Bundaberg Sugar Ltd v Isis Sugar Mill Co Ltd
[2006] QSC 2
To print this judgment please return to the case and click on the PDF icon
next to the
case name. For court use, a full PDF copy is required or preferred.
Exit Distraction Free Reading Mode
Please Note: You are about to print a copy of the onscreen
version of
this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please
return to
the case for PDF printing options.
- Unreported Judgment
- Bundaberg Sugar Ltd v Isis Sugar Mill Co Ltd[2006] QSC 2
- Add to List
Bundaberg Sugar Ltd v Isis Sugar Mill Co Ltd[2006] QSC 2
Bundaberg Sugar Ltd v Isis Sugar Mill Co Ltd[2006] QSC 2
SUPREME COURT OF QUEENSLAND
CITATION: | Bundaberg Sugar Ltd v Isis Sugar Mill Co Ltd [2006] QSC 002 |
PARTIES: | BUNDABERG SUGAR LTD (ACN 077 102 526) |
FILE NO/S: | BS 1591 of 2005 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 10 January 2006 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 20 December 2005 |
JUDGE: | Muir J |
ORDER: | The application is dismissed. |
CATCHWORDS: | CORPORATIONS – CORPORATE FINANCE – SHARES – TRANSFER – DIRECTORS’ POWER TO REFUSE TO REGISTER – Where the defendant’s directors refused to register the transfer of shares from the transferors to the plaintiff – Where the plaintiff claimed refusal to register the transfer was abuse of power – Whether refusal was bona fide and reasonable under Article 46(1)(c) of the defendant’s Articles of Association – Summary judgment refused Corporations Act 2001, s 1071F Regulation of Sugar Cane Prices Act 1962 Uniform Civil Procedure Rules, r 293 Australian Metropolitan Life Assurance Company Ltd v Ure (1923) 33 CLR 199 Duke of Sutherland v British Dominions Land Settlement Corporation Ltd [1926] 1 Ch 746 Gambotto v WCP Ltd (1995) 182 CLR 432 Gray v Morris [2004] QCA 5 Re Coalport China Co [1895] 2 Ch 404 Re Smith and Fawcett Ltd [1942] Ch 304 Roberts v Coussens (1991) 25 NSWLR 171 T C Newman (Qld) Pty Ltd v DHA Rural (Qld) Pty Ltd [1988] 1 Qd R 308 |
COUNSEL: | D Jackson QC with Ms S Brown for the plaintiff W Sofronoff QC with D Kelly or the defendant |
SOLICITORS: | Minter Ellison for the plaintiff Corrs Chambers Westgarth for the defendant |
Introduction
- The applicant Bundaberg Sugar Ltd (“Bundaberg”) in a claim filed 28 February 2005 seeks an order pursuant to s 1071F of the Corporations Act 2001 that nine share transfers executed in its favour by holders of shares in the capital of the defendant Isis Sugar Mill Company Limited (“Isis”) and lodged with Isis for registration between 11 June 2003 and 6 August 2004 be registered by the latter company.
- Bundaberg and Isis own and operate sugar mills in the Bundaberg area. Of recent times Bundaberg purchased cane farms from sugar cane farmers who, for reasons which are largely historical, held shares in the capital of Isis, the owner of the mills to which land within the farms was assigned under the Regulation of Sugar Cane Prices Act 1962.
- The power on the part of the director of Isis to refuse to register transfers is to be found in Article 46 of its Articles of Association which relevantly provides:
“46. (1)The Directors may refuse to register any transfer of shares:-
…
- in respect of which the proposed transferee has not entered into the agreement or agreements referred to in Article 5;
- in favour of a person of whom the Directors do not approve or who the Directors consider that it would be inimicable to the interests of the Company to admit to membership;
…
- It shall not be necessary for the Directors to assign any reason for any decision made by them under this Article.”
- Article 5 provides that shares in Isis may be held only “by bona fide Suppliers who have entered into such agreement or agreements as the Directors shall from time to time require”. “Supplier” is a defined term meaning a registered proprietor, owner or lessee of “Assigned Land” and the holder of “an Assignment or a Peak to the Mill and who or which actually supplies sugar cane to the Company’s Mill in accordance with that Assignment or Peak … or who otherwise satisfies the Directors that he supplies or agrees to supply sugar cane to the Company’s Mill”.
The pleadings
- Bundaberg alleges in its statement of claim that on the proper construction of Article 46(1)(c) the directors of Isis may refuse to register a transfer only if they form the opinion that:
“It would be inimicable to the interests of [Isis] to admit the transferee to membership … and that the opinion be formed:
(a)bona fide and reasonably; or
(b)bona fide.”
- It is further alleged that in refusing to register the transfers the Directors of Isis did not form the required opinion or alternatively, did not act bona fide in forming any relevant opinion or in the further alternative did not form any relevant opinion reasonably.
