Ascot Investments Pty Ltd v Harper
148 CLR 33733 ALR 631
(Judgment by: BARWICK CJ)
Between: ASCOT INVESTMENTS PTY LTD
And: HARPER
Judges:
Barwick C.J.Gibbs J.
Stephen J.
Mason J.
Murphy J.
Aickin J.
Wilson J.
Subject References:
Family Law
Judgment date: 2 February 1981
CANBERRA
Judgment by:
BARWICK CJ
In this case, the second-named respondent (the husband) was ordered by a court exercising jurisdiction under the Family Law Act 1975 (Cth) as amended ("the Act"), to pay to his wife a considerable sum of money by way of maintenance at a time when a decree nisi for dissolution of their marriage had been made. The Court ordered the husband to transfer to his wife by way of security for the payment of the ordered sum of maintenance, his shareholding in a private company, the present appellant. That shareholding was substantial but not controlling. The husband refused to sign a transfer to his wife of his shareholding. The Court appointed a Master of the Court to sign the necessary transfer on the husband's behalf. This was done and the transfer delivered to her. Of the appellant, the husband was a director, one of four, the others being adult children of the marriage. He was, in fact, managing director. Upon presentation of such a transfer to the appellant, its directors, acting under the provisions of the appellant's memorandum and articles of association, would have the right to refuse to register it.
Clause 4 (a) of the memorandum of association of the company provided:
"The right of the members to transfer shares in the Company shall be restricted in that the Directors of the Company may decline to register any transfer without assigning any reason therefor."
Article 11 of the articles of association of the company is in these terms:
"Save as herein otherwise provided and subject to the provisions of the Act, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a Court of competent jurisdiction or as required by Statute, be bound to recognise (even when having notice thereof) any equitable or other claim to or interest in such share on the part of any other person."
Article 143 (a) provides as follows:
"The right of the members to transfer shares in the Company is restricted in that the Board may at any time in its absolute discretion decline to register any transfer of shares."
However, before any refusal by the directors to register the transfer, the wife sought of the Court, amongst other things, an order that the appellant and its directors register the transfer. At first instance, no such order was made. But, on appeal, a Full Court of the Family Court has ordered the company and its directors, including the husband, to register the said transfer of the shares. The Court did so largely on the footing of statements made by members of this Court in Sanders v. Sanders (1967) 116 CLR 366 ; Antonarkis v. Delly (1976) 51 ALJR 21 ; and Reg. v. Dovey; Ex parte Ross (1979) 141 CLR 526 . The Full Court also appears to have founded its order in some part upon the circumstance that the company had intervened in the proceedings in the Family Court and thus become, by reason of s. 92 of the Act, a party to those proceedings.
The appellant has appealed to this Court by its special leave against the orders of the Full Court of the Family Court.
No question of constitutional validity has arisen in the appeal. The submission of the appellant is that the restriction on the registrability of the husband's shareholding imposed by the memorandum and articles of association of the appellant was inherent in the nature of his shares. The consequence is, according to the submission, that, having regard to the memorandum and articles of association, the shares did not carry any right to the registration of their transfer and that therefore the husband could not himself have compelled the registration of the transfer of the shares - nor, for that matter, could the transferee. It follows, submits the appellant, that the appellant and its directors cannot, in the circumstances, be ordered to register the transfer of the shares.
It was also submitted that no additional jurisdiction accrued to the Family Court in the case by the operation of s. 92 and the intervention of the company.
The submission made on behalf of the wife is that the Family Court has jurisdiction to do anything which is required to be done to make its orders against the husband fully effective. The transfer of the shares is in this submission ineffective till registration of the transfer: or at least is imperfect till that has happened. Consequently, it is said, the Family Court has jurisdiction to require the registration of the shares as a means of effectively enforcing its order for their transfer.
It may at once be conceded that the Family Court may make orders which are appropriate to render effective orders made by it within its jurisdiction. Such enforcing orders must, of course, do no more than is necessary and appropriate for the enforcement of the substantive order or orders. They cannot directly affect the rights of third parties. But it is no objection to such an enforcing order that it binds or operates upon a stranger to the Family Court proceedings or that compliance with it may indirectly or consequentially effect substantive rights of the stranger. The cases to which I have already made reference and cases subsequent thereto establish so much.
But it is essential first to determine the precise nature of what I have called the substantive order of the Family Court, i.e., in this case the order that the husband transfer his shareholding to his wife by way of security for the payment of the ordered maintenance. It seems to me that failure in this respect has both led the Full Court of the Family Court into error and been the basis of much of Mr. Goldberg's submissions to this Court.
It will be profitable to recall what the substantive order was. An order had been made that the husband pay to his wife a sum of money by way of maintenance. That order is to be obeyed by him. There is no question as to its validity. As a means of enforcing obedience to that order and as a security for its performance, a court exercising jurisdiction under the Act had power and authority to compel the husband to execute a transfer of his property, either absolutely or by way of security, in order to satisfy, or secure the satisfaction of, the order for payment of maintenance. No question arises as to the validity of such an order.
