Australian Securities and Investments Commission v NRMA

[2002] NSWSC 1135

Reported Decision: 43 ACSR 451
(2003) 21 ACLC 186

New South Wales

Supreme Court

CITATION:	ASIC V NRMA [2002] NSWSC 1135
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 5523 of 2002
HEARING DATE(S):	25 November 2002
JUDGMENT DATE:	28 November 2002
PARTIES :	Australian Securities and Investment Commission (Plaintiff) National Roads and Motorists' Association Limited (First Defendant) William Snodgrass (Second Defendant)
JUDGMENT OF:	Windeyer J at 1

COUNSEL :	S.C. Finch SC with him Mr G Rich (Plaintiff) R. McDougall QC with him Ms E A Collins (First Defendant) In person (Second Defendant)
SOLICITORS:	Jan Redfern (Plaintiff) Corrs Chambers Westgarth (First Defendant) In person (Second Defendant)
CATCHWORDS:	CORPORATIONS LAW - meetings - whether a special general meeting had been "held" - Corporations Act 2001 s249D(5) and s1324(1)(a)
LEGISLATION CITED:	Companies Act 1961, s136 Corporations Act 2001, 249D, s1324
CASES CITED:	Guss v Veenhuizen (1976) 136 CLR 34
DECISION:	See paragraph 22

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

THURSDAY 28 NOVEMBER 2002

5523/02 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V NATIONAL ROADS AND MOTORISTS’ ASSOCIATION LIMITED & ORS

JUDGMENT

1 The affairs of NRMA remain in disarray. That state of affairs is likely to continue until legislative action is taken as often recommended by this Court. Until that is done the funds of the organisation will be consumed in responding to minority demands for meetings.

Background

2 On 3 July 2002 in proceedings No. 3237 of 2002 and 3345 of 2002 I made orders extending to 10 September 2002, the time within which NRMA was required to call a general meeting of the company in response to certain requisitions of two groups of requisitionists who were conveniently called the Snodgrass requisitionists and the Dupree requisitionists. I also ordered that the time by which such meetings must be held up to and including 17 October 2002. The Snodgrass requisitionists sought the calling of a meeting to consider a resolution for the removal of a particular group of directors who were generally known as the Members First group of directors and the Dupree resolution sought the removal of the directors who were generally known as the Talbot group of directors. Had both resolutions been passed, and had the composition of the board remained as it was when I made the orders, the company would have been left without directors. That position changed prior to 17 October as certain directors resigned and other persons were appointed to fill the vacancies.

3 The requisitioned meetings were called for 17 October 2002. As is well known and as is established by the evidence and by agreed facts, the venue booked for the meeting was unable to hold all those persons entitled to attend and vote who wished to attend. The president, Mr Ross Turnbull, opened the meeting at 4.10 pm. He moved a motion for the appointment of Sir Laurence Street as chairman for the balance of the meeting. The vote on that motion was not concluded. At 4.47 pm Mr Turnbull, having satisfied himself that the venue was not large enough to accommodate those persons entitled to attend and vote, adjourned the meeting to a date to be fixed. It is agreed and accepted that in doing so he acted within power.

4 NRMA now proposes to continue the adjourned meeting on 14 January 2003.

5 The annual general meeting of the company is required to be held in 2002 unless an extension of time is granted by ASIC. The company has applied for an extension to 14 January 2003. Its stated intention is to hold the annual general meeting immediately prior to the adjourned meeting. The board of directors of NRMA has resolved – perhaps only in principle – to include in the general business the annual general meeting a resolution that all members of the board as at 8 November 2002 be removed from office. Mr Turnbull had proposed to the board that all directors should resign with the right, with any other candidates, of whom there are quite a number, to seek appointment or reappointment as a director. Those directors who in general support Mr Talbot, and are those whom the Dupree requisitionists wish to remove, did not agree to the spill proposed by Mr Turnbull so that it is likely that the resolution proposed by the present majority of directors will proceed to the annual general meeting.

6 A further complication has arisen because the requisite number of members have requested the directors to call a meeting of members for the purpose of considering a resolution for the removal as directors of five persons appointed to the board to fill casual vacancies arising as a result of the resignation of directors over the past few months. Messrs Scandrett and Snodgrass, who seem to be the chief protagonists for the anti-Members First group of members, are recognised as the chief organisers of the request for this meeting. It is of course ridiculously easy to round up the necessary 100 signatories for such a requisition. In proceedings No 5261 of 2002 in this Division, Palmer J held on 25 November that NRMA was obliged to call a meeting. As it was accepted that extensions of time were necessary for the calling and holding of this meeting, he referred it to me to decide this aspect. For reasons which will become obvious, I extended the time for the holding of this requisitioned meeting up to 15 January 2003. The company has made the necessary arrangements to book a venue sufficient to hold what would appear well above the number of persons likely to attend any such meeting.

