PARTIES:	AUSTRALIAN AGRICULTURAL COMPANY & ORS
V
OATMONT PTY LTD & ORS

TITLE OF COURT:	In the Court of Appeal of the N o r t h Et r n Territory of Australia

JURISDICTION:

APPEAL	from	SUPREME
Territory jurisdiction

COURT	exercising

DELIVERED: HEARING DATES:
JUDGMENT OF:

AP 12 of 1991 on appeal from sec 712 of 1990

Delivered at Darwin 19 March 1992

Heard	at Darwin  7, 8, 9	and	10	October
1991

Asche CJ, Martin and Mildren JJ

CATCHWORDS:

ADMINISTRATIVE LAW - Judicial review on grounds of ultra vires or defective exercise of powers - Declarations and orders - Locus standi - Standing - Declaration sought that defendant in breach of Crown Lands Act - Order sought that Minister forfeit Crown leases

ADMINISTRATIVE LAW - Judicial review on grounds of ultra vires or defective exercise of powers - Declarations and orders - Locus standi - Standing - Fiat of Attorney-General refused - Joinder of Attorney-General does not overcome standing problem where right is a public right

CORPORATIONS				Companies		Stock	Exchange,		sharebroking transactions			and	dealings		with		issued			shares Shareholders'	rights			Declarations		Locus		standi Standing	-	Equitable		interest· only shown -	Not essential that legal cause of action established
Supreme Court Rules (NT),r23.05
Crouch v The Commonwealth (1948) 77 CLR 339, applied.
CORPORATIONS				Companies			Stock		Exchange,	sharebroking transactions			and	dealings		with		issued			shares Shareholders'		rights			Declarations		Locus		standi standing - Sufficiently arguable case - Circumstances where sufficiently	arguable		case	founds	sufficient		standing	to prevent summary dismissal
Robinson v The Western Australian Museum (1977-78) 138 CLR 283, applied.

CORPORATIONS		Companies	Stock transactions	and	dealings		with

Exchange,	sharebroking issued		shares

Shareholders'		rights		Declarations Standing	Interference	with	public	and Interference		with	public		right	causing peculiar to the plaintiff

Locus	standi
private	right special		damage

Boyce v Paddington Borough Council [1903] 1 Ch 109 at 114, applied.

CORPORATIONS			Companies		Stock	Exchange,		sharebroking transactions		and		dealings		with		issued			shares Shareholders'	rights		Declarations		Locus		standi standing - May arise where shareholder seeks declaration on proposed	unlawful	activity			Derivative	action	No derivative action where mere negligence
Pavlides v Jenson [1956] Ch 565, referred to.
Powell v Kempton Park Racecourse Company  [1897 J	2 QB 242, referred to.
Prudential	Assurance  Co Ltd v Newman Ind Ltd	& Ors (No.2)
[1982] 1 Ch 204, referred to.
CORPORATIONS				Companies			Stock		exchange,	sharebroking transactions			and	dealings			with		issued		shares Shareholders'	rights			Declarations		Locus		standi Standing	-	Personal		Action	-	No	personal	action	can	be based upon a diminution of a company's share value
Prudential  Assurance  Co Ltd v Newman Ind Ltd	& Ors (No.2)
[1982] 1 Ch 204, applied.
CORPORATIONS				Companies		Stock	exchange,		sharebroking transactions			and		dealings		with		issued		shares Shareholders'		rights			Declarations		Locus		standi standing		Unlawful		conduct,		reckless	indifference	to legality	of	acts	nor	negligence		alleged	-	Oppressive	to grant standing to a shareholder whose personal rights are unaffected and who cannot bring derivative_action
Anderson v Midland Railways [1902] 1 Ch 369, applied.
CORPORATIONS				Companies			Stock	exchange,	sharebroking transactions			and	dealings			with		issued		shares Shareholders'		rights			Declarations			Locus		standi Standing	- Shareholder	aware  of alleged unlawfulness	when purchasing shares - Minimal share purchase - Circumstances of	purchase	sufficient		to		preclude		standing			in	both personal  and derivative  action - No real interest	in the litigation

Central	Queensland		Speleological	Society		Inc	v Queensland	Cement	Pty	Ltd	(1989)		2	Qd	R	512 applied.
Trower v African Tug Co [1904] 1 Ch 558, applied.

Central
at	531,

CORPORATIONS				Companies		stock	exchange,	sharebroking transactions			and	dealings		with		issued		shares Shareholders'	rights		Declarations		Locus		standi Standing	Special	interest			Interest		in	requiring	a

competitor to comply with legislative restrictions - No interest beyond any other member of the public

Boyce v Paddington Borough Council (1903] 1 Ch  109, referred to.
Yates Security Services Pty Ltd v Keating &  Ors (1980) 98 ALR 68, applied.
CORPORATIONS - Companies - Management and administration - Directors - Shareholders' rights - Abuse of powers - Acts contrary to law may involve breaches of fiduciary duties owed to company

CORPORATIONS - Companies - Management and administration - Shareholders' rights - Derivative action - No derivative action where mere negligence

CORPORATIONS Companies Stock Exchange, sharebroking transactions and dealings with issued shares - Entity who contracts through a broker to purchase shares has an equitable interest under unregistered transfer

Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87 at 104, applied.

CORPORATIONS		Companies	Stock	Exchange,	sharebroking transactions	and	dealings		with		issued		shares Circumstances surrounding purchase of shares sufficient to preclude standing in both personal and derivative action - Oppressive to grant standing to shareholder

Anderson v Midland Railways (1902] 1 Ch 369, Central	Queensland		Speleological	Society Queensland	Cement	Pty	Ltd	(1989)		2	Qd applied.

applied.
Inc	v	Central
R	512	at	531,

Trower v African Tug Co (1904.J	1 Ch 558, applied.
CORPORATIONS Companies Stock Exchange, sharebroking transactions and  dealings  with  issued  shares  Ultra vires - Ultra vires in wide and narrow sense - Distinction between corporate incapacity and abuse of powers by directors and shareholders  "Conduct"  proscribed  by statute - Where company engages in conduct contrary to the general law the conduct may not be ultra vires or unauthorised Distinction between civil liability and criminal responsibility - Ultra vires in the narrow sense repealed

Companies (Northern Territory) Code,ss66C,67 and 68 Corporations Law,ss160,161 and 162
Morgan v Babcock & Wilcox Ltd (1929) 43 CLR 163, applied.
S	&	Y	Investments	(No.2)	Pty	Ltd	v	Commercial	Union Assurance Co Australia Ltd (1986) 44 NTR 14, applied.
Tesco Ltd v Nattrass (1972] AC 153, applied.
Anderson v Midland Railways (1902] 1 Ch 369, discussed.
ANZ Executors & Trustees Co Ltd v Qintex Australia Ltd
(1990) 8 ACLC 900, discussed.
Powell v Kempton Park Racecourse Company [1897 J 2 QB 242,
discussed.

