Wood v W amp; G Dean Pty Ltd [1929] HCA 44; (1929) 43 CLR 77 (12 December 1929)

HIGH COURT OF AUSTRALIA

Wood Applicant, Appellant; and W. &. G. Dean Proprietary Limited Respondent, Respondent.

H C of A

On appeal from the Supreme Court of Victoria.

12 December 1929

Knox C.J., Isaacs and Starke JJ.

Ham K.C. (with him Ellis), for the appellant.

Fullagar, for the respondent.

Ham K.C., in reply.

The following written judgments were delivered:—

Dec. 12

Knox C.J.

The appellant is the assignee of the insolvent estate of Ernest Dean, who at the date of his insolvency was the holder of 7,034 fully paid shares in the respondent Company. Certificates for 4,500 of these shares have come into the hands of the appellant as assignee of the insolvent, and certificates for the remaining 2,534 shares are held as security by creditors of the insolvent. A request by the appellant to the Company to have his name entered on the register of members as the holder of all the fully paid-up shares shown on the register as belonging to the insolvent having been refused, the appellant applied to the Supreme Court of Victoria for an order that the register of members should be rectified by inserting therein the name of the appellant as the holder of 7,034 or alternatively of 4,500 fully paid-up shares. The application was dismissed, and the appellant now appeals from that order. Sec. 166 of the Insolvency Act 1915 provides that every order placing an estate under sequestration in the hands of an assignee (as the sequestration order in this case did) shall vest in such assignee absolutely the property of the insolvent of or to which he is then seised, possessed or entitled. By sec. 154 it is provided that where any portion of the property of the insolvent consists of shares transferable in the books of any company the right to transfer such property shall be absolutely vested in the assignee. "Property" is defined by sec. 4 of the Act as including every description of property whether real or personal. By sec. 29 (1) of the Companies Act 1915 it is provided that the shares or other interest of any member in a company shall be personal estate transferable in manner provided by the articles of the company.

The articles of the respondent Company contain no provision restricting the right of an assignee in insolvency to become registered as a member by transmission, though art. 32 provides that registration of a person becoming entitled to shares on the death of a member is subject to the consent of the directors, which they are under no obligation to give. Nor do the articles contain any provision authorizing or recognizing the right of an assignee in insolvency to become registered by transmission as a member. So far as I can find, the only articles in which the assignee of an insolvent is mentioned are 40, 128 and 129, which appear to me to contain nothing relevant to the determination of the question for decision in this case. Art. 29, in my opinion, does not apply because it deals only with the "transfer" of shares, and it is clear from the provisions of art. 28, and from the heading to arts. 26-41 that "transfer" should not in this context be read as including "transmission." The real question is whether an assignee has the right to be registered as a member subject only to the restrictions, if any, imposed by the articles, or whether he has no right to be so registered except so far as it may be conferred on him by the articles. We have not been referred to, nor have I been able to find, any decision precisely in point, but the observations of Page Wood L.J. in Weston's Case[1] have some bearing on the matter. In that case, after pointing out that the position of a shareholder in a company differs from that of a partner in that the former can retire at once by transferring his shares, he says:—"In the absence of any such restriction"—i.e., a restriction contained in the articles—"I think it is perfectly plain that the Companies Act 1862, in the 22nd section, gives a power of transferring shares. ... I apprehend the shares are transferable by virtue of the statute, and that the province of the articles is to point out the mode in which they shall be transferred, and the limitations (if any) to which a shareholder shall be subjected before he can transfer. ... I think ... that the shares are at once transferable ... unless something is found to the contrary in the articles of association." These observations seem to indicate that the assignee in insolvency has a right to be registered as a member in respect of shares standing in the name of the insolvent subject only to the restrictions, if any, imposed by the articles. I have pointed out that no such restrictions are to be found in the articles of this Company.

