Vaspip 2 Pty Ltd v Thorn Group Ltd
[2020] VSC 700
•14 October 2020
IN THE SUPREME COURT OF VICTORIA
Not Restricted
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2020 03719
IN THE MATTER OF THORN GROUP LIMITED (ACN 072 507 147)
VASPIP 2 PTY LTD
Plaintiff
v
THORN GROUP LIMITED (ACN 072 507 147) and others
Defendants
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JUDGE:
RIORDAN J
WHERE HELD:
Melbourne
DATE OF HEARING:
30 September and 7 October 2020
DATE OF JUDGMENT:
14 October 2020
CASE MAY BE CITED AS:
Vaspip 2 Pty Ltd v Thorn Group Ltd
MEDIUM NEUTRAL CITATION:
[2020] VSC 700
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CORPORATIONS – Requisition by members for a general meeting under s 249D of the Corporations Act 2001 (Cth) (‘the Act’) – Requisition compiled by attaching separate execution pages to the requisition – Whether requisition valid – Principles to be applied in determining validity considered – Requisition not valid.
CORPORATIONS – Whether deficiency in request under s 249D of the Act was validated under s 1322(2) – Whether deficiency in request was a procedural irregularity within the meaning of s 1322(1) – Whether the procedural irregularity has caused or may cause substantial injustice.
CORPORATIONS – Whether Court could validate deficiency in request under s 1322(4) of the Act – Whether deficiency was a contravention within the meaning of s 1322(4) – Whether relief must be refused under s 1322(6).
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APPEARANCES:
Counsel
Solicitors
For the Plaintiff
Mr S K Wilson QC with
Mr R E T Wodak
Axial Advisory
For the First Defendant
Mr B Coles QC with
Mr D Meyerowitz-Katz
Marshalls+Dent+Wilmoth
HIS HONOUR:
1 By originating process filed 23 September 2020, the plaintiff (‘Vaspip’) seeks the following relief against the first defendant (‘TGA’):
1. An order under sections 1322(4) and 1324 of the Corporations Act that within 7 days of this order TGA call a general meeting of its members (the Meeting) at which the resolutions set out in the 249D Request are proposed as ordinary resolutions.
2. An order under section 1324 of the Corporations Act that TGA distribute, together with the notice of the Meeting, the statement attached to the 249P Request.
3. An order under section 1324 of the Corporations Act that the second to fifth defendants do all things necessary to cause TGA to comply with paragraphs 1 and 2 of this order.
4. A declaration pursuant to section 1322(4) and pursuant to the Court's inherent jurisdiction that the 249D Request is not invalid by reason of any contravention of the requirements of sections 203D(2) of the Corporations Act.
5. An order that the first defendant pay the plaintiff’s costs of the proceedings.
2 By submissions filed 29 September 2020, Vaspip further seeks relief from any alleged invalidity in the s 249D request under sub-ss 1322(2) and (4) of the Corporations Act 2001 (Cth) (‘the Act’).
Background
3 TGA is a company listed on the official list of the Australian Securities Exchange operated by ASX Ltd.
4 Vaspip is a shareholder in TGA, and an associate (within the meaning of Chapter 19.12 of the ASX Listing Rules) of other shareholders, being:
(a) Narlack Pty Ltd (ACN 006 837 065) (‘Narlack’);
(b) Ace Property Holdings Pty Ltd (ACN 076 383 410) (‘Ace Property Holdings’);
(c) Vanward Investments Limited, a Canadian company (‘Vanward Investments’);
(d) Warwick Sauer (‘Mr Sauer’); and
(e) Permanent Capital Limited, a New Zealand company (‘Permanent Capital’),
(together with Vaspip, ‘the Requisitioning Shareholders’).
5 The Requisitioning Shareholders together hold 16,158,193 shares in TGA and have a voting power of 5.005% of the votes that may be cast at a general meeting of TGA.
