In the matter of Jervois Mining Ltd

[2016] NSWSC 1650

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Jervois Mining Ltd [2016] NSWSC 1650
Hearing dates:	22 November 2016
Date of orders:	23 November 2016
Decision date:	23 November 2016
Jurisdiction:	Equity - Corporations List
Before:	Lindsay J
Decision:	Orders available under section 1322(4) of the Corporations Act 2001 Cth to allow an extraordinary general meeting (called pursuant to section 249F of the Act) to be held, chaired by an independent chairman appointed by the Court, despite non-compliance with a time constraint in section 203D(2) on a motion for removal of a director.
Catchwords:	CORPORATIONS – Membership, rights and remedies – Members’ remedies and internal disputes – Meetings – Calling of extraordinary general meeting chaired by independent Court-appointed chairman
Legislation Cited:	Corporations Act 2001 Cth
Cases Cited:	BP Australia Limited v Brown (2003) 58 NSWLR 322 Central Exchange Limited v Rivkin Financial Services Limited [2004] FCA 1546; 213 ALR 771 David Grant & Co Pty Limited v Westpac Banking Corporation (1995) 184 CLR 265 Jones v Dunkell (1959) 101 CLR 298 Mortimer v Proto Resources & Investments [2015] FCA 654 Re Duet Management Company Limited [2013] NSWSC 817; 96 ACSR 34 Re Ryde Ex-Services Memorial & Community Club Limited (Administrator appointed) [2015] NSWSC 226 Weinstock v Beck (2013) 251 CLR 396
Category:	Principal judgment
Parties:	Plaintiff: Scandium Development International Pty Ltd First Defendant: Jervois Mining Limited Second Defendant: Duncan Campbell Pursell Third Defendant: Roger John Fairlam Fourth Defendant: Derek Alan Foster
Representation:	Counsel: Plaintiff: Ms IJ King Defendants: PG Willis SC   Solicitors: Plaintiff: Connor & Co Defendants: Gadens
File Number(s):	2016/00345705

Judgment

INTRODUCTION

1. These proceedings have been brought to a final hearing in circumstances in which an urgent determination is sought by the parties and required by the nature of the case. The proceedings were commenced by an originating process filed on 18 November 2016. Urgency attaches to their determination because the subject matter of dispute is, in substance, whether an extraordinary general meeting of a company (the first defendant) can proceed to deal with substantive business tomorrow (24 November 2016) and, if so, upon what terms.

2. The plaintiff applies for relief under sections 1322 and 1324 of the Corporations Act 2001 Cth (jointly or severally) in aid of a right of members of a company to convene a general meeting of the company under section 249F of the Act.

3. The plaintiff is a member of the first defendant, a publicly listed company. The plaintiff’s standing is not in issue.

4. The second, third and fourth defendants are the directors of the first defendant.

5. The plaintiff is one of twelve members of the first defendant who, invoking section 249F, have jointly called an extraordinary general meeting (“the EGM”) of the company for 1.00 pm tomorrow in Sydney.

THE CORE ISSUES IN STATUTORY CONTEXT

6. The defendants concede that those twelve members (“the Convening Shareholders”) hold the requisite number of shares in the first defendant, with voting entitlements, to have invoked the power for which section 249F provides. The section requires that the members who call a meeting to have at least 5% of the votes that may be cast at a general meeting of the company. The Convening Shareholders have slightly more than that percentage.

7. Section 249F is in the following terms (with emphasis added):

Calling of general meetings by members

(1) Members with at least 5% of the votes that may be cast at a general meeting of the company may call, and arrange to hold, a general meeting. The members calling the meeting must pay the expenses of calling and holding the meeting.

(2) The meeting must be called in the same way--so far as is possible--in which general meetings of the company may be called.

(3) The percentage of votes that members have is to be worked out as at the midnight before the meeting is called.

8. By a Notice of Meeting distributed to members of the first defendant on 25 October 2016 (and formally served on the first defendant on 27 October 2016) the Convening Shareholders propose that the EGM consider six resolutions, three of which propose that the current directors of the first defendant (the second, third and fourth defendants) be removed from office and three of which propose that nominated persons replace them.

9. The defendants contend that the EGM will be unable, validly, to pass any such resolutions because the Notice of Meeting for the EGM failed to give two months notice of the proposed resolutions as required by section 203D(2) of the Corporations Act 2001.

10. The validity of the calling of the meeting is not in dispute. The availability of business to be considered by the meeting is the focal point of disputation. The defendants’ contend that there is no substantive business that can be conducted at the meeting and, accordingly, the Court should order that no meeting be held.

11. Section 203D is in the following terms (with emphasis added):

REMOVAL BY MEMBERS – PUBLIC COMPANIES

Resolution for removal of director

(1) A public company may by resolution remove a director from office despite anything in:

(a) the company's constitution (if any); or

(b) an agreement between the company and the director; or

(c) an agreement between any or all members of the company and the director.

