Phosphate Co-operative Company of Australia Limited v Shears

The High Court of Australia considered a dispute between The Phosphate Co-Operative Company of Australia Limited and Douglas Stephen Shears and Cityfarm Phosphates Pty Ltd concerning the interpretation of the company's articles of association. The core of the disagreement revolved around the meaning and effect of Article 5A, particularly in relation to the holding of shares and the right to vote.

The legal issues before the Court were primarily the construction of Article 5A, specifically whether the first sentence meant that a reference to "shares held" in the articles included shares in which a "relevant interest" was held. Additionally, the Court had to determine the consequence of the second sentence of Article 5A, which stipulated that if directors requested information about relevant interests and satisfactory evidence was not provided, a shareholder would lose their right to vote.

The Court, through the submissions of Mr. Finkelstein, was presented with an argument that the first sentence of Article 5A operated to include shares where a relevant interest was held, thereby aggregating both actual and deemed holdings for the purposes of other articles, such as Article 5 (maximum shares) and Article 52 (voting rights). The second sentence was understood to impose a condition on registered shareholders: failure to provide satisfactory evidence of no relevant interest upon a director's request would result in the loss of voting rights. The Court noted that if no request was made under the second sentence, the voting rights of shareholders would not be affected by that provision. The application of Article 5A to Article 52 was explained as requiring an aggregation of registered and deemed shareholdings to determine a shareholder's total votes.