In my opinion the true view is that the assignee of an insolvent member of a company is entitled to have his name placed on the register of members subject to the restrictions, if any, imposed by the articles of association, and as no such restrictions are imposed by the articles in this case I think the appellant is entitled to the relief he claims, at any rate in respect of the 4,500 shares the certificates of which are in his hands.

Isaacs J.

This is not the case of a transfer of shares. In such a case the general principle of law is clear. It is stated on high authority, in In re Discoverers Finance Corporation Ltd.—Lindlar's Case[2], where Buckley L.J. (for Cozens-Hardy M.R., Fletcher Moulton L.J. and himself) says that "in the absence of restrictions in the articles the shareholder has by virtue of the statute the right to transfer his shares"; and he adds: "It was the policy of these Acts to give a free right of disposition, leaving it to the regulations of the company to impose such restrictions upon its exercise as might be desired." But that establishes merely the right of a member, the owner of a share, to alienate his property as he pleases unless by his social contract he has limited his prima facie right. The present case depends on further considerations. An assignee in insolvency under the insolvency law of Victoria, whom I may now conveniently refer to as a trustee in bankruptcy, does not take from the member exercising his rights under the Companies Act, and the question here is not how far the trustee as a member can deal with his property. It is as to the right of the trustee in bankruptcy to insist on registration of himself as a member of the Company. Obviously different considerations arise. Sec. 166 of the Insolvency Act of Victoria, like all enactments of that nature, vests in the trustee, as I term him, absolutely the property of the insolvent—that means, of course, for the same interest, legal and equitable as the insolvent possessed (see per Collins J. in Minna Craig Steamship Co. v. Chartered Mercantile Bank of India, London and China[3]. Subject to some special provisions, such as reputed ownership and other instances mentioned in the Act, the trustee stands in the shoes of the insolvent with respect to his property. As to shares in a limited company, the insolvent being bound by the social contract, so is the trustee, except so far as the insolvency law overrides it. The company cannot deny the force of the section in the Insolvency Act, vesting in the trustee the property in the shares.

The Company in the present case does not controvert that proposition, but it maintains, that unless by the articles, provision is made entitling a trustee in bankruptcy to be registered, the trustee has no right to registration but must be content with the ordinary property rights resulting from the share. The right to vote, and so take part in the management of the company, that is, in the common concern of the shareholders, is dependent on membership, which connotes registration. And the right to vote is itself a right of property (Pender v. Lushington[4]); so that on principle the doctrine of Lindlar's Case[5] ought to apply. For although the trustee's right to the shares does not arise by a transfer from the shareholder, yet it is, as Jessel M.R. said in Seear v. Lawson[6], "a statutory transfer ... one single transfer, so to say, from the bankrupt to the trustee," and the reasoning in Lindlar's Case applies just as cogently for the benefit of the creditors as it does for the benefit of the solvent shareholder desiring to transfer. And so I find it has been considered. For instance, in In re W. Key & Son Ltd.[7] it is said by Byrne J.: "Prima facie, the right of a person taking by transmission is to be entered upon the register in the same way as his predecessor in title was entered, and to have the certificate in the same form as that of his predecessor in title." Again, in Wise v. Lansdell[8] Astbury J. said:—"Wise himself before his bankruptcy had the right to vote beneficially in respect of his shares. The right to place himself in a position to exercise that voting power, subject to the rights of the mortgagees, passed to the trustees under secs. 38 and 53, although he clearly could not exercise it, or attempt to do so, unless and until he had had the name of the bankrupt removed from the register, and his own name substituted." It will be observed that the trustee's right to be registered is rested in the passage quoted on the sections in the Bankruptcy Act, which merely vest the property in the trustee and correspond to secs. 141 and 166 of the Victorian Act. Qualifications, if any, of that prima facie right must be found in the memorandum or articles of the Company. No restriction is there found. On the contrary art. 40 is a tacit recognition of the trustee's right to sell and transfer the shares. While, therefore, it is true the mere vesting of the bankrupt's shares in the trustee does not make the trustee a shareholder, he may, if he chooses and unless some valid restriction exist, insist on becoming a shareholder. It is at this point and with much respect my conclusion differs from that of the learned Chief Justice from whom this appeal comes.