If the director was appointed to represent the interests of particular shareholders or debenture holders, the resolution to remove the director does not take effect until a replacement to represent their interests has been appointed.

Note: See sections 249C to 249G for the rules on who may call meetings, sections 249H to 249M on how to call meetings and sections 249N to 249Q for rules on members' resolutions.

Notice of intention to move resolution for removal of director

(2) Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given.

Note: Short notice of the meeting cannot be given for this resolution (see subsection 249H(3)).

Director to be informed

(3) The company must give the director a copy of the notice as soon as practicable after it is received.

Director's right to put case to members

(4) The director is entitled to put their case to members by:

(a) giving the company a written statement for circulation to members (see subsections (5) and (6)); and

(b) speaking to the motion at the meeting (whether or not the director is a member of the company).

(5) The written statement is to be circulated by the company to members by:

(a) sending a copy to everyone to whom notice of the meeting is sent if there is time to do so; or

(b) if there is not time to comply with paragraph (a)--having the statement distributed to members attending the meeting and read out at the meeting before the resolution is voted on.

(6) The director's statement does not have to be circulated to members if it is more than 1,000 words long or defamatory.

Time of retirement

(7) If a person is appointed to replace a director removed under this section, the time at which:

(a) the replacement director; or

(b) any other director;

is to retire is to be worked out as if the replacement director had become director on the day on which the replaced director was last appointed a director.

Strict liability offences

(8) An offence based on subsection (3) or (5) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

12. The parties’ submissions have traversed the relationship between section 249F (on the one hand) and sections 203D(2), 249H(3), 249N, and 249O(1), on the other hand, as well as what is meant by the expression “notice of intention to move [a] resolution” in section 203D(2).

13. The defendants’ case draws particular support from section 249O(1), which provides that “[if] a company has been given notice of a resolution under section 249N, the resolution is to be considered at the next general meeting that occurs more than two months after the notice is given”.

14. Section 249N provides, by section 249N(1), that members with at least 5% of the votes that may be cast on a resolution may give a company notice of a resolution that they propose to move at a general meeting. Section 249N(2) provides that such a notice must be in writing, set out the wording of the proposed resolution, and be signed by the members proposing to move the resolution.

15. The defendant contends, and I accept, that section 249F must be construed in the context of other provisions of Chapter 2G of the Corporations Act that govern, inter alia, “who” may call a meeting of members of a company (Division 2, including section 249F), “how” to call a meeting of members (Division 3) and “what” business may be transacted at such a meeting (Division 4, including sections 249N and 249O).

16. In the circumstances of urgency which attend the Court’s determination of the proceedings, attention must be given to core issues, mindful of, but not distracted by, questions of lesser importance which might be entitled, in a more leisurely environment, to closer, express consideration.

17. The relationship between sections 249F(2) and 203D(2) is the core issue in the proceedings, followed closely by a consideration of the availability and operation of section 1322(4) of the Corporations Act.

18. Section 1322 is in the following terms (with emphasis added):

Irregularities

(1) In this section, unless the contrary intention appears:

(a) a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and

(b) a reference to a procedural irregularity includes a reference to:

(i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme; and

(ii) a defect, irregularity or deficiency of notice or time.

(2) 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.

(3) A meeting held for the purposes of this Act, or a meeting notice of which is required to be given in accordance with the provisions of this Act, or any proceeding at such a meeting, is not invalidated only because of the accidental omission to give notice of the meeting or the non-receipt by any person of notice of the meeting, unless the Court, on the application of the person concerned, a person entitled to attend the meeting or ASIC, declares proceedings at the meeting to be void.

(3AA) A meeting held for the purposes of this Act, or a meeting notice of which is required to be given in accordance with the provisions of this Act, or any proceeding at such a meeting, is not invalidated only because of the inability of a person to access the notice of meeting, unless the Court, on the application of the person concerned, a person entitled to attend the meeting or ASIC, declares proceedings at the meeting to be void.

Note: Under paragraph 249J(3)(cb), a company may, in certain circumstances, give a member notice of a meeting by notifying the member that the notice of meeting is available and how the member may access the notice of meeting.

(3A) If a member does not have a reasonable opportunity to participate in a meeting of members, or part of a meeting of members, held at 2 or more venues, the meeting will only be invalid on that ground if:

(a) the Court is of the opinion that:

(i) a substantial injustice has been caused or may be caused; and

(ii) the injustice cannot be remedied by any order of the Court; and

(b) the Court declares the meeting or proceeding (or that part of it) invalid.

(3B) If voting rights are exercised in contravention of subsection 259D(3) (company controlling entity that holds shares in it), the meeting or the resolution on which the voting rights were exercised will only be invalid on that ground if:

(a) the court is of the opinion that:

(i) a substantial injustice has been caused or may be caused; and

(ii) the injustice cannot be remedied by any order of the court; and

(b) the court declares the meeting or resolution invalid.