Rolled Steel Ltd v British Steel Corporation [1986] 1 Ch 246, discussed.

COURTS AND JUDGES - Courts - Jurisdiction - Jurisdiction to grant declaratory relief very wide  Limited  only  by court's discretion
Forster v Gododex Pty Ltd (1972) 127 CLR 421, considered.

REPRESENTATION:

Counsel: Appellant: Respondent:  Cross Appellant: Cross Respondent:

Solicitors: Appellant: Respondent:  Cross Appellant: Cross Respondent:

Russell  QC with him D Trigg R Conti QC with him N Henwood R Conti QC with him N Henwood T Riley QC with him J Waters

Philip & Mitaros cridlands cridlands
Solicitor for the NT

Judgment category classification: CAT A Court Computer Code:
Judgment ID Number: MIL92006 Number of pages: 24
General Distribution

IN THE COURT OF APPEAL
OF THE NORTHERN TERRITORY OF AUSTRALIA
AT DARWIN	No. AP12 of 1991
On	appeal	from	Supreme	Court No. 712 of 1990
BETWEEN:
AUSTRALIAN AGRICULTURAL COMPANY
First Appellant

AND:
SHILLONG PTY LTD
Second Appellant

AND:
THE PEEL RIVER LAND AND MINERAL COMPANY PTY LTD
Third Appellant
AND:
NT PASTORAL COMPANY PTY LTD
Fourth Appellant

AND:
AA & P JOINT HOLDINGS PTY LTD
Fifth Appellant

AND:
THE GULF CATTLE COMPANY PTY LTD
Sixth Appellant

AND:
AUSTCATTLE HOLDINGS PTY LTD
Seventh Appellant

AND:
WAXAHACHI PTY LTD
Eighth Appellant

AND:
OATMONT PTY LTD

AND:

Respondent

DELAMERE STATION PTY LTD
Cross Appellant

AND:
MINISTER FOR LANDS AND HOUSING
Cross Respondent

CORAM: Asche CJ, Martin and Mildren JJ

REASONS FOR JUDGMENT
(Delivered 19 March 1992)

Asche CJ:	I	agree	with	the judgment	of	Mildren	J	and	the orders proposed by him.

Martin J:	I	agree	with	the judgment	of	Mildren	J	and	the orders proposed by him.

Mildren J:

Pursuant to s38A of the Crown Lands Act, it is an offence for a person or company to hold or have an interest in pastoral land which exceeds 12,950 square kilometres in area. In the case of a company, it may commit this offence if it and its subsidiaries have between them such an interest. Section 38A (lB} permits the Minister to give his consent to extending the area to a maximum of 20,000 square kilometres. Oatmont Pty Ltd ("Oatmont") and Delamere Station Pty Ltd ("Delamere") commenced this action seeking, inter alia, a declaration that Australian Agricultural Company Limited ("AACO") is in breach of s38A of the Act, an order that the Minister take all necessary steps to forfeit the relevant Crown leases, and an order that AACO cause and procure the disposition of certain pastoral lands held by the other Defendants which are its subsidiaries.

By art amended Summons filed 30 January 1991, AACO, and those of the other Defendants which are its subsidiaries, applied to strike out the proceedings on a number of grounds including the ground that the Plaintiffs lacked standing to bring the proceedings. Upon the hearing of the application at first instance the learned judge held that Oatmont, but not Delamere, had established a sufficiently arguable case to found standing to seek the declarations and relief sought against AACO and its subsidiaries. His Honour held that neither Oatmont nor Delamere had any special interest based upon a claim that they were potential competitors for the acquisition of pastoral leases on the Barkly Tableland. However, he held that Oatmont, which claimed to be the holder of fifty shares in AACO, had a sufficiently plausible argument, firstly, that is was entitled to be treated as a shareholder and, secondly, that as such it had a right to bring an action against AACO to prohibit acts by

the company prohibited and penalised by law where the property
of the company and the value of its shares were put at risk to prevent the Appellants from summarily  shutting  out Oatmont's
action at this stage of the proceedings. His Honour also held that the court could not make an order against the Minister to forfeit the leases. The only appropriate order would be to compel the Minister to exercise his discretion to forfeit the leases, and it could not be said that the only proper exercise of that discretion would demand forfeiture. Accordingly, he dismissed the claims against the Minister and the Attorney­ General.

AACO has sought leave to appeal against this decision on the ground that  Oatmont  as  a  shareholder  of  A.ACO  has   no  arguable right of action to prohibit acts by it which are prohibited and penalised by the general law where AACO's property and the value of its shares are put at risk and, alternatively, on the
ground that his Honour wrongly held that the facts alleged by Oatmont disclosed an arguable right of action by Oatmont as a shareholder.

Oatmont and Delamere have sought leave to cross-appeal from his Honour's dismissal of the proceedings against the Minister, and from that part of his Honour's decision wherein his Honour held that Delamere and Oatmont had no "special" interest in the subject matter of the proceedings sufficient to grant locus standi.

The factual basis in support of the allegations of Oatmont and Delamere is disputed by AACO and the other Defendants. However it was common ground before his Honour and before this Court that for the purposes of this appeal the facts alleged by oatmont and Delamere may be taken to have been proven. similarly, it was agreed by counsel for the parties that the purposes of the argument before his Honour as well as for the purposes of this appeal, it should be assumed that a contravention of s38A exists (although AACO and the other Appellants dispute this as well).

