S and O Nominees Pty Ltd v Taipan Resources Nl - [2000] WASC 270

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: S & O NOMINEES PTY LTD & ORS -v- TAIPAN RESOURCES NL [2000] WASC 270

CORAM: ANDERSON J

HEARD: 20 SEPTEMBER 2000

DELIVERED : 20 SEPTEMBER 2000

FILE NO/S: COR 250 of 2000

BETWEEN: S & O NOMINEES PTY LTD (ACN 000 458 597)
R & B INVESTMENTS PTY LTD (ACN 092 304 786)
BATOKA PTY LTD (ACN 002 904 930)
Plaintiffs
AND
TAIPAN RESOURCES NL (ACN 060 156 452)
Defendant

Catchwords:

Corporations - Company - Merger - Shareholders' meeting - Request of register of members so that shareholders could circularise arguments to other shareholders - Breach of s 173(3) of the Corporations Law - Request not complied with in time - Meeting postponed

Legislation:

Corporations Law, s 173(3), s 771, s 777(4)

Result:

Application allowed

Representation:

Counsel:

Plaintiffs: Mr C L Zelestis QC &
Mr N P Gentilli

Defendant: Mr J Gilmour QC &
Mr M D Howard

Representatives of St Barbara Mines : Ms C J McLure QC &
Mr L D Ayres

Solicitors:

Plaintiffs:        Jackson McDonald
Defendant:        Clayton Utz
Representatives of St Barbara Mines       :        Minter Ellison

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

Nil

Case(s) also cited:

Emlen Pty Ltd & Anor v St Barbara Mines Ltd & Ors (1997) 15 ACLC 1107
Poliwka & Anor v Heven Holdings Pty Ltd & Ors (1992) 6 WAR 505
Re Waldcourt Investment Co Pty Ltd [1988] WAR 1