(4) 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;

(b) an order directing the rectification of any register kept by ASIC under this Act;

(c) an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a);

(d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;

and may make such consequential or ancillary orders as the Court thinks fit.

(5) An order may be made under paragraph (4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence.

(6) The Court must not make an order under this section unless it is satisfied:

(a) in the case of an order referred to in paragraph (4)(a):

(i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;

(ii) that the person or persons concerned in or party to the contravention or failure acted honestly; or

(iii) that it is just and equitable that the order be made; and

(b) in the case of an order referred to in paragraph (4)(c)--that the person subject to the civil liability concerned acted honestly; and

(c) in every case--that no substantial injustice has been or is likely to be caused to any person.

PARAMETERS OF THE CASE: AN AGREED STATEMENT OF ISSUES

19. At the commencement of the hearing, the parties agreed that the questions for determination focus upon the following topics:

1. The period of notice required for the EGM, and the business able to be conducted at the EGM, having regard, particularly, to the relationship between sections 249F(2) and 203D(2) and, to a lesser extent, the other sections previously mentioned.

2. Whether section 1322 has any scope for operation in the context of section 203D(2) and, if so:

1. whether a “failure” to give at least two months notice as required by section 203D(2) is a “procedural irregularity” within the meaning of sections 1322(1)(b) and 1322(2).

2. whether, having regard to section 1322(6), relief is available under section 1322(4) in a case in which less than the two months notice required by section 203D(2) is given.

3. In the event that the EGM called by the Convening Shareholders is held, who is to be the chairman of the meeting. In particular:

1. is the election of the chairman to be left to the directors of the first defendant, in the first instance, pursuant to clause 35 of the Constitution of the first defendant?

2. is the election of the chairman left to the meeting itself pursuant to section 249F?

3. can, and should, the Court appoint an independent chairman pursuant to section 1322(4) or section 1324?

4. What are the duties of a chairman?

5. What, if any, impact does section 250BD (relating to proxy voting by key management personnel or closely related parties) have on the duties of a chairman in circumstances in which the business to be transacted at the meeting involves proposed resolutions for removal of all the directors of the company?

6. Did any of the first defendant’s announcements to the Australian Stock Exchange (in particular, announcements made on 10 November and, after the close of business, on 11 November 2016) contain statements that were misleading and deceptive?

7. If the answer to (6) is in the affirmative, what (if any) consequences flow from that; in particular, can, and should, the Court order that the first defendant make a corrective announcement to the Australian Stock Exchange?

20. The first defendant reserves a right to recover from the Convening Shareholders (in accordance with section 249F(1)) expenses of “calling and holding” the EGM; but, in these proceedings, the defendants expressly disavow any suggestion that the payment of such expenses is a condition precedent to the holding of the meeting or that non-payment of them affects the validity of business transacted at the meeting.

21. For its part, the plaintiff invites the Court to sidestep controversy about the scope of section 1322(2) by first addressing the availability, and operation, of section 1322(4). I propose to take up that invitation.

22. Although their primary contention is that, as a matter of construction, no provision of section 1322 is available to overcome a deficiency of notice under section 203D(2), the defendants accept that, if that primary contention is rejected, section 1322(4) – which is not confined to “procedural irregularities” - is capable of operation to address, subject to section 1322(6), a deficiency of section 203D(2) notice. A secondary contention they advance in this context is that the two month time stipulation in section 203D(2) – reinforced by a similar stipulation in section 249O(1) – is of such importance in the scheme of the Corporations Act that the Court should be slow to sanction any relaxation of it.

23. There is agreement between the parties that, for the purpose of these proceedings, the duties of a chairman of the EGM can be taken as having been adequately summarised by me in Re Ryde Ex-Services Memorial & Community Club Limited (Administrator appointed) [2015] NSWSC 226 at [104]–[108]:

“[104] Various formulations of the duties of a chairman (all subject to express provisions governing the particular company) are commonplace:

(a) a chairman has a duty to preserve order, and to take care that the meeting under his or her control is conducted in a proper manner, in order to facilitate the sense of the meeting being properly ascertained on any question properly before the meeting: National Dwellings Society v Sykes [1894] 3 Ch 159 at 162; The Second Consolidated Trust Limited v Ceylon Amalgamated Tea & Rubber Estates Ltd [1943] 2 All ER 567 at 569; John v Rees [1970] Ch 345 at 380E and 382D-E; Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 at 480 [40]-481 [41].

(b) a chairman has a duty to regulate proceedings, so as to give all persons entitled a reasonable opportunity of voting: Byng v London Life Association Ltd [1990] Ch 170 at 186E-G.