AACO is a listed public company incorporated in Queensland. Its principle shareholder is the Colonial Mutual Life Assurance Society. Certain of AACO's subsidiaries are lessees of pastoral lands in the Northern Territory pursuant to the Crown Lands Act as follows:

Lease	Date of Acquisition	Proprietor	Land Area		
Avon Downs	pre 1948	3rd Appellant1	3,939	km2	
Rockhampton Downs	pre 1948	4th Appellant2	5,081	km2	
Brunette Downs	1979	6th Appellant3	12,250	km2	
Austral Downs	1990	8th Appellant4	2,010	km2	

Total Deemed Area5

}
}   9,020 km2
}

12,250 km2

}
}
}    4,167 km2
Burramurra	1990	8th Appellant4	2,157	km2	}
---------2-------------2
25,437 km	25,437 km

The Peel River Land and Mineral Company Pty Ltd.
2	NT Pastoral Company Pty Ltd.
3	The Gulf Cattle Company Pty Ltd.
4	Waxahachi Pty Ltd.
5		This is the area in square kilometres in which Oatmont and Delamere assert that AACO is deemed to have a beneficial interest pursuant to s38A(1O) of the Crown Lands Act by reason of AACO's subsidiaries' ownership of these leases.

The Appellants contend that on the true construction of s38A(10) the total deemed area is in fact only 10,661 km2 •

Oatmont contends that all of the above leases are situated in the Barkly Tablelands which is an area ranging from Newcastle Waters Station south east to Lake Nash Station on the border of Queensland and comprises approximately thirty properties. It comprises predominantly "downs country" which is the best all round cattle country in the Northern Territory and amongst the best in Australia. It is rare for properties on the tableland to come onto the market, and once properties are acquired by

large

corporations

they	are rarely,	if	ever,	sold.	Most	of

these them

properties are are	held	by

of good quality and a large percentage of large	corporations	including	Heytesbury

Pastoral Company

Company (which	is

Limited,	the		Vesteys	Group,	Desa		Cattle controlled	by	the	Government		of	Sabah),

Australian Consolidated Press Holdings Limited and North Australian Pastoral Company Limited, and by the Appellants. The rest are mostly in the hands of smaller family companies or individuals. Properties in the tablelands usually come onto the market only when the owners run into financial difficulty, or because of the ill-health or age of the owners. It is unlikely that those properties held by larger corporations would be sold due to adverse financial circumstances.

The present proceedings were commenced by Originating Motion filed 10 December 1990. On 2 November 1990, Oatmont entered into negotiations with Waxahachi Pty Ltd (which was then not a subsidiary of AACO) to purchase Austral Downs and Burramurra pastoral leases. Whilst the negotiations were still in train, on 12 November 1990, AACO acquired through another subsidiary, Shillong Pty Ltd, all of the shares in Waxahachi Pty Ltd. At this time Oatmont was not a shareholder in AACO. AACO's purchase was announced to its shareholders and the stock exchange on 13 November 1990 and was widely reported in the media on 14 November 1990. The purchase was, by then at least, known to Mr Peter Sherwin, a director of both Oatmont and Delamere, and the person who controls both of those companies. On 30 November 1990 Oatmont was adv-ised by senior counsel that the purchase by AACO of the shares in Waxahachi Pty Ltd breached s38A of the Crown Lands Act and on 30 November 1990 Oatmont's solicitors wrote to AACO, Shillong Pty Ltd and Waxahachi Pty Ltd. The letter to AACO included the fallowing passage:

"Our client has searched and considered your company's present structure and land holdings and is advised by Senior Counsel that your company is in breach of Section 38A of the Crown Lands Act of the Northern Territory, in that Australian Agricultural Company Limited controls in excess of 20,000 square kilometres of pastoral land in the Territory which is well in

excess of the 12,950 square kilometre limit. This breach will be exacerbated by Shillong's purchase of Waxahachi Pty Ltd.

Our client has asked the Attorney-General of the Northern Territory to seek to prevent the proposed sale, on the basis that to proceed will result in a breach of the statute."

The letters to Shillong Pty Ltd and Waxahachi Pty Ltd contained paragraphs in similar terms. Each letter concluded by requesting an undertaking not to proceed with the sale pending the resolution of the contemplated proceedings.

On the same date, viz., 30 November 1990, Oatmont through Mr Sherwin, contracted to buy fifty shares in AACO through its broker, J.B. Were & Son. AACO's issued share capital was then in excess of fourteen million shares. Registration of the Oatmont shareholding did not occur until 31 December 1990, i.e. twenty-one days after the Originating Motion was issued. Completion of the sale of the shares in Waxahachi Pty Ltd to Shillong Pty Ltd occurred on 14 December 1990. There can be no doubt that at the time Oatmont contracted to purchase its fifty shares in AACO it already had been advised that AACO was in breach of s38A of the Crown Lands Act and that the sale of the shares in Waxahachi Pty Ltd would also breach s38A.

Does Oatmont have standing due to its shareholding?
Although Oatmont was granted leave to amend the Originating Motion at the hearing to claim a rtght as a member of AACO to bring the action not only on its own behalf but also on behalf of all remaining shareholders of AACO, Mr Conti Q.C., for Oatmont, told this Court that oatmont was not relying upon an entitlement to bring a derivative action in order to provide standing. Oatmont's contention was that it had a private right as a shareholder to prevent corporate misuse of power where that misuse of power is ultra vires due to illegal conduct of the kind which is proscribed by statute, and attracts penalties.  The penalty  for a breach  of s38A(l) of the Act is
$100 per day or part of a day during which the offence continues,  and, so Oatmont contends, forfeiture  of the leases

or at least some of the leases pursuant to s38A(ll) by the Minister.

AACO submitted that as Oatmont was not registered as a shareholder at the time of the commencement of the proceedings, there could be no question that it had standing to bring these proceedings in that capacity, and that as Oatmont was aware of the breaches of s38A(l) of the Act including the illegality resulting from the contract to purchase Waxahachi's shares, it could not rely on that illegality to give it standing, as otherwise this would mean that in any case where the conduct of a company was concerned, a person could acquire locus standi by
the simple expedient of acquiring some of its shares. To the extent that the claim for locus standi relied upon the statutory contract between AACO and Oatmont at the time the shares were agreed to be purchased, it was submitted that Oatmont must be regarded as having waived those rights.

