Career Employment Australia Ltd v Shepley
[2021] QSC 235
•17 September 2021
SUPREME COURT OF QUEENSLAND
CITATION: Career Employment Australia Ltd v Shepley & Ors [2021]
QSC 235PARTIES: CAREER EMPLOYMENT AUSTRALIA LTD ACN 613 305 098
(applicant/cross-respondent)v
JOHN STEPHEN SHEPLEY(first respondent/cross-applicant)
andPATRICK DOUGLAS PURCELL (second respondent/cross-applicant)
andBRIAN JAMES DALEY (third respondent/cross-applicant)
andJODIE-LEE LUCKUS (fourth respondent/cross-applicant) FILE NO/S: BS 3531 of 2021 DIVISION: Trial PROCEEDING: Originating Application ORIGINATING Supreme Court at Brisbane COURT: DELIVERED ON: 17 September 2021 DELIVERED AT: Brisbane HEARING DATE: 10-11 May 2021, 14 June 2021
Supplementary written submissions: 17, 21 June 2021JUDGE: Flanagan J ORDER:
1. Pursuant to s 10 of the Civil Proceedings Act 2011 (Qld), the Court declares that the following persons were elected as a director of Career Employment Australia Ltd at the annual general meeting of Career Employment Australia Ltd on 10 February 2021:
(a) Francis Thomas Wilson;
(b) Ian Douglas Hall;
(c) Vicki Bailey;
(d) Shane Gilmore Cowan;
(e) Sharon Leigh Frances Cowan;
(f) Jason Michael Gardiner;
(g) Alice Mary Langford; and
(h) David Anthony Hatton OAM.2. Pursuant to s 10 of the Civil Proceedings Act 2011
(Qld), the Court declares that each of the respondents and Paul Casey ceased to be a director of Career Employment Australia Ltd upon the election of the directors in paragraph 1 of this order.
3. Pursuant to s 1322(2) of the Corporations Act 2001
(Cth), the Court declares that the resolutions carried by the board of directors of Career Employment Australia Ltd on 4 February 2021 are invalid.
4. The respondents’ amended cross-application is
dismissed.
5. I will hear the parties as to costs.
CATCHWORDS:
CORPORATIONS – MANAGEMENT AND ADMINISTRATION – MEETINGS – MEETINGS OF DIRECTORS – NOTICE – where approximately 25 hours’ notice of a directors’ meeting was given to certain directors – where other directors were given more notice – where three
directors did not attend the meeting purportedly because of the short notice – where the business transacted at the meeting went to the heart of the management and control of the company – where draft motions were circulated approximately five hours prior to the meeting – where directors’ meetings had previously been held by telephone at short notice – where the
absent directors wished to seek further advice, including legal advice, on the draft motions – where there was insufficient time to obtain that advice – where the company’s constitution required the giving of reasonable notice of a directors’ meeting
– whether there was reasonable notice of the directors’ meeting CORPORATIONS – SUPERVISION – COURTS – POWERS – AS TO IRREGULARITIES – SUBSTANTIAL INJUSTICE
– where there was a failure to give reasonable notice of a directors’ meeting contrary to the company’s constitution – where that is a procedural irregularity under s 1322(2) of the Corporations Act 2001 (Cth) – where the lack of notice prevented the absent directors from obtaining advice and attending the meeting in a position to make fully informed
decisions – where the business transacted at the meeting went to the heart of the management and control of the company –
whether the irregularity caused a substantial injustice CORPORATIONS – MANAGEMENT AND ADMINISTRATION – MEETINGS – MEETINGS OF DIRECTORS – OTHER MATTERS – where there was a failure to give reasonable notice of a directors’ meeting
contrary to the company’s constitution – where 15 resolutions were carried at that meeting – where, prima facie, the resolutions are void – where the minutes of the meeting
indicate that the resolutions were moved, seconded and carried as a composite whole – where the resolutions were discussed generally prior to a vote on all resolutions – where the
respondents submit that the resolutions are severable because they can be carried into effect separately – where the resolutions were intended to operate collectively – whether the
resolutions are severable and able to be saved from invalidity CORPORATIONS – MANAGEMENT AND ADMINISTRATION – OFFICERS OF A CORPORATION – DIRECTOR – APPOINTMENT – CONSENT – where a director nominated for re-election as a director – where the director subsequently attended a directors’ meeting and voted in favour of a resolution to postpone the election of directors – where the resolution was carried – where the election proceeded anyway, contrary to the resolution – where the
director did not attend the election because he believed it to be a legal nullity – where the director was re-elected at the election – whether the appointment of the director is invalid
for want of consent Corporations Act 2001 (Cth) s 201D, s 248C, s 1322 R 583, applied
Ashrafinia v Ashrafinia [2012] NSWSC 500, cited
Bell v Burton (1993) 12 ACSR 325, cited
Bentley Capital Ltd v Keybridge Capital Ltd (2019) 139
ACSR 289; [2019] FCA 1675, cited
BI Constructions Pty Ltd v Shad [2010] NSWSC 484, cited
Chalet Nominees (1999) Pty Ltd v Murray [2012] WASC
147, citedAmalgamated Pest Control Pty Ltd v McCarron [1995] 1 Qd distinguished
Elderslie Finance Corp Ltd v Australian Securities Hawcroft v Jamieson [2017] NSWSC 1478, applied
Hedges v NSW Harness Racing Club Ltd (1991) 5 ACSR
291, cited
Hickey v Aselford [2003] NSWSC 185, cited
Markopolous v Wedlock (2008) 26 ACLC 129; [2008]
WASC 3, distinguished
McMaster v Eznut Pty Ltd (2006) 58 ACSR 199; [2006]
WASC 109, distinguished
Re Deposit Power Pty Ltd [2018] NSWSC 1484,
distinguished
Re Keneally (2015) 107 ACSR 172; [2015] NSWSC 937,
considered
Re Statewide Office Furniture Pty Ltd (2015) 293 FLR 275;
[2015] NSWSC 142, consideredCommission (1993) 11 ACSR 157, applied cited
Savoy v Insurance and Care NSW (2020) 142 ACSR 200; Simon v HPM Industries Pty Ltd (1989) 15 ACLR 427,
applied
Summerdowns Rail Ltd v Stevens [2015] NSWSC 321, cited
Toole v Flexihire Pty Ltd (1991) 6 ACSR 455, cited[2020] NSWSC 133, distinguished cited
COUNSEL: G R Coveney, with S T Lane, for the applicant/cross-
respondent
D de Jersey QC for the respondents/cross-applicantsSOLICITORS: HWL Ebsworth for the applicant/cross-respondent Holding Redlich for the respondents/cross-applicants
The Court is required in this proceeding to determine who constitutes the duly elected board of directors of the applicant, Career Employment Australia Ltd (CEA). To do so, the Court must resolve several issues arising from a chronology of events culminating in two meetings:
(a) a purported meeting of CEA’s board of directors (CEA Board or Board) held on 4 February 2021; and
(b) a purported annual general meeting (AGM) of CEA’s members held on 10 February 2021.
CEA’s position is that the duly elected Board is that which was elected at the AGM
on 10 February 2021. The respondents’ position is that the election held at the AGM
on 10 February 2021 is of no effect because the AGM was adjourned by resolution
passed at the board meeting on 4 February 2021.Background
CEA is a company limited by guarantee and a not-for-profit registered training organisation (RTO). It provides training and support services to government programs, funds charitable services, and operates several social enterprises. It is effectively the parent organisation of a network of entities that I will refer to as the “CEA Group”.[1] Whilst each entity has its own board of directors or management
committee, in practice the CEA Board controls the entire CEA Group. For at least the last 20 years, elections for positions on the CEA Board have been uncontested; that is, there were never more nominees than vacant positions.
[1] A reference to the CEA Group includes a reference to CEA itself.
The CEA Group includes three companies limited by guarantee, seven incorporated associations and one cooperative company. All except one of these entities are not-for-profit charities registered with the Australian Charities and Not-for-profits Commission. The CEA Group also includes two for-profit entities: the Lufra Investment Trust (Lufra) and Business Success Group Pty Ltd (BSG).
