In re Coolibah Pty. Ltd.

Judges:
Sheahan J

Court:
Supreme Court of Queensland

Judgment date: Judgment handed down 7 February 1980.

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Sheahan J.

I have before me two related matters: the first is an application by notice of motion by a company named Coolibah Pty. Ltd. for two orders, namely:

``1. That Ian Gordon Jensen be appointed to represent all persons who were members of the company on twenty-eighth June, 1977.

2. Pursuant to Section 63 of The Companies Act 1961-1978, the allotments of shares in the capital of the company specified hereunder made on the twenty-eighth day of June, 1977 be validated.''

I mention that the allotment of shares just referred to is not specified in the Notice of Motion, as filed, but nothing turns on that at this time.

The second application is by summons taken out on the first application by the Commissioner of Taxation of the Commonwealth of Australia pursuant to Order 3 Rule 11 of the rules of the Supreme Court that he be added as a respondent in the first application.

The basis for the second application is that the Commissioner of Taxation has disallowed certain claims by each of the numerous persons listed as respondents in the summons (other than the Commissioner of Corporate Affairs) for tax losses asserted to be allowable as such to the said respondents. The claims of the said respondents that such losses are allowable for taxation purposes are based on a series of transactions involving shares in Coolibah, the details of which are recited in the material put before me by affidavit and which I do not consider necessary to set out in detail. In essence, the position seems to be this: if I allow the second application, the Commissioner wishes to argue on the hearing of the first application that it would not be just and equitable for a court to validate certain allotments of shares made by the company Coolibah to the said respondents, which allotments were made before certain necessary alterations to the company's Memorandum were registered and certified to under the provisions of sec. 21(3) of the Companies Act by the Commissioner for Corporate Affairs. If, on the other hand I refuse to add the Commissioner of Taxation as a respondent to the first application, it is said that the Commissioner who has assessed to income tax the said respondents by disallowing the claimed tax losses will be deprived of the opportunity of arguing that rights to taxation which may have accrued to him by virtue of the non-compliance with sec. 21(3) of the Act should not be taken away by a validation order made pursuant to sec. 63 of the Companies Act, the substantial relief which the first application seeks.

The second application is, understandably, opposed by counsel for the respondents (Mr. Davies Q.C.) who have claimed the tax losses on the basis that Order 3 Rule 11 does not justify the order sought by the applicant in the second application.

Mr. Ambrose Q.C. for the Commissioner of Taxation, relied on the second paragraph of Order 3 Rule 11 which gave power to a Court or a Judge to order that the name of a person whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate and settle all the questions involved in the cause or matter be added.

I will not attempt to summarise the arguments of counsel for the parties, each of whom argued lucidly and succinctly, nor will I attempt an analysis of the authorities cited to me by counsel, none of which was irrelevant to the question I have to answer and to all of which authorities I have given consideration. I must confess to having had some fluctuations of mind during the arguments of counsel but in the end and after some hesitation I have decided to exercise my discretion in favour of the applicant, the Commissioner of Taxation, in the second application, that he be added as a respondent to the first application. I do so because I consider that the Commissioner of Taxation should be allowed to present arguments and/or evidence that in the events which have happened, and because of them, it

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would not be just and equitable that a validation order under sec. 63 of the Companies Act should be made.

In coming to this conclusion I mention that the English rule which corresponds with our Order 3 Rule 11 (Order 15 Rule 6) differs in one material particular in that it uses the words, ``whose presence before the Court is necessary'', not as in Order 3 Rule 11 the words, ``may be necessary''. This I consider is not a distinction without a difference but in truth a real distinction which widens somewhat the scope of the power of the Court or a Judge under Order 3 Rule 11, compared with the scope of the English rule, Order 15 Rule 6. For the benefit of any appellate court I add that this distinction has played a decisive part in my decision to add the Commissioner of Taxation as a respondent to the first application.

Two other things I think I should mention; firstly, it seems that until 1971 the corresponding English rule used the words, ``whose presence before the Court may be necessary'' (Order 16 Rule 11 now Order 15 Rule 6). Therefore, it seems to me that cases decided in England subsequent to that amendment may not be persuasive in every case of the situation in Queensland. Lastly, I have been concerned during the argument with the question of whether or not Order 3 Rule 11 has any application on its true construction to causes or matters which are not truly issues joined between parties; in other words does Order 3 Rule 11 contemplate the adding of a respondent to an application to which it was not necessary in the first place to have joined him so far as the applicant is concerned? In the short time at my disposal I have not been able to resolve this matter, namely, whether or not the words ``cause or matter'' refer to an action strictly so-called brought by one party against another or others. In
Amon v. Raphael Tuck & Sons Ltd. (1956) 1 Q.B. 357 at p. 369, Mr. Justice Devlin (as he then was) said:

``It is not, I think, disputed that `the cause or matter' is the action as it stands between the existing parties. If it were otherwise, then anybody who showed a cause of action against either a plaintiff or defendant could, of course, say that the question involved in his cause of action could not be settled unless he was made a party.''

What I am really trying to say is that in the cases to which I have had recourse, not only today but in previous cases, I have some doubt as to whether the words ``cause or matter'' in Order 3 Rule 11 truly embraces applications of the kind the subject of my decision. However, as this matter was not argued I say no more about it.

The Order of the Court is:

Order as per summons.

Further Order that the costs of and incidental to that application be reserved.

I adjourn the hearing of the motion to a date to be fixed and I also order that the costs of the motion be reserved.