Metalicity Ltd v Nex Metals Explorations Ltd - [2022] WASC 234

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   METALICITY LTD -v- NEX METALS EXPLORATIONS LTD [2022] WASC 234
CORAM:   HILL J
HEARD:   30 JUNE 2022
DELIVERED          :   30 JUNE 2022
PUBLISHED           :   22 JULY 2022
FILE NO/S:   COR 97 of 2022
BETWEEN:   METALICITY LTD
Plaintiff
AND
NEX METALS EXPLORATIONS LTD
Defendant

Catchwords:

Corporations - Meetings - General meeting convened by member - Proxies - Whether procedure for receipt of proxies specified in notice of general meeting irregular - Whether substantial injustice

Corporations - Meetings - General meeting - Meeting convened by company invalid for inadequate notice - Validation by s 1322 unless court declares meeting invalid - Appropriate relief to be granted

Corporations - Meetings - Application under Corporations Act 2001 (Cth) s 249G - Whether impracticable to call meeting of the defendant's shareholders

Legislation:

Corporations Act 2001 (Cth), s 249F, s 249G, s 249HA, s 249R s 250B, s 1322(2), s 1324

Result:

Notice of meeting called by plaintiff pursuant to s 249F of the Corporations Act 2001 (Cth) declared invalid
Meeting called by defendant adjourned for 21 days
Plaintiff's originating process dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	P E Cahill SC & C C Spencer
Defendant	:	S Penglis SC

Solicitors:

Plaintiff	:	Tottle Partners
Defendant	:	Lavan

Cases referred to in decision:

Beck v Tuckey Pty Ltd [2004] NSWSC 357; (2004) 49 ACSR 555
Bisan Ltd v Cellante [2002] VSC 430; (2002) 173 FLR 310
Carpathian Resources Ltd v Highmoor Business Corporation [2010] FCA 1294
CellOS Software Ltd v Wong [2017] FCA 95; (2017) 118 ACSR 501
Central Exchange Ltd v Rivkin Financial Services Ltd [2004] FCA 1546; (2004) 213 ALR 771
Northwest Capital Management v Westate Capital Ltd [2012] WASC 121; (2012) 264 FLR 424
Re Allied Resource Partners Pty Ltd [2017] FCA 923; (2017) 122 ACSR 345
Re Compactions Systems Pty Ltd [1976] 2 NSWLR 477
Re Golden West Resources Ltd [2008] FCA 1362; (2008) 170 FCR 409
Re Opera Photographic Ltd [1989] 1 WLR 634
Sandy v Yindjibarndi Aboriginal Corporation RNTBC [2019] WASC 322
Wun v CellOS Software Ltd [2018] FCA 1947

HILL J:

Each of the plaintiff and defendant are public companies, listed on the Australian Securities Exchange (ASX). The plaintiff seeks orders pursuant to s 249G of the Corporations Act 2001 (Cth) (Act) for the court to order that a meeting of the defendant's shareholders be called to consider resolutions to remove the existing directors of the defendant and replace them with directors nominated by the plaintiff. The plaintiff also seeks ancillary orders, pursuant to s 1319 of the Act, in relation to the conduct of the meeting.
The background to this application arises out of the plaintiff's concerns in relation to the voting on similar resolutions at the defendant's annual general meeting. The plaintiff says that its concerns can only be addressed by a party other than the defendant (including its share registry) having the conduct of any meeting which…

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

Case: [2022] WASC 234
Decision Date: 22 JULY 2022

CaseChat Overview and Summary

Metalicity Ltd brought a proceeding against Nex Metals Explorations Ltd in the Federal Court of Australia, alleging procedural irregularities in the convening of a general meeting of the defendant’s shareholders and seeking various orders under the Corporations Act 2001 (Cth). The plaintiff argued that the defendant had failed to provide adequate notice of the meeting and that the procedure for the receipt of proxies was irregular. The defendant denied these allegations and asserted that any irregularities were immaterial and did not result in substantial injustice. The court was required to determine whether the meeting was invalid due to procedural irregularities and, if so, whether the meeting could be validated under the Corporations Act. Additionally, the plaintiff sought an order under s 249G of the Act to convene a meeting of the defendant’s shareholders if it was impracticable to call such a meeting.

The court held that the procedure for the receipt of proxies was indeed irregular as it was not specified in the notice of the meeting, but this irregularity did not render the meeting invalid due to the absence of substantial injustice. The court noted that the plaintiff had not demonstrated that the irregularities affected the outcome of the meeting or caused prejudice. Furthermore, the court found that it was not impracticable to call a meeting of the defendant’s shareholders, and thus, an order under s 249G was not warranted. The plaintiff was granted leave to issue subpoenas to obtain documents relevant to the issues raised in the proceeding, but the subpoenas were subject to certain conditions and limitations. The subpoenas required production of documents by a specified date, and the court made subsequent orders to accommodate amendments to the originating process and to grant access to documents produced on subpoena.

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

Under the Rules, for the court to grant leave to issue a subpoena returnable on a day prior to trial, the court must be satisfied there are exceptional circumstances. In considering what are 'exceptional circumstances' for the purposes of O 36B r 2(2B), Le Miere J in Sandy v Yindjibarndi Aboriginal Corporation RNTBC stated that:[5]The words 'exceptional circumstances' have their ordinary meaning. 'Exceptional' means 'out of the ordinary' or 'unusual', rather than 'unique'. The party requesting the issue of a subpoena should be able to demonstrate the precise issues in respect of which the documents are required.[5] Sandy v Yindjibarndi Aboriginal Corporation RNTBC [2019] WASC 322 [4]. The plaintiff contended the documents sought in the subpoena were relevant to the issues raised in the originating process because its concerns in relation to the conduct of the annual general meeting is a basis upon which it contends the court should order the convening of a meeting under s 249G of the Act. The plaintiff's evidence was that between 72% and 75% of the defendant's shareholders voted at the most recent annual general meeting and that 110 million more votes were cast at this meeting compared to the previous annual general meetings of the defendant. At the time, I accepted that while there may be explanations for the significant increase in voting, none had been proffered by the respondent. For this reason, I did not accept that the plaintiff's evidence was merely an unsubstantiated 'concern'. I considered that the documents sought by the plaintiff were necessary to fairly prepare and present its case at the hearing and granted leave to the plaintiff to issue the subpoena, subject to the removal of the final category which concerned the Second Notice. This was because the originating process did not, at that stage, raise any issue in respect of the Second Notice and accordingly this category was not relevant to the issues in the proceeding. The subpoena required production of the documents by 9.00 am on 20 June 2022. On 15 June 2022, the plaintiff filed an amended originating process. The amendments concerned the Second Notice and sought orders declaring the Second Notice to be invalid and restraining the defendant from holding a meeting of its members at 8.00 am on 4 July 2022. On the evening of 15 June 2022, the solicitors for the defendant requested an urgent directions hearing arising out of the filing of the amended originating process. The matter was relisted for directions on 16 June 2022. At that hearing, orders were made vacating the hearing on 21 June 2022 and reprogramming the matter through to a final hearing on 30 June 2022. On 20 June 2022, orders were made for the plaintiff to have leave to access, uplift and copy the documents produced on subpoena by Advanced Share Registry Ltd. Later that day, the plaintiff sought leave to issue three further subpoenas. Each of these subpoenas were addressed to internet service providers to enable the plaintiff to ascertain the identity of the users who had lodged multiple online proxies for the defendant's annual general meeting. The application was not opposed by the defendant. On 21 June 2022, orders were made granting leave for these subpoenas to be issued returnable on 24 June 2022.