The individuals who are central to the issues in this proceeding can be understood to have evolved into two ‘factions’ within CEA.[2] For simplicity, I will refer to them as
the “Applicant Faction” and the “Respondent Faction”. As the labels suggest, members of the Applicant Faction are behind the application brought in CEA’s name
[2] See, eg, T 2-64 to T 2-65.
in this proceeding; each member of the Respondent Faction (except Paul Casey) is a
respondent to this proceeding.Applicant Faction
Shane Cowan has been involved with CEA since around 1982 and has been employed as its General Manager since about 1995. In that role, he has been responsible for managing the day-to-day operations of the CEA Group, other than Lufra and BSG. He has not been a director on the CEA Board, although he has frequently attended board meetings in his capacity as the General Manager. Mr Cowan has extensive family connections within CEA. His wife, Leanne Cowan, and his children, Keohnie Cowan and Sharnay Cowan, all work for entities in the
CEA Group. Mr Cowan’s sister is Sharon Cowan.
Sharon Cowan has been a CEA employee since 2000 and its Deputy General
Manager since 2003. In that capacity, Ms Cowan’s main responsibility has been to
assist her brother, Shane, as the General Manager. Ms Cowan has been a director on the CEA Board since 2012. Ms Cowan, like Mr Cowan, has extensive family connections in the CEA Group. Her children, Shilo Cowan and Nat Luckus, work in CEA Group organisations, as does her son-in-law, Jason Gardiner.
Jason Gardiner has been involved with the CEA Group since about 2002 and is the manager of its Indigenous Youth Mobility Program. He has also been a director of
CEA since 2018. He is Shilo Cowan’s husband and Colleen Beard’s son, both of
whom work in the CEA Group.
Frank Wilson has been a member and director of CEA since 2014. Since 2018, he has also been employed by CEA as its Financial Manager. Mr Wilson previously had a lengthy career with the Australian Taxation Office and he is close friends with Shane Cowan.
Shane Cowan, Sharon Cowan, Jason Gardiner and Frank Wilson were all purportedly elected or re-elected to the CEA Board at the AGM held on 10 February 2021.
Further, at a purported meeting of the “new” Board on 11 February 2021, Shane Cowan was appointed as CEA’s executive chairman and Jason Gardiner was appointed as CEA’s deputy chairman. Additionally, four other individuals associated
with the Applicant Faction were purportedly elected to the Board at the AGM held
on 10 February 2021:
(a) David Hatton, who became a member of CEA on 2 December 2020; (b) Ian Hall, who has attended CEA’s AGMs for around 20 years and has been the general manager of the BTC Cooperative, one of the charities in the CEA
Group;
(c)
Alice Langford, who has been the Manager, Small Business Programs at CEA since 2009; and
(d) Vicki Bailey.
Lastly, Beverley Austin started working for CEA in 2001. At least in recent years, Ms Austin has been employed as the personal assistant to the general manager, Shane Cowan. In that role, Ms Austin has acted as the returning officer in elections to the Board and has been intimately involved in the administrative processes surrounding the Board. Ms Austin gave evidence for the applicant in the proceeding and, for this reason, I have included her under the banner of the Applicant Faction.
Respondent Faction
The Respondent Faction consists of individuals who were directors on the Board as at the commencement of the AGM held on 10 February 2021 but who were not, except Paul Casey, re-elected at that AGM.
John Shepley has been the chairman of CEA since around 1990. Unlike any of the Applicant Faction, Mr Shepley is also a director of BSG. In that capacity, he earns a salary of approximately $116,000 per year. His partner, Jenny Soon, is a manager at BSG and his son, Robert, is a trainer at BSG.
Along with Mr Shepley, both Brian Daley and Jodie-Lee Luckus have been directors of CEA and BSG.[3] Mr Daley has been involved with CEA since 1994 and a long-standing director on the Board. Since 2018, he has been its treasurer, prior to which he was the vice-president. Ms Luckus has been involved with CEA for around 20 years and was elected to the Board in 2018.
[3] Ms Luckus commenced as a director of BSG on 24 April 2019.
Patrick Purcell has also been a long-standing Board member and has been its deputy chairman. Lastly, Paul Casey has been involved with CEA for around 25 years and a director since 2016. Since September 2017, he has been the company secretary.
Unlike Mr Daley, Ms Luckus and Mr Purcell, Mr Casey is not “singularly aligned”
with Mr Shepley and the evidence is that he has voted at board meetings on an issue-by-issue basis.[4][4] T 2-97, ln 39.
Chronology of events
The following chronology is largely undisputed, save where differences in the evidence have been outlined.
Pre-July 2020: BSG’s financial difficulties
In 2011 or 2012, CEA purchased 100% of the shares in BSG; the rationale for the purchase being that profits made by BSG could be used to cross-subsidise the not-for-profit activities of other CEA Group entities. BSG provided opportunities for students with disabilities in schools to obtain traineeships which enabled those students to complete school with a better exit score and greater opportunities to obtain full-time employment. In 2018, BSG became a labour hire company and commenced a new venture involving the hosting of trainees with disabilities with employers. The
employer provided workplace experience and skills, but the trainee’s wage was paid
by BSG. The venture was to be funded through incentives to employers, training fees paid to BSG as the supervising RTO and funding incentives paid to Disability Employment Services providers.
Until around 2015, BSG was profitable and provided CEA with some funds. However, it then began to struggle financially. Since 2015, it has depended on
“loans” from CEA for cash-flow purposes and, from around mid-2018, that
dependence became almost entire. BSG has made substantial losses in recent years, including over $1 million in each of the 2018/19 and 2019/20 financial years.
Mr Wilson, as CEA’s Financial Manager, opines that the ongoing contracts and
constraints on BSG mean that it will continue to be a strain on CEA’s funds.[5] On the
other hand, Mr Shepley believes that BSG will return, at least, to “break even”.[6] It is
common ground that, as things stand, BSG would become insolvent without funding from CEA. Mr Shepley accepts that he would lose his salary if BSG was wound up.
[5] Affidavit of F T Wilson sworn 5 March 2021 (CD-20), paragraph 16.
[6] Affidavit of J S Shepley sworn 19 April 2021 (CD-25), paragraph 12(e).
Mr Wilson, Mr Gardiner, Mr Shane Cowan and Ms Sharon Cowan each gave
evidence that they attempted to raise concerns regarding BSG’s financial position
with Mr Shepley and others at CEA Board meetings from around 2018 or 2019 to early 2020. However, they said that Mr Shepley was unwilling to engage with those
concerns. Ms Luckus’ view was that it was inappropriate to single-out BSG for
criticism in circumstances where other entities in the CEA Group were also losing
money. Mr Shepley’s evidence was that, when concerns were raised, Board members
who were also BSG directors (i.e. himself, Mr Daley and Ms Luckus) thought it
unnecessary to discuss BSG’s financial matters at CEA Board meetings.[7]
[7] T 3-34, ln 13-15.
At a CEA Board meeting on 26 February 2020,[8] Mr Wilson moved the following motion:
“That BSG provide some sort of financial information, providing a
forecast as to where they propose that their future funding will come from so that we can determine whether or not BSG is viable into the future, that it will be able to cover the costs that are currently funded
by loans from CEA.”[9]
[8] The meeting was attended by Mr Shepley, Mr Daley, Mr Purcell, Mr Casey, Ms Luckus, Mr Wilson,
[9] Affidavit of F T Wilson sworn 5 March 2021 (CD-20), paragraph 21 and exh FTW-5.
The motion was defeated by a split 4-4 vote, with Mr Shepley, Mr Daley, Mr Purcell and Ms Luckus voting against. Mr Casey, who voted in favour of the motion, regarded it as a reasonable request to enable the Board to make informed decisions.[10] As evidence that other entities in the CEA Group were struggling financially and that BSG was implementing strategies for improvement, the respondents identify that,
during the same meeting, Mr Shane Cowan provided a “Monthly Program Report”
which states:
“As mentioned again at the last Board meeting, cash reserves have
been depleting over the past 20 months. Just looking forward from the Audits last year, we have been in discussions with all the Entities that recorded a loss wanting to implement strategies, to change, reduce and return each one to a surplus, only BSG continues to
operate with any evidence of change reported to the Board.”[11]
[10] T 2-98, ln 44 to T 2-99, ln 2.
[11] Affidavit of S G Cowan sworn 11 March 2021 (CD-14), paragraph 20 and exh SGC-6 (emphasis
In his affidavit, Mr Shane Cowan states:
“Over a number of years, Mr Shepley has made boastful comments
to me about the fact that he has the majority vote of the board. As a result, I have felt powerless in my position at [sic] General Manager to effect any meaningful change to the financial arrangement between
CEA, BSG and Lufra.”[12]
[12] Affidavit of S G Cowan sworn 11 March 2021 (CD-14), paragraph 22.