- In its defence, Isis alleges that Article 46(1)(c) requires of its directors that they bona fide form the opinion that:
“(i)it would be inimicable to the interests of the defendant to admit the transferee to membership; or
(ii)they do not approve of the transferee; …”
- The defence denies that any opinion needs to be formed reasonably and alleges that the directors of Isis formed the opinion that it would be inimicable to the interests of Isis to admit the plaintiff to membership and that they did not approve of Bundaberg as an entity that should be admitted to membership of Isis.
- It is alleged also that such opinions were formed against the following background:
“A.[Bundaberg] is not a bona fide supplier within the meaning of that expression as it appears in clause 5 of the Articles.
B.[Bundaberg] is a competitor of [Isis].”
Application for summary judgment
- The pleadings closed on 6 May 2005, disclosure has been completed and Bundaberg has served the affidavits containing most of the evidence in chief it intends to adduce on the trial of the proceedings.
- By this application Isis applies for summary judgment under Rule 293 of the Uniform Civil Procedure Rules.
The arguments advanced by Isis in support of the summary judgment application
- Bundaberg has the onus of proving that the directors of Isis did not exercise their powers under Article 46 in good faith. The court will not infer an improper purpose or an abuse of power or an absence of good faith where the material before it is consistent with an honest and proper exercise of the discretion vested in the directors.[1] In the absence of evidence to the contrary, the court will take for granted that the directors acted reasonably and bona fide.[2] There is nothing objectively improper about a board of directors refusing to register a share transfer on the basis that it has been lodged by a competitor.[3]
- Bundaberg’s witness statements do not contain evidence tending to establish that the directors of Isis were motivated by any improper purpose in refusing to register the transfers. The ultimate question is whether or not the evidence adduced by Bundaberg points to the existence of an unjustifiable reason for those refusals such as would call for Isis and the directors to substantiate the refusals.[4] To allow Bundaberg to proceed to trial on the basis of the material presently delivered would allow Bundaberg to fish for a case through cross-examination of the directors of Isis.
Summary of Bundaberg’s submissions
- By bringing the application for summary judgment it may be inferred that Isis seeks to avoid being put in the position on trial of having to make an election not to call evidence before making a “no case” submission. Isis wrongly assumes that Bundaberg will seek to adduce no other evidence. Bundaberg has in fact indicated that it intends to call further evidence by subpoena and intends to tender documents. Isis has delayed substantially in bringing the application.
- Bundaberg seeks relief pursuant to s 1071F of the Corporations Act 2001 which relevantly provides that “if the court is satisfied on the application that the refusal or failure [to register a transfer] was without just cause” the court may make orders, including an order that the transfer be registered. The onus of proof that the directors did not exercise a power conferred on them by the Articles in good faith, where the directors are silent, is not as high as it was under the common law.[5] The words “without just cause” arguably place an onus on the directors to show just cause rather than on the applicant.[6]
- The circumstances relied on by Bundaberg, if unexplained, show the absence of any legitimate reason for the refusal. Those circumstances are:
- The refusal by Isis to register any of the transfers in favour of Bundaberg;
- Failure by Isis to provide any ground for refusal even though required to do so in law;[7]
- The shares involved in the relevant transfers amount to approximately 4.57 per cent of the issued share capital of Isis;
- Bundaberg has complied in all respects with the pre-conditions applicable to transfers of the shares;
- Isis purported to forfeit shares of a member, Branchvale Pty Ltd, knowing that Bundaberg had purchased the shares and mistakenly applied for a transfer of the shares showing Branchvale’s directors as the transferor. There are aspects of the conduct of Isis in relation to the forfeiture which are suggestive of deception and unfair dealing;
- Bundaberg had been a supplier of cane to Isis for several years and continued to supply cane to Isis after deregulation of the market;
- Bundaberg continues to offer to be a supplier to Isis;
- No basis is shown for the contention that the fact that Bundaberg is also a mill owner and a competitor in respect of markets for the supply of sugar cane products or in relation to milling services provided to growers constitutes a just cause for refusal.
- Being a competitor alone is insufficient to trigger the operation of Article 46(1)(c) unless there is some rational basis for the belief that having a competitor as a shareholder is “inimicable” to the interests of the company.
- Another matter relied on by Bundaberg is the “patently false allegation” that there would be a contravention of the Articles if the subject transfers were to be registered as Bundaberg is not a bona fide supplier within the meaning of Article 5. The contention by Isis is that Bundaberg is not a bona fide supplier because it is not a party who has entered into an agreement such as that described in Article 5. But there is evidence to support the contention that no such agreement has been entered into only because of the refusal of Isis to do so.
Principles applicable to summary judgment applications
- Under r 293 of the Uniform Civil Procedure Rules judgment may be given for a defendant against a plaintiff for all or part of the plaintiff’s claim if the court is satisfied:
“(a)the plaintiff has no real prospect of succeeding on all or a part of the plaintiff’s claim; and
(b)there is no need for a trial of the claim or part of a claim.”
