(1) Declare that the resolution of directors of Hawcroft General Trading Co Pty Ltd (the company) on 28 June 2016 adopting the terms of the chairperson proposal tabled at a meeting of directors of the company on 1 February 2016 and appointing the first defendant as the chairperson of the company is invalid and of no effect.
(2) Otherwise dismiss the amended statement of claim filed 21 February 2017, except in relation to the question of costs.
(3) Any party seeking an order for costs different to that proposed in [290] of these reasons, and in respect of the plaintiff’s application for an order for interest on costs, such party and the plaintiff (as the case may be) shall file and serve written submissions not exceeding 4 pages and any affidavit evidence in relation to the issue of costs within 14 days of these reasons. Each other party may file and serve written submissions in reply not exceeding 3 pages and any affidavit evidence in reply within 21 days of these reasons. Subject to any application for an oral hearing in relation to costs, direct that the question of costs will be dealt with on the papers.
Catchwords:
CORPORATIONS – membership, rights and remedies – validity of resolution of directors of company – where resolution purported to appoint director as chairperson with authority and remuneration additional to that of other directors – whether chairperson resolution was beyond the power of the directors under the constitution – where constitution provided that the directors may delegate their powers to committees of such member or members of their body as they think fit – where constitution also provided that remuneration of directors be determined by the company in general meeting – whether invalid part of single resolution of directors severable.
CORPORATIONS – management and administration – where plaintiff is director of company and entitled to be registered as holder of one third of the shares therein as legal personal representative of her late husband who was also a former director – where defendants are the other two directors and each one third shareholders of the company – whether the plaintiff’s late husband and the defendants entered a binding agreement described as proposed preliminary protocols (Protocol) that governed the manner in which the company would be managed and operated – whether the directors qualified their assent to the document before signing – whether the directors intended immediately to be bound to the terms of the Protocol – whether subsequent conduct by the directors indicated the existence of a concluded bargain – whether plaintiff has standing to enforce agreement arising from the Protocol.
CORPORATIONS – where constitution of company provided for decisions by directors by simple majority -– where Protocol required a special majority of 70 percent of directors or shareholders for any…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Hawcroft v Jamieson [2017] NSWSC 1478
Case
[2017] NSWSC 1478
Decision Date
CaseChat Overview and Summary
Hawcroft was the legal personal representative of a deceased director of the respondent company, and was entitled to one-third of the shares in the company. The other two directors, who were each one-third shareholders, were the respondents. The dispute concerned the management and operation of the company, and the validity of a resolution of the directors appointing one of the respondents as chairperson with additional remuneration. The plaintiffs claimed that the directors had entered into a binding agreement that governed the company’s management, and that the resolution appointing the respondent as chairperson was beyond the power of the directors under the company’s constitution. The plaintiffs sought to enforce the agreement and the invalidity of the resolution.
The court considered the validity of the resolution appointing the respondent as chairperson, and whether the agreement was binding. The court considered whether the agreement was binding in the face of the company’s constitution which provided for the appointment of directors by a simple majority, while the agreement required a special majority for any variation to the management of the company. The court also considered whether the plaintiffs were estopped from asserting the agreement was binding, as they had not raised the issue in earlier proceedings against the company.
The court found that the resolution appointing the respondent as chairperson was invalid, as it was beyond the power of the directors under the constitution. The court found that the agreement was binding, as the directors’ subsequent conduct indicated that they intended to be immediately bound by the agreement. The court found that the plaintiffs were not estopped from asserting the agreement was binding, as it was not unreasonable for the plaintiffs not to have joined the additional defendants in the earlier proceedings, or to have raised the issue of the validity of the agreement.
The court ordered that the resolution appointing the respondent as chairperson was invalid, and that the agreement was binding. The court ordered that the company pay the plaintiffs damages for breach of the agreement.