Bisan Ltd v Cellante
[2002] VSC 504
•21 November 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7431 of 2002
| BISAN LTD | Plaintiff |
| v | |
| MASSIMO LIVIO CELLANTE & Ors | Defendants |
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JUDGE: | DODDS-STREETON J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 19 November 2002 | |
DATE OF JUDGMENT: | 21 November 2002 | |
CASE MAY BE CITED AS: | Bisan Ltd v Cellante & Ors | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 504 | |
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G. Bloch | HS Wise Gershov & Co |
| For the Defendants | Mr I. Jones | Tress Cocks Maddox |
HER HONOUR:
ORDERS SOUGHT
In this proceeding, the plaintiff, by summons filed 8 November 2002, seeks, inter alia, an order that the defendants be restrained from holding a general meeting of its members called pursuant to s.249F of the Corporations Act (“the Act”) and scheduled to be held on 27 November 2002.
THE PARTIES
The plaintiff is Bisan Ltd (“Bisan”), a public company listed on the Australian Stock Exchange. The defendants are Massimo Livio Cellante, Ramon Jiminez, Licia Nunzia Buccheri, Karmala Pty Ltd and Googley Pty Ltd.
BACKGROUND
In this proceeding, on 10 October 2002 I made an order restraining the holding of a general meeting of Bisan called pursuant to s.249F of the Act on the grounds that there were serious questions to be tried as to whether: (a) the statutory minimum percentage of voting power required under s.249F(1) was satisfied and: (b) whether the proxy appointment forms supplied with the notice of the proposed meeting failed to comply with ss.250B and 250BA of the Act in that they specified return of the forms to an entity other than the company. I took the view that the balance of convenience favoured the injoining of the meeting.
On 24 October 2002, Bisan gave a Notice of Annual General Meeting to be held at 3.00 p.m. on 28 November 2002 at the CMA Center, Level 20, 500 Collins Street, Melbourne. The Notice, dated 24 October 2002, lists two agenda items, namely, (1) that the company receive and consider the financial statements and the directors’ and auditors’ reports for the year ended 30 June 2002 and (2) that Mr Stephen Shnider, who retires by rotation, being eligible, offers himself for re‑election.
The Notice of Annual General Meeting was accompanied by a proxy appointment form with a blank space for the insertion of a proxy of the member’s choice. The form provides that, failing such a nominated person, the Chairman of the meeting will be the proxy.
A Notice of General Meeting of the members of Bisan dated 25 October 2002 signed by Mr Cellante, as the attorney of four corporate shareholders, Googley Pty Ltd, Larmala Pty Ltd, Wyanda Nominees Pty Ltd and Genesis Homes Pty Ltd, gave notice of a general meeting of Bisan called pursuant to s.249F of the Act. The meeting is scheduled to be held at 5.00 p.m. on 27 November 2002 at the RACV Club, 123 Queen Street, Melbourne.
Googley Pty Ltd, Karmala Pty Ltd, Wyanda Nominees Pty Ltd and Genesis Homes Pty Ltd are shareholders of Bisan Ltd, and hold in aggregate shares entitling them to exercise 5.24 per cent of the votes that could be exercised at a general meeting of the company. It is not disputed that the four corporate shareholders’ aggregated voting power satisfies the requirements of s.249(1) of the Act.
The Notice states that the business of the general meeting is to consider and if thought fit pass the following resolutions as ordinary resolutions of the company.
“Election of Directors
That Mr Brian Richard Goldsmith, having consented to act, be appointed as a director of the company.
That Mr Bill Chaim Golfand, having consented to act, be appointed as a director of the company.
That Mr Massimo Livio Cellante, having consented to act, be appointed as a director of the company.
That Mr Ramon Jimenez, having consented to act, be appointed as a director of the company.
Removal of Directors
That pursuant to the provisions of the Constitution of the company Mr Michael Goldhirsch be removed from office as a director of the company.
That pursuant to the provisions of the Constitution of the company Mr Hyman Henry Sharp be removed from office as a director of the company.
That pursuant to the provisions of the Constitution of the company Mr Stephen Shnider be removed from office as a director of the company.”
The Notice of General Meeting convened pursuant to s.249F (“the s.249F meeting”) was accompanied by a letter to shareholders from Messrs Cellante and Jiminez dated 25 October 2002. That letter refers to a deterioration in the company’s net asset position and losses.
