CMPS&F Pty Ltd v Crooks Michell Ltd

[1997] FCA 745

FEDERAL COURT OF AUSTRALIA

CORPORATIONS LAW - whether the Court, having made orders for the convening of meetings of a company, has power to revoke that order without the shareholders having the opportunity to make any decision on a scheme of arrangement which was to have been proposed at the meetings - circumstances in which the proposed scheme of arrangement had lost all utility - whether section 1319 gave the Court power to revoke its order by way of “consequential direction”, consequential on the meeting now lacking in utility having been convened in the first place.

Corporations Law, ss 411, 1319

Re North Flinders Mines Limited (1996) 14 ACLC 629        )
Smith v Paringa Mines Limited [1906] 2 Ch 193                 ) distinguished

CMPS&F PTY LIMITED v CROOKS MICHELL LIMITED & ANOR
NG 3082 of 1997

Burchett J
Sydney
22 July 1997

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)   NG 3082 of 1997
)
GENERAL DIVISION	)

BETWEEN:              

CMPS&F PTY LIMITED
Applicant

  AND:  

CROOKS MICHELL LIMITED
First Respondent

INFRASTRUCTURE INVESTMENTS LIMITED
Second Respondent

JUDGE:	BURCHETT J
PLACE:	SYDNEY
DATED:	22 JULY 1997

MINUTE OF ORDERS

THE COURT ORDERS THAT all previous orders made in the proceedings in relation to the convening of meetings of the applicant, or of classes of shareholders
of the applicant, be vacated, and that the proceedings be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court     Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)   NG 3082 of 1997
)
GENERAL DIVISION	)

BETWEEN:              

CMPS&F PTY LIMITED
Applicant

  AND:  

CROOKS MICHELL LIMITED
First Respondent

INFRASTRUCTURE INVESTMENTS LIMITED
Second Respondent

JUDGE:	BURCHETT J
PLACE:	SYDNEY
DATED:	22 JULY 1997

REASONS FOR JUDGMENT

In this matter, I made orders under s 411 of the Corporations Law involving the calling of meetings of the company for the purpose of dealing with a proposed  scheme of arrangement which would have affected class shareholdings in the company.  Since then, the company has entered into another transaction, with the approval of the shareholders given in a general meeting of the company, which are, if not absolutely inconsistent with the proposed arrangement, at least of such a character as to deprive it of all practical utility.  The proposed scheme of arrangement has therefore been replaced by another proposal, which it is intended will be placed before meetings of shareholders.

The question which is now raised is whether I should vacate the order for the calling of the meetings pursuant to the original proposal, those meetings having already been postponed because of the impending proposal.  Mr Pesman has properly referred me to a decision of Debelle J of the Supreme Court of South Australia in Re North Flinders Mines Limited (1996) 14 ACLC 629, which casts some doubt on my power to vacate orders convening meetings, once notice of the meetings has been given, as it has in this case.  Debelle J referred to Smith v Paringa Mines Limited [1906] 2 Ch 193 as authority for a proposition which he stated at p 630:

“It is open to serious question whether a meeting which has not only
been convened by order of the Court but of which notice has been given
can be cancelled by the Court.”

It should, however, be pointed out that Smith v Paringa Mines Limited is not actually authority for any limitation on the Court’s powers, but for a limitation on

the powers of directors.   His Honour went on, at p 631, to suggest that it might be appropriate to revoke or vary the order in a case in which notice had not been given, a comment which seems to relate the matter, not really to the power of the Court, but rather to the propriety of the exercise of the power.  Plainly, his Honour was concerned that shareholders who had notice of a meeting should not have the capacity taken away from them to decide the destiny of their own company.

It seems to me that the decision is distinguishable, because there is really nothing left for shareholders to decide in any practical sense in the present matter. That is because of the transaction upon which the shareholders have already determined. Furthermore, I note that Debelle J does not appear to have had cited to him the provisions of s 1319 of the Corporations Law.  That section provides:

“Where, under this Law, the Court orders a meeting to be convened,
the Court may, subject to this Law, give such directions with respect to
the convening, holding or conduct of the meeting, and such ancillary or
consequential directions in relation to the meeting, [and I emphasise that last clause] as it thinks fit.”

I do not think that an order revoking the convening of a meeting could properly be described as “ancillary”, but I do think, in circumstances where the usefulness of the meeting has been destroyed or very greatly compromised, the word "consequential" is entirely apt.  It seems to me that, in the special circumstances of such a case, a direction having the effect of revoking the convening of the meeting would be consequential on its having been convened in the first place.  In this case, it would be an appropriate consequential order to make, not raising the objections going to the exercise of the discretion which concerned Debelle J in Re North Flinders Mines Limited.

As to the discretion, I have given weight to a submission that, in the present circumstances, it would be confusing as well as useless to provide shareholders with the sort of material that they would have to receive in respect of two schemes of arrangement if the meetings went ahead in conjunction with the meetings which will have to be called in relation to the new proposal.  From the point of view of expense and practicality, the meetings undoubtedly would have to be called for the same days.

For these reasons, I make an order revoking the previous order convening meetings of the shareholders of the company.  The formal order that I make is that all previous orders made in the proceedings in relation to the convening of meetings of the applicant, or of classes of shareholders of the applicant, be vacated, and that the proceedings be dismissed.

I certify that this and the preceding one (1) page are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

Associate:

Date:

Solicitor for the Applicant:  Mr M. Pesman of Allen Allen   & Hemsley

There was no other appearance.

Date of hearing:  22 July 1997