ANDERSON J: Time is short and much as I regret that I must do so, I must give a decision in the matter now for it to be of any practical use whatever.
It has been a long day. There has been a lot of material placed before me and I have heard extensive and comprehensive argument. What I am about to say will in no way do justice to the quality of the material that has been presented to me, nor to the high quality of the argument that I have heard, but, as I say, the circumstances are such that I must proceed. It is my duty to do so, even although what I propose to say will not satisfy me, at any rate, as to its quality.
This is practically a last‑minute application to stop a shareholders' meeting scheduled for tomorrow to consider a merger proposal. I do not pause to go into the details of the proposal. Really, the merger proposal and its details and the merits of it do not concern me.
The application is brought by three members of the defendant company on three stated grounds.
The first ground is that the plaintiffs, or one of them, or some of them, or someone on behalf of one or other of them, requested the company to provide a copy of the register of members and the stated purpose in seeking to be provided with a copy of the register of members was so that one or other or all of the plaintiffs or a member of the top management of one or other or all of the plaintiffs could circularise members of the defendant company with arguments against the proposal to be voted on at the meeting. It is submitted that the request should have been complied with within 7 days pursuant to the Corporations Law s 173 (3) and it was not. The compliance did not occur, if it has occurred at all, until it was too late for any worthwhile communication to be made to the members on the register.
The second stated ground is that the company has, as I understand it, failed to implement a requirement of the Australian Stock Exchange to give certain sellers of partly‑paid shares the opportunity to be reinstated as the holders of partly‑paid shares. I will leave that for the moment and pass on to the third stated ground of the application, which is, I think I am correct in saying this, that the notice of the meeting of shareholders to be held on 21 September and the information memorandum to shareholders with respect to that meeting and the subject‑matter of it having been sent out to shareholders was not then immediately lodged with the Australian Stock Exchange pursuant to listing requirements.
Going back to the second of these three grounds, which is to the effect that the company has failed to implement a requirement of the Australian Stock Exchange to give those holders of partly‑paid shares who elected to sell them shortly before the scheduled call date the opportunity to be reinstated following a postponement of the call, I am not satisfied that this ground has been made out.
I am not satisfied that there is a relevant failure - that there is currently a relevant contravention of the law. I am not satisfied that the plaintiffs, assuming there to be a relevant failure or relevant contravention of the law, are persons aggrieved by that contravention within the meaning of s 771 when that section is read together with the definition of "person aggrieved" in s 777(4). Whether I am right about that or not, this ground of application, if I can so describe it, has about it an air of total unreality, to my mind.
Whilst I do respect, of course, the decision of the Australian Stock Exchange to require the company to do its best to remedy any disadvantage that partly‑paid shareholders who had sold their shares may conceivably have suffered by a failure to give 10 days' notice (before the call due date) of the intention to postpone the call, whilst I respect the decision of the Australian Stock Exchange to require the company to do what it is that they have required the company to do, I, for myself, cannot think why any former partly‑paid shareholder, having sold his shares, would now want to come back in. It seems to me that there is, at the very least, a high possibility, if not a probability, that once all the problems have been ironed out, this merger will go ahead. On the plaintiffs' own case, should that happen, the partly‑paid shares will be worth much less.
It strikes me that therefore a person in the category of the persons covered by the ASX requirement is a person who would be required to pay over the proceeds of the sale that he had successfully made and he would get in return a share which, according to the plaintiffs, would be worth less in the event that the merger succeeds. So that comes down to this, that the partly‑paid shareholder concerned would be being asked to give over - I do not say "give back" because that is not accurate - but give over, disgorge, pay up everything that he had got for his shares in circumstances in which what he would get in return is something worth less than that, or might be worth less than that.
That is how I see it, and I might be wrong about all that, but it leads me to say this, that on discretionary grounds I would not stop the meeting on this basis, even if I had the power to do so, and I am very doubtful about whether or not my jurisdiction to do so is in fact enlivened on the facts of the case.
I go then to the third matter which is the notice of meeting and the information memorandum having been sent out to shareholders but not then immediately having being lodged with the ASX. As I work the dates, my finding is that the notice should have been lodged by 25 August, whereas at the earliest the material was lodged on about 1 September. I do not say that those dates are entirely correct.
I am assuming without actually making a positive finding about it that the notice and information memorandum went out together, and I think that they were the dates, namely, a 25 August send‑out and a lodgment with the ASX on 1 September but whatever the precise facts may be, I am satisfied that there was a breach of the requirement to lodge material sent out to shareholders immediately with the Australian Stock Exchange. However, I am not satisfied that in the context of this case any person has been or might have been prejudiced by this delay.
It is true, no doubt, to say that the delay in lodging with the ASX meant that for a short time the relevant public or the market was uninformed. However, I am not, on the facts of this case, able to infer from that any sensible prejudice, any degree of prejudice, to any relevant person in this case. Therefore, on discretionary grounds I would not stop the meeting on the ground that there was that delay.
That gets us to the first ground which I described as the first of the three grounds upon which the injunction is based, namely, that the plaintiffs requested the company, or one of them or someone on their behalf requested the company, to provide a copy of the register of members so as to circularise members with the arguments against the proposal.
That request should have been complied with within 7 days. My finding is that a request which satisfies the relevant section was made at latest in writing on 5 September. There may well have been a request earlier than that, perhaps as early as 1 September but in all events, there was certainly a request received by the company by 5 September. That request was not complied with within the stipulated time, that is, the time stipulated in s 173 (3) of the Corporations Law.