The letter further states that at the meeting, it is proposed that all the existing directors of the company be removed and that four new directors be appointed in their place. The letter urges all shareholders to vote for change. A proxy appointment form for the s.249F meeting accompanied the notice. The proxy appointment form contains a blank space for the insertion of a proxy of the member’s choice. It provides that in the absence of that person, or if no person is named, Mr Cellante will be the proxy.
ISSUES IN DISPUTE
Mr Jones, counsel for the defendants, contends that although the plaintiff’s application is framed as an application for an injunction, the hearing is a final hearing, which must be determined according to the standard applicable to a hearing for a declaration of rights. Mr Bloch, counsel for the plaintiff, submits that the hearing is interlocutory. The test for distinction between an interlocutory order and a final order, while clearly stated, is not necessarily easily applied. In my opinion, however, the injoining of the s.249F meeting would not be in the nature of interim or provisional relief. If the holding of the s.249F meeting were to be injoined, the injunction would finally determine the rights of the parties in relation to that meeting. I shall therefore determine the issues in dispute according to the standard applicable to a final hearing, rather than by reference to a serious question to be tried.
The plaintiff contends that there are a number of defects, irregularities, or contraventions of the Act which are not capable of remedy by order of the court or otherwise, and which justify the restraint of the proposed s.249F meeting.
The alleged defects or contraventions on which the plaintiff relies are discussed in detail below.
Was there failure to give sufficient notice of resolutions to remove directors?
First, the plaintiff alleges that Bisan was not given two months’ notice of the resolutions to remove the incumbent directors, as required by s.203D(2) of the Act. Section 203D(2) of the Act provides:
“Notice of intention to move the resolution must be given to the company at least two months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this sub-section, the meeting may pass the resolution even though the meeting is held less than two months after the notice of intention is given.
Sub-section (3) provides ‘the company must give the director a copy of the notice as soon as practicable after it is received.”
The resolutions for removal of directors set out in the Notice of the s.249F meeting are expressly stated to be “pursuant to the provisions of the Constitution of the Company”.
It is clear, therefore, that the resolutions to remove the directors are made pursuant to article 104(e) of Bisan’s constitution.
Article 104 of Bisan’s constitution provides:
“Subject to the provisions of the Code and of Article 93 the following provisions shall apply to all Directors –
…
(e)Subject to the provisions of the Code, the Company in general meeting may at any time by resolution remove any appointed or elected Director before the expiration of his period of office, and, if so desired, elect another person in his stead. The person so elected shall hold office during such time only as the Director in whose place he is elected would have held office if he had not been removed.”
Article 104(e) has no requirement of notice, in contrast to s.203D(2) which, in the usual case, requires that two months’ notice of the resolution be given to the company. Mr Bloch, counsel for the plaintiff, submits that by reason of the phrase “subject to the Code” the notice requirements and other conditions of s.203D are imported into article 104(e) of Bisan’s constitution. If that submission be correct, there is non‑compliance with article 104(e), as only 33 days’ notice of the resolutions was given.
In Link Agricultural Pty Ltd v Shanahan[1] the Court of Appeal recognised that the statutory right to remove the directors of a public company under s.227 of the Corporations Law on the one hand, and a provision for their removal in the company’s constitution on the other hand, may provide “concurrent and alternative procedures pursuant to which the company in general meeting may remove a director and appoint another in his place. The members have a choice, whether to proceed under s.227 (and subject themselves to the requirements of the section) or to proceed under [the relevant article] (and subject themselves to the requirements of the article) …”.[2]
[1][1999] 1 VR 466
[2]at 1477
In Link Agricultural, Kenny JA observed that:
“Section 227 provides a procedure for the removal of a director (and implicitly for the appointment of a new one) which is additional to the procedure laid down [in the relevant article]. Where members proceed to under s.227, not [the article] the requirements of [the article] are not relevant. Holmes v Life Funds of Australia Ltd (1971-1973) CLC 40-013 at 27179 [1971] NSWLR 860 at 862 per Street J. Likewise, of course, if the members choose to proceed under [the article], then the requirements of s.227 have no application and the company’s board of directors does not have the right to pre-empt the member’s choice of procedure.”[3]
[3]ibid
Section 203D of the Act is similar, but not identical terms, to s.227 of the Corporations Law. In my opinion, the above observations of Kenny JA in Link Agricultural (with which Batt and Buchanan JJA concurred) apply equally to s.203D of the Act.