Similarly, Mr Gardiner states:
“Mr Shepley also relies on support from a long-serving core group of
board members. I have often felt disempowered because board
members who were not a part of Mr Shepley’s central group were not
given an opportunity to express their concerns.”[13]
[13] Affidavit of J M Gardiner sworn 11 March 2021 (CD-2), paragraph 12.
1 July 2020 to 22 January 2021
As at 1 July 2020, the CEA Board comprised of Mr Shepley (chairman), Mr Purcell (deputy chairman), Mr Casey (secretary), Mr Daley (treasurer), Ms Luckus, Ms Sharon Cowan, Mr Wilson and Mr Gardiner.
On 22 July, the CEA Board met and resolved that an AGM was to be held on 16 September and that nominations for CEA Board positions were to be returned by 1 September. Ms Austin notified the members on 27 July, the same day on which Ian Hall nominated for a position on the Board by submitting his nomination form to Ms Austin. His nomination was the first to be submitted.[14] Mr Wilson then nominated on 20 August.
[14] Affidavit of J S Shepley sworn 19 April 2021 (CD-25), exh JSS-14.
On 26 August, the CEA Board met and resolved to postpone the AGM from 16 September to 28 October, and to extend the return date for nominations to
13 October. The apparent reason for the postponement was the inability of CEA’s
auditors, Nexia, to complete their audit of the financial documentation by
16 September. Ms Austin notified the members on 27 August.
On 30 August, Mr Shepley, Mr Purcell, Mr Daley, Mr Casey and Ms Luckus all nominated for the Board, bringing the number of nominations to seven for a total of nine available positions. On 1 September, Ms Langford, Ms Sharon Cowan and Ms Bailey each submitted their nominations to Ms Austin. The consequence of the nominations submitted on 1 September is that there were 10 nominees for nine positions, requiring the election to be contested. On 3 September, Mr Shane Cowan also submitted a nomination.
In late September or early October 2020, the Board met by telephone and resolved to indefinitely postpone the AGM scheduled for 28 October due to the COVID-19 pandemic. The Board did not discuss nor pass any resolutions regarding the return
date for nominations. Mr Shepley’s evidence was that no such discussion occurred
at the meeting because they “didn’t put [their] minds to it because … the board
considered that the nominations had closed. There was no need to further extend.”[15]
However, that evidence is inconsistent with the fact that nominations were due by 13 October pursuant to the resolution made on 26 August. The board meeting at which the AGM was indefinitely postponed must have been held on or before
6 October 2020, the date on which Ms Austin emailed CEA’s members to advise them
of the indefinite postponement.[16] Ms Austin sent similar emails updating the members in the days immediately following the previous CEA Board meetings on 22 July and 26 August.[17] Given that the meeting must have occurred before 13 October, nominations were still open at the time the meeting was held.
[15] T 3-50, ln 9-11.
[16] Affidavit of B J Austin sworn 11 March 2021 (CD-19), paragraph 6 and exh BJA-4.
[17] Affidavit of B J Austin sworn 11 March 2021 (CD-19), paragraphs 3 and 5, exhs BJA-1 and BJA-3.
On or around 12 November, the CEA Board met to sign off on CEA’s financial
documents. Mr Gardiner swears that Nigel Bamford of Nexia raised concerns at the
meeting that CEA’s investments in BSG and Lufra posed a significant risk to CEA’s
financial future and that Mr Bamford urged the Board to take action to make those entities profitable.[18] There are apparently no minutes of that meeting.[18] Affidavit of J M Gardiner sworn 11 March 2021 (CD-2), paragraph 22.
At 12.47pm on 1 December, Ms Austin emailed Mr Daley, Mr Gardiner, Ms Luckus, Mr Shepley, Mr Casey and Ms Sharon Cowan advising that their nomination forms had been lost and that they needed to re-submit them. At 2.13pm, in a reply to all recipients of that email, Mr Shepley wrote:
“please disregard the closing date on the forms, we will set election
timetable tomorrow night can anyone not attending please print off
and sign ‘accept nomination’ and send to shane or myself Ta”[19]
[19] Affidavit of J S Shepley sworn 19 April 2021 (CD-25), paragraph 30 and exh JSS-9.
Approximately 20 minutes later, Ms Sharon Cowan sent a further reply to all
recipients of Mr Shepley’s email, writing:
“Hi please do not do new nomination. WE HAVE John, Brian, Pat,
Jodie and Pauls completed nomination forms.”[20]
[20] Affidavit of J S Shepley sworn 19 April 2021 (CD-25), exh JSS-9.
The following day, the Board met by telephone and resolved that the AGM that had previously been indefinitely postponed was to be held on 10 February 2021 (10 February AGM). Again, the Board did not discuss setting a new return date for board nominations. The same day, Mr Hatton became a member of CEA.
On 18 December, Mr Gardiner submitted his nomination for a board position. In cross-examination, Mr Gardiner stated that he had originally nominated in August but that he re-nominated because his original nomination had apparently been lost, as
reported in Ms Austin’s email of 1 December.[21]
[21] T 2-49, ln 9-24.
On 21 January 2021, Mr Shepley asked Ms Austin to provide him with a range of documents for the forthcoming 10 February AGM, including a list of all nominations for board positions. The following day, before Ms Austin had provided those documents, Mr Hatton nominated for a board position.
25 January 2021 to 3 February 2021
On 25 January, Ms Austin provided Mr Shepley with the list of nominees. By reading that list, Mr Shepley became aware for the first time that there were more nominees (13) than vacant positions (9).
On 27 January, there was a breakfast meeting between Ms Langford, Mr Shepley and a Mr Miszkowski. Mr Shepley showed Ms Langford the list of nominations (which
included hers) and accused her of “going against” the Board.[22] According to Ms Langford, Mr Shepley interrogated her about her knowledge of a “conspiracy”
regarding board nominations and demanded to know why she was running against him and his “mates”.[23] Her account of the meeting is that Mr Shepley was very angry,
that he threatened “vicious litigation” and that she felt uncomfortable.[24] Mr Shepley
accepts that he was “a bit angry” that Ms Langford had not previously told him about
her nomination.[25] Five days later, Mr Shepley caused a document to be sent to Ms Langford which, had she signed it, would have effected the withdrawal of her nomination. However, she chose not to sign the document.
[22] T 3-36, ln 41-45.
[23] Affidavit of A M Langford sworn 11 March 2021 (CD-8), paragraphs 8-13.
[24] Affidavit of A M Langford sworn 11 March 2021 (CD-8), paragraphs 8-13; T 2-5, ln 13-39.
[25] T 3-37, ln 15-16.
On 28 January, Mr Shepley emailed Ms Austin, requesting copies of all nomination forms that Ms Austin had received. Shortly later, Ms Austin provided those forms
and Mr Shepley noticed that Mr Gardiner’s nomination, signed 18 December 2020, and Mr Hatton’s nomination, signed 22 January 2021, were both signed after
13 October 2020, the supposed closing date for nominations. Later the same day,
according to Mr Shepley, he:“… made further enquiries in relation to the nomination forms and
conduct of the AGMs, in particular:
(a) a discussion with Mr Bamford of Nexia, to ensure that the CEA Group Association financial records and IT Systems were secured because I was concerned that there may be some interference with those records and systems by other board members or senior officers of the CEA Group associations; and (b) communications with the Australian Electoral Commission and Queensland Electoral Commission to obtain information as to whether those bodies may be able to assist by running the AGMs.”[26]
[26] Affidavit of J S Shepley sworn 19 April 2021 (CD-25), paragraph 41.
In late January and early February, having realised on 25 January that the election for the Board would be contested, Mr Shepley had multiple discussions with certain other board members (but not Mr Wilson, Mr Gardiner or Ms Sharon Cowan) regarding the forthcoming 10 February AGM. According to Mr Daley, he and Mr Shepley
discussed that, because the election would be contested and because Mr Gardiner’s
and Mr Hatton’s nominations were out of time, the 10 February AGM would need to
be adjourned so that an independent person could be appointed to run the election. They agreed that an urgent board meeting was needed. A similar discussion was had between Mr Casey and Mr Shepley.
On 1 February, Mr Shepley emailed Ms Austin, asking her to sign a statutory declaration regarding the nomination forms that she had received:
“Dear Bev,
I have attached emails that you have sent to the Board Members dated 27th August, 2020 and 1st December, 2020 regarding the nomination procedures, and also one from Sharon on 1st December.
