure is
described at pages 312 � 313 of Australivil Procedure by BernaBernard
C. Cairns in these terms,
��But if the defendant
oppose application he must show cause why summary judgment shouldhould not
be entered, which is
usually done by filing an affidavit in reply to the
plaintiff�s affidavit. Of course, if the defendant disputes the plaintiff�s
application on technical grounds, affidavit evidence may not be necessary.
But at all events the defendant should not
ignore the proceedings, for a
judgment entered in the defendant�s absence on an application for summary
judgment is not
a default judgment, and consequently it cannot be set aside,
except on appeal��
��Toessfully show cause
the defendant�s affidavit must shst show a defence to the plaintiff�s claim and
disclose the facts
on which the defence is based. It is not necessary for
the defendant to show a defence that must succeed. He need only show
that he
has an arguable defence, or, where he asserts that there is a defence on the
facts, that his version of the facts
shows a prima facie defence. A simple
denial is insufficient, the affidavit must show the grounds for the denial��
lass="Mss="MsoNormal" style="margin-top: 1; margin-bottom: 1">
My finding on the validity of
the purported transfer of shares clearly disposes of Mr Ashley�s argument
that there was
a contract for the sale of Mr Fera�s shares. As I have said
in this judgement, I find on evidence of a contract for the sale
of Mr
Fera�s shares in the 2nd 3rd and 4th
Defendants. There is no case for an arguable defence in this case. Mr
Ashley�s other argument about statutory defence
does not arise because the 1st,
2nd, 3rd and 4th Defendants would no longer
have standing to challenge the validity of the appointment of the Official
Receiver and the
Plaintiffs as Special Managers in that they are not
shareholders in the 2nd, 3rd and 4th
Defendants. There is however evidence of approval by Directors for the
transfer of shares to take place between Mr Fera
and the 2nd, and
4th Defendants but such contract was never effected. Although
cash payments were made on 3rd July 2000, such payments were for
allocation of shares which was a legal impossibility in view of there being
no prior
increase in capital in the 2nd, and 4th
Defendants. The cash paid simply went into the family business. There is no
evidence to show that Mr Fera received such
payment for his shares in the 2nd,
and 4th Defendants. Even if there had been a contract for sale of
shares, which had been paid in cash, 1st Defendants would still
be no shareholders until their names are entered in the company register
recording the share transfers.
Of course this was not the case here. For
these reasons, I must dismiss the application by the 1st, 2nd,
3rd and 4th, Defendants. I would grant leave under
Order 14 rule 1 (a) of the High Court Rules for the plaintiffs to enter
judgments
for the relief claimed in their Statement of Claims with costs.
The Plaintiff�s application is granted accordingly.
F.O. Kabui,
Judge.
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URL: http://www.paclii.org/sb/cases/SBHC/2001/28.html