The effect of entering into a contract through a broker to purchase shares from another shareholder is to confer on the purchaser an equitable interest as a transferee under an unregistered transfer: Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87 at 104. As the learned judge at first instance held, it is not essential in order to obtain declaratory relief under r23.05 of the Supreme Court Rules that Oatmont cannot establish a legal cause of action: see the cases referred to by his Honour at (1991) 75 NTR 1 at 11; Crouch v The Commonwealth (1948) 77 CLR 339-at 359 per Williams J. The mere fact, therefore, that Oatmont was not a shareholder at the time of the issue of the proceedings is not necessarily fatal to its right to seek declaratory relief.

The relevant principles to be applied in deciding whether this court should grant declaratory relief have been authoritatively stated by Gibbs J (with whom the rest of the Court agreed) in Forster v Jododex Pty Ltd (1972) 127 CLR 421. At 435, Gibbs J said:

"The jurisdiction to make a declaration is a very wide one. Indeed, it has been said that, (under the relevant

Rule of Court) 'the power of the court to make a declaration, where it is a question of defining the rights of two parties, is almost unlimited; I might say only limited by its own discretion': Hanson v Radcliffe Urban District Council [1922] 2 Ch. 490 at 507; and see Barnard v National Dock Labour Board [1953] 2 QB 18 at 41; and Ibeneweka v Egbuna [1964] 1 WLR 219 at 225."

At 437-8, Gibbs J said:

"It is neither possible nor desirable to fetter the broad discretion given ... by laying down rules as to the manner of its exercise. It does, however, seem to me that the Scottish Rules summarised by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd (1921] 2 AC 438 at 448,  should in general be satisfied before the discretion is exercised in favour of making a declaration:
'The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, someone presently existing who has a true interest to oppose the declaration sought.'
Beyond that, however, little guidance can be given. As Lord Radcliffe said in Ibeneweka v Egbuna (1964] 1 WLR at 225:
'After all, it is doubtful if there is more of principle involved than the undoubted truth that the power to grant a declaration should be exercised with a proper sense of responsibility and a full realisation that judicial pronouncements ought not to be issued unless there are circumstances that call for their making. Beyond that there is no legal restriction on the award of -a declaration.'"

The requirement that a plaintiff to a suit seeking a declaration must have a real interest to raise the question to be decided is another way of asking the question whether the plaintiff has locus standi. The traditional test expounded by Buckley J. in Boyce v Paddington Borough Council [1903] 1 Ch
109 at 114 recognised different tests depending  upon whether the plaintiff was alleging an interference with a private right or not:

"A plaintiff can sue without joining the Attorney­ General in two cases: first, where the interference with the public right is such as that some private right of his is at the same time interfered with (eg, when an obstruction is so placed in a highway that the owner of premises abutting upon the highway is specially affected by reason that the obstruction interferes with his private right to access from and to his premises to and from the highway); and, secondly, where no private right is interfered with, but the plaintiff, in respect of his public right, suffers special damage peculiar to himself from the interference with the public right."

I should observe, in passing, two things. Firstly, the fiat of the Attorney-General to bring these proceedings had been refused; and, secondly, that the Attorney-General has been joined as a Defendant to these proceedings. This joinder was presumably felt necessary due to the relief being sought against the Minister. The presence of the Attorney-General as a defendant does not overcome any problem of locus standi where the right in respect of which declaratory relief is sought is a public right. In such cases the Attorney-General must be either
a plaintiff or to have given his fiat: see Young, Declaratory Orders, par901.

Leaving the question of waiver to one side for the moment, the first question is whether the learned judge at first instance was correct in deciding that a shareholder, or a person in the position of, or entitled to be treated as, a shareholder for these purposes, has a sufficiently arguable case to found locus standi so as to prevent Oatmont from having its claim summarily dismissed. As his Honour correctly observed, the test to be applied at this stage of the proceedings is that stated by Gibbs J (as he was then) in Robinson v The Western Australian Museum (1977 - 78) 138 CLR 283 at 302:

" it will be a matter for decision whether the court proceeds to determine the disputed questions whose only immediate relevance is to establish whether the plaintiff has standing to sue, or whether it will be satisfied to accord standing to the plaintiff on the ground that he asserts, not implausibly, that his interests are threatened by the operation of the legislation in question. The court has a discretion: it is not bound to take one course rather than the other.

If the plaintiff's claim to have locus standi is merely colourable, and can easily be exploded, the court will no doubt proceed immediately to decide the question of standing and, having decided it against the plaintiff, will dismiss the action."

Oatmont submitted that illegality of conduct is ultra vires the company under the general law, in the so-called "wide" sense of ultra vires, the distinction being between corporate incapacity (ultra vires in the "narrow" sense), and abuse of powers by directors and shareholders (ultra vires in the "wide" sense). This dichotomy appears to have arisen in the context of legislative changes produced by ss66C,67 and 68 of the Companies Acts and Codes 1981: (see ss160,161 and 162 of the Corporations Law). In ANZ Executors & Trustees Co Ltd v Qintex Australia Ltd (1990) 8 ACLC 900 at 988-9 McPherson J (Lee and MacKenzie JJ concurring) said:

"In Plain Ltd v Kinley	&    Royal Trust Co (1931)  1 DLR
468 at 479, Orde JA spoke of ultra vires 'not in the primary application to the powers of the company as a corporate body, but in its secondary application to the irregular exercise by the directors or the shareholders of their powers or rights within the company ' In several recent English decisions, notably Rolled Steel Products Ltd v British Steel Corporation (1982) 3 All ER 1057 at 1077, a similar distinction is made between corporate capacity (ultra vires in the narrow sense), and abuse of power by directors or shareholders (ultra vires in the wide sense). It is ultra vires in the second sense that is directly relevant in answering the question 'whether a disposition of the property of the company was made for the benefit and to promote the prosperity of the company.' The distinction was adopted by Browne-Wilkinson LJ in the Rolled Steel case on appeal (1986) Ch 246, in a passage adverted to by Mason CJ in Northside Developments Pty Ltd v Registrar­ General  &   Ors (1990) 8 ACLC 611 at 621; (1990) 64 ALJR
427 at 433. See also Darvall v North Sydney Brick  &  Tile Co Ltd & Anor (No.4) (1988) 6 ACLC 1095 at 1103-4; (1988) 14 ACLR 474 at 483. The judgment of Vinelott J. at first instance in the Rolled Steel case was responsible in Australia for the amending insertion in 1985 of s67(3) of the Companies Code, which declares:

'67(3) The fact that the doing of an act by a company would not be, or is not, in the best interests of the company does not affect the legal capacity of the company to do the act.'

