139 This issue was raised by Messrs Berresford and Kain but expressed as a 'secondary' issue only. It was not the subject of opening. Given the conclusions I have reached on Issues 1, 2 and 4, I do not strictly need to deal with this issue. However, submissions were made on the point in closing by the parties, and it was the subject of evidence and
(Page 39)cross-examination. I should explain why I do not accept the alternative submission of Messrs Berresford and Kain on this issue.
140 The misleading or deceptive conduct pleaded by Messrs Berresford and Kain was that Mr Thompson and Mr Keene distributed proxy forms by email or post around 19 December 2011 and procured the signed proxy forms in circumstances as follows.
(i) The proxy forms and/or distributing covering notes do not provide any or sufficient information to enable the recipient shareholder to consider the substance of the resolutions and make an informed decision about whether to sign the proxy form. (ii) The emails required return of the proxy forms to persons other than NWPL.
(iii) The majority of the proxy forms sent by Mr Thompson were both pre-filled in that the boxes to vote 'for' the resolutions were ticked and the forms were also pre-dated.
141 It is said by Mr Berresford and Mr Kain that this conduct entitles them to an order that the plaintiffs and NWPL were, and are, not entitled to rely on the proxies tabled by Mr Godfrey at the general meeting. 142 There are numerous obstacles to the relief they seek in relation to this issue.
143 First, there are doubts concerning whether the provisions of either The Australian Consumer Law (which is sch 2 of the Competition and Consumer Act 2010 (Cth)) or the ASIC Act apply to any misleading or deceptive conduct with respect to procuring the purported resolutions.
144 The proscription against misleading or deceptive conduct in the ASIC Act appears in s 12DA. That section provides that a person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.
145 At no stage did Messrs Berresford and Kain explain how their three particulars of conduct relating to the provision of proxy forms for the shareholder meeting were in relation to a 'financial service' as defined in s 12BAB.
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146 Messrs Berresford and Kain referred to the decision of Barker J in Avoca Consultants Pty Ltd v Millennium3 Financial Services Pty Ltd.154In that case his Honour considered a representation made in an agreement authorising a person as representative for the purposes of providing financial product advice. His Honour held that such a representation was not conduct in relation to providing financial product advice. 147 Messrs Berresford and Kain conceded that it is arguable that, based on this case (where, at the least, there had been detailed submissions concerning s 12BAB), s 12DA of the ASIC Act might not apply.155 They are correct. The three particulars are even further removed from a financial service, at least on the submissions before me, than the conduct in Avoca Consultants Pty Ltd. I proceed on the basis that the ASIC Act does not apply.
148 Perhaps anticipating that any misleading or deceptive conduct in this case would not be in relation to a financial service, Messrs Berresford and Kain relied also upon TheAustralian Consumer Law. Section 18 of TheAustralian Consumer Law provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. The misleading or deceptive conduct under TheAustralian Consumer Law does not apply to the supply, or possible supply, of services that are financial services, or of financial products.156
149 Messrs Berresford and Kain asserted that the conduct relating to the provision of proxy forms for a shareholder meeting was 'in trade or commerce'. They relied only upon one case for this proposition.157. In that case the issue concerned the conduct of a public company in passing a resolution at an extraordinary general meeting authorising the acquisition of a private company. In the Federal Court, French J (as the Chief Justice was then) held that the acquisition was conduct in trade or commerce and the notice of meeting and supporting documents were also within trade or commerce because they were closely related and necessary antecedent communication.
150 No detailed submission was made, nor authority cited, concerning whether, and why, a resolution for the removal of directors, and appointment of a new director was conduct in trade or commerce. Although there may be real doubt on this point, the question need not be
(Page 41)resolved because the submissions on this issue fail for other reasons. I proceed (without deciding) on the basis that the assumption of the proxy forms in the manner suggested in particulars (i) - (iii) was conduct 'in trade or commerce', being 'conduct which is an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character'158.