In Link Agricultural, the article in the company’s constitution providing for the removal of a director was not prefaced by the phrase “subject to the provisions of the Code”. Mr Bloch submits that the presence of the phrase constitutes a vital ground of distinction.
In Browne v Panga,[4] Ipp J considered the relationship of s.227 of the Corporations Law to an article in very similar terms to article 104 of Bisan’s constitution.
[4]17 ACSR 75
The relevant article provided:
“Subject to these articles and to the Code the company in general meeting may at any time by ordinary resolution remove any director before the expiration of his period of office”.
No notice was required.
As in the present case, in Browne v Panga, the plaintiffs, sought to restrain a requisitioned general meeting of the company at which resolutions to remove directors were to be put. The plaintiffs contended that although directors could be removed either by the statutory power or (where applicable) the articles, the phrase “subject to the Code” imported into the article all the provisions of s.227, including the notice requirements. As in the present case, the two months’ notice required by s.227 had not been given.
Ipp J rejected the plaintiff’s contentions. Rather, he accepted the defendant’s submission that the phrase “subject to these articles and the Code” was intended to mean “subject to any contrary provisions contained in the articles or the relevant statute” and did not import the procedure established by s.227 into the removal of a director under the relevant article.
Mr Bloch submitted that Browne v Panga should not be followed, on the grounds that
(a)In the present case, there is not only a specific reference “subject to the Code” in article 104(e) but also a general reference at the commencement of article 104.
(b)The decision in Browne v Panga was merely interlocutory, involved complex and difficult issues and was produced as a matter of urgency.
I consider that the construction endorsed by Ipp J in Browne v Panga was correct. I agree that the natural meaning of the phrase “subject to the Code” is “subject to any contrary provisions contained in the Code”. Once it be accepted that s.203D is a self‑contained provision, the internal requirements of which apply only when a shareholder proceeds pursuant to that provision, s.203D does not contain contrary or inconsistent provisions to article 104. It merely contains alternative co-existent provisions.
I am fortified in my conclusion on this issue by a consideration of the fundamental purpose of s.203D of the Act, which is to safeguard ultimate shareholder control in companies in which the public invest or may invest, by ensuring that despite anything in a company’s constitution, directors may be removed by the shareholders. See Allied Mining and Processing v Boldbow Pty Ltd[5] and Holmes v Life Funds of Australia Ltd.[6] If an article which provided more liberal grounds for the removal of directors were to be “read down” by importing all the restrictions of s.203D, including those which protect directors’ interests at the expense of shareholders’ entitlement to remove them, shareholder control would be diminished, not enhanced. In this context, I accept the reasoning of Robert Smith J in Allied Mining and Processing Limited in which his Honour observed that the principle embodied in s.203D was not to set a minimum standard, but is rather
“To do no more than prevent directors becoming entrenched and to ensure that even though a company’s constitution may contain articles which could have that effect the shareholders could always in the last resort have recourse to s.203D which could never be excluded but may be supplemented by constitutional articles providing alternative ways, whether more or less rigorous than s.203D, by which shareholders may remove directors.”[7]
[5][2002] WASC 195 at 17
[6](1971) 1 NSWLR 860 at 862
[7]at p.16
Further, I agree with his Honour’s observation that in the present context at least:
“ … the tension between preventing directors from being able to become entrenched by giving shareholders the power to remove directors on the one hand, and guaranteeing the directors natural justice when shareholders move to remove them on the other, should be resolved in favour of the shareholders.”[8]
[8]at p.17
I do not accept that the repetition of the phrase “subject to the Code” supports the construction advanced on behalf of the plaintiff. The repetition does not alter the essential meaning of the phrase, which in my opinion, is that accepted by Ipp J in Browne v Panga.
In the present case, the convening shareholders elected to proceed under Bisan’s constitution, as is expressly stated in the notice of meeting. In my opinion, article 104(e) of the constitution does not import any of the requirements of s.203D. It follows that there was no obligation to give the company two months’ notice of intention to move the resolution and that failure to do so does not provide a valid basis for injoining the holding of the general meeting called pursuant to s.249F.
