SUPREME COURT OF QUEENSLAND
CITATION:
Saltwater Studios Pty Ltd & ors v Hathaway & Anor [2004] QSC 435
PARTIES:
SALTWATER STUDIOS PTY LTD
(ACN 095 533 369)
(first applicant)and
SALTWATEROZ HOLDINGS PTY LTD
(ACN 072 984 555)
(second applicant)and
PAUL TERENCE HATHAWAY as Trustee of the
PT HATHAWAY FAMILY TRUST
(third applicant)v
MICHAEL JAMES HATHAWAY
(first respondent)and
ANNITA HATHAWAY
(second respondent)FILE NO/S:
SC 7603/04
DIVISION:
Trial Division
PROCEEDING:
Originating Application
ORIGINATING COURT:
Supreme Court
DELIVERED ON:
7 December 2004
DELIVERED AT:
Brisbane
HEARING DATE:
8, 11 October 2004
JUDGE:
Atkinson J
ORDER:
1. Paul Terence Hathaway has leave to bring this proceeding on behalf of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd.
2. Paul Terence Hathaway is a duly appointed director of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd.
3. The appointment of Annita Hathaway as a director of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd is invalid.
4. The appointment of Michael James Hathaway and Annita Hathaway as governing directors of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd is invalid.
5. The appointment of the directors of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd at the Extraordinary General Meeting held on 28 September 2004 is invalid.
6. Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd are directed to file documents to rectify the register of the Australian Securities and Investments Commission to show that:
a) the only two directors are Paul Terence Hathaway and Michael James Hathaway;
b) there are no governing directors; and
c) the registered address of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd is 18 Grandview Lane, Coolum Beach.
CATCHWORDS:
CORPORATIONS – CONSTITUTION AND LEGAL CAPACITY – INTERNAL DISPUTES – derivative action – whether leave to proceed under s 237 Corporations Act 2001 (Cth) should be granted
CORPORATIONS – MANAGEMENT AND ADMINISTRATION – DIRECTORS AND OTHER OFFICERS – APPOINTMENT, REMOVAL, RESIGNATION AND RETIREMENTS – REMOVAL, RESIGNATION OR RETIREMENT – where company had two directors – where criteria to be director of company included employment by company – where one director purported to remove other director by terminating his employment – whether director validly removed
Corporations Act 2001 (Cth), s 140, s 201M, s 236, s 237, s249F, s 249N
AWA Ltd v Daniels (t/as Deloitte Haskins & Sells) (1992) 7 ACSR 759, cited
Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72, cited
Goozee & Anor v Graphic World Group Holdings Pty Ltd & ors [2002] NSWSC 640; 2 ACSR 534, cited
Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1, applied
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549, cited
Isak Constructions (Aust) Pty Ltd v Faress [2003] NSWSC 784; (2003) 47 ACSR 224, cited
Metyor Inc (formerly Talisman Technologies Inc) v Queensland Electronic Switching Pty Ltd [2002] QCA 269, (2002) 42 ACSR 398, cited
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- Case
- [2004] QSC 435
- Decision Date
CaseChat Overview and Summary
The court considered the constitutions of the companies, which stipulated that a director must be employed by the company to hold office. It was argued that Michael, as managing director, had the power to dismiss Paul from his employment, which would automatically terminate his directorship. However, the court found that the constitutions did not confer such power to Michael. Although managing directors have implied authority for day-to-day management, this does not extend to removing the only other director. The court also found that Annita's appointment as a director was invalid because it did not follow the constitution's requirements. The appointments of Michael and Annita as governing directors and the appointments at the Extraordinary General Meeting were also deemed invalid.
The court granted Paul leave to bring the proceeding on behalf of the companies and confirmed that he was a duly appointed director. It declared the appointments of Annita as a director, Michael and Annita as governing directors, and the appointments at the Extraordinary General Meeting as invalid. The court ordered the companies to rectify their registers with the Australian Securities and Investments Commission to reflect the correct directors and registered address.
Orders
Orders of the court
1. Paul Terence Hathaway has leave to bring this proceeding on behalf of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd.
2. Paul Terence Hathaway is a duly appointed director of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd.
3. The appointment of Annita Hathaway as a director of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd is invalid.
4. The appointment of Michael James Hathaway and Annita Hathaway as governing directors of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd is invalid.
5. The appointment of the directors of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd at the Extraordinary General Meeting held on 28 September 2004 is invalid.
6. Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd are directed to file documents to rectify the register of the Australian Securities and Investments Commission to show that:
a) the only two directors are Paul Terence Hathaway and Michael James Hathaway;
b) there are no governing directors; and
c) the registered address of Saltwater Studios Pty Ltd and Saltwateroz Holdings Pty Ltd is 18 Grandview Lane, Coolum Beach.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
On 13 April 2004, Michael Hathaway wrote to Paul Hathaway complaining about Paul’s activities with Saltwater Studios and asserting, “Please cease all involvement in operational matters until your activities past and future have been discussed with this office.” He asked if Paul Hathaway had noted in his diary the board meeting to be held in the solicitors’ office on 21 April 2004. Then on 19 April 2004, Michael Hathaway first warned Paul that his employment was at risk and then purported to terminate Paul Hathaway’s employment with Saltwater Studios. Michael Hathaway also wrote to Paul Hathaway on Saltwateroz letterhead informing Paul Hathaway that he had ceased to be a director of Saltwateroz as his employment with Saltwater Studios had been terminated. Yet, on the same date, that is 19 April 2004, Michael Hathaway sent an agenda to Paul Hathaway on Saltwateroz letterhead for the board meeting to be held on 21 April. Apart from notifying the time, date and place for the meeting, it said: The method of appointment and removal of directors is set out in clauses 22 and 23 of the constitutions of the companies. Clause 22.1 provides that the number of directors would not be fewer than two nor more than 25, and that the company was able to appoint directors and increase or reduce the permissible number of directors by resolution passed in general meeting. Clause 22.3(a) sets out the way in which directors can be removed and replaced. It provides: Clause 22.10(a) provides that the office of a director will be vacated in various specified circumstances. Clause 22.10(b) is the relevant clause in these proceedings. It provides that: It was argued on behalf of the respondents that Michael Hathaway had power, as managing director, to dismiss the only other director, Paul Hathaway, from his employment with the companies which would lead to the automatic termination of his directorship. It is certainly true that s 198C of the Corporations Act provides that the directors may confer on a managing director any of the powers that the directors can exercise. It is apparent, however, that no such conferral is found in the constitutions of the companies which make no reference to the position of “managing director”. Clause 23.1 in the constitutions provides that the business of the companies is managed “by the Directors”. However, the managing director has implied authority to do all such things as fall within the usual scope of that office.[6] This includes the day to day management of the companies and may include personnel decisions.[7] They include the “normal day-to-day running of the office” referred to in Michael Hathaway’s notes of a meeting of himself, Paul Hathaway, Chris Davies and Paul Barnetby on 25 November 2003. But his or her powers are not unlimited. In Re Qintex Ltd(No 2),[8] for example, it was held that the office of managing director did not carry with it the authority to make critical decisions following the presentation of a petition to wind up the company, such as deciding to oppose the application and appointing legal representatives to carry out those instructions. The power of a managing director does not impliedly include the capacity to remove the only other director of the companies from his employment and thus remove him from being a director. Nor was such a power explicitly conferred on him in this case.[6]Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72.[7]AWA Ltd v Daniels (t/as Deloitte Haskins & Sells) (1992) 7 ACSR 759 at 866-867.[8](1990) 2 ACSR 479