151 The second obstacle to the relief sought by Messrs Berresford and Kain is that the nature of the injunctive relief sought has no support in any authority based on the statutes upon which they rely. 152 Messrs Berresford and Kain relied on s 232 of The Australian Consumer Law and s 12GD of the ASIC Act, seeking injunctive relief as provided under each of the Acts. Section 232 provides a broad power for the Court to grant an injunction if the Court is satisfied that a person has engaged, or is proposing to engage, in conduct which is, or would be, misleading or deceptive. Messrs Berresford and Kain sought an injunction in the form of an 'order that the first, second and third plaintiffs and the third defendant were, and are, not entitled to rely on the proxies'.159
153 No authority was cited for this form of injunctive relief. The assumption upon which the relief is sought is that the proxies held by the plaintiffs were validly relied upon at the general meeting. The injunctive relief is not sought to prevent any future misleading or deceptive conduct.160 The injunctive relief sought is akin to an estoppel, although no estoppel was pleaded nor alleged. The injunction is sought to enjoin the plaintiffs from relying upon those proxy votes even though the general meeting has already taken place and the purported reliance on those votes, and declaration of a result, has already occurred.
154 Unsurprisingly, I was not referred to any authority supporting this alleged type of 'injunction'.
155 The third obstacle to relief based upon the pleaded misleading or deceptive conduct is that the particulars of misleading or deceptive conduct concern only Mr Thompson and Mr Keene. But the relief sought
(Page 42)by Messrs Berresford and Kain is against all of the plaintiffs (including NWPL).
156 This may not necessarily be an absolute bar to relief, but no submissions were made, and no authority was cited, concerning the circumstances in which injunctive relief should issue in relation to third parties against whom no plea of misleading or deceptive conduct (upon which the alleged injunction is said to be based) is made. 157 The fourth obstacle to the injunctive relief sought by Messrs Berresford and Kain is that they did not point to any shareholder who was actually misled or deceived. I accept that for injunctive relief, unlike a claim for loss or damage, it is not necessary for any shareholder actually to have been misled.161 But the issue of misleading or deceptive conduct cannot be considered in the abstract.162 The absence of any evidence that any of the shareholders was misled is significant, although not conclusive, for the question of whether misleading or deceptive conduct has occurred.163
158 Fifthly, and most fundamentally, the conduct relied upon by Messrs Berresford and Kain was not misleading or deceptive within s 18 of TheAustralian Consumer Law. It is noteworthy that there was a paucity of submissions concerning (a) how any shareholder could have been misled or deceived by the particulars of conduct pleaded; (b) what a hypothetical shareholder might have been misled into believing; or (c) why being misled on such a matter was significant.
159 The only points made by Messrs Berresford and Kain were essentially as follows.
(i) members were misled about the proper manner in which proxies were to be returned to NWPL; (ii) inadequate information was provided about why the proxies were to be signed and why Messrs Berresford and Kain were to be removed; and
(iii) that members might have been misled into thinking that they needed to act urgently.
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160 As to (i), I have already explained in relation to Issue 3 above that the manner of return of the proxies to NWPL was not invalid or improper. 161 As to (ii), it was not suggested that any independent positive duty existed in relation to any information not provided in this case. It may generally be the case that the provision of inadequate information will only be misleading or deceptive if 'the combination of what is said and what is left unsaid' is capable of being misleading or deceptive.164 However, the case law in this area is conflicting and there is no binding authority on the scope and effect of the meaning of the words 'engage in conduct',165 which conduct is misleading or deceptive.166 The best approach, on the current state of the law, is to examine the conduct said to be misleading or deceptive, including any alleged misleading or deceptive conduct by omission or silence, by reference to all the circumstances and context.167.
162 No submission was made for Messrs Berresford and Kain to elucidate how the inadequate information in the proxy forms somehow left any matter unsaid; or how any shareholder might have been misled by a lack of information about why Messrs Berresford and Kain were to be removed; or why the particular information which was missing was material to any decision which might be made. There was a paucity of evidence concerning the information which the shareholders had, or did not have, about the possible removal of Messrs Berresford and Kain. I am not satisfied that any information omitted in the proxy forms was misleading or deceptive or likely to mislead or deceive.
163 As to (iii), again I do not accept that this amounts to misleading or deceptive conduct, still less misleading or deceptive conduct which should cause a court to issue an injunction to prevent the plaintiffs from relying upon proxy votes which (on the assumption upon which this alternative ground rests) would otherwise have been valid.