Present proceedings

7 The present proceedings before me were commenced by originating process filed on 15 November 2002. The document has all the hallmarks of rushed preparation and no check whatever. It may have been intended to be used in an interlocutory application to be filed in the earlier Snodgrass and Dupree proceedings. Paragraph 3 indicates that. If it were so intended it would have failed as those proceedings have long since concluded. In any event there are references in the originating process to its being an interlocutory application and it asks for orders against the plaintiff/respondent. What is really sought are orders against the defendant, NRMA. There is no respondent. This is a document filed by the solicitor for the Australian corporate regulator. I could have and perhaps should have just dismissed the proceedings but I proceeded to deal with them as if in proper form. The orders sought by ASIC are sought pursuant to s1324 of the Corporations Act 2001 (the Act) and are as follows:

1. That this Originating Process be made returnable instanter.
2. That the time for service of this Originating Process and the supporting affidavit be abridged to 5:00pm on 15 November 2002.
3. That the Plaintiff/First Respondent hold the meeting of members referred to in paragraphs 1 and 2 of the orders of this Honourable Court made in these proceedings on 3 July 2002 (the “Special General Meeting”) on or before 17 December 2002.
4. That the Plaintiff/First Respondent send out notices of the Special General Meeting, including forms for the appointment of proxies, to members by post on or before 25 November 2002, such notices to include a statement to the effect that any member who has already voted by proxy need not appoint another proxy as their earlier vote will be counted.
5. That the Plaintiff/First Respondent publish notices of the Special General Meeting, including forms for the appointment of proxies, in the Sydney Morning Herald and the Daily Telegraph on or before 25 November 2002, such notices to include a statement to the effect that any member who has already voted by proxy need not appoint another proxy as their earlier vote will be counted.
6. That the Plaintiff/First Respondent count all proxy votes already received by the Plaintiff/First Respondent and include the proxy votes in any poll conducted at the Special General Meeting.
7. That the Plaintiff/First Respondent puts the two resolutions the subject of the requisitions calling for the Special General Meeting, to the Special General Meeting.
8. That the Plaintiff/First Respondent pay the costs of the Applicant.
9. Such further or other orders as this Honourable Court thinks fit to make.

8 The relevant parts of s1324 are as follows:

1324. Injunctions
(1) Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:

(a) a contravention of this Act; or
…

the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.

...

(2) Where a person has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that the person is required by this Act to do, the Court may, on the application of:

(a) ASIC; or

(b) any person whose interests have been, are or would be affected by the refusal or failure to do that act or thing;

grant an injunction, on such terms as the Court thinks appropriate, requiring the first-mentioned person to do that act or thing.

9 Sections 249D(5) sets out the time for the calling and holding of general meetings required by members. It is as follows:

249D. Calling of general meeting by directors when requested by members
…
5) The directors must call the meeting within 21 days after the request is given to the company. The meeting is to be held not later than 2 months after the request is given to the company.

10 My orders in the Dupree and Snodgrass actions extended the times in response to an application under s1322(4)(d) of the Act.

11 The only question of substance before me was whether the required meeting had been held. If it had been held then there was no conduct to which s1324(1)(a) would apply. If it had not been held then there would be a contravention of the Act in failing to hold the meeting within the required time as extended by the court.

12 The simple argument of ASIC is that “held” means a meeting commenced and concluded. The simple argument of NRMA is that “held” means duly convened and commenced and lawfully adjourned or at least includes such a meeting. The ASIC argument relies on the ordinary meaning of the word. It is a verb of past tense or a past participle. But people often refer to matters in progress such as continuing court actions as being held before a particular judge. In that case, however, “being” involves continuing. The NRMA says that it could not have been the intention to abrogate the power to adjourn a meeting so as to make it a requirement to complete a requisitioned meeting within the stipulated time. Without going to authority I would have considered that the ordinary meaning of “held” in s249D(5) requires completion and does not allow adjournment outside the statutory date, unless by order of the court. The clear intention is to require the resolution proposed to be dealt with within a limited time which intention would be abrogated if the chairman could exercise his power of adjournment to fix some future time which time would presumably have to be fixed by him or by the directors. This is particularly so when the resolutions would determine the future of directors.

13 The plaintiff’s argument gains support from the decision of the High Court of Australia in Guss v Veenhuizen (1976) 136 CLR 34. That case dealt with s136 of the Companies Act 1961 the relevant provision being as follows:

136. (1) A general meeting of every company to be called the “annual general meeting” shall in addition to any other meeting be held at least once in every calendar year and not more than fifteen months after the holding of the last preceding annual general meeting.
(2) The Commission may, in application made by a company in accordance with a resolution of the directors and signed by a director or secretary, subject to such conditions as the Commission thinks fit -
(a) extend the period of fifteen months or eighteen months referred to in subsection (1) of this section;
or
(b) permit an annual general meeting to be held in a calendar year other than the calendar year in which it would otherwise be required by subsection (1) of this section to be held.