Mr Bloch submitted that certain problems may follow if the s.249F meeting is held on 27 November 2002, which is one day prior to the scheduled annual general meeting. He pointed out that article 104(e) requires that if a director is elected instead of the director who is removed, the newly elected person shall hold office “during such time only as the director in whose place he is elected would have held office if he had not been removed”. In consequence, if Mr Shnider is elected and replaced at the s.249F meeting, his replacement would have to stand for re-election the following day.
Mr Bloch submitted that Mr Shnider could not stand for re-election at the annual general meeting the following day, as there would not be adequate notice to members.
Although 28 days’ notice is required for the general meeting of a listed company pursuant to s.249HA(1) of the Act, s.250R of the Act provides:
“The business of an AGM may include any of the following, even if not referred to in the notice of meeting:
…
(b) the election of directors.”
In the present case, adequate notice was given for the annual general meeting. Section 249H(3) requires 21 days’ notice for a meeting of a public company at which resolutions to remove a director under s.203D and appoint a director in place of the director removed under that section, are to be put. However, the 21 days’ notice relates to the meeting, not to the resolutions, which, in any event, are resolutions pursuant to s.203D.
Accordingly, I am not satisfied that there would be an impediment to the re-election of Mr Shnider at the annual general meeting.
In any event, if the s.249F meeting were adjourned to occur immediately after the annual general meeting, as I am minded to order for reasons discussed below, the situation envisaged by the plaintiff would not arise.
Framing of Resolutions
The plaintiff further submits that the resolutions set out in the Notice of the s.249F meeting are unsatisfactorily framed, in that resolutions for removal are not expressed so that removal takes effect only upon the election of successors. In Claremont Petroleum NL v Indosuez Nominees Pty Ltd,[9] a requisition for a meeting to consider resolutions to remove all incumbent directors and to appoint other persons to the board was considered to be valid, despite the possibility that the removal of the directors would leave the company, at least temporarily, without the requisite minimum number of directors required by the statute. De Jersey J observed that the possibility of adjusting the resolutions existed and
“ … because that possibility of adjustment exists, even if the present form of requisition be considered invalid (which I do not accept), this court would not in any event accede to the claim for an injunction. This court obviously should not ordinarily interfere with the conduct of company business because of a technical deficiency which has no significant practical ramification and which might readily be rectified.”[10]
[9](1986) 10 ACLR 520
[10]at p.522
Connolly J was of the view that the point was artificial and saw no impediment to framing the resolutions at the meeting so that the removal of the existing directors would take effect only on the election of their successors. He considered that “resolutions so framed would be within the scope of those proposed in the requisition.”[11]
[11]at 523
I agree with the tenor of their Honour’s observations and consider that any difficulties posed by the framing of the resolutions in the Notice in this case are readily remediable.
Consent to Act as a Director
Mr Bloch contends that the candidates for election at the general meeting scheduled for 27 November 2002 have failed to provide valid consents to act as a director. The absence of a valid consent prior to appointment would cause the company to contravene s.201D of the Act which provides –
“(1)A company contravenes the sub-section if a person does not give the company a signed consent to act as a director before being appointed.
(2)The company must keep the consent.”
The absence of a valid consent would also result in a breach of article 104(f) of Bisan’s constitution which relevantly provides –
“No person (not being a retiring director) shall be eligible for election to the office of Director at any general meeting unless he or some member intending to propose him, has at least fifteen days before the meeting left at or dispatched to and which has been received at the office a notice in writing duly signed by the nominee giving his consent to the nomination and signifying his candidature for the office …”
The candidates for election at the s.249F meeting scheduled for 27 November 2002 were also candidates for election at the general the meeting of Bisan scheduled for 15 October 2002. That meeting was cancelled by order of the court. On or about 4 October 2002, a consent executed by each candidate was forwarded to the company under cover of the letter of Omnium Corporate Pty Ltd and subsequently by letter of Tress Cocks Maddox dated 9 October 2002.
The consents to act as a director are addressed to the directors of Bisan Limited. In each case the consent states, “I the undersigned hereby consent, if so appointed, to act as a Director of Bisan Limited (ACN 006 301 800).”
The consents are not expressed to be conditional upon appointment at any particular meeting or on any particular method of appointment, and contain no temporal limitation.