164 It was never explained why members would have been misled into thinking that they had to act more urgently than was the case. Although the proxy forms were 'pre-completed' or 'pre-dated', the notice of meeting
(Page 44)told members precisely when the voting forms needed to be received by NWPL.
165 There was no misleading or deceptive conduct by any of the plaintiffs. Also, even if the conduct pleaded had been misleading or deceptive, Messrs Berresford and Kain would not have been entitled to the relief they sought on this ground.Issue 6: What relief should be granted?
166 The consequence of my conclusions on Issues 1,2 and 4 is that no valid resolution was passed at the 18 January 2012 general meeting of NWPL.
167 The question which then arises is whether, as Messrs Berresford and Kain contend, a new general meeting should be convened under s 249G and s 1319 Corporations Act.
168 Section 249G provides that upon application by any director (such as Messrs Berresford and Kain) the Court has a discretion to order a meeting of the company's members to be called if it is impracticable to call the meeting in any other way.
169 The meaning of impracticability was considered in Beck v Tuckey Pty Ltd.168In that case, Austin J referred to two decisions in which courts had ordered meetings to be called. His Honour directed, contrary to the company constitution, that the quorum of the meeting could be one member to avoid a deadlock.169.
170 In one of the cases cited by Austin J, Wynn-Parry J said170 that the word 'impracticable' required the Court to examine the 'circumstances of the particular case and answer the question whether, as a practical matter, the desired meeting of the company can be conducted, there being no doubt, of course, that it can be convened and held'.
171 I am satisfied that an order should be made convening a general meeting for the purposes of determining who should be the directors of NWPL. It is impracticable to call a general meeting in any other way. The board of NWPL is deadlocked. Mr Godfrey and Mr Thompson are opposed to Mr Berresford and Mr Kain and vice versa. There is a history of dispute between the directors concerning who has the capacity to call
(Page 45)meetings, who is the chairperson, and the proper method for the receipt and tabling of proxies. Further, the business of the company needs to be transacted and the deadlock of directors is causing difficulty. Messrs Godfrey and Thompson are pressing for creditors to be paid.171 Mr Berresford is resisting some of these payments. Some shareholders of the company rely upon regular distributions and dividends as a source of income.172
Conclusions in the company proceedings 172 Messrs Berresford and Kain are entitled to a declaration that no resolutions were validly passed at the general meeting on 18 January 2012. There should be an order made under s 249G directing a new meeting of the members of NWPL.
173 Section 1319 broadly provides a power for the Court to give directions in relation to the convening, holding or conduct of the meeting. I will hear from counsel as to the appropriate ancillary directions to give effect to the order directing a meeting of the members of NWPL.
The third party proceedings
174 The only remaining extant matter in the company proceedings is an application for indemnity costs in relation to the third party proceedings.
175 By leave, granted early on 8 March 2012, the first and second defendants (Messrs Berresford and Kain) commenced third party proceedings and served upon the solicitors for the plaintiffs a third party notice. A mediation was then held on Thursday, 8 March 2012. By email on Friday, 9 March 2012 at approximately 4.00 pm the first and second defendants advised the plaintiffs of their intention to discontinue the third party proceedings. On Monday, 12 March 2012, the first day of trial, those proceedings were discontinued.
176 I have received submissions concerning an application for indemnity costs in relation to the third party proceedings. It is appropriate that I deal with this matter at the same time as any costs orders and consequential orders which follow from these reasons.
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The trust proceedings: CIV 1118 of 2012The background and issues
177 The shares in NWPL are stapled to units in the Northwest Property Unit Trust. No share can be issued in NWPL without the issue of a unit, nor can a unit be issued without the issue of a share in NWPL.173
178 The Trust was created by deed on 4 March 2010 (the Trust Deed). Westate, the first defendant, was appointed as trustee.174
179 The directors of Westate are Mr Berresford (since 3 March 2010),175 Mr Kain (since 3 September 2010),176 Mr Godfrey (since 6 May 2010)177 and Mr Quirk (since 1 January 2012).178
180 On 19 December 2011, a circulating resolution was sent to some of the unit holders. The circulating resolution proposed, in part, that Westate be removed as trustee and replaced by Northwest Capital Management Pty Ltd (NW Capital). NW Capital is the first plaintiff.