The nominations from 27th August, 2020 was extended until 13th
October, 2020.The email on 1st December, 2020 advised that whilst moving you appeared to have lost nominations for some Board Members and that email asked people to provide new nominations.
Neither your email or that of Sharon’s identifies any other
nominations. Can you confirm by Statutory Declaration all the candidates nomination forms you had before 1 Dec, which ones were
‘lost’ and how within under 2 hrs they were found? Can I have this
before COB tomorrow Tues2 Feb.
Regards John”[27]
[27] Affidavit of B J Austin sworn 11 March 2021 (CD-19), paragraph 9 and BJA-7.
During 1 and 2 February, Mr Shepley discussed his concerns regarding the forthcoming 10 February AGM with all other board members except Mr Gardiner, Mr Wilson and Ms Sharon Cowan. It was decided that he would draft some board motions that would then be taken for discussion to a meeting on 3 February between Mr Shepley, Mr Daley, Mr Shane Cowan and Ms Sharon Cowan. The draft board motions were discussed by Mr Shepley, Mr Purcell, Mr Daley, Mr Casey and Ms Luckus before the meeting with the Cowans, but were not provided to the other directors, Mr Wilson, Mr Gardiner and Ms Sharon Cowan.
On 3 February, the meeting with the Cowans did not proceed because Mr Shane Cowan was not in the office. At 1.10pm, Mr Shepley emailed the draft board motions to all board members except Mr Gardiner, Mr Wilson and Ms Sharon Cowan. The draft board motions (Draft Motions) read as follows:
“MOTIONS FOR THE BOARD MEETING ON 4 FEBRUARY 2021
1. That the nominations of David Hatton and Jason Gardiner are not valid due to the fact that the dates as presented on their nominations are not within the valid nomination period. Mr Gardiner provided a dated nomination of 18 December 2020 (some two months later than what was required) and Mr Hatton was not a member at the time when nominations closed.
2. That the Annual General Meetings of 10 February 2021 be adjourned.
3. That the Board authorises the Chair to organize and finalize a Returning Officer and a body to perform the process, and inform the Board to ensure they have no conflicts.
4. That the documentation from the Chair to Ms Bev Austin be followed through and require her to answer that before close of business, Friday, 5 February 2021. That she be suspended until such time as she has provided the information to the Board, if not received by then.
5. That both Sharon Cowan, Bev Austin and Shane Cowan be required to provide information to the Board as to why they had not disclosed at any prior time to a request from the Chair of any other nominations in respect to the Board, especially the first nomination of 27 July 2020 being prior to the call of nominations for the Board Members.
6. That the Board has a view that the deliberate nature of Shane Cowan, Sharon Cowan and Bev Austin is a deceit exercised upon the Board in respect to not providing in a timely and efficient way appropriate information to the Board in respect to what is required by the Board and the operations of the Associations Incorporations Act and the Corporations Act.
7. That Shane Cowan, Sharon Cowan and Bev Austin, provide in full detail to the Auditor for safekeeping all details regarding access, passwords and so forth to the I.T. systems of the organizations including their own personal and professional details that are on the I.T. systems of the organizations, and agree not to change them until authorised by the Board.
8. That it is not to be presumed that the requirement to provide that is any presumption that they have committed any offences or details or any prevention of any offences against the Constitution or Rules but to ensure that should something happen would be transferred through to that.
9. That Shane Cowan advises Brad and other I.T. people of CEA and associated organisations that forthwith until such time as otherwise advised by the Board that the I.T. control system is to be transferred to the Auditor for safekeeping and they should provide all I.T. issues and confirmation of changes to him until otherwise directed by the Board.
10. That Frank Wilson shall provide prior to the finalization of business on Friday, 5 February 2021 to Brad, the I.T. Provider all the codes in connection for the finance system to be held by
the Auditor until otherwise directed by the Board.”[28]
[28] Affidavit of J S Shepley sworn 19 April 2021 (CD-25), paragraph 45 and JSS-16.
At 3.39pm, Mr Shepley emailed the entire CEA Board, giving notice of a board meeting to occur by telephone the following day at 5.00pm (4 February Board Meeting). There was no content in the body of the email and the Draft Motions were not attached. The only content was the subject line, which read:
“Tomorrow thurs there will be an urgent Board meeting 5pm by
telephone call 1800[******] pw 9179147”[29]
[29] Affidavit of F T Wilson sworn 5 March 2021 (CD-20), paragraph 32 and FTW-11.
At 5.34pm, Mr Shepley emailed a copy of the Draft Motions to Mr Bamford of Nexia.
Events on 4 February 2021 prior to the board meeting
At 10.00am on 4 February, Mr Shepley attended at the CEA office in Coorparoo to meet with Mr Shane Cowan and Ms Sharon Cowan. Mr Shepley told them that he was calling an emergency board meeting that night, and he provided them with a copy of the Draft Motions which he said the Board would be voting on.
In his affidavit, Mr Cowan recalls this meeting as follows:
“I recall that there were approximately 10 motions listed and that,
upon reading them, they caused me great distress.
I recall Mr Shepley saying that there were ‘too many Cowans’ and
that he intended to postpone all AGMs because the Cowans would
‘cause the entire group to fall apart’ or words to that effect. …
I became so overwhelmed with emotion and anger that I ripped up the list of motions and threw them at Mr Shepley. I felt extremely powerless against Mr Shepley and his supporters on the board, and felt that Mr Shepley planned to undo the work I had devoted myself
to for forty years. As a result, I said to him words to the effect ‘I will resign at the end of the day’, and left the head office to attend a student graduation.”[30]
[30] Affidavit of S G Cowan sworn 11 March 2021 (CD-14), paragraphs 31-33.
In cross-examination, Mr Cowan stated that he did not read all the motions and that he only got to about halfway down the page.[31]
[31] T 1-85, ln 39.
Mr Shepley recalled that Mr Shane Cowan said words to the effect of, “I am resigning and my last official function will be to attend a graduation at Ipswich at 11am”. He
also recalled that Ms Sharon Cowan, after Mr Cowan left the meeting, said words to
the effect of, “you can expect my resignation by the end of the week too”.[32]
[32] Affidavit of J S Shepley sworn 19 April 2021 (CD-25), paragraph 51.
Ms Sharon Cowan’s evidence of this meeting was as follows. She recalled that she
and Mr Cowan “were accused of many things” which were “so hurtful”. She recalled
a tirade from Mr Shepley which included accusing the Cowans of disloyalty. As to what Mr Shepley was accusing them of being disloyal about, Ms Cowan stated that
“it was our involvement in… there being a contested election”.[33]
[33] T 1-113, ln 33-45.
In cross-examination, Mr Shepley was asked whether he accused the Cowans of disloyalty at this meeting:
“I don’t remember if I used the word disloyal. I certainly think they
had no doubt that I thought that they had been deceptive [and] the fact is, as I indicated to you earlier, that there had been this whole period
of time where they knew there was nominations and they hadn’t
disclosed it.”[34][34] T 3-42 to T 3-43.
At 11.16am, following the meeting with the Cowans, Mr Shepley forwarded to the Board (except Mr Gardiner, Mr Wilson and Ms Sharon Cowan) a chain of emails
between himself and Mr Bamford of Nexia that commenced with Mr Shepley’s email
to Mr Bamford at 5.34pm the previous evening. The chain contained advice from
Mr Bamford on the Draft Motions.
Shortly thereafter, Mr Shepley amended the Draft Motions to include one further motion in the following terms (Amended Draft Motions):
“11. Acknowledge the resignation of Shane Cowan as General
Manager and request Sharon to fill the position until the Board
decides on a course of action.”[35]
[35] Affidavit of J S Shepley sworn 19 April 2021 (CD-25), paragraph 54 and JSS-20.
At 11.27am, Mr Shepley emailed the Amended Draft Motions to the entire CEA Board plus Mr Shane Cowan. This was the first time that Mr Wilson and Mr Gardiner had been made aware of any draft motions.