(c) a chairman has a duty to act in a way calculated to ensure that the true will of the meeting is ascertained, rather than in pursuit of some personal desire or preference or in a manner designed to achieve some policy objective of another body (such as the Club’s Board of Directors), taking care to create a convenient forum in which the relevant constituency can consult together and exercise their voting rights in an orderly and constructive way: McKerlie v Drill Search Energy Ltd (2009) 72 ACSR 288; [2009] NSWSC 488 at [27]-[39]; Re Walker and Anor (in their capacity as the joint liquidators of One.Tell Limited (2009) 262 ALR 150; [2009] NSWSC 1172 at [27].

[105] Subject to any express provision governing him or her, the chairman of a meeting has prima facie authority to decide all incidental questions which arise at the meeting, and necessarily require decision at the time: In re Indian Zoedone Company (1884) 26 ChD 70 at 77. Nevertheless, a chairman remains a servant, not the master, of the meeting. Any mastery a chairman may exercise over a meeting depends on his or her due recognition of that truth.

[106] The powers exercisable by a chairman are not unfettered: Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 at 480 [39]:

(a) they must be exercised in good faith and for a proper purpose (McKerlie v Drill Search Energy Ltd (2009) 72 ACSR 288; [2009] NSWSC 488 at [29]-[35]), acting reasonably (Alliance Craton Explorer Pty Ltd v Quasar Resources Ltd [2010] SASC 266 at [67]; Australian Olives Limited v Stout (No 2) [2007] FCA 2090 at [19]).

(b) the validity of a chairman’s decision about the conduct of a meeting depends, inter alia, upon whether it facilitated the purpose for which the chairman was empowered to make decisions relating to conduct of the meeting: Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 at 482 [42]-[43].

(c) a chairman’s powers cannot be exercised so as unlawfully to deprive members of their votes: Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 at 480 [39].

(d) the purpose of powers conferred upon a chairman with respect to conduct of a meeting is to facilitate consideration of business properly before the meeting in order that the will of the majority of members present and entitled to vote can be reliably ascertained: Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 at 480 [40].

[107] At a company meeting a member is generally entitled, not only to vote, but also to hear and to be heard in debate - powers conferred on a chairman in the conduct of a meeting being designed to facilitate the presence of those entitled to debate and vote on a resolution at a meeting where such debate and voting is possible: Byng v London Life Association Ltd [1990] Ch 170 at 188H.

[108] Although different formulations can be found of the grounds upon which the Court will interfere with an exercise of a chairman’s broad discretionary powers in the conduct of a meeting (some of which are noticed in Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 at 480 [40]-482[42]; Australian Olives Ltd v Stout (No 2) [2007] FCA 2090 at [20]; and McKerlie v Drill Search Energy Ltd (2009) 72 ACSR 288; [2009] NSWSC 488 at [27]-[35]), each formulation has at its core, first, recognition that any exercise of discretion by a chairman must be bona fide in exercise of the purpose for which the discretion was conferred and, secondly, the chairman’s decision must be measured against that standard.”

24. On the question of identification of a chairman for the EGM, the essential difference between the parties is whether: (a) as the defendants contend, the election of the chairman should be left, in the first instance, to a decision of the directors (under clause 35 of the Constitution of the first defendant) and, under that clause, to the members participating in the meeting (in person or by proxy) in default; or (b) as the plaintiff contends, the Court should appoint an independent chairman pursuant to section 1322(4).

25. The defendants accept that, should their primary contention be rejected, the Court’s powers under section 1322(4) extend to the appointment of an independent chairman as an order “ancillary” to an order of the type for which sections 1322(4)(a)-(d) provide. They also accept that, should their primary contention be rejected, it would be open to the Court to make a declaration under section 1322(4)(a) to the effect that the Convening Shareholders’ Notice of Meeting for the EGM is not invalid by reason of any contravention of the notice provision found in section 203D(3).

26. Although the defendants accept that it would be open to the Court to appoint an independent chairman under section 1322(4) if their primary contention about its unavailability in the context of section 203D(2) is rejected, they contend that, in any event, the Court should leave the conduct of the EGM (including the identity of the chairman of the meeting) to the directors in accordance with, and subject to, clause 35 of the first defendant’s constitution.

27. If the Court were to leave identification of the chairman, in effect, to the directors, questions about the construction and operation of section 250BD must be confronted. The defendants contend that the section has no relevant scope for operation because it is directed towards the question of “remuneration” of directors as a specific topic associated with adoption or otherwise of a remuneration report, not extending to a resolution for removal of the directors of the company. I am minded to accept that contention; but it is not a clear cut question in the context of a company in which the directors’ remuneration has been a recurrent controversy, nor one that requires determination in the current proceedings.

28. If the Court were to appoint an independent chairman (as I am minded to do), the parties accept that questions about the construction and operation of section 250BD do not arise for determination.

