Markopoulos v Wedlock - [2008] WASC 3

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MARKOPOULOS -v- WEDLOCK [2008] WASC 3

CORAM: HASLUCK J

HEARD: 4 JANUARY 2008

DELIVERED : 4 JANUARY 2008

FILE NO/S: COR 188 of 2007

BETWEEN: CONSTANTINO MARKOPOULOS
ALAN PAUL RUDD
MICHAEL REGINALD WILSON
Plaintiffs
AND
GEOFFREY LLOYD WARBURTON WEDLOCK
JOHN PALMERO
GOLDEN WEST RESOURCES LTD (ACN 102 622 051)
Respondent

Catchwords:

Corporations - Management and administration - Motion for injunction - Whether procedural irregularity may cause substantial injustice which cannot be remedied by order of the court - Whether injunctive relief should be granted in circumstances where matter in contention is to be addressed at a forthcoming general meeting of members - Balance of convenience weighs against injunctive relief where forthcoming meeting is to be held - Application for injunctive relief and/or early trial refused

Legislation:

Corporations Act 2001 (Cth), s 9, s 134, s 140(1), s 201M(1), s 249D, s 1322(4), s 1324(1)

Result:

Application for injunction dismissed

Category: B

Representation:

Counsel:

Plaintiffs: Mr M L Bennett
Respondent: Ms P E Cahill

Solicitors:

Plaintiffs: Lavan Legal
Respondent: Maxim Litigation Consultants

Case(s) referred to in judgment(s):

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Commissioner for Fair Trading v Holz [2005] WASC 202
Garden Cottage Foods v Milk Marketing Board [1984] AC 130
Paringa Mining & Exploration Co Plc v North Flinders Mines Ltd (1988) 52 SASR 22; (1988) 14 ACLR 587
Smolarek's case (2006) 32 WAR 109

HASLUCK J:

Introduction

The plaintiffs commenced proceedings by way of an originating process dated 24 December 2007. The plaintiffs are directors of the third defendant, Golden West Resources Ltd. They seek relief concerning allegations they have made about the management of the defendant company in recent weeks.
The application for relief concerns the validity of the appointment of the first defendant Geoffrey Wedlock as a director of the company, the validity of the removal of the second defendant John Palermo as company secretary and the validity of the resolutions, if any, passed at a purported directors' meeting on 24 December 2007.
The plaintiffs brought on an application for interlocutory injunction pursuant to s 1322(4) and s 1324(1) of the Corporations Act 2001 (Cth) and arguably pursuant to the inherent jurisdiction of the Supreme Court. Various orders were sought, including that the first and second defendants be restrained from participating in the conduct and management of the defendant company.
The application for relief came before the Court initially on Monday, 24 December 2007 as an ex parte application. On that occasion programming orders were made which provided for the application to be returned before the Supreme Court on Friday, 4 January 2008.
I now have before me in support of the application for injunctive relief the affidavits of Constantino Markopoulos and David Grant Sanders, sworn 24 December 2007. I have also the further affidavits of Michael Patrick Bruce, sworn 24 December 2007, the affidavits sworn 3 January 2008 of Mr Markopoulos and Michael Reginald Wilson and…

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.

Continue reading Markopoulos v Wedlock

Details

AGLC: Markopoulos v Wedlock [2008] WASC 3
Case: [2008] WASC 3
Decision Date: 4 January 2008

CaseChat Overview and Summary

The case of Markopoulos v Wedlock involved a dispute concerning the validity of the appointment of Geoffrey Wedlock as a director of the company, the removal of the company’s secretary, and the resolutions passed at a purported directors' meeting on 24 December 2007. The plaintiffs sought interim relief on the grounds of procedural irregularities, arguing that they had been deprived of their right to vote at a lawfully convened general meeting of the company. The matter was brought before the court to decide whether the procedural irregularities could cause substantial injustice and whether injunctive relief should be granted in the circumstances.

The central legal issues revolved around the authority of the court to intervene in matters concerning corporate management and administration, particularly in relation to procedural irregularities. The court had to consider the balance of convenience, the potential for substantial injustice, and whether the status quo could be preserved pending the outcome of the litigation. Furthermore, the court needed to assess whether the relief sought by the plaintiffs was appropriate given that the matters in contention were to be addressed at an upcoming general meeting.

The court found that while the plaintiffs had standing to vindicate their personal rights based on the contractual relationship evidenced by the company’s constitution, care must be exercised in intervening to address procedural irregularities. The court noted that the balance of convenience weighed against granting injunctive relief, as the forthcoming general meeting on 5 February 2008 provided an opportunity for the shareholders to address the issues. The court also considered the principle that acts done by a director are effective even if his appointment is invalid, which suggested that the company could continue to function pending the resolution of the matters at the general meeting.

The application for injunctive relief and/or an early trial was ultimately refused. The court concluded that the balance of convenience did not favour the granting of the relief sought, given the imminent general meeting where the shareholders could address the issues.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

In Paringa Mining & Exploration Co Plc v North Flinders Mines Ltd (1988) 52 SASR 22; (1988) 14 ACLR 587 it was held that the Court has power to postpone the transaction of business at a meeting by way of interlocutory order or to direct the adjournment of a meeting if the exercise of the power is necessary to protect the rights of the parties pending the outcome of litigation and is otherwise fair and just to those parties and to any other parties who might be affected by the exercise of that power. It was thought in the Paringa case that the injunctions restraining the takeover offers and the rights issue under notice in that case preserved the status quo. However, the relevant status quo includes the right of a shareholder to vote at a lawfully convened general meeting of the company. To deprive shareholders, in particular a majority shareholder, of that right was not a preservation of the status quo but a disturbance of it. Let me now return to the circumstances of the present case. I noted in earlier discussion that this is an application concerning the validity of the purported appointment of the first defendant Geoffrey Wedlock as a director of the defendant company, the validity of the removal of the company's secretary and the validity of the resolutions, if any, passed at a purported directors' meeting on 24 December 2007. I noted also that the application for interim relief was made pursuant to s 1322(4) and s 1324(1) of the Corporations Act and arguably pursuant to the inherent jurisdiction of the Supreme Court. It emerges from my review of the statutory provisions and legal principles that, where the conduct complained of arguably operates to infringe a personal right, shareholders - such as the plaintiffs in the present case - have standing to vindicate personal or individual rights on the basis that the constitutional rules of the company evidence a contractual relationship between the interested parties. However, it emerges also that care must be exercised by the Court in intervening to address procedural irregularities, especially in circumstances where a correction can be effected by the shareholders of a company in general meeting. I am conscious that I must give weight also to the consideration reflected in cl 15 of the defendant company's constitution, especially cl 15.9, and similar provisions in the Corporations Act, to the effect that acts done by a director are effective even if his appointment is invalid. In the circumstances of the present case this precept has a bearing upon the balance of convenience because it suggests that, even if the irregularities complained of are substantiated, the company is at liberty to function in accordance with an assumed regularity of process, at least until the meeting on 5 February 2008, when various matters in issue may well be resolved by resolutions of the shareholders. It emerges also from the decided cases, including Paringa's case, that care must be exercised in determining what is a preservation of the status quo. Relevant status quo includes the right of a shareholder to vote at a lawfully convened general meeting of the company.