The evidence before the Court is that, having received the Amended Draft Motions from Mr Shepley at 11.27am, Mr Wilson, Mr Gardiner, Ms Sharon Cowan and Mr Shane Cowan engaged in several conversations throughout the afternoon of 4 February regarding the board meeting scheduled for that evening. The evidence of those conversations, which took place in the CEA office before the meeting, is as follows:
(a)
Mr Wilson told Mr Gardiner and Ms Sharon Cowan that he did not intend to attend the board meeting;[36]
(b)
Ms Sharon Cowan told Mr Gardiner and Mr Wilson that she would not be attending the meeting;[37]
(c)
Mr Gardiner told Mr Wilson, Ms Sharon Cowan and Mr Shane Cowan that he had a prior engagement and that he would not be attending the meeting;[38]
(d)
Mr Wilson, Mr Gardiner and Ms Sharon Cowan discussed the fact that they did not want the Amended Draft Motions to be carried at the meeting;[39]
(e)
Mr Wilson discussed with Mr Gardiner and Ms Sharon Cowan the fact that the meeting would be inquorate without their attendance.[40] Mr Shane Cowan also discussed that matter with Ms Sharon Cowan.[41] Both Mr Gardiner and Ms Sharon Cowan denied that such discussions took place;[42] and
(f)
Mr Wilson, Mr Gardiner, Ms Sharon Cowan and Mr Shane Cowan discussed the idea of sending emails to Mr Shepley expressing their apologies for not attending the proposed board meeting (but Mr Gardiner denied discussing this[43]).[44]
[36] T 1-45, ln 6-9; T 1-45, ln 34-41.
[37] T 1-107, ln 45-46; T 1-108, ln 14-17.
[38] T 2-36.
[39] T 1-48, ln 21-22; T 2-36.
[40] T 1-48, ln 24-41; T 1-56, ln 19-23.
[41] T 1-89, ln 1-10; T 1-90, ln 5-9.
[42] T 1-108, ln 31-40; T 2-42, ln 27.
[43] T 2-43, ln 40.
[44] T 1-48, ln 25-30; T 1-90, ln 29-31.
Following those discussions, Mr Wilson, Mr Gardiner and Ms Sharon Cowan each sent an email to Mr Shepley as follows (Apology Emails):
(a) At 4.05pm, Mr Gardiner wrote: “I am unable to attend on such short notice. Please record my apologies in the minutes.”
(b) At 4.30pm, Mr Wilson sent an email identical to Mr Gardiner’s. (c) At 4.32pm, Ms Sharon Cowan wrote: “I am unable to attend with the short notice please record my apology.”
At 4.51pm, Mr Shane Cowan sent an email to the entire CEA Board, stating, “I have
not and will not tender my resignation.” His evidence was that, having reflected upon
his emotional statement to Mr Shepley earlier in the day, he ultimately did not wish to carry out his threat to resign. Each of Mr Shepley, Mr Casey, Mr Daley and
Ms Luckus read Mr Cowan’s email before commencing the board meeting at
5.00pm.[45]
[45] T 2-78, ln 4-6; T 2-101, ln 20; T 3-12, ln 43; T 3-46, ln 21. Mr Purcell did not give evidence in the
4 February Board Meeting
The 4 February Board Meeting commenced at 5.00pm and was attended by five directors: Mr Shepley, Mr Purcell, Mr Daley, Mr Casey and Ms Luckus. Under
CEA’s constitution, attendance by six of the eight directors was required to achieve
a quorum.[46] Acknowledging that the meeting was possibly inquorate, the attendees agreed to proceed with the meeting anyway. During oral submissions, Mr Coveney, who appeared with Mr Lane for CEA, expressly abandoned any reliance on a lack of quorum at the 4 February Board Meeting. It is therefore unnecessary to consider whether the attendees were entitled to proceed with only five directors present. In any event, it is sufficient to note that their decision to proceed with five was premised on the alleged urgency of the business to be done at the meeting, namely dealing with the Amended Draft Motions, particularly the motion to adjourn the 10 February AGM.[47]
[46] Constitution of Career Employment Australia Ltd, cl 11.5 (See Exhibit 2).
[47] See, Affidavit of J Luckus sworn 22 April 2021 (CD-28), paragraphs 9-10; Affidavit of B J Daley
Each of the Amended Draft Motions was passed unanimously at the meeting, with the exception that it was not resolved that Ms Sharon Cowan would become acting
general manager of CEA. Ms Luckus’ evidence was that she did not want Ms Sharon Cowan to be the acting general manager if Ms Cowan had been involved in “deceit
in relation to the nominations”.[48] Instead, it was resolved that Mr Shepley would
temporarily be appointed as “Administrator” of CEA.[49] Draft Motion 4, compelling
Ms Austin to provide information to the Board under threat of suspension, was also amended so as to make any such suspension unpaid. An additional four motions which had not been circulated prior to the meeting were also carried.[50]
[48] Affidavit of J Luckus sworn 22 April 2021 (CD-28), paragraph 9(d).
[49] Affidavit of J Luckus sworn 22 April 2021 (CD-28), exh JLL-1.
[50] Including the motion appointing Mr Shepley as “administrator”.
Despite Mr Shane Cowan’s email of 4.51pm purporting to retract his threat to resign,
the attendees unanimously passed a motion acknowledging his resignation and resolved that no payment would be made to Mr Cowan until after such payment had
been recommended by the auditor. Mr Casey’s cross-examination on this matter
included as follows:
“You’d seen the email from Mr Cowan by which he said, effectively,
‘I’m not going to resign’, that was – he was emotional but he decided
not to resign; do you remember that?---Yep.
Yes. So into the meeting you go knowing that he hasn’t resigned but,
yet, you’re faced with a resolution dealing with him having
resigned?---Yes.
Yes. And you do deal with it on the basis that he has resigned?---Yes.
Yes. All right. And you determine those things about Mr Cowan and the other resolutions that affected people like Mr Gardiner and Ms Cowan without regard to stopping the meeting until those people
could be there?---We based it on the discussions that had been – that had been held and the report which did come back to us from – from
John [Shepley].
…
So a lot of faith was placed in John by all of you?---Yes.”[51]
[51] T 2-101, ln 15-32.
At 8.35pm, Mr Shepley circulated minutes of the 4 February Board Meeting, including a copy of the resolutions passed (Resolutions), to each person who attended the meeting (but not to Mr Wilson, Mr Gardiner or Ms Sharon Cowan). The Resolutions were in the following terms:
“MOTIONS FOR THE BOARD MEETING ON 4 FEBRUARY 2021
1. That the nominations of David Hatton and Jason Gardiner are not valid due to the fact that the dates as presented on their nominations are not within the valid nomination period. Mr Gardiner provided a dated nomination of 18 December 2020 (some two months later than what was required) and Mr Hatton was not a member at the time when nominations closed.
2. That the Annual General Meetings of 10 February 2021 be postponed.
3. That the Board authorises the Chair to organize and finalize a Returning Officer and a body to perform the process, and inform the Board to ensure they have no conflicts.
4. That the documentation from the Chair to Ms Bev Austin be followed through and require her to answer that before close of business, Friday, 5 February 2021. That she be suspended until such time as she has provided the information to the Board, if not received by then. That such suspension be unpaid.
5. That both Sharon Cowan, Bev Austin and Shane Cowan be required to provide information to the Board as to why they had not disclosed at any prior time to a request from the Chair of any other nominations in respect to the Board, especially the first nomination of 27 July 2020 being prior to the call of nominations for the Board Members.
6. That the Board has a view that the deliberate nature of Shane Cowan, Sharon Cowan and Bev Austin is a deceit exercised upon the Board in respect to not providing in a timely and efficient way appropriate information to the Board in respect of what is required by the Board and the operations of the Associations Incorporations Act and the Corporations Act.
7. That Shane Cowan, Sharon Cowan and Bev Austin, provide in full detail to the Auditor for safekeeping all details regarding access, passwords and so forth to the I.T. systems of the organizations including their own personal and professional details that are on the I.T. systems of the organizations, and agree not to change them until authorised by the Board.
8. That it is not to be presumed that the requirement to provide that is any presumption that they have committed any offences or details or any prevention of any offences against the Constitution or Rules but to ensure that should something happen would be transferred through to that.
9. That Shane Cowan advises Brad and other I.T. people of CEA and associated organisations that forthwith until such time as otherwise advised by the Board that the I.T. control system is to be transferred to the Auditor for safekeeping and they should provide all I.T. issues and confirmation of changes to him until otherwise directed by the Board.
10. That Frank Wilson shall provide prior to the finalization of business on Friday, 5 February 2021 to Brad, the I.T. Provider all the codes in connection for the finance system to be held by the Auditor until otherwise directed by the Board.