I consider that the consents are unambiguous and would remain in force until an effective revocation were communicated to the company.
The plaintiff submits that the consents, if read in the light of the accompanying letters to Bisan from Omnium Corporate Pty Ltd dated 4 October 2002 and from Tress Cocks Maddox dated 9 October 2002, must be limited only to appointment at the proposed meeting schedule for 15 October 2002, which was cancelled pursuant to the order of the court. That limitation is said to arise by reason of the heading in the letters “Re Meeting of Members of Bisan Limited (ACN 006 301 800) to be held at 5.00 p.m. on 15 October 2002.”
I consider that the heading, on a proper construction, simply identifies the meeting at which the election of the relevant candidates was originally to be considered and to which the consents were relevant, though not exclusively so. The heading does not constitute a limitation on the consents to act, which are expressed in absolute terms.
It follows that I do not consider that there have been, or will be, contraventions of s.205B of the Law or of the requirement under article 104(f) that consents be received at least 15 days before the meeting at which the resolution for election will be put.
Given that finding, it is unnecessary for me to consider the defendants’ objections to parts of the affidavit of Mr Goldhirsch sworn 18 November 2002. Nor is it necessary for me to consider the status of the observations of Cohen J in Wesgo v Gabriel.[12]
[12](1991) 9 ACLC 1087
Proxy Appointment Forms – Defective or Misleading?
The plaintiff submits that the proxy form accompanying the notices of meeting pursuant to s.249F are defective, in that they do not accord with article 86 of Bisan’s constitution, which provides that the instrument of proxy may be in the usual common form or such form as the directors may from time to time.
By affidavit sworn 18 November 2002 Mr Goldhirsch, an incumbent director of Bisan, deposed to the form of proxy appointment that the directors of Bisan have prescribed. He deposes that the proxy appointment form provided with the Notice of the s.249F meeting (which nominates Mr Cellante as the proxy in the event that a proxy is not nominated or the nominated proxy is absent), is not prescribed or accepted by the directors.
Mr Jones, counsel for the defendants, objected to the admissibility of Mr Goldhirsch’s evidence as to the prescribed or accepted form of proxy appointment. I consider that Mr Goldhirsch, as a director, is entitled to give evidence as to the form of proxy prescribed or accepted by the directors of Bisan.
In the reasons for judgment in Bisan Ltd v Cellante & Ors; Eromanga NL v Cellante, delivered on 15 October 2002, I considered whether a proxy appointment form which satisfies the requirements of ss.250A and 250B is valid despite a failure to conform to the requirements of the company’s constitution. It was unnecessary for me to determine the issue on that occasion. However, I expressed the view that s.250A of the Act appeared to be an ameliorating provision aimed at upholding the validity of proxy forms in order to reduce the likelihood that shareholders seeking to vote by proxy will be disenfranchised by reason of technical deficiencies. As such, I considered that a proxy appointment form which satisfied the requirements of s.250A of the Act would be valid, despite non-compliance with a form prescribed by the company’s constitution.
A consideration of the terms of the relevant Explanatory Memorandum and a number of recent authorities to which Mr Jones referred me, fortifies that conclusion.
The Explanatory Memorandum accompanying the Company Law Review Bill 1997, by which the relevant provision was introduced, provides:
“10.52The proxy provisions will be streamlined to make it easier to appoint a proxy and less likely that the appointment will be invalid.”
In the New South Wales Henry George Foundation Ltd v Booth,[13] Gzell J there held that the word “proxy” in the Corporations Act is sufficiently broad to include an attorney.[14] His Honour observed that:
“… ss.250A(2) and 250B(5) [of the Act] contain provision for the amendment of these requirements by the constitution of a company. That does not mean, however, that the constitution may make provision for a different form.
In my view articles such as those of the plaintiff, providing for voting by proxy and voting by attorney must be construed to comply with Corporations Act ss.250A and 250B or else struck down as invalid.”[15]
[13]41 ACSR 288
[14]at p.6
[15]at p.6
In Fast Scout v Bergel,[16] Templeman J held that pre-completed proxy forms were not invalid by reason of non-conformity with requirements of the company’s constitution, provided that the criteria in s.250A(1) of the Act were satisfied.