181 The directors of NW Capital since 15 December 2011 have been Mr Godfrey, Mr Keene, and Mr Thompson.179
182 NW Capital and the other plaintiffs seek a declaration recognising the validity of this removal and replacement. They say that the Trust Deed permits the removal of the trustee without a meeting of the unit holders, and without circulation of the notice to many of the unit holders of the proposal (and hence without notice to many of the unit holders of the proposal to remove the trustee). This might immediately be thought to be a very surprising result.
183 Alternatively the plaintiffs say that the Court should exercise a discretion conferred by s 77 of the Trustees Act 1962 (WA) to remove and replace Westate as trustee.
184 Westate says that it remains the trustee.180 It says that a declaration should be made that the circulating resolution is of no force or effect.181
(Page 47)Westate resists any removal of it under s 77 of the Trustees Act and says that if it were to be removed and replaced then this should occur after a meeting of unit holders.
185 NW Capital and the other plaintiffs, and Westate (as defendant), raise the following issues arising from this relief sought.
Issue 1: Did the Trust Deed allow for the removal of a trustee by a circulating resolution?182 Issue 2: Alternatively, can the plaintiffs rely upon the circulating resolution even though it was not circulated to all unit holders?
Issue 3: If the circulating resolution to replace Westate as trustee was invalid, should Westate be removed as trustee?
Issue 4: Should the Court exercise its discretion to appoint NW Capital as trustee?
Issue 5: If the circulating resolution was otherwise valid, do either or both of s 18 The Australian Consumer Law and s 12 GD ASIC Act apply to the misleading or deceptive conduct with respect to procuring the circulating resolution?
Issue 6: What relief should be granted?
Issue 1: Did the Trust Deed allow for the removal of a trustee by a circulating resolution? 186 Clause 15.1 of the Trust Deed183 provides:
Removal of Trustee Subject to the Corporations Act the Trustee may be removed by a majority vote of the Members at any time and from time to time.
187 A 'Member' is defined in cl 1.1 as 'the person Registered as the holder of a Unit (including persons jointly Registered) and where required by the Corporations Act'.184 188 At the commencement of these proceedings the plaintiffs pleaded that a resolution of unit holders of the Trust, held on 1 March 2011, had
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amended cl 15A of the Trust Deed to provide that members may by resolution appoint an additional trustee or a new trustee in place of any trustee who, for any reason ceases to be a trustee. That plea was denied by Westate. It was subsequently withdrawn by the plaintiffs. 189 Therefore, the only question raised by this issue is whether cl 15.1 of the Trust Deed permits the removal of a trustee by a circulating resolution. In other words, on a proper construction of the Trust Deed, can the Trustee be removed by a majority circular resolution 'vote' which does not occur at a meeting of unit holders? On this point, the words of cl 15.1 are ambiguous.
190 The construction of words in the Trust Deed proceeds by the same principles as the construction of words in a contract.185 The search is for the objectively manifested meaning of the words used.
191 In the context of the Trust Deed as a whole, the objectively manifested meaning of the words 'a majority vote of the Members at any time and from time to time' is not 'a majority vote of the Members at any time and from time to time at a meeting'. This is so for seven reasons.
192 First, cl 15.1 does not mention the requirement of a meeting.
193 Secondly, cl 15.1 is separate, and independent, from cl 18 which is concerned with 'Meetings of Members'. There is nothing in cl 15 or cl 18 which creates any relationship between those two clauses.
194 Thirdly, although the word 'vote' is not defined in the Trust Deed, its ordinary meaning does not require a meeting.186 As the plaintiffs' closing submissions expressed the point, in common parlance the use of 'vote' occurs without a requirement of meeting in instances such as voting at council elections, or State or Federal elections.
195 Fourthly, the word 'vote' is used elsewhere in the Trust Deed in connection with voting in the absence of a meeting. Clause 18.19 of the Trust Deed provides that a 'resolution is taken to be carried if a simple majority of the votes cast on the resolution are in favour of it'. Although this subclause is part of cl 18, entitled 'Meetings of Members', the term 'resolution' used in cl 18.19 is defined in cl 1.1 to include votes being cast in the absence of a meeting: 'where the law allows, a resolution in writing signed by members holding the required majority of the Units in the Trust'.