11. That the Board acknowledges the resignation of Shane Cowan as General Manager and that no payment shall be made to Mr Cowan until such time as there has been an audit of the Books and that the proposed payment has been authorized by the Board on the recommendation of our Auditor.
12. That the Chairman (John Shepley) be appointed Administrator of CEA and its associated organizations for a period of seven (7) days while the Board considers its process of this matter. The Chairman will be authorized to enter the building and implement the above decisions, including changing of locks and passwords to the building and advising essential personnel and providing them with keys in respect to those issues.
13. That besides advising Brad in the I.T. Department regarding all of the I.T. requirements and financials, that John Shepley contacts the banks for CEA and associated entities regarding the change and be appointed the Sole Administrator in respect to finance.
14. That any monies be paid(advanced) to BSG are to be authorized by Pat Purcell and Brian Daley so that there is no conflict of interest.
15. That within seven (7) days, John Shepley is to report to the Board in respect to what has occurred and that there be a further Board Meeting by telephone.
[52] Affidavit of J S Shepley sworn 19 April 2021 (CD-25), paragraph 61 and exh JSS-24.
Moved: Pat Purcell Seconded: Brian Daley Carried Unanimously”[52]
5 February 2021 to 9 February 2021
On 5 February, Mr Shepley attended the CEA office and provided each of Ms Sharon Cowan, Mr Shane Cowan, Mr Gardiner, Mr Wilson and Ms Austin with a copy of the various Resolutions that affected them as individuals. By way of example, Ms Austin
was given a copy of Resolution 4. Mr Gardiner’s evidence is that he and Ms Sharon
Cowan challenged Mr Shepley regarding the validity of the 4 February Board Meeting and that Mr Shepley threatened to seek a court injunction if the requirements of the Resolutions were not met.[53] Later the same day, Mr Gardiner changed the locks at the CEA office at Coorparoo on instruction from Ms Sharon Cowan.
[53] Affidavit of J M Gardiner sworn 11 March 2021 (CD-2), paragraph 35.
On 7 February, Mr Shepley, with Mr Daley’s concurrence, sent correspondence to
various recipients as follows:
(a) an email to CEA’s members, notifying them that the 10 February AGM had been postponed;
(b)
an email letter to Mr Wilson informing him that he had been suspended without pay because he had failed to provide the finance system access codes as required by Resolution 10;
(c)
an email letter to Mr Gardiner, Ms Austin, Ms Sharon Cowan and Ms Shilo Cowan alleging that they had entered into a conspiracy to take over the financial affairs of CEA and demanding a response to the allegations by 8.00am the following day; and
(d)
an email letter to Ms Austin and Ms Sharon Cowan requiring that they provide information regarding the IT control system authorities by 8.00am the following day.
From 7 February onwards, Mr Shepley began changing the locks at CEA premises and refusing entry to certain CEA staff including Mr Gardiner and Mr Shane Cowan.
On 9 February, Ms Sharon Cowan emailed CEA’s members, notifying them that the
10 February AGM would be proceeding as originally scheduled.
10 February AGM
As at 10 February 2021, CEA had 45 members entitled to vote in the election for the CEA Board.
At 5.50pm, Mr Wilson attempted to gain access to the CEA premises at Coorparoo for the purposes of attending the 10 February AGM but was denied entry by security guards. Mr Wilson and Mr Gardiner then attempted to establish the AGM in the car park but were moved on by security guards. In those circumstances, they established an AGM on the footpath, outside the CEA office.
The meeting opened at 6.05pm and closed at 6.41pm. Thirty of the 45 members attended the meeting, along with an independent observer, Ms Kyla Brose, a solicitor.[54] Nine people were purportedly elected to the CEA Board: Mr Wilson, Mr Hall, Ms Bailey, Mr Shane Cowan, Ms Sharon Cowan, Mr Gardiner, Mr Casey, Ms Langford and Mr Hatton. No votes were cast in favour of electing Mr Shepley, Mr Daley, Mr Purcell or Ms Luckus.
[54] Of the 15 absent members, four were the respondents, one was Mr Casey, six were apologies and
Events following the 10 February AGM
On 11 February, absent Mr Casey, the persons purportedly elected to the CEA Board at the 10 February AGM held a board meeting. The minutes of the AGM were affirmed and ratified unanimously. By a show of hands, Mr Shane Cowan was appointed executive chairman, Mr Gardiner was appointed deputy chairman, and Ms Langford was appointed secretary.
On 12 February, a further meeting was held by the “new” Board.[55] It was resolved
that CEA’s solicitor, Mr Tolhurst of HWL Ebsworth, would amend the ASIC register
to reflect the changes to the Board and to amend CEA’s registered office address to
that of HWL Ebsworth in Brisbane.
[55] Mr Casey was absent and Ms Bailey was an apology.
On 14 February, Ms Bailey resigned from the “new” Board under a threat from
Mr Shepley to the effect that she had to decide between resigning and not returning to work on the following Monday. The same day, Mr Shepley emailed all CEA staff, making, inter alia, the following points:
(a) Mr Shane Cowan had resigned on 4 February; (b)
a CEA Board meeting on 4 February had resolved to postpone the 10 February AGM;
(c) Ms Austin, Ms Shilo Cowan, Mr Gardiner and Mr Wilson had been suspended; (d) Ms Sharon Cowan’s employment had been terminated effective 11 February; and
(e) there was a conspiracy to illegally take over CEA by Mr Shane Cowan, Ms Sharon Cowan, Ms Austin, Ms Shilo Cowan, Mr Gardiner and Mr Wilson.
On 16 February, Ms Leanne Cowan received a text message from Mr Shepley stating that her position was being made redundant. The following day, she sought an explanation for her redundancy, but no explanation was given.
The parties’ competing applications
There are two applications before the Court: an amended originating application filed by CEA and an amended cross-application filed by the respondents. Both applications ask the Court to determine who constitutes the duly elected board of CEA. CEA contends that the Board is comprised of those persons elected at the 10 February AGM and it seeks declaratory relief to that effect pursuant to s 10 of the Civil Proceedings Act 2011 (Qld) or the inherent jurisdiction of the Court. On the other hand, the respondents contend that the Board is comprised of those persons who constituted the Board prior to the 10 February AGM. They seek, inter alia, a declaration pursuant to s 1322(4)(a) of the Corporations Act 2001 (Cth) (Corporations Act) that the 4 February Board Meeting and the Resolutions carried at that meeting are not invalid.
If the respondents succeed on their cross-application, CEA’s amended originating
application must fail because the effect of the relief sought by the respondents would be that the 10 February AGM was adjourned by Resolution 2 carried at the 4 February Board Meeting. Any business conducted at the 10 February AGM would be of no
effect. It is therefore expedient to deal with the respondents’ cross-application first.
Respondents’ amended cross-application
The respondents seek declarations of non-invalidity pursuant to s 1322(4)(a) of the Corporations Act. That section provides:
“Subject to the following provisions of this section but without
limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a)
an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;
… and may make such consequential or ancillary orders as the Court
thinks fit.”
An order under s 1322(4)(a) operates to ‘cure’ a contravention of a provision of the Corporations Act or a provision of a company’s constitution. Clearly, before any
order under s 1322(4)(a) is necessary, there must be a contravention to cure. Here, CEA submits that cl 11.2 of CEA’s constitution was contravened.[56] Clause 11.2
[56] CEA initially also relied on a lack of quorum at the 4 February Board Meeting but abandoned that
(‘Notice of Board Meeting’) provides:
“The convenor of each Board meeting:
(a) must give reasonable notice of the meeting (and, if it is adjourned, of its resumption) individually to each Director who is in Australia; ... …”
Before I turn to consider that question, it is important to identify the relevance of s 1322(2), which provides that:
“A proceeding under this Act is not invalidated because of any
procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the
proceeding to be invalid.”
The adoption of resolutions at a board meeting is a proceeding under the Act,[57] and a
[57] Corporations Act 2001 (Cth) s 1322(1)(a); City Pacific Ltd v Bacon (No 2) (2009) 178 FCR 81, [51]
deficiency of notice (such as a contravention of cl 11.2(a) of CEA’s constitution) is a
procedural irregularity.[58] CEA must therefore demonstrate that:
[58] Corporations Act 2001 (Cth) s 1322(1)(b)(ii).
[59] Australian Hydrocarbons NL v Green (1985) 10 ACLR 72, 83 (Hodgson J).