The husband's property, however, was relevantly his shareholding in the appellant. The rights which shares carry or represent are determined by the memorandum and articles of association of the company in whose capital they are held and by the general law. Those documents and the general law circumscribe the rights covered by the shares and indicate what rights the shareholder or anybody taking through or under him may exert or enforce.
Clearly, as I have said, the husband could be compelled to sign a transfer of the shares: that was something he could do. In default of his doing so, the court could appoint somebody to sign the transfer for him. In this case, the court did so. The transfer so signed would be valid. The husband might be ordered to take such steps as he could lawfully take to secure the registration of the transfer. But the court could have no authority to compel the husband to do something which he could not do or compel others to do. It is clear, in my opinion, that the husband's rights as a shareholder are derived from and determined by the memorandum and articles of association of the appellant and by the applicable general law which in this case is the Companies Act 1961 (Vict.), as amended, in which State the appellant was incorporated, and as interpreted by the courts. Under that law, restrictions on transferability and on registrability are permissible. Indeed, there has been no suggestion in this case that the appellant's memorandum and articles of association in any relevant respect are invalid. Consequently, the shares in the appellant did not entitle the shareholder to compel the registration of any transfer of a share or shares which he might make. The property of the husband in the shareholding did not extend to or include a right to the registration of a transfer of his shares. Therefore, the husband, in my opinion, could not be ordered to secure the registration of the transfer, for that he could not do. I have indicated that he might be ordered to use his best endeavours to obtain that registration. Whether he could be ordered to exercise his vote as a director in favour of the registration of the transfer may be a question because of the fiduciary aspects of the office of directors, though it may be in a particular case that no interest of the company could arise. But that question need not now be resolved. I have said earlier that the husband's shareholding did not place him in control of the company. By that I mean to say that not only could his vote in a general meeting of the company not determine the result of a motion before that meeting: I mean also to indicate that the husband was not shown to be able to treat the company as his own, an alter ego. Though he was managing director, it does not follow that he could exercise the powers of that office for his own personal purposes. The word "control" in this connexion may be ambiguous. The control which is significant here would be the ability to treat the company and its affairs as his own. Control he might exercise in the interests of the company and all its shareholders would be irrelevant. If the Full Court thought there was material on which he could be said to be in control of the company in the relevant sense, their Honours were, in my opinion, in error.
In my opinion, the appellant and its directors could not be ordered to do something in relation to the shareholding which the husband by dint of his shareholding could not compel the appellant or its directors to do. Nor could the court alter the nature, incidents or extent of the property which the court could command the husband to transfer. It could only require him to deal with, i.e. to transfer, what in point of property he had. To conclude otherwise would be unauthorizedly to enlarge the rights inherent in the shareholding.
It is said by counsel for the wife that until registration, the transfer signed and delivered by the husband was ineffective. But this clearly is not so. The transfer was effective to create equitable rights. No doubt registration would convert the equitable title into a legal title: and the absence of a right to compel registration of a transfer reduced the ambit of the equitable interest in the shares. In truth, the transfer already signed on behalf of the husband and delivered to his wife is as effective a transfer of the property in the shares as the husband as a matter of right could make.
If these fundamental considerations are borne in mind it becomes apparent that the decision of the Full Court of the Family Court is clearly insupportable as an exercise of the admitted power to render effective the order of the Family Court that the husband transfer to his wife his shareholding in the appellant.
However, the order that the appellant and its directors register the transfer of the husband's shares in the appellant was sought to be justified because, by operation of s. 92, the appellant had become a party to proceedings in the Family Court. I have considerable difficulty in understanding why the joinder of the appellant as a party can in any respect add to the court's powers or authority so as to provide a basis for the order for the registration of the shares. Whatever the effect of s. 92, it is, in my opinion, quite clear that its operation cannot in this case cause any relevant accretion of jurisdiction to the Family Court.
There is no need for me to discuss the decisions to which the Full Court made reference. Properly understood, they have nothing to say on the question on which this appeal turns: I have earlier indicated what they do decide; and they decide no more. Those cases are, in my opinion, quite beside the point in this case and do not in any respect justify the order which the Full Court has made.
Before parting with the matter, I ought to make it clear that in deciding it I am not concerned to consider or comment upon the obduracy of the husband in relation to the order for payment of maintenance. But I can say that the circumstances of this case illustrate that the denial by the Act of the power to order imprisonment as a means of securing compliance with an order for maintenance has left the Family Court with inadequate power to deal with a recalcitrant person who is prepared to ignore or avoid his obligations. Indeed, the lack of such a power puts a premium on recalcitrance.
I would allow the appeal and set aside the orders made by the Family Court against the company and its directors.