The explanatory memorandum accompanying the amending Bill, to which Mr Keane QC referred us, explains that sec 67(3) 'specifically excludes' the application  of the Rolled Steel case (1982) 3 All ER 1057, and is 'designed to prevent any suggestion that any doctrine of "wider ultra vires" as expounded by the courts remains in existence.' Section 67(3) operates, however, to the extent and in the manner intended by s66C; that is, it is concerned to ensure that the wider form of ultra vires 'does not affect the legal capacity of the company to do the act', thus maintaining the validity of corporate dealings with outsiders: see s66C(a). It does not free the directors or shareholders from ensuring that 'rules  of the company  are  given  effect to by the company's officers and members': s66C(b). Except in relation to the validity of corporate dealings with outsiders, it therefore does not disturb the fundamental rule that the powers or funds of a company may be used only for company purposes. Cf. Darvall v North Sydney Brick & Tile  Co Ltd & Anor (No.4) (1988) 6 ACLC 1095 at 1104; (1988) 14
ACLR 474 at 484.11

Thus is was submitted by Oatmont that conduct which is proscribed by statute necessarily or inherently involves a misuse of corporate power, and, where the proscribed conduct consists of an acquisition of an asset, a misapplication of the corporate funds. In such circumstances, so the argument goes, a shareholder has locus standi (and in this case, a person entitled to be treated as a shareholder is in the same position) to restrain the carrying out of the transaction and a fortiori can seek a declaration.

on the other hand, AACO submitted that ultra vires in the wide sense was not concerned with abuse of corporate capacity; rather it was concerned with abuse of power by directors or shareholders, and that in so far as some authorities had recognised a shareholder's right to bring such an action, that right depended upon ultra vires in the narrow sense, which had now been repealed by ss160,161 and 162 of the Corporations Law.

It was submitted by Mr Conti QC that the historical basis for a shareholder's locus standi to enjoin his company's illegal and therefore ultra vires conduct was discussed by Lord Wedderburn in his article  "Shareholders' Rights  and  the Rule  in Foss v

Harbottle" {1957) Cam L J 194 at 204-5, where his Lordship said:

"Heading 1.	Ultra Vires or Illegal Acts.
It is plain that the minority can sue in this case because the majority cannot ratify an act ultra vires the company; and a fortiori the same reasoning will be applied to acts which are not merely outside the powers of one company, but 'illegal' in the sense of impossible for any registered company, or prohibited under the general law. In such a case, a shareholder has a right of action, primarily for a declaration or injunction to restrain the act in question, suing either on his own behalf alone, or in a representative action on behalf of himself and all the other shareholders of the company, except any who are joined as defendants."

The authorities to which his Lordship referred which bear on the questions of acts prohibited by law are scanty. In Powell v Kempton Park Racecourse Company [1897] 2 QB 242 the plaintiff was a shareholder in the defendant company and sought an injunction against it to prevent it from permitting part of the lands it owned and upon which it had a racecourse, to be used as a place for betting, contrary to the Betting Act 1853.  No point was taken to the standing of the shareholder in that case to sue. Lindley LJ observed, at 260, that:
"It has been assumed, and probably rightly, that the Court has jurisdiction to protect the shareholders of a company from a misapplication by the company of its property, although such misapplication may be punishable as a criminal offence. I will also assume such jurisdiction, and leave this point open for decision when raised and insisted on."

Lopes LJ observed at 268-69:

"No point has been made that an injunction will not lie to restrain the commission of a criminal offence. I believe that it will lie when its object is to protect the shareholders of a company from any misapplication of its property, although such application may be punishable as a criminal offence."

None of the other members of the court referred to the matter, but as the injunction was refused on the merits, the question did not arise.

In Anderson v Midland Railway Co [1902 J 1 Ch 369 Buckley J dismissed an action for an injunction sought by a shareholder on behalf of himself and all the other shareholders of the company to restrain breaches by the company of s4O of the Railway Clauses Act which prevented more preference being given to certain customers of the railway, including the defendant Henry Wiggin & Co. In that case, if the plaintiff's contentions were right, the company had a cause of action against Henry Wiggins & Co. Buckley J held that the plaintiff had no cause of action because the breach of the Act, if there was one, was not one which gave rights as between the shareholders and the corporation. That case was clearly concerned with a situation where the company had a cause of action, and there was nothing to show that there was any misconduct on the part of the directors for not pursuing it at that stage. Buckley J said (at
3 77):

"The breach, if there be a breach, of the Act of Parliament is not one which gives rise to any rights as between the corporator and the corporation, but one which gives rise to rights as between the corporation and other customers of the corporation. There is nothing ultra vires in the act which is done by the corporation towards the particular customer of which the corporator can complain; it is an act of which other customers of the corporation may complain by proceedings taken by them before a tribunal different to this, and which will give rise to other remedies altogether different from those sought here.
This is not an action which can be brought by the plaintiff suing on behalf of himself and all other shareholders, except under circumstances which do not exist and are not alleged to exist here."

Of the other authorities referred to in the article, Simpson v Westminster Palace Hotel Co (1860) 8 HLC 712 was a case which recognised the right of an individual shareholder to restrain acts by the company which were ultra vires on the basis that the funds of the company were not being applied in accordance with the objects stated in the company's memorandum of association. Hoole v Great Western Railway (1868) 3 Ch App 262, was a case of a representative action by a shareholder to restrain the allotment of shares in lieu of dividends contrary

to s30 of the Act governing the company and was therefore ultra vires and illegal. In that case, an injunction was granted. In Howden v Yorkshire Miners [1903] 1 KB 308; affirmed (1905) AC 256, a member of a trade union was held to be entitled to seek an injunction against the union preventing it from misapplying its funds for purposes not sanctioned by its rules. None of these cases are apposite in my opinion, as they depended upon the power of the court to prevent the misapplication of funds by ultra vires dispositions which were contrary to the Act or constitution governing the particular body. In an analogous situation under the present Corporations Law, the remedy of injunction is conferred by s1324(1) of the Corporations Law upon the Commission or "a person whose interests have been, are or would be affected by the conduct": see sl62(7), which provides that such a contravention may be asserted or relied upon only in the circumstances referred to in that section. The section does not, by its terms, confer any right to apply to the court for relief where the allegation is a breach by the company of the general law, nor is there any such provision elsewhere to be found in the Corporations Law.