29. Although the relief sought by the plaintiff can, in large measure, if not entirely, be accommodated within the framework of section 1322(4), the plaintiff also invokes section 1324, which authorises the Court to grant a statutory form of injunction where a person has engaged, is engaging or proposing to engage in conduct that constitutes or would constitute a contravention of the Corporations Act.

30. In the event that the Court were to decide to order (pursuant to section 1322(4) or section 1324) that the first defendant make a corrective announcement to the Australian Stock Exchange, the plaintiff contends that the content of such an announcement should embody statements to the effect that: (a) the EGM scheduled for tomorrow will be held; (b) the EGM has been validly convened; (c) the EGM will deal with the proposed resolutions, for the removal and replacement of the first defendant’s directors, set out in the notice of meeting distributed on 25 October 2016; and (d) the chairman of the EGM will be an independent chairman appointed by the Court.

31. Without prejudice to their primary case that there is no occasion for the appointment of an independent chairman, the defendants accept, as the plaintiff proposes, that Dr RP Austin of the NSW Bar (a leading corporations law scholar, and a former judge of this Court) would be an appropriate appointee. Through the solicitor for the plaintiff, and with the acquiescence of the defendants in such procedural informality, Dr Austin has communicated to the Court his consent, and availability, to act as chairman should the Court decide to appoint him to that role.

32. The plaintiff has volunteered an undertaking to pay the costs of Dr Austin being retained (on behalf of the first defendant) to chair the meeting. Having regard to the final sentence of section 249F(1), and the power to impose conditions for which section 1322(4) expressly provides, such an undertaking would, in any event, be an appropriate condition to impose on relief granted under section 1322(4) providing for an independent chairman.

33. The evidence adduced at the hearing comprised affidavits, and documents annexed or exhibited to affidavits, on both sides of the record, with no material evidentiary objections taken and no deponents required for cross-examination.

34. The parties’ approach to the form, and parameters, of the evidence facilitates a determination of the proceedings on an urgent basis.

35. For the record, I note, in passing, that the plaintiff draws attention to the absence of any evidence from the directors of the first defendant (that is, the second, third and fourth defendants), and invites the Court to draw inferences of the kind identified in Jones v Dunkell (1959) 101 CLR 298 in weighing up whether to accept the directors’ assurances that they can, and will, discharge in good faith whatever duties they may have in the election of a chairman, the acceptance of otherwise of proxies, and the conduct of the EGM. I see no occasion to invoke Jones v Dunkell.

36. The plaintiff contends that, even if the first defendant’s announcements to the Australian Stock Exchange are not to be characterised as misleading and deceptive, they, and other statements made by or on behalf of the defendants in correspondence, demonstrate a fixed intention on the part of the defendants to ensure that no business of substance is conducted at the EGM, and that proxies unfavourable to their cause not be accepted, such that any assurances given by them to the Court should not be relied upon.

THE FACTUAL MATRIX

37. The evidence to which the Court has been taken establishes that the first defendant’s membership includes, and has included since at least April 2016, a group of shareholders (including the plaintiff) steadfastly opposed to the current board of directors, and, in their turn, steadfastly opposed by the board.

38. Since April 2016 or thereabouts, the defendants have been on notice that the first defendant’s dissident membership contends that the second, third and fourth defendants should be removed and replaced as directors.

39. On or about 28 September 2016, the first defendant made an application to the Takeovers Panel, pursuant to section 657C of the Corporations Act, designed (by a complaint about an alleged failure on the part of the plaintiff to disclose its substantial interest in voting shares of the first defendant) to thwart steps allegedly taken by the plaintiff and other dissident shareholders in connection with the company. On 6 October 2016, the Takeovers Panel declined to conduct proceedings on that application.

40. On 29 September 2016, dissident shareholders (identified with 327th P&C Nominees Pty Limited but evidently in the same interest as the plaintiff) gave notice to the first defendant, pursuant to section 249N(1)(a) of the Corporations Act, of an intention to move at the company’s annual general meeting, resolutions, for the removal and replacement of the company’s directors, in terms substantially the same as those subsequently embodied in the Convening Shareholders’ notice of meeting for the EGM.

41. On 6 October 2016 the first defendant made an announcement to the Australian Stock Exchange, first, that it had received the proposed resolutions of the dissenting shareholders, and, secondly, that it would hold its AGM on 29 November 2016.

42. On 11 October 2016 the first defendant advised 327th P&C Nominees Pty Limited that its letter containing proposed resolutions for the removal and replacement of the company’s directors was “received less than two months before the date set down for the 2016 Annual General Meeting” and “[in] the circumstances the Board [of Directors of the company] considers it is not appropriate to place these resolutions … before the 2016 Annual General Meeting”.

43. On 11 October 2016 the first defendant made an announcement to the Australian Stock Exchange to the same effect, relying upon the two month stipulation in section 249O(1).