(a) Mr Shepley failed to give reasonable notice of the 4 February Board Meeting; and (b) that lack of notice has caused, or may cause, substantial injustice.[59]
Unless CEA discharges that burden, the Resolutions are deemed not to be invalid by reason of s 1322(2) of the Corporations Act without the need for any further order of the Court.[60] The Court may nonetheless decide to make declarations to clarify the validity of the Resolutions.[61]
[60] Re Mosaic Oil NL (No 2) [2010] FCA 1186, [15] (Jacobson J), citing SGIC Insurance Ltd v Insurance
[61] Re iProperty Group Ltd (No 2) [2016] FCA 36, [15] (Yates J).
Reasonable notice?
As set out above, cl 11.2(a) of CEA’s constitution requires the giving of reasonable
notice of a board meeting. The term “reasonable notice” is not defined in the
constitution. Clause 11.2(a) replaces the replaceable rule in s 248C of the
Corporations Act,[62] which provides that:“A directors’ meeting may be called by a director giving reasonable
notice individually to every other director.”
[62] This is the effect of cl 2.7 of CEA’s constitution, which provides that, “The replaceable rules referred
In my view, the notice requirements in cl 11.2(a) and s 248C are materially the same, such that cl 11.2(a) can be construed by reference to the authorities on s 248C. Mr Coveney correctly accepts that cl 11.2(a) requires the giving of notice of the meeting itself, but not notice of the business to be done at the meeting. Mr Shepley gave notice of the 4 February Board Meeting at 3.39pm on 3 February. The question is whether, in the circumstances of the case, that notice was reasonable. It is a question of fact that is to be determined by reference to notions of fairness to all parties.[63] It is a context-specific inquiry that accounts for the nature and urgency of the business to be done and the practicability of providing longer notice.[64] It is
relevant to consider the Board’s previous practice.[65] It is also relevant to consider
whether, by reason of the lack of notice, the directors were unable to attend the meeting.[66][63] Hickey v Aselford [2003] NSWSC 185, [26] (Gzell J), citing Perri v Coolangatta Investments Pty Ltd
[64] Summerdowns Rail Ltd v Stevens [2015] NSWSC 321, [175]-[176] (Robb J); Ashrafinia v Ashrafinia
[65] Wilson v Manna Hill Mining Co Pty Ltd [2004] FCA 912, [25] (Lander J).
[66] Ashrafinia v Ashrafinia [2012] NSWSC 500, [33] (Slattery J), citing Toole v Flexihire Pty Ltd (1991)
In their Apology Emails, Mr Gardiner, Mr Wilson and Ms Sharon Cowan each represented to Mr Shepley that they were unable to attend the meeting because of the “short notice”.[67] In their affidavits and during oral evidence, they each gave evidence
as to the reasons why they could not attend. The respondents have made submissions on that evidence,[68] and they invite the Court to find that Mr Wilson chose not to attend the board meeting, intending the Board to proceed inquorate without him. As to Mr Gardiner and Ms Sharon Cowan, whilst the respondents stop short of submitting that they could have attended the meeting, it is submitted that Mr Gardiner and Ms Cowan nonetheless chose not to ask for the meeting to be adjourned, intending the Board to proceed inquorate without them. On the question of reasonable notice, it is unnecessary for me to determine whether Mr Wilson, Mr Gardiner and Ms Cowan deliberately did not attend the meeting. A finding that they could, practically speaking, have attended the meeting does not mean the notice period was reasonable. In Re Keneally,[69] Black J held that a requirement for reasonable notice of a board meeting had not been satisfied even though the complaining director had, in fact, attended the meeting.[70] That Mr Wilson, Mr Gardiner and Ms Cowan did not make enquiries about adjourning the meeting does not, in my view, affect the reasonableness of the notice they were given by Mr Shepley.
[67] See [54] above.
[68] Outline of Submissions on Behalf of the Respondents, paragraphs 66 to 74 (Respondents’
[69] (2015) 107 ACSR 172.
[70] Re Keneally (2015) 107 ACSR 172, [60].
In the ordinary course, CEA Board meetings were held on ample notice. Ms Austin’s
evidence,[71] which was corroborated by others[72] and which I accept, was that she distributed to the directors at the beginning of each year a calendar which identified the dates on which board meetings were to be held. Generally, board meetings were scheduled for the fourth Wednesday of each month, with a reminder sent out to the directors by Ms Austin on the preceding Friday. The calendar for 2020, which was tendered by CEA, is consistent with that evidence.[73] Of the board meetings identified in the chronology above, those on 26 February 2020, 22 July 2020, 26 August 2020 and 2 December 2020 all appear on the 2020 calendar, which was provided to the directors on 5 December 2019.
[71] T 1-60, ln 33-41; T 1-61, ln 10-22.
[72] T 1-76, ln 46 to T 1-77, ln 12 (Shane Cowan); T 1-101, ln 25 (Sharon Cowan); T 2-17, ln 5-37; T 2-26,
[73] Exhibit 22.
[127] Resolution 1 has the effect of permanently preventing both Mr Hatton and Mr Gardiner from contesting the election, thereby reducing the number of nominees
to 11. Resolution 11 has the effect of terminating Mr Shane Cowan’s employment as
the General Manager of CEA. The remaining Resolutions can be understood as a means to, at least temporarily, maintain the status quo on the Board by postponing the AGM and transferring effective control of CEA to Mr Shepley and his supporters on the Board. Mr Shepley had already attempted to persuade Ms Langford to withdraw her nomination for the Board, threatening “vicious litigation”.[138] This
[138] See [36] above.
attempt having failed, additional time was required by Mr Shepley to find a means to ensure that, when the AGM eventually did occur, his election was not threatened. In cross-examination, Mr Daley explained how he felt when he found out about the new nominations for the Board:
“This was basically, I felt, underhand.
…
Yes. And what felt underhanded about it to you?---The nominations
that were selected. … we had a concept that it’s time for some of us
to move on, including me. And we were looking at putting younger people on the board and preferably some more females, and these
nominations weren’t younger people. And just – it wasn’t the idea of
the board.
…
… But when it didn’t meet your preferred view of the future is that
when you took exception to the nominations?---I would say, yes… that we had a meeting and discussed this as a board. We needed to…
look at the future, and these are the people that should come on the
board.
Right?---And that was going to be [the] question, why are we doing
it? This is… these, I feel, are the wrong people to put on the board.”[139]
[139] T 3-7, ln 42 to T 3-8, ln 17.
[128] When considered in this context, isolating Resolution 2 from the remaining
Resolutions would produce a substantially different result. I accept Mr Coveney’s
submission that the Resolutions were intended to operate collectively to stifle opposition to the Board as it existed on 4 February 2021. The Resolutions should not
be severed and the respondents’ amended cross-application must fail.
In disposing of the respondents’ amended cross-application under s 1322(4)(a), an
issue arises as to whether it is sufficient simply to order that the cross-application be dismissed or whether the Court should make a further order under s 1322(2) declaring that the Resolutions are invalid. The issue arises because there is an apparent tension between s 1322(2) and s 1322(4)(a). The effect of dismissing the cross-application is that the Court refuses to declare that the Resolutions are not invalid. Section 1322(2), however, provides that a proceeding is not invalidated because of any procedural irregularity unless two conjunctive matters occur. First, the Court must be of the opinion that the irregularity has caused or may cause substantial injustice and, secondly, the Court by order declares the proceeding to be invalid. Although the applicant has not sought a declaration that the Resolutions are invalid, given the tension between s 1322(2) and s 1322(4)(a), the issue should be placed beyond doubt by the Court making the declaration contemplated by s 1322(2).
CEA’s amended originating application
Having determined that the respondents’ cross-application must fail, and that the
Resolutions are invalid pursuant to s 1322(2) of the Corporations Act, it falls to
consider CEA’s amended originating application. Beyond their primary contention
that the 10 February AGM is of no effect on the basis that it was postponed pursuant
to Resolution 2, the respondents do not challenge its validity.
The primary relief sought by CEA is a declaration to the effect that each of the nine persons elected at the 10 February AGM comprises the duly elected CEA Board. However, the respondents submit that a declaration to that effect ought not be made in relation to Mr Casey because he did not consent to being appointed as a director of CEA at the 10 February AGM.
The election of Mr Casey
In his affidavit,[140] Mr Casey relevantly swears as follows:
[140] Affidavit of P B Casey sworn 22 April 2021, CD-27.