There was a notice or a response indicating a preparedness to comply with the request but that response was not sent until 15 September and so far as I can gather from the evidence, it was sent by way of a facsimile transmission from Perth to the representatives of the plaintiffs known to be in Sydney, to an address in Sydney, despatched on a Friday at about 4.15 pm Perth time, so that it could not have been received in Sydney until after ordinary business hours on the Friday.
It is enough to say, I think, that that was too late - well, it was an incomplete response in that it did not in fact transmit a copy of the register of the company but only indicated a willingness to do so and presumably that could not have been achieved on the 15th and perhaps not until the following Monday. This meeting was of course scheduled for 21 September and I find that that response would have been in fact far too late for any worthwhile communication by the plaintiffs to members listed on the register.
So, there is no doubt that the company was in breach of s 173(3) of the Law and, in my opinion, this did result in the plaintiffs losing an opportunity to put to all of the members of the defendant the case which the plaintiffs wished to put against the proposal. I do not say that the Law affords to any member an enforceable right to put a case against any proposal that is to be before a meeting but the provisions of s 173(3) are there for a purpose and there is no doubt that one of the purposes is to enable any person to communicate with members of the company.
The register provides the names and addresses of the members of the company; and the result in fact of the company's failure in this case to comply with the requirements of s 173(3) is that these plaintiffs lost an opportunity to put their case against the proposal to the members. As to the merits of the case against the proposal, I do not and cannot go into it. All I can say is that I cannot say that it is not a bona fide and well‑founded case.
The result will be that the meeting which is to proceed tomorrow will proceed without the plaintiffs having had an opportunity in advance of the meeting to make a statement to members as to why they should not vote for the proposal.
It has been submitted to me by Mr Gilmour that there are provisions in the law affording alternative measures by which a shareholder may communicate with other shareholders. The right to avail oneself of those provisions seems to me to require the support of at least 5 per cent of the voting rights of the company or the support of at least 100 members of the company.
Now, it seems to me that in order to avail oneself of that right, once again one would have to - well, not have to, but one would be assisted by having a compliance with one's request for a copy of the register of members, and that was not forthcoming. It seems to me, therefore, that in the circumstances of this particular case Mr Gilmour's answer is not an answer.
The other matter put forward by Mr Gilmour as going, I think, to the balance of convenience and to prejudice and so on is that there is still to be a meeting. The plaintiffs are entitled to attend and Mr Ryan is entitled on behalf of one or two of the plaintiffs to attend and to put his case to the meeting. Well, that is undoubtedly true, but it seems to me to be not an answer to the propositions that the plaintiffs have lost the opportunity which I have tried to describe.
This is simply because by tomorrow - indeed by now, I would imagine; certainly by tomorrow - all the proxies will have been delivered and one cannot live in the real world without knowing that these meetings mostly go with the proxies, the results of them; but whether that is right or not, the fact is that there are many people who will have decided where to place their proxies and who to give them to and so on already; and that decision was made without the benefit of seeing and digesting and understanding the proposals or the statements which the plaintiffs wish to put against the proposals.
It seems to me, therefore, that - well, there is another matter I should mention, an important matter, going to the balance of convenience, and it is the question of the deadline. By cl 6.5 of the implementation deed - the provisional agreement, if I can perhaps otherwise describe it, between the parties - it is a condition of the merger that the approval of Taipan shareholders - that is, the approval which is to be sought tomorrow at this meeting tomorrow - should be received by the 2 October. Now, of course, if the meeting is postponed it seems out of the question, I would have thought, that it could be reconvened by 2 October.
By cl 6.7 of the provisional agreement or implementation deed, merger deed, unless that deadline is extended by the agreement of St Barbara Mines the merger is off, that essential condition not having been complied with. However, the deadline in cl 6.5 clearly can be extended by the agreement of St Barbara and I see no real risk of that agreement being not forthcoming.
I have received submissions on behalf of St Barbara and Taipan during the course of the day which are based upon what appears to be a firmly held view that this merger is in the best interests of both companies and their shareholders. There is or seems to me to be no magic in the date 2 October except that that is the date that the parties have agreed upon. It is for that reason that I see no real risk that the St Barbara agreement to an extension of the date will not be forthcoming.
Now, it seems to me that on the other side the plaintiffs were entitled to have their request for a copy of the register complied with timeously. It seems to me that the failure to comply with their request - that is, the failure to comply with the requirements of s 173(3) - has resulted in the loss of an opportunity, the value of which I cannot weigh; but it has resulted in the loss of an opportunity to put a case, a bona fide case, against the proposal to members. Not only have the plaintiffs lost the right to put their case to members but, and I do not say this as a major consideration, the members also have lost the benefit of having that case before them. Now, the members are not before me and, as I say, I do not put that into the scales really, but I just make that observation.
I have to consider and I have been concerned about the extreme inconvenience that any postponement of this meeting will cause, not to mention the cost. I have put that in the scales. When all is said and done and when everything is - if I can just say, if I were to take a step back from the case and look at it in the broad, it seems to me that the balance of convenience is in favour of postponing this meeting for the short time necessary to overcome the problem created by the breach of s 173(3).
It may not get down to a question of shortness of time. I do not know. I will hear the parties about that, but I would not wish that the meeting be postponed for any inordinate time or for any time which would not strictly overcome the problem which has been encountered and to which I have referred. I would not countenance an injunction restraining the meeting until trial of this action.
I would have to formulate some form of interim injunction such as that the defendant is restrained from proceeding with its meeting for a period of some specified and quite short period of time. Whether the parties can assist in that regard, I do not know, but to formalise my reasons, can I just say that in my opinion the plaintiffs have made out a case for interim relief on the basis that there was a breach of s 173(3) which has affected the plaintiffs' rights in the way that I have attempted to explain? The balance of convenience favours the plaintiffs in respect to the meeting proceeding tomorrow but that is as far as I can go, I think.