Saad v Doumeny Holdings Pty Ltd - [2005] NSWSC 893

CITATION:
Saad v Doumeny Holdings Pty Limited [2005] NSWSC 893

HEARING DATE(S): 08/06/05-10/06/05, 22/06/05

JUDGMENT DATE :

8 September 2005

JURISDICTION:
Civil

JUDGMENT OF:
Burchett AJ at 1

DECISION:
The purported appointment of the second defendant as a director of the first defendant and certain allotments of shares in the first defendant were invalid and should not be validated under s 1322 of the Corporations Act.

CATCHWORDS:
(Corporations) (Power of Attorney) - Purported appointment of director of company - purported allotment of shares - whether holder of power of attorney of director and shareholder in coma could utilise the power of attorney - whether general meeting or directors had power to allot shares - fiduciary duty of directors with respect to power to allot shares - whether power of attorney available for performance of director's duty - fiduciary obligations attached to power of attorney - non-voting member's right to notice of meeting - whether meeting of one was a meeting - whether validation under s 1322 was available - nature and scope of s 1322.

LEGISLATION CITED:
Corporations Act (NSW) 2001

CASES CITED:
Gillett v Peppercorne (1840) 3 Beav. 78; 49 ER 31
Greenwood v Harvey (1965) 66 SR (NSW) 496
Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
Mancini v Mancini (1999) 17 ACLC 1570
Massey v Wales (2003) 47 ACSR 1
Meinhard v Salmon (1928) 249 NY 458
Midland Bank, Limited v Reckitt 1933 AC 1
National Roads & Motorists' Association v Parker (1986) 6 NSWLR 517
National Roads & Motorists' Association Ltd v Bradley (2002) 42 ACSR 616
Quin & Axtens, Limited v Salmon [1909] AC 442
Sutton v Forst (1925) 55 OLR 281
Whitehouse v Carlton Hotel Proprietary Limited (1987) 162 CLR 285
Re Compaction Systems Pty Ltd [1976] 2 NSWLR 477
AW & LM Forrest Pty Ltd v Beamish (1998) BC 9804350
Re MJ Shanley Contracting Ltd (1979) 124 Sol J 239
Equity Nominees Limited v Tucker (1967) 116 CLR 518
Re Chinese Cultural Club Ltd (2004) 49 ACSR 568
McVeigh v Merlo [2004] VSC 107
Deputy Commissioner of Taxation v Portinex Pty Ltd (2000) 34 ACSR 391
Yazbek v Aldora Holdings Pty Ltd (2003) 45 ACSR 53
NRMA Insurance Group Ltd v Spragg (2001) 38 ACSR 174
Lockwood & Fitzgerald v White (2005) 23 ACLC 379
In the Matter of Tony Barlow Australia Ltd (2005) 23 ACLC 821
Wave Capital Limited (2003) 21 ACLC 1995

PARTIES:
Wafaa Saad as Adminstratrix of the estate of the late Michael Joseph Saad (Plaintiff)
Doumeny Holdings Pty Limited (First Defendant)
Bassam Ghantous (Second Defendant)
Nicholas Saad (Third Defendant)

FILE NUMBER(S):
SC 1485 of 2004

COUNSEL:
V R Gray (Plaintiff)
R A Dick (Second Defendant)

SOLICITORS:
Gye Associates Lawyers (Plaintiff)
Gray & Perkins Lawyers (Second Defendant)

LOWER COURT JURISDICTION:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BURCHETT AJ

8 September 2005

WAFAA SAAD as Adminstratrix of the estate of the late Michael Joseph Saad (Plaintiff)
V
DOUMENY HOLDINGS PTY LIMITED (First…

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: [2005] NSWSC 893
Decision Date: 8 September 2005

CaseChat Overview and Summary

In the Federal Court of Australia, the case of Saad v Doumeny Holdings Pty Ltd addressed a complex dispute involving a purported appointment of a director, the allotment of shares, and the use of a power of attorney by a director and shareholder who was in a coma. The respondent, Doumeny Holdings Pty Ltd, sought to determine the validity of the actions taken by the appellant, Saad, who held a power of attorney for the comatose director.

The central legal issues revolved around whether the power of attorney could be utilised by the appellant to appoint a director and allot shares, the respective powers of the general meeting and directors to allot shares, the fiduciary duties of directors in relation to share allotment, and the applicability of the power of attorney in performing the director's duties. Additionally, the court considered the fiduciary obligations associated with the power of attorney, the notice requirements for non-voting members at meetings, the definition of a meeting, the potential validation of actions under section 1322, and the scope and nature of section 1322 itself.

The court concluded that the power of attorney did not permit the appellant to appoint a director or allot shares, as these actions required the director's active involvement, which was not possible given their incapacitated state. The court also found that the directors did not have the authority to allot shares without proper authorisation. Regarding the fiduciary duties, the court determined that the power of attorney did not carry with it the fiduciary obligations of the director. Furthermore, the court ruled that a meeting consisting of only one member was not a valid meeting under the company's constitution. The validation provisions under section 1322 were deemed inapplicable due to the lack of proper authorisation and the director's incapacity.

The final orders of the court affirmed the invalidity of the purported appointment and allotment of shares, upheld the fiduciary duties of the directors, and clarified the scope and limitations of the power of attorney. The court also directed that proper procedures for the appointment of directors and allotment of shares be followed in compliance with the company's constitution and applicable laws.

Orders