(a) the first time that he was advised that an AGM had been held on 10 February 2021 was by an email from Mr Shane Cowan at 5.01pm on 11 February 2021; (b) he did not agree to be nominated for or elected as a director at an AGM held on 10 February 2021; and (c) he does not think the appointment of directors made at an AGM on 10 February 2021 was valid and he expressed that opinion to Shane Cowan in emails dated 11 February 2021 and 23 March 2021.
In cross-examination, Mr Casey accepted that he submitted a nomination for election to the Board in August 2020. He also stated that it remained his view that, as at the date of his cross-examination, the CEA Board was that which was elected in 2019.[141] When asked by Mr Coveney whether he intended to continue as a director if CEA was successful in the proceeding, Mr Casey stated that:
[141] T 2-95, ln 43-45.
“My position has been consistent. If – depending which way this
matter goes … I’d make a decision at that time based upon whatever
I had before me.
… And I’d make an independent decision as to whether or not – yeah,
I would continue or what my decision would be, yes.”[142]
[142] T 2-96, ln 7-20.
The respondents submit that Mr Casey’s written and oral evidence is consistent and
demonstrates that he did not agree to be nominated and elected as a director at the 10 February AGM. They invite the Court to infer from his cross-examination that he will resign as a director if CEA succeeds in the proceeding.[143] CEA rejects that such an inference should be drawn,[144] and contends that Mr Casey validly nominated for election to the CEA Board and that such nomination amounts to consent.[145]
[143] Respondents’ Submissions, paragraph 91; T 3-84, ln 1-10.
[144] T3-86, ln 33-43.
[145] Applicant’s Submissions, paragraph 92B.
Section 201D(1) of the Corporations Act provides:
“A company contravenes this subsection if a person does not give the
company a signed consent to act as a director of the company before
being appointed.”
However, failure to comply with s 201D(1) does not invalidate an otherwise valid appointment of a director.[146] In Hedges v NSW Harness Racing Club Ltd,[147]
[146] See, eg, Kocic v Deputy Commissioner of Taxation (2011) 85 ATR 489, [35] (Gzell J; Beazley JA and
[147] (1991) 5 ACSR 291, 293.
McLelland J stated that the “status of director of a company, which involves
significant statutory and fiduciary obligations, cannot be imposed on any person
without his consent”. Consent to be appointed as a director need not be in writing at
general law.[148] It follows that a person may withdraw their consent to be appointed
other than by writing.[148] Knight v Bulic (1994) 13 ACSR 553, 560 (Hayne J).
When Mr Casey signed the director nomination form on 30 August 2020, it was expected that the AGM would occur in October 2020. However, it was subsequently re-scheduled for 10 February 2021. The list of nominations Ms Austin sent to
Mr Shepley on 25 January 2021 included Mr Casey’s nomination. There is no
evidence before the Court that Mr Casey withdrew his nomination between 25 January 2021 and the 4 February Board Meeting. As at the commencement of the
4 February Board Meeting, Mr Casey’s consent to being appointed as a director at the
10 February AGM remained on foot.
However, that consent was impliedly withdrawn by the passing of Resolution 2 which was to postpone the 10 February AGM and which Mr Casey voted in favour of. His absence at the 10 February AGM is consistent with his having withdrawn his consent. I accept his evidence that, at all times since the 4 February Board Meeting, he did not agree to be appointed to the Board at the 10 February AGM. This is not a case analogous to Savoy v Insurance and Care NSW[149] where there was actual proven consent to be appointed as a director in the absence of a signed consent under s 201D.[150] Indeed, in oral submissions, Mr Coveney conceded that:
[149] (2020) 142 ACSR 200.
[150] (2020) 142 ACSR 200, [55] (Basten J). Cf, Re Whitsunday Clean Sands Pty Ltd [2017] NSWSC 1199
“… if [Mr Casey’s] evidence is accepted, that he intended … at the
meeting on the 4th … for the AGM to be postponed, and thereafter,
had no interest in being elected at the meeting on the 11th, then what would have occurred, in fact, is the passage of an invalid resolution
appointing him as a director.”[151]
[151] T 3-87, ln 9-13.
For these reasons, Mr Casey’s election as a director at the 10 February AGM was
invalid.[152] The purported resolution appointing him as a director is a substantive irregularity which cannot be remedied by order under s 1322.[153] Therefore, the Court cannot make a declaration that Mr Casey was duly elected to the Board.
[152] Re Whitsunday Clean Sands Pty Ltd [2017] NSWSC 1199, [15] (Black J).
[153] Hedges v NSW Harness Racing Club Ltd (1991) 5 ACSR 291, 295 (McLelland J); Re Whitsunday
The respondents identify a further difficulty in “unscrambling the egg”, in the sense
that a question arises as to how the votes cast for Mr Casey ought to be dealt with given the invalidity of his election. However, CEA submits that, because the election
was conducted on a ‘first-past-the-post’ basis, and no votes were received by any of
the respondents,[154] the result is that no candidates missed out on election by reason of votes being cast for Mr Casey. The results of the election, which I have already described at [66] above, are set out in full in the following table:[155]
[154] See Exhibit 2, tab 11.
[155] See Exhibit 2, tab 11.
Candidate Votes For Votes Against Abstained Ian Hall 28 0 1 Vicki Bailey 27 0 1 Shane Cowan 28 0 1 Sharon Cowan 27 0 1 Jason Gardiner 27 0 1 John Shepley 0 28 2 Patrick Purcell 0 25 4 Paul Casey 26 0 3 Brian Daley 0 25 5 Jodie Luckus 0 23 6 Alice Langford 28 0 2 David Hatton 28 0 2 Frank Wilson 29 0 1
CEA’s constitution requires a minimum of five directors. Aside from Mr Casey, eight
directors were elected. For these reasons, the difficulty identified by the respondents
does not arise.Disposition
The following orders should be made:
1.
Pursuant to s 10 of the Civil Proceedings Act 2011 (Qld), the Court declares that the following persons were elected as a director of Career Employment Australia Ltd at the annual general meeting of Career Employment Australia Ltd on 10 February 2021:
(a) Francis Thomas Wilson; (b) Ian Douglas Hall; (c) Vicki Bailey; (d) Shane Gilmore Cowan; (e) Sharon Leigh Frances Cowan; (f) Jason Michael Gardiner; (g) Alice Mary Langford; and (h) David Anthony Hatton OAM. 2. Pursuant to s 10 of the Civil Proceedings Act 2011 (Qld), the Court declares that each of the respondents and Paul Casey ceased to be a director of Career Employment Australia Ltd upon the election of the directors in paragraph 1 of this order.
3. Pursuant to s 1322(2) of the Corporations Act 2001 (Cth), the Court declares that the resolutions carried by the board of directors of Career Employment Australia Ltd on 4 February 2021 are invalid.
4. The respondents’ amended cross-application is dismissed.
5. I will hear the parties as to costs.
Mr Gardiner, Mr Sharon Cowan and Mr Shane Cowan.
added).
See [25] and [26].
proceeding for personal reasons.
sworn 22 April 2021 (CD-26), paragraphs 6-11; Affidavit of J S Shepley sworn 19 April 2021
(CD-25), paragraph 59.
four were unaccounted for: Exhibits 23 and 35.
ground during the hearing of the applications.
(Dowsett J).
Australia Ltd (2004) 51 ACSR 593, [12]-[16] (Jacobson J).
to in section 141 of the Act do not apply to the Company and are replaced by the rules set out in
this document”: Constitution of Career Employment Australia Ltd (See Exhibit 2).
(1982) 149 CLR 537, 567-8 (Brennan J).
[2012] NSWSC 500, [33] (Slattery J), citing Toole v Flexihire Pty Ltd (1991) 6 ACSR 455, 461
(Demack J).
6 ACSR 455, 461 (Demack J).
Submissions).
ln 32-33 (Jason Gardiner).
(Jason Gardiner).
Pty Ltd [1993] 1 Qd R 125, 127 (Byrne J).
21 ACLC 17 (upheld on appeal in Whitehouse v Capital Radio Network Pty Ltd (2004) 13 Tas R 27).
omitted).
(Banks-Smith J).
Handley AJA agreeing); Savoy v Insurance and Care NSW (2020) 142 ACSR 200, [48]-[55] (Basten
J); Collins v Zernike Australia Pty Ltd (2006) 198 FLR 126, [28] (Le Miere J).
(Black J).
Clean Sands Pty Ltd [2017] NSWSC 1199, [16] (Black J).
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