- The power under the Rule is designed to facilitate the expeditious determination of matters without the costs and delays inherent in a trial and the completion of the interlocutory steps preliminary to it. It is a power to be “exercised with great care” and only where it is “clear that there is no real question to be tried” and where it would be just to dispense with a trial.[8]
- I am not attracted to Bundaberg’s “no case” argument or to the proposition that it is an impediment to the grant of summary judgment that the respondent wishes to adduce evidence from subpoenaed witnesses and to tender documents in the course of the hearing. Rule 293 entitles a defendant to apply for summary judgment. Where the defendant takes that course, it is incumbent on the respondent plaintiff, assuming the defendant’s material makes out a case to be answered, to adduce sufficient evidence to demonstrate a “real prospect” of success on all or part of its claim and the need for a trial. The plaintiff may also succeed by persuading the court that its discretion should be exercised against the granting summary judgment.
- How the plaintiff goes about demonstrating the prospects of success of its case is a matter for it, but it has long been recognised that the affidavits relied on by a respondent to a summary judgment application ought “condescend upon particulars.[9] The fact that some of the plaintiff’s evidence may have to be given by subpoenaed witnesses or take the form of tendered documents, without more, is irrelevant. So too is the prospect that the defendant, if it succeeds in its application, will not be put in the position it would have been in had the matter gone to trial. It is a necessary consequence of the application of the Rule that there will be no trial if the court is satisfied in terms of sub-rule (2).
Conclusion
- Isis concedes the existence of a triable issue in respect of the forfeiture of Branchvale’s shares. These shares are the subject of one of the transfers which Bundaberg wishes to have registered. It is submitted on behalf of Isis that this issue can be put to one side. But the conduct of the Board of Isis in relation to the Branchvale shares is relevant to an assessment of the Board’s conduct in relation to the other transfers. Whilst this conduct may not amount to much in itself, when added to the other matters on which Bundaberg relies, there is sufficient, in my view, to prevent my being satisfied in terms of r 293(2) and to justify the exercise of my discretion under r 293 against the giving of judgment.
- A central issue is the bona fides of the directors in making the relevant decisions. A factual enquiry of that nature is normally best undertaken on a trial after cross-examination. The argument of Isis makes a great deal of the lack of obligation on its directors to explain the reasons for its refusal and the authorities which establish that impropriety cannot be inferred from silence when there is no duty to speak. The fact, however, that the board of Isis initially gave no reasons for its refusal and declined to do so after written request by Bundaberg is a relevant consideration on this application. The significance of this aspect of Isis’s conduct, for present purposes, is enhanced by its conduct, for present purposes, in relying on a spurious reason for declining registration.[10]
- I recognise that if, at trial, Isis declines to adduce evidence which will permit any effective cross-examination as to the bona fides of the directors’ conduct, the case may well have to be decided on the generally unsatisfactory basis of inferences drawn from documents and affidavits sworn by witnesses called by Bundaberg. In that event, the state of the evidence at the conclusion of the trial may not be markedly different from the existing one. There remains, however, a tangible difference between a case presented on trial with evidence-in-chief and a procession of witnesses being made available for cross-examination, and a case on affidavit in the applications list in which the applications judge is confronted with a bundle of affidavits, bundles of authority and lengthy submissions. In the latter case, where the plaintiff is relying on inferences to be drawn from a combination of facts and circumstances, it tends to be more difficult to assess and determine the true flavour of a party’s conduct. The problem is compounded where, as is the case here, some relevant evidence is to be given by subpoenaed witnesses.
- It is ordered that the application be dismissed. I will hear submissions on costs.
Footnotes
[1] Australian Metropolitan Life Assurance Company Ltd v Ure (1923) 33 CLR 199 at 226-7.
[2] Re Coalport China Co [1895] 2 Ch 404 at 407 and Duke of Sutherland v British Dominions Land Settlement Corporation Ltd [1926] 1 Ch 746 at 756.
[3] See T C Newman (Qld) Pty Ltd v DHA Rural (Qld) Pty Ltd [1988] 1 Qd R 308 at 328 and Re Smith and Fawcett Ltd [1942] Ch 304.
[4] Australian Metropolitan Life Assurance Company Ltd v Ure and T C Newman (Qld) Pty Ltd at 328.
[5] Roberts v Coussens (1991) 25 NSWLR 171.
[6] Roberts v Coussens and cf Gambotto v WCP Ltd (1995) 182 CLR 432 at 447.
[7] Duke of Sutherland v British Dominions Land Settlement Corporation Ltd [1926] 1 Ch 746.
[8] Gray v Morris [2004] QCA 5 at [46].
[9] Wallingford v Mutual Society (1880) 5 App Cas 685 at 704 and Colverdell Lumber Co Pty Ltd v Abbott (1924) 34 CLR 122 and 128.
[10] It is assumed for present purposes that Bundaberg’s arguable case in this regard ultimately will be successful.