As to the concept of ultra vires in the wide sense, in Rolled Steel Ltd v British Steel Corporation [1986] 1 Ch 246, Browne­ Wilkinson LJ identified that expression as referring to transactions which are within the company's capacity, i.e. within the objects specified by the memorandum of association, but in excess or abuse of the powers of the company to carry out those objects. Slade LJ, on .the other hand, seemed to identify ultra vires in the wide sense as also encompassing transactions which were beyond the authority of either the board of directors or of the shareholders. Browne-Wilkinson LJ held that transactions of this kind could be restrained at the suit of shareholders, if they learn of the facts in time. At
303 he said:

"If the members of the company learn of what is proposed in time, they will be able to restrain such transaction: if they only discover the facts later , their remedy lies against those who have wrongly caused the company to act in excess or abuse of the company's powers."

It is not clear whether, in that passage, Browne-Wilkinson LJ was referring to a derivative action, or to an action by an individual shareholder.

However that may be, the authorities to which I have referred show that, where the company is acting within its corporate capacity, and where it is not alleged that the company did not have the authority, or the directors did not have the authority, to enter into the transaction, no question of ultra vires, whether in the true sense or in any wider sense, arises. Where all that is alleged is that the company has engaged in conduct which is contrary to the general law, the impugned conduct is not ultra vires, nor is the conduct necessarily unauthorised in the sense that the articles did not authorise the directors to enter into transactions of that general kind or in the sense that the transaction was not duly authorised by the directors at a validly called meeting of the directors.

Ford, Principles of Company Law 5th ed  at 129  notes (see footnote 8) in relation to corporate criminal liability:

"The doctrine of ultra vires did not create difficulty. The idea that a corporation could not commit a crime because any crime would necessarily be ultra vires the corporation is wrong because it seeks to equate civil liability with criminal responsibility. The criminal law has not required any such equation, as witness the criminal liability of a minor for offences involving fraudulent dealing, although he or she lacks capacity to make certain contracts: Welsh (1946) 62 LQR 346-7. Section 68/162 now precludes .reference to lack of capacity."

Section 161 of the Corporations Law provides:

"A	company jurisdiction,
II

has,	both	within		and	outside		this the legal capacity	of a natural	person

That it is inappropriate to speak of corporate crime being unauthorised is supported by Knox CJ and Dixon J in Morgan v Babcock & Wilcox Ltd ( 1929) 43 CLR 163 at 173-4 where their Honours said:

"An offence involving corrupt intention can be committed by a corporation only through a servant or agent, who, with the necessary mens rea, does or causes to be done, the forbidden act for and on behalf of the corporation acting within the course of his employment or authority ...

Sir James Kemnal, in paying the bribe, acted for and on 'behalf of the Company, and it remains only to consider whether it was within the course of his employment or authority. It is consistent with the articles that he had very wide powers indeed, and it is implicit in the description	of		his	office	that	he	administered	the business	concerns	of the Company.	This	is enough		to prove a prima	facie case  that he was acting	in the
course of his authority."

(See also Isaacs J at 177 who observed that the bribe "was an authorised act of the company").

More recent authority, including this Court in S  &  Y Investments (No.2) Pty Ltd v Commercial Union Assurance Co of Australia Ltd (1986) 44 NTR 14 shows that not every act of an agent of a company is to be treated as an act of the company. Whether the act is that of the company depends upon whether the agent can be considered to be the directing mind and will of the company, either generally, or for the relevant specific conduct constituting the offence: see also Tesco Ltd v Nattrass [1972] AC 153. But whilst not every act of an agent which is a crime can be imputed to a company, it is clear that the criminal acts of agents which are authorised by the company's mind and will are the authorised acts of the company itself.

Nevertheless, there is no doubt that there could be acts of the directors which, whilst not ultra vires or in excess of the authority of the directors in the sense discussed, are so plainly illegal that the directors have acted in abuse of their powers; similarly, if the directors of a company knew that the acts of the company which they authorised were contrary to law. In the latter case the directors would be in breach of their duties as directors to act in good faith; in the former, to act with reasonable care and diligence. In both cases, the directors would breach their fiduciary duty not to disregard the interests of the company as a whole by exposing it to

prosecution, adverse publicity, a fine, and in some cases, possibly forfeiture of the company's property. Perhaps also the directors would be in breach of the duty to act honestly in the exercise of their powers  (Corporations  Law  s232(2))  or their duty to see that the company's property is not applied towards any improper purpose. But not every act of the directors which results in criminal liability of the company involves these considerations. The Board of Directors may have honestly acted upon legal advice that the conduct to be engaged in by the company was lawful, for example. Is a shareholder to be given standing to dispute the recommendation to the Board by the company's legal advisers that the alleged conduct is lawful?

In some cases, it seems to me, a shareholder may well have locus standi to seek a declaration that the proposed activity is unlawful. For example, where the directors are acting in abuse of their powers by knowingly or recklessly acting contrary to the general law, as a result of which the company sustains loss, this breach of the directors' fiduciary duty could well give rise to a derivative action. In such an action the individual shareholder would seek to bring the action the company has vested in it against the directors for the damages suffered to the company for breach of the fiduciary duty: see generally, Ford, op.cit., parl727 and following. In such a case, the company is a proper party, and if the action is successful judgment is given in favour of. the company: Spokes v
Grosvenor	Hotel	Co	[ 1897 J	2 QB 124. In a case where, on the
facts, a derivative action would lie, or might in the future lie, it seems to me that an individual shareholder might well have a sufficient interest to bring an action for a declaration. That, it seems to me, provides one possible explanation for the observations of Lindley LJ and Lopes LJ in Powell v Kempton Park Racecourse Company, to which I  have already referred. Another possibility is that their Lordships considered that such conduct amounted to a misapplication of property which was ultra vires the company's memorandum of association. If so, it was a case of ultra vires in the narrow sense, which, as Mr Russell QC correctly submitted, has been repealed by ssl60,161 and 162 of the Corporations  Act. But it

is worth noting that no derivative action lies where there is mere negligence by the directors: see Pavlides v Jenson [1956] Ch 565 and cf Prudential Assurance co Ltd v Newman Industries
Ltd & Ors (No.2) [1982] 1 Ch 204 at 210-11.