[16]SCWA, 20, 21, 26 November 2001
His Honour stated:
“In my view, all that is required for such an instrument [appointing a proxy] to be valid is that it shall comply with s.250 of the Corporations Act.”[17]
[17]at p.8
He further observed:
“I can see force in the argument that pre-completed proxy forms are undesirable. However, in my view, even if the argument was overwhelming, it could not influence the outcome of this application. If, as I believe to be the case, s.250A of the Corporations Act permits the use of pre-completed forms, the merits or otherwise of that practice are irrelevant.”[18]
[18]at p.8
I therefore consider that the proxy appointment forms are valid, in that they comply with the statutorily prescribed conditions. Given that they so comply, the failure to conform to any additional or contrary requirements in the company’s constitution does not, in my view, invalidate the proxy appointments.
Contravention of s.249R of the Act?
The plaintiff submits that convening the s.249F meeting to be held the day prior to the company’s annual general meeting contravenes s.249R of the Act.
Section 249R of the Act provides:
“A meeting of a company’s members must be held at a reasonable time and place.”
Section 249R was introduced by the Company Law Review Bill 1997. The Explanatory Memorandum accompanying the Bill relevantly stated:
“10.24 The Bill includes a requirement that members’ meetings be held at a reasonable time and place (Bill s.249R) and for a proper purpose. (Bill s.249Q). These rules are designed to protect shareholders and directors by preventing general meetings being called at times and places that are unreasonably inconvenient for them and by preventing meetings being called for improper purposes.”
In the present case, the notice of annual general meeting is dated 24 October 2002. The notice of the s.249F meeting is dated 25 October 2002. There is no evidence before me as to whether the members calling the s.249F meeting deliberately chose to call for it the day prior to the annual general meeting.
Mr Jones, for the defendants, submitted that s.249R of the Act does not create any substantive new law and, as such, its legitimate operation is restricted to prescribing a time and place where all members of the company will be able to attend. He contended that s.249R does not empower the court to consider the time and place of the general meeting in question in relation to the time and place of another scheduled general meeting of the company when determining whether a time is reasonable in terms of s.249R.
In Howard v Mechtler,[19] Austin J considered s.249R. His Honour noted that the Explanatory Memorandum for the bill introducing the provision was “unhelpful” but considered that it “did not create any new substantive law”.[20] His Honour found that there was evidence that the time and place of the meeting at issue in the case before him were inconvenient to at least some of the plaintiffs, although he was not persuaded that those persons would have attended at any other time. The time limits established by the articles applicable to the meeting required it to be held in early January, if not late December. In those circumstances, his Honour was not persuaded that a meeting at 6.00 p.m. on 30 December 1998 was an inherently unreasonable time. He was therefore not “persuaded by the submission that s.249R be invoked to strike down the meeting”.[21]
[19]30 ACSR 343
[20]at p.442
[21]at p.442
In Smith v Salder,[22] a case decided prior to the introduction of s.249R, Young J considered that general law principles would permit the court to make orders preventing the general meeting of a co-operative corporation from being held at a venue which at least one member of the company was likely to be barred from entering.
[22]25 ACSR 672
His Honour observed that in general, “directors have a fiduciary duty to convene meetings, particularly annual general meetings, at a time and a place where all members of the company present in the State will be able to attend.”[23] He also referred to American authority which endorsed the principle that directors may not frustrate a member’s right to participate in the annual general meeting “by either not holding the meeting or holding it at a time or place where it is almost impossible for some shareholders to attend.”[24]
[23]at p.2
[24]at p.2
Young J observed a previous practice whereby “companies deliberately scheduled annual general meetings in obscure upstate towns during the festive season”[25] and noted that, in the absence of an express statutory provision “the practice is controlled by the court policing fiduciary duties not to use the power to convene a meeting as a cloak for fraud.”[26]
[25]at p.3
[26]at p.3
In Fiore v Carlton Football Club Ltd,[27] Warren J considered whether a general meeting to be convened under s.249D of the Act (which would facilitate the election of members of a certain faction of the corporate football club) should be deferred for one month until the date of the annual general meeting, at which a spill of directors would occur.
