In the matter of Dairy Farmers Milk Co-operative Ltd

The matter before the court was an application by Dairy Farmers Milk Co-operative Ltd, a co-operative registered under the Co-operatives Act 1992 (NSW), seeking an order approving an arrangement with its members. The arrangement involved the cancellation of seven out of each ten shares in the co-operative in exchange for a return of capital. The application was based on an agreement that had been reached by a special resolution passed through a special postal ballot. The dispute centred around the effect of this arrangement on the shares of inactive members who, although they had no voting rights, were still subject to the cancellation.

The primary legal issue before the court was whether the co-operative could proceed with the arrangement, particularly the cancellation of shares, without the consent of all members, including those who were inactive and did not have voting rights. The court had to determine if the special resolution passed through the postal ballot was sufficient to authorise the arrangement and whether the co-operative was entitled to proceed with the cancellation of shares despite the objections of some members.

The court considered the provisions of the Co-operatives Act 1992 (NSW) and previous case law in relation to the rights of members and the powers of the board in such arrangements. It concluded that the special resolution passed by the special postal ballot was valid and sufficient to authorise the arrangement. The court found that the co-operative had the authority to proceed with the cancellation of shares, including those belonging to inactive members who did not have voting rights. The court held that the arrangement was fair and in the best interests of the co-operative as a whole, and thus approved the application.

The court made an order approving the arrangement between the co-operative and its members, allowing for the cancellation of shares as agreed. The order confirmed that the special resolution passed through the special postal ballot was valid and that the co-operative was entitled to proceed with the arrangement, including the cancellation of shares belonging to inactive members.