6 By email of 3 August 2020 to TGA, Mr Piperoglou of Vaspip attached ‘an official letter for the board of directors’ requesting a complete copy of TGA’s ‘current share register’. The letter stated:
The reason for this request is so that we can contact existing shareholders to discuss the possibility of gathering enough shareholder support for a requisition of a general meeting. Over the years TGA has unfortunately destroyed shareholder value. The aim of calling a general meeting would be to remove the majority of directors and to simply wind the business up and return all surplus capital to shareholders.
7 On 6 August 2020, TGA arranged for Computershare to provide a copy of the register of members to Mr Piperoglou.
8 By emails of 26 August 2020 to each of Mr Haddad of Permanent Capital (as agent for Vanward Investments), Mr Homewood and Mr Sauer, Mr Holzer (Vaspip’s solicitor) stated:
As you all know, we have now assembled a 6 member group of Thorn Group Limited (TGA) shareholders. That shareholder group holds more than 5% of the shares in TGA and of the votes that may be cast at a general meeting of TGA shareholders.
Shareholders or shareholder groups that hold at least 5% of the votes in a company can requisition a meeting of that company’s shareholders under section 249D of the Corporations Act 2001 (Cth) (Act). The benefit of this section 249D mechanism is that TGA's directors must call a general meeting of TGA shareholders within 21 days after a section 249D requisition is given to TGA and that meeting must be held within two months after the date that the section 249D requisition is given to TGA.
The purpose of that general meeting will be to consider resolutions to remove three of the four directors of TGA and to appoint Vas and myself in their place. It is not proposed to remove Paul Oneile as a director of TGA.
To achieve this, we attach the following documents:
1. cover letter to the TGA board explaining the actions proposed by our shareholder group;
2. requisition for a general meeting of shareholders of TGA pursuant to section 249D of the Act;
3. a notice, pursuant to section 203D of the Act, of intention to move resolutions at a general meeting to remove certain directors of TGA. This notice is a formal requirement under the Act that requires shareholders who want to remove a director at a general meeting, to first give notice of their intention to do so at least two months before the meeting is held;
4. a request that TGA provide to its members a copy of a statement we have prepared containing important matters that should be considered at the general meeting. This request will be made pursuant to section 249P of the Act which permits the distribution of statements, at TGA’s expense, in relation to a proposed resolution or matters that may be properly considered at a general meeting; and
5. the Members’ Statement.
Please consider each of the attached documents and if you are happy with them, please, in the next 24 hours:
• execute documents 2, 3 and 4 on the page in which your name/company appears;
• send me a scan of the full document with you executed signature page; and
• post the original to me to (PO Box 3090 Ripponlea Victoria 3185).
Please feel free to contact either Vas or myself with any queries you may have regarding these documents.
9 As referred to in the email, the draft cover letter to the directors of TGA relevantly enclosed the following documents:
(a) a requisition for a general meeting of the shareholders of TGA, given by the Requisitioning Shareholders pursuant to s 249D of the Act (‘the draft Requisition’);
(b) a notice of intention to move resolutions for the removal of directors at the requisitioned general meeting pursuant to s 203D of the Act (‘the draft 203D Notice’); and
(c) a request that TGA distribute a members’ statement to its members in accordance with s 249P of the Act, together with the members’ statement (‘the draft 249P Notice’).
10 With respect to the draft Requisition:
(a) the page numbered 1 requested that the directors of TGA call a general meeting and proposed resolutions for the appointment and removal of directors as follows:
RESOLUTION 1 - Mr Allan Clive Sullivan be REMOVED as a director of Thorn Group Limited as of the close of the meeting
RESOLUTION 2 - Mr Warren John Mcleland be REMOVED as a director of Thorn Group Limited as of the close of the meeting
RESOLUTION 3 - Mr Kent Mathew Bird be REMOVED as a director of Thorn Group Limited as of the close of the meeting
RESOLUTION 4 - That any director of Thorn Group Limited appointed during the period commencing on [insert the date of this notice} and ending on the date of this general meeting, be REMOVED as of the close of the meeting
RESOLUTION 5 - Mr Vasilios Piperoglou be APPOINTED as a director of Thorn Group Limited as of the close of the meeting
RESOLUTION 6 - Mr Ronald Holzer be APPOINTED as a director of Thorn Group Limited as of the close of the meeting
(b) the page numbered 2 provided for execution by Vaspip, Narlack and Ace Property Holdings; and
(c) the page numbered 3 provided for execution by Vanward Investments, Mr Sauer and Permanent Capital.