[27]BC 200206212, Warren J, 17 October 2002, VSC 455
Warren J did not order the deferral of the s.249D meeting. While one reason advanced in support of the deferral was the futility of an interim election, that was not the principal issue. Section 249R was not referred to. Rather, her Honour, in refusing to order the deferral, emphasised that
“The lack of confidence in the existing directors is such that the inconvenience attaching to such a short term in office is a matter they are prepared to contemplate in the interests of the company. Whilst in the ordinary scheme of things it would be undesirable for a company to convene a meeting for the purpose of electing new directors for a very short time and, indeed, in some cases it may well be futile and wasteful, the loss of confidence in the membership in the existing directors of Carlton is so dramatic that I do not consider the convening of the meeting on 12 November can be viewed in present circumstances as futile and wasteful.”[28]
[28]at p.4
I do not consider that the terms of the Explanatory Memorandum or reasoning expressed in Howard v Mechtler, Smith v Sadler or Fiore v Carlton Football Club Ltd preclude the court from considering the time of other scheduled general meetings when assessing reasonableness. If general law principles of fiduciary duties were thus limited, it may be that the express statutory prescription of a reasonable time and place provides a basis for considering a wider variety of factors. The reference in the Explanatory Memorandum to protection from “unreasonably inconvenient” times and places supports that approach.
Further, it should be noted that pursuant to s.249F, a general meeting may now be called by members, who do not owe fiduciary duties. In the light of recent statutory provisions entitling a minority of members either to require the company to call a general meeting or to call and hold a meeting themselves, the possibility of a number of general meetings, not necessarily co‑ordinated, arises. Section 249R, if liberally construed, may provide a means of reducing or addressing the problems posed by multiple general meetings.
In Pinnacle VRB Ltd v Ronay Investments Pty Ltd,[29] a general meeting of a company called pursuant to s.249F was scheduled to be held on 31 July 200 and a general meeting of the company, requisitioned pursuant to s.249D, was to be held on 15 August 2000. The Chairman of Directors appeared at the earlier meeting and adjourned it to 15 August 200, to take place one hour prior to the s.249D meeting.
[29]200 18 ACLC 733
Beach J held that the adjournment was valid. In that context, his Honour expressed concern about two general meetings within a short space of time.
He observed that the directors under the articles gave the directors the power
“ … to ensure that a general meeting of the company is held at a time and place convenient to the majority of the members of the company. Indeed, s.249R specifically provides that the meeting of a company’s members must be held at a reasonable time and place.”[30]
[30]at p.37
His Honour further stated that the directors
“ … were faced with the situation that as matters stood before they postponed the s.249F meeting, the members of Pinnacle were being required to give consideration to the separate general meetings, some 14 days apart, to consider the same subject matter. I would have thought that common sense, if nothing else, dictated that the meetings be held on the same day at the same location.”[31]
[31]at p.738
While, as Mr Jones submits, the decision of Beach J in Pinnacle is interlocutory and neither Smith v Sadler nor Howard v Mechtler were considered, in my opinion his Honour’s observations on the undesirability of successive general meetings within a short space of time are persuasive. I note also the approach of Santow J in NRMA v Spragg,[32] in a slightly different context.
[32](2001) 38 ACSR 174
I consider that, in the absence of unusual circumstances which render it unavoidable, the holding of a general meeting within a day, or within a very short time, of a further general meeting, does not satisfy the statutory requirement that it be held at a reasonable time.
In the present case, there appear to be no circumstances which preclude the consecutive holdings of the annual general meeting of Bisan and the s.249F meeting, at the same venue.
In the circumstances, in my opinion, the scheduling of s.249F meeting contravenes s.249R. In the interests of the members of the company, I consider that I should order that the s.249F meeting be adjourned to 5.00 p.m. on 28 November 2002, at the same venue as the annual general meeting, pursuant to s.1324, alternatively, s.1322, of the Act.
Section 250B(2) of the Act provides:
“If a meeting of a company’s members has been adjourned, an appointment and any authority received by the company at least 48 hours before the resumption of the meeting are effective for the resumed part of the meeting.”
Any proxy appointment form received by 5.00 p.m on Tuesday 26 November 2000 would therefore seem to be effective for the adjourned s.249F meeting.
If the s.249F meeting is adjourned pursuant to the order of the court, and members are advised of this by Monday 25 November 2002, it would not be impossible for members who needed to vote by proxy by reason of the adjournment to lodge the appointment form within the required time. Given the tight time frame, however, an order abridging the statutory time frame may be desirable.
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