14 In that case Barwick CJ said at page 39:

The Supreme Court has decided that a meeting called for a date within the calendar year at which nothing of substance was done except a motion to adjourn the meeting to some date outside the calendar year was held within the calendar year within the meaning of the section. I am unable to agree. In my opinion, the word "held" in this connexion means called and concluded within the calendar year. It is to a meeting which will have concluded its business before 31st December of the year that the balance sheet must be produced with auditors' certificates and directors' indorsements. The question is not really whether a company has power to adjourn its annual general meeting but whether, if it does not conclude its meeting within the confines of the calendar year, it performs the obligation placed upon it by s136 of the Act.

15 Stephen and Mason JJ came to a similar conclusion. At page 45 of their joint judgment they said:

In the result, therefore, we reject the notion that s. 136 merely requires that the annual general meeting will be convened within the prescribed time and that the meeting may then be adjourned to a date beyond the end of the calendar year referred to by the sub-section. It may well be that sub-s. (1) is not satisfied unless the meeting is completed within the calendar year and that it cannot be adjourned beyond that time in the absence of the Commissioner's permission under sub-s(2)(b). However, in this case it is unnecessary to express a concluded opinion on this question; it is sufficient to say that as all that took place within the calendar year 1972 was an adjournment of the meeting to a date in the succeeding year it is impossible to conclude that the meeting was held in 1972. It may be that something short of completion of the meeting in the calendar year will suffice as a performance of the statutory obligation, as, for example, if all matters required by the Companies Act and the articles to be dealt with at the meeting are attended to within the prescribed time, it may then be permissible to adjourn other business to a date in the succeeding year.

16 That case dealt with a requirement to lay proper accounts and a balance sheet before an annual general meeting, it being accepted that this was the main purpose of an annual general meeting. But whether or not other business had to be concluded the business of a requisitioned meeting is to consider the proposed resolution. Guss would, I think, require a conclusion that that was the business which had to be concluded within the time allowed. It is the responsibility of the directors to convene the meeting but it is the company which has to hold the meeting. It follows I think that NRMA has engaged in conduct that constitutes a contravention of the Act so that the power in the court to make a mandatory order is enlivened as it is under s1324(2) if that were necessary. I should add that it was the decision of NRMA to hold the meeting on the last possible day. This meant there was no room for flexibility if the unexpected happened as it often does.

17 There are proper reasons for not ordering that the meeting be held on or before 17 December 2002. One purpose of that date as I understood it would be to ensure that the meeting concluded before the annual general meeting so as to give effect to my reasons for not allowing the requisitioned meetings to be held on the same day as the annual general meeting. I am grateful to ASIC for that consideration. ASIC did not push for 17 December.

18 I gave counsel for the NRMA leave to seek an extension of time for the holding of the meeting up to and including 15 January 2003, that being a date sought by the company and that being the date to which I have extended the time for the holding of the meeting, the subject of the decision by Palmer J. It is easy to be wise in hindsight about the size of the meeting hall required. There was no intentional conduct on the part of NRMA to put it in contravention of the Act. Rather than order that a meeting be held on or before a particular date pursuant to my powers under s1324 I propose to extend the time for the holding of the meeting up to 15 January 2003.

19 As a matter of law, NRMA would have to give notice of the time and place of the adjourned meeting and can at the same time explain, if it wishes, that the time for holding the meeting has been extended. It is for the company to deal correctly with the proxies and there is no reason to think they will not do so, or to make an order to that effect. At the commencement of the hearing before me Mr Finch SC for ASIC said that the order sought in paragraph 4 of the originating process was not pressed, but that the order sought in paragraph 5 was. I see no reason to make the paragraph 5 order; while NRMA can advertise anywhere it wishes the evidence is that if notification were given by that means only then a significant number of country members would be unlikely to receive notice. There is no basis for the orders sought in paragraph 6 and 7. In addition the orders sought in terms of paragraph 6 would not be satisfactory as some of the existing proxy givers might have died or no longer be members.

20 I point out that it is a matter for ASIC to consider the request of NRMA for an extension of time for the annual general meeting. It is clear that an extension will have to be granted. ASIC can impose conditions and no doubt in thinking about this will consider the order of meetings. I only say, as ASIC paid respect to the reasons I gave in the earlier proceedings in concluding that the requisitioned meeting should be held before the annual general meeting and not on the same date, that circumstances have significantly changed since then and I would not necessarily come to the same conclusion now. There is a requisition for a new meeting; there is the proposed spill resolution to be put at the annual general meeting and there are the extraordinary costs incurred in holding meetings which would be significantly reduced if the meetings were held on the same day or even one day after the other if they could not be concluded on the one day. The court is not involved in deciding this in these proceedings.

21 It follows from this that because I propose to grant an extension of time for the holding of the meeting as adjourned the originating process should be dismissed. Had I not allowed NRMA to make that application for the extension of time then it would have been appropriate to make an order under s1324 and in those circumstances I consider that although the proceedings will be dismissed there should be no order as to costs.

22 The orders are as follows:

1. On the application of the defendant, order that the time within which the general meeting ordered to be held by 17 October 2002, must be held, be extended up to and including 15 January 2003.

2. Order that the originating process be dismissed.

3. No order as to costs.

4. Exhibits may be returned.

Last Modified: 12/02/2002