The appeal, therefore, should in my opinion be allowed.

Starke J.

The point in this case is whether the assignee of an insolvent is entitled to be placed upon the register of members of a company in respect of fully paid-up shares registered in the name of the insolvent and owned by him. "A share is ... an interest made up of various rights conferred by the contract contained in the articles of association" of the company (Buckley on the Companies Acts, 8th ed., p. 31. It is personal estate, transferable in manner provided by the articles of the company (Companies Act 1915, sec. 29). And, in the absence of restriction in the articles, the shareholders have a free right of transfer (Weston's Case[9]). This property vests, by force of the Insolvency Act, in the assignee (Insolvency Act 1915, secs. 103, 154, 166). Usually, the articles of association of a company provide that any person becoming entitled to shares in consequence of death or insolvency may, upon proof of his title, be registered as a member in respect of such shares, or transfer such shares. (See Palmer's Company Precedents, 12th ed., Part I., pp. 651-652; and cf. Companies Act 1915, sec. 34.) The articles of association in the present case (art. 32) make such a provision in the case of any person becoming entitled to a share in consequence of the death of any member, but none in the case of an assignee or trustee in insolvency. So the point must be decided on principle.

The right of a person becoming entitled to a share in a company, whether he be a transferee, or an executor, or an administrator, or an assignee, is to succeed to the interest of his predecessor, comprising the various rights conferred by the contract contained in the articles of association—the rights to transfer, to vote and take part in the management of the company, to receive dividends, and so forth. And these rights are, prima facie, absolute, though, as we have seen, they may be restricted by the articles. But such persons do not, ipso facto, become members of the company. To exercise some, if not all, of the rights attaching to their shares, they must have their names entered on the register of members. And if to exercise and avail themselves of such rights they must be registered, then it follows, in my opinion—subject to any restriction in the articles—that they must be entitled to registration as an incident of their property. Executors, trustees, and assignees and trustees in insolvency do not often claim to be registered as members of a company, because notice of trusts may not be entered on the register, and registration as members may involve them in personal liability. But they may have the shares transferred into their own names if they so desire (City of Glasgow Bank in Liquidation—Buchan's Case[10]).

The learned Chief Justice of the Supreme Court of Victoria relied upon the provisions of art. 29, empowering the directors in their discretion, and without assigning any reason therefor, to refuse to register the transfer of any share to any person whom they should not approve as transferee. But what is involved in the present case is not a transfer within the meaning of that article, but a transmission of rights by force of the Insolvency Act (In re Bentham Mills Spinning Co.[11]), and the article is therefore inapplicable.

The appeal should be allowed, and an order made in the terms of the notice of motion.

Appeal allowed. Order of the Supreme Court discharged. Order that the register of the Company be rectified by inserting therein the name of the appellant as the holder of 4,500 fully paid ordinary shares therein, and that scrip for such shares be issued to the appellant in his own name.

Solicitors for the appellant, R. E. Lewis & Beacham Kiddle.

Solicitors for the respondent, Blake & Riggall.

[1] (1868) L.R. 4 Ch., at p. 27.

[2] (1910) 1 Ch. 312, at pp. 316, 317.

[3] (1897) 1 Q.B. 55, at p. 63.

[4] (1877) 6 Ch. D. 70.

[5] (1910) 1 Ch. 312.

[6] (1880) 15 Ch. D. 426, at p. 433.

[7] (1902) 1 Ch., at p. 474.

[8] (1921) 1 Ch. 420, at pp. 428, 429.

[9] (1868) L.R. 4 Ch. 20.

[10] (1879) 4 App. Cas. 547, 549, at p. 588.

[11] (1879) 11 Ch. D. 900.