The cause of action upon which Mr Conti QC relies is personal. But, as the Court of Appeal pointed out in the Prudential Assurance case, no personal action exists based upon any diminution of Oatmont's share value. At 222-3, the Court said:

"In our judgment the personal claim is misconceived. It is of course correct, as the judge found and  Mr Bartlett did not dispute, that he and Mr Laughton, in advising the shareholders to support the resolution approving the agreement, owed the shareholders  a duty to give such advice in good faith and not fraudulently. It is also correct that if directors convene a meeting on the basis of a fraudulent circular, a shareholder will have a right of action to recover any  loss which he has been personally caused in consequence of the fraudulent circular; this might include the expense of attending the meeting. But what he cannot do is to recover damages merely because the company in which he is interested has suffered damage. He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a 'loss' is merely a reflection  of the loss suffered by the company. The shareholder does not suffer any personal loss. His only 'loss' is through  the company in the diminution in the value of the net assets of the company, in which he has (say) a 3 per cent shareholding. The plaintiff's shares are merely a right of participation in the company on the terms of the articles of association. The shares themselves, his right of participation, are not directly affected  by the wrongdoing. The plaintiff still holds all  the shares as his own absolutely unencumbered property. The deceit practised upon the plaintiff does not affect the shares; it merely enables the defendant to rob the company. A simple illustration will prove the logic of this approach. Suppose that the sole asset of a company is a cash box containing £100,000. The company has an issued share capital of 100 shares, of which 99 are  held by the plaintiff. The plaintiff holds the key of the cash box. The defendant by a fraudulent misrepresentation persuades the plaintiff to part with the key. The defendant then robs the company of all its money. The effect of the fraud and the subsequent robbery, assuming that the defendant successfully flees with his plunder, is (i) to denude the company of all its assets; and (ii) to reduce the sale value of the plaintiff's shares from a figure approaching  £100,000 to nil. There are two wrongs, the deceit practised on

the plaintiff and the robbery of the company. But the deceit on the plaintiff causes the plaintiff no loss which is separate and distinct from the loss to the company. The deceit was merely a step in the robbery. The plaintiff obviously cannot recover personally some
£100,000 damages in addition to the £100,000 damages recoverable by the company."

At 223-4, the Court further said:

"The plaintiffs in this action were never concerned to recover in the personal action. The plaintiffs were only interested in the personal action as a means of circumventing the rule in Foss v Harbottle. The plaintiffs succeeded. A personal action would subvert the rule in Foss v Harbottle and that rule is not  merely a tiresome procedural obstacle placed in the path of a shareholder by a legalistic judiciary. The rule is the consequence of the fact that a corporation is a separate legal entity. Other consequences are limited liability and limited rights. The company is liable for its contracts and torts; the shareholder has no such liability. The company acquires causes of action for breaches of contract and for torts which damage the company. No cause of action vests in the shareholder. When the shareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the company and that he can only exercise his influence over the fortunes of the company by the exercise of his voting rights in general meeting. The law confers on him the right to ensure that the company observes the limitations of its memorandum of association and the right to ensure that other shareholders observe the rule, imposed upon them by the articles of association. If it is right that the law has conferred or should in certain restricted circumstances confer further rights on a shareholder the scope and consequences of such further rights require careful consideration. In this case it is neither necessary nor desirable to draw any general conclusions."

Of course, Oatmont in this case is not seeking damages. It is seeking a declaration, which was not the remedy being sought in the Prudential case. Nevertheless, it seems to me that the remarks of the Court of Appeal are relevant to the question of standing, in that they show the nature of Oatmont's rights allegedly affected by AACO's conduct.

In this case, it is not alleged that AACO or its directors have acted in a way which the directors knew to be unlawful, or that they were recklessly indifferent to the legality of their actions, or even that they were negligent. Indeed the position of AACO is that its acts were and are lawful. Consequently the case in my view falls within the dictum of Buckley J in  Anderson v Midland Railways (1902] 1 Ch 369 to 376-7 to which I have previously referred. In my opinion it would be oppressive to permit an individual shareholder, where personal rights were not affected, except as to a possible diminution in the value of his shares, and who is unable to bring a derivative action, to seek declaratory relief when the lawfulness of the conduct complained of is neither deliberate nor reckless, nor for that matter, negligent. That is particularly so where the Crown does not assert that the conduct is unlawful, and the Attorney­ General has refused his fiat, and the probability of any proceedings being brought against AACO for the alleged offence is practically non-existent.

If I am wrong in this view, it seems to me to be pertinent to note that at the time Oatmont applied to purchase its shares, it was fully aware of the alleged unlawfulness. The learned judge at first instance did not consider this to be relevant. I respectfully disagree. The number of shares purchased was minimal. Even if the purchase of the shares was not made for the sole purpose of giving oatmont standing, the purchase in the shares in these circumstances would be enough to preclude Oatmont from seeking relief in. either a personal or a derivative action: Tower v African Tug Company [1904] 1 Ch 558: see especially the remarks of Vaughan Williams LJ at 556-7 and Cozens-Hardy LJ at 571-2. The reason their Lordships gave for this was that the plaintiff in such a case does not have a real interest in the litigation. For the same reasons, it seems to me that Oatmont does not have a sufficient interest to maintain standing in this case to seek declaratory relief based upon any right it may have to be entitled to be treated as a shareholder of AACO.

In Central Queensland Speleological Society Incorporated v Central Queensland Cement Pty Ltd (1989) 2 Qd R 512, Derrington J said, at 531, that "a party cannot create his own standing simply by spending money in support of the cause being or intended to be promoted in the litigation, whether it be by printing slogans on T-Shirts or by any other means." Similarly, in my opinion, it is not possible to acquire standing by the simple expedient of purchasing a few shares on the stock exchange in the company which the purchaser wishes to sue when the purchaser knows full well the circumstances said to give rise to the presumed unlawful conduct of that company.