44. In that context, absent an agreement on the part of the dissident shareholders who gave notice of the proposed resolutions to withdraw them, the proposed resolutions could be reasonably expected to considered “at the next general meeting that occurs more than two months after the notice is given”, but not at the AGM scheduled to be held (in Melbourne) on 29 November 2016.

45. Had the first defendant resolved to hold its AGM a day later, on 30 November 2016, the resolutions proposed by the dissident shareholders (and now, in substance, advocated by the Convening Shareholders) could have been dealt with at the AGM without any need for the EGM, which arose from the defendants’ disinclination to allow the dissident shareholders any opportunity to be heard.

46. The defendants contend that the proposed resolutions of 29 September 2016 were withdrawn by the dissident shareholders who ventured to propose them. The defendants rely, not upon evidence of an express withdrawal of the proposed resolutions, but upon inferences said to arise from correspondence. That correspondence comprises, in date order: first, a letter dated 19 October 2016 in which the dissident shareholders invited the first defendant to reconsider its decision to refuse to place the proposed resolutions on the agenda for the 2016 AGM, and foreshadowed an intention to sponsor the calling of an extraordinary general meeting under section 249F; secondly, a letter dated 20 October 2016 written by the first defendant in reply in which the first defendant invited the dissident shareholders to withdraw their “proposed notice” and to reconsider their strategy; and, thirdly, an announcement by the first defendant to the Australian Stock Exchange on 27 October 2016 in which the company asserted as a fact that, in light of competing proposals for challenges to its directors’ occupation of their respective offices as directors, “the Company takes [the dissident shareholders’ notices of proposed resolutions] to have been withdrawn”.

47. I am not satisfied that there is any reliable evidence, in fact, that the proposed resolutions of which notice was given under section 249N on 29 September 2016 have been “withdrawn” by the dissident shareholders who gave that notice.

48. The better view, on the whole of the evidence, is that there was no such withdrawal. That is the inference I draw from the whole of the evidence, absent any direct evidence bearing on the question from any of the dissident shareholders or any party to the proceedings.

49. Nevertheless, the fact is that, rightly or wrongly, the proposed resolutions of 29 September 2016 have not been included in the notice of Annual General Meeting issued by the first defendant (for 29 November 2016) on 26 October 2016, and no party to these proceedings contends that it is open to the Court, directly or indirectly, to take steps designed to have those resolutions, or similar resolutions, proposed for consideration at the AGM.

50. The dissident shareholders’ letter dated 19 October 2016 included a draft form of “Notice of Extraordinary General Meeting” that contemplated an EGM being called (as it was subsequently, on 25 October 2016, called pursuant to section 249F) for tomorrow, 24 November 2016 at 1.00 pm in Sydney. That the document was but a draft appears from the absence, in its text, of any identification of “convening shareholders”.

51. Although that document was only a draft, it is relied upon by the plaintiff as an indication to the defendants, not the first, of a determination on the part of a body of shareholders of the first defendant to move for the removal and replacement of the company’s directors. The Notice of EGM subsequently given by the Convening Shareholders, and the defendants accept validly given (even if pyrrhic in terms of the business able to be conducted), follows the form of the draft document in substance.

52. During the course of the hearing of the current proceedings, the time for return of proxy forms to the first defendant’s share registry (outsourced to Computershare Investor Services Pty Limited) expired. There is no evidence before the Court bearing upon the number, or terms, of proxy forms delivered to the share registry.

53. At a directions hearing conducted by Black J as the Corporations List Judge (at the time the originating process was filed) on 18 November 2016, Computershare Investor Services Pty Limited (“Computershare”), through the solicitor for the defendants, foreshadowed undertakings to the Court designed to ensure an orderly, administrative processing of proxy forms, subject to any rulings that might be made by the chairman of the EGM in the ordinary course. Computershare has since been retained by the first defendant (on terms disclosed in the evidence and deemed acceptable by the plaintiff) to provide professional services referrable to the EGM.

54. The final hearing was conducted on the basis that both sides of the record accept that those undertakings will be formally given at the time that the Court’s judgment is published. There is no dispute as to the content, and appropriateness, of the undertakings. The dispute between the parties is no longer about the integrity of the administrative process for dealing with proxies but, rather, about who should make decisions about them as chairman of the EGM.

55. It is not necessary, in this judgment, to make any determination about the validity or otherwise of particular proxy forms or of any class of proxy forms. I forebear from doing so. Nothing in the parties’ competing contentions about the form of proxies – for or against their respective interests – provides a justification for attributing invalidity to the calling, or prospective conduct, of the EGM. Nor a reason for denying a grant of section 1322(4) relief to the plaintiff, particularly in circumstances in which, aided by procedural undertakings by Computershare, an independent chairman can be appointed by the Court to chair the EGM.