11 With respect to the draft 203D Notice:
(a) the page numbered 1 notified TGA of the intention of the Requisitioning Shareholders to propose the resolutions for the removal of directors, as referred to in the draft Requisition; and
(b) the pages numbered 2 and 3 were execution pages identical to the pages numbered 2 and 3 in the draft Requisition.
12 With respect to the draft 249P Notice:
(a) the page numbered 1 requested that TGA give all members a copy of the attached statement, and provided for execution by Vaspip and Narlack;
(b) the page numbered 2 provided for execution by Ace Property Holdings, Vanward Investments and Mr Sauer;
(c) the page numbered 3 provided for execution by Permanent Capital; and
(d) a four page statement to members was attached.
13 By email of 26 August 2020 at 1:53 pm to Mr Holzer, Mr Piperoglou attached entire copies of the draft Requisition, the draft 203D Notice and the draft 249P Notice, each executed by Vaspip and Narlack.
14 By email of 26 August 2020 at 7:45 pm to Mr Sauer (copied to Mr Piperoglou), Mr Holzer attached ‘slightly amended’ versions of the draft documents which had been sent at 1:21 pm (referred to in paragraphs 8 to 12 above). He requested that those documents be executed and stated:
Note that we reserve the right to make minor non-material changes to the documents after they have been executed. By providing us with executed documents, you are deemed to consent to that. If you have any concerns with that, please let me know.
15 Relevantly, the amended documents included an amended version of the draft 249P Notice (‘the 249P Notice’) in respect of which:
(a) the page numbered 1 requested that TGA give all members a copy of the attached statement (without any provision for execution); and
(b) the pages numbered 2 and 3 were execution pages identical to the pages numbered 2 and 3 in the draft Requisition.
16 The amended documents also included amended versions of the draft Requisition (‘the Requisition’) and the draft 203D Notice (‘the 203D Notice’). The amended documents were substantially in the same form as the original drafts, but simply rearranged the numbering and order of the proposed resolutions.
17 By email of 27 August 2020 at 7:05 am to Mr Holzer (copied to Mr Piperoglou), Mr Haddad attached entire copies of the amended documents, each executed by Vanward Investments.
18 By email of 27 August 2020 at 7:18 am to Mr Holzer (copied to Mr Piperoglou), Mr Haddad attached three photographs of single execution pages, all numbered 3, and each executed by Permanent Capital and stated:
I have printed the signature pages for the three docs (the three docs are attached to the email). Each signature page relates to one of the three docs. The signature pages for all three are identical, but I have printed and signed them separately.
19 By email of 27 August 2020 at 11:31 am to Mr Sauer (copied to Mr Piperoglou), Mr Holzer stated:
We have yet to receive signed copies of the attached documents from you.
If it would assist, we are happy for you to provide us with photos of the signed signature pages. With your permission and authorisation, we will then insert those signature pages in the relevant documents.
Alternatively, if you send us a photo of your signature, we could (with your approval) place it on the documents.
20 By email of 27 August 2020 at 11:40 am to Mr Holzer (copied to Mr Piperoglou), Mr Sauer attached three photographs of single execution pages, all numbered 3, and each executed by him and a witness.
21 By email of 27 August 2020 at 11:41 am to Mr Holzer, Mr Homewood of Ace Property Holdings attached a photograph of his signature.
22 By email of 28 August 2020 at 8:16 am to Mr Holzer, Mr Piperoglou attached an entire copy of the 249P Notice with the page numbered 2 executed by Vaspip and Narlack.
23 By email of 28 August 2020 at 12:05 pm to Mr Piperoglou, Mr Holzer stated:
Attached please find signed copies of the following documents that we intend to post and email to TGA at 2