I	have finding

not was

overlooked	the that	Oatmont

fact had

that	his established

Honour's	initial a	sufficiently

arguable case, whereas I have gone somewhat further than that. However, the matter was fully argued before us, and there are no other facts which are likely to be elucidated at the trial which could bear on the matter. In these circumstances it seems to me that it would be a waste of time and put the parties to undue expense to limit my considerations to whether there was merely an arguable case.

Do Oatmont and Delamere have standing by virtue of any special interest?

The case which Oatmont sought to establish was that it was a competitor with AACO for the acquisition of land on the Barkly Tablelands generally and for the Austral Downs and Burramurra pastoral leases in particular. Whilst Oatmont did not engage in any tender for the shares in Waxahachi Pty Ltd, it sought to compete commercially with AACO for the acquisition of Austral Downs and Burramurra by entering into negotiations with Waxahachi Pty Ltd to purchase those leases. It has submitted that Oatmont has a special interest in requiring that its competitor for the acquisition of property complies with the law concerning restrictions on entitlement to acquire the property.

Delamere's case was that it was a competitor with AACO for access to and use of cattle fattening country in the Tablelands.

The sale of the shares in Waxahachi Pty Ltd to AACO having been completed, no injunction was now able to be sought preventing that sale completing. Thus the focus of attention was to obtain a declaration that AACO's acquisition of Waxahachi's shares placed it in breach of s38A of the Crown Lands Act with a view to compelling AACO to either voluntarily sell its interests in Austral Downs and Burramurra, or perhaps some other leases which it holds through its other subsidiaries, or to put in train the forfeiture process in s38(11) of the Act with a view

to	enabling negotiations

Oatmont	or with	either

Delamere, Waxahachi

or	both,		to		enter	into Pty		Ltd	or	the relevant

subsidiaries concerned, or with the Minister, to acquire those interests.

Putting aside any question as to the lack of evidence of the financial capacity of either Oatmont or Delamere to acquire the properties, and assuming that, if the declaration sought was granted, the consequences of the declaration would have the results contended for, it is my opinion that neither oatmont or Delamere has any special interest to give it standing to sue under the second limb of Boyce v Paddington Borough Council [1903] 1 Ch 109 at 114 (which I have cited in full above) as that limb has since been developed by such cases as Australian
Conservation Foundation v The Commonwealth (1980 - 81)	146	CLR	
493; Robinson v The Western Australian Museum (1977 -	78)	138	
CLR 283 and Onus v Alcoa Australia Limited (1981 - 82)	149	CLR	
27.			

The general principles to be applied have been sufficiently set out in the judgment of the learned judge at first instance at (1990) 75 NTR 1 at 3-5 and there is no need to repeat them.

In my opinion, the point which is fatal to Oatmont's and Delamere's claims for standing is that the best that they could hope for if they succeeded in this litigation is an

opportunity, together with any other member of the public, to negotiate to purchase such of the properties as might be forced onto the open market.  In Yates  Security  Services  Pty  Ltd  v Keating and Ors (1980) 98 ALR 68, all three members of the Federal court of Australia rejected standing when that was all that could be shown. Lockhart J said at 81:

"The essential findings of the trial judge were that Yates desired to redevelop the site itself and it hoped that success in this proceeding would provide the opportunity to do so; further, that although success in the case would not enable Yates to make a financial claim, it would confer upon it commercial benefit in the sense of the opportunity to negotiate for the acquisition and development of the site. This benefit would not be unique to Yates as other developers would also have the opportunity to negotiate if they wished. The evidence was that Yates had incurred expenditure in excess of $100,000 with respect to a proposal for the development of Paddy's Market, a proposal which Yates abandoned during the course of the hearing.

In my opinion the ability to negotiate for the acquisition and development of the site, even if it is a commercial benefit, is one which Yates has whether it wins this case or not. Like any other member of the public it may negotiate for the acquisition and development of the site. The Treasurer's order of revocation places no impediment on Yates negotiating with Rockvale to acquire Paddy's Market and to negotiate with the Darling Harbour Authority to develop the site. The evidence does not establish that Yates has a special interest in the subject matter of the proceedings. Therefore it has no standing to bring it."

Merling J said at 87 and 88:

"Moreover, even if it be assumed, contrary to my opinion, that the opportunity to negotiate for the acquisition and development of ·the Paddy's Market site conferred a benefit upon Yates, such a benefit was enjoyed by all other members of the Australian public. The opportunity to negotiate was in no way special to Yates. The mere fact that it had expressed interest in developing the site did not give it any advantage over any other member of the public who might be interested to negotiate for its acquisition.

In my opinion, there is no authority to support the finding in the present case that Yates had standing to bring the proceedings. In ACF  Gibbs J  made it plain  (CLR at 526) that an ordinary member of the public, who has no interest other than that which any member of the

public has in upholding the law, prevent the violation of a public the performance of a public duty. (CLR at 530; ALR at 270):

has no standing to right or to enforce As his Honour said

'A person is not interested within the meaning of the rule, unless he is likely to gain some advantage, other than the satisfaction of righting a wrong, upholding a principle, or winning a contest, if his action succeeds or to suffer some disadvantage, other than a sense of grievance or a debt for costs, if his action fails.'"

Pincus J said at 97:

"It should not be forgotten that what was in issue was the validity of the acquisition of an interest in land by Rockvale. It not uncommonly happens that contracts for sale of land are alleged in specific performance suits to be illegal, on one ground or another. If the decision on standing in this case is correct, then a stranger to the contract might have a claim to be heard in such a suit, merely on the basis that if the sale in question fell through the stranger would be interested in buying the property."

Even if the provisions of the Crown Lands Act could be characterised as aimed at preventing monopolisation of pastoral lands in the Northern Territory, neither the Act nor the relief which Oatmont and Delamere seek, would confer upon them any advantage not enjoyed by all other members of the Australian public. Furthermore, there is nothing to prevent oatmont or Delamere from now negotiating with Waxahachi Pty Ltd or any of the other subsidiaries of AACO.

For these reasons I would allow the appeal and dismiss the cross-appeal, and I would order that the action be dismissed with costs, the Respondent and the Cross-Appellant to pay the Appellants' and Cross-Respondent's costs of this appeal and of the hearing before the learned judge at first instance.