56. Nor do I propose to enter, in depth, upon whether statements made by the first defendant in its stock exchange announcements of 10 and 11 November 2016 were false or misleading. It is not necessary for the Court to be drawn into this controversy. It is sufficient to note that the first defendant’s announcements were overtly partisan, in favour of the current directors, and they were intemperate in tone, suggesting a predisposition on the part of the directors to challenge the validity of any business conducted at the EGM adverse to their interests.

CONSIDERATION

57. Subject to addressing the particular objections taken by the defendants to the availability and operation of section 1322(4) in the context of the two month notice stipulations found in sections 203D(2) and 249O(1), I am satisfied that, for the reasons here articulated and in light of the acrimony that has characterised disputation within the first defendant, the appropriate form of relief to grant in the proceedings is relief to the following effect: (1) a declaration that the notice of extraordinary general meeting dispatched to members of the first defendant on 25 October 2016 is not invalid by reason of its contravention of the requirement in section 203D(2) of the Corporations Act that at least two months notice of an intention to move the resolutions proposed in the notice of meeting be given to the first defendant; and (2) an order that Dr RP Austin be appointed to act as chairman of the EGM.

58. I am disinclined to make an order that the first defendant make a “corrective statement” to the Australian Stock Exchange in circumstances in which the publication of the Court’s orders and reasons for judgment will, of itself, trigger an obligation on the part of the first defendant to make an appropriate announcement to the Stock Exchange and the parties are at liberty to provide a copy of the Court’s orders and reasons to the ASX. That said, a statement substantially to the effect of that sought by the plaintiff (noted in paragraph 30 above) would appear to be appropriate.

59. I turn my attention to the operation of sections 203D(2) and 249O(1) in their interaction with section 1322(4). It is not necessary to address their interaction with section 1322(2) and, having regard to time constraints, I do not do so.

60. In essence, the defendants contend that section 1322 cannot be engaged because the time stipulations in sections 203D(2) and 249O(1) – especially the former – cover the field.

61. They point, particularly, to the imperative language found in the first sentence of section 203D(2) – “must” and “at least” – and say that the second sentence of the subsection (commencing “However”) exhibits an intention that there be no dispensing power other than that conferred on the company in the second sentence. They rely also on the note to section 203D(2).

57. They contend that the special character of the subject matter of section 203D (manifested in its first subsection), reinforced by the provisions of the second subsection, militate against subjecting the section to a general dispensing power such as that found in section 1322. They draw parallels between section 203D(2) and provisions considered by the High Court of Australia in David Grant & Co Pty Limited v Westpac Banking Corporation (1995) 184 CLR 265 and by the Court of Appeal in BP Australia Limited v Brown (2003) 58 NSWLR 322.

58. I do not accept that section 203D(2), in terms or in context, manifests an intention that the subsection operate outside the scope of section 1322(4).

59. The subject matter of section 203D(2) relates to the internal management of a public company insofar as it provides (in addition to whatever provision may be made in the constitution of a company) for the removal of a director. The provisions considered by the High Court in David Grant and BP v Brown related to third party business; in the former case, provisions governing the validity of a statutory demand (section 459G) and, in the latter case, provisions governing voidable transactions (section 588FF).

60. Insofar as the time stipulation for which section 203D(2) provides may provide a form of procedural fairness protection for a director (Mortimer v Proto Resources & Investments [2015] FCA 654 at [65(d)]) or a means of facilitating the orderly conduct of a company’s affairs, those factors can be, and can reasonably be expected to be, taken into account by the Court in its consideration of section 1322(4) and the provisions of section 1322(6) which inform section 1322(4). Section 203D provides an avenue for directors of public companies to be held to account with safeguards open, under section 1322(4), to be moulded to the circumstances of the particular case. Section 249F provides no less an important right, to hold companies accountable, that can and should, be accommodated in the context of section 1322(4): Cf, Central Exchange Limited v Rivkin Financial Services Limited [2004] FCA 1546; 213 ALR 771 at [33] and [52].

61. In this case, although the Convening Shareholders did not distribute their Notice of Meeting until 25 October 2016 or thereabouts, the antecedents to their distribution of that Notice clearly put the defendants on notice of the case sought to be made against them. They declined, presumably for strategic or tactical reasons, to have distributed with the Notice of Meeting a written outline of their defence to the proposed resolutions for their removal.

62. The two months time stipulation for which section 249O(1) is no less amenable to the operation of section 1322(4) than is section 203D(2).

63. In the case of both sections, it would be open to a company to advance an earlier consideration of a motion for removal and replacement of a director notwithstanding that notice of an intention by members of the company to move such a resolution falls short of two months. The time stipulations for which the sections provide are not in all circumstances absolute.

64. There appears to be no sound policy reason for why a company (under the control of directors who may be the subject of challenge, as they are in these proceedings) should have a dispensing power, but the Court should be declined the remedial powers for which section 1322(4) provides. Those powers are to be construed broadly and applied pragmatically by reference to considerations of substance rather than form: Weinstock v Beck (2013) 251 CLR 396 at [39].

65. I am mindful of the importance of maintaining a culture in which parties adhere to time stipulations for which the Corporations Act provides; but, in the circumstances of the present case, I apprehend no reason for denying section 1322(4) relief to the plaintiff. Although the Notice of Meeting relied upon by the plaintiff falls short of the two months required by section 203D(2), as the primary provision relied upon by the defendant, the lateness of giving of notice was occasioned, largely, if not entirely, by decisions made by the first defendant, through directors under challenge, calculated to ward off the challenge which the section 249F Notice represents.

66. It is not suggested by any party that an absence of representative orders binding all members of the first defendant provides a reason for denying a grant of relief to the plaintiff.

67. Having regard to the requirements of section 1322(6), I am satisfied that the Convening Shareholders acted honestly (within the meaning of section 1322(6)(a)(ii)), and that (within the meaning of section 1322(6)(a)(iii)) it is just and equitable that a declaration be made under section 1322(4)(a). I am satisfied also, that no substantive injustice has been, or is likely to be caused to any person (within the meaning of section 1322(6)(c)) by the orders under section 1322(4) that I have foreshadowed.

68. I adopt Black J’s observation in Re Duet Management Company Limited [2013] NSWSC 817; 96 ACSR 34 at [18] that an act may be taken honestly, or it may be just and equitable to validate it, for the purposes of section 1322(6) notwithstanding that a technical defect with the act is known at the time it takes place. This is such a case. The Convening Shareholders’ late service of their Notice of Meeting was occasioned, as has been noted, by calculated adversarial decisions taken by the directors of the first defendant having the effect of manoeuvring their opponents into a contravention of the section 203D(2) time constraint despite earlier, open, consistent statements of intent to seek to have the directors removed from office.

69. The appointment of an independent chairman for the EGM – which I hold to be in the best interests of the members of the first defendant as a whole, allowing the will of the membership to be ascertained in an orderly way, minimising risks of procedural misadventure – incidentally dispenses with any need to consider the operation of section 250BD.

CONCLUSION

75. I will allow the parties a short opportunity to address the form of the orders to be made, and undertakings to be given, to give effect to these reasons for judgment.

76. Prima facie, the second, third and fourth defendants should personally bear the costs of the proceedings without recourse to assets of the first defendant. The true, adversarial parties in these proceedings are the plaintiff and the directors. On that basis, the ordinary rule (that costs follow the event) should apply and the directors should pay the costs of the proceedings.

ADDENDUM (23 November 2016)

77. Having allowed the parties an opportunity to make submissions about the form of orders to be made in disposition of the proceedings, Lindsay J made notations and orders in the following terms:

1. NOTE that the plaintiff, by its counsel:

1. Confirms that Dr R P Austin has consented to act as independent chair of an extraordinary general meeting of the first defendant scheduled for 24 November 2016, if so appointed by the Court; and

2. undertakes to the Court that it will pay the costs of Dr R P Austin as such chair.

2. NOTE that the First Defendant, by its counsel,:

1. confirms that it has already retained Computershare Investor Services Pty Ltd to carry out the customary functions performed by a share registry service before, during and after the extraordinary general meeting of the first defendant called for 24 November 2016;

2. confirms that it has instructed Computershare Investor Services Pty Ltd to act consistently with its usual practices and standard procedures; and

3. confirms that it has instructed Computershare Investor Services Pty Ltd to record and retain all proxy forms submitted and to scrutinise them in accordance with its standard procedures and professional judgement without interference by the First Defendant or any other person.

3. NOTE that the Defendants, by their counsel, undertake to the Court that they will not interfere with Computershare Investor Services Pty Ltd in the performance of its functions and duties in respect of the extraordinary general meeting of the first defendant called for 24 November 2016.

4. Upon the undertakings and confirmatory statements recorded in paragraphs 1, 2 and 3 of these orders and notations:

1. DECLARE, pursuant to section 1322(4) of the Corporations Act 2001 Cth, that the notice of extraordinary general meeting despatched to members of the First Defendant on Monday 25 October 2016 is not invalid by reason of its contravention of the requirements of section 203D(2) and section 249O(1) of the Corporations Act 2001, jointly or severally.

2. ORDER, pursuant to section 1322(4) of the Corporations Act 2001, that Dr R P Austin be appointed to act as the Chairman of the extraordinary general meeting of the First Defendant scheduled for Thursday 24 November 2016.

5. ORDER that the First Defendant pay the Plaintiff’s costs of the proceedings.

6. NOTE that no orders are made as to the costs of the Second, Third and Fourth Defendants, with the intent that they pay or bear their own costs of the proceedings.

7. RESERVE to all parties (and Dr RP Austin) liberty to apply generally.

8. ORDER that these orders be entered forthwith.

**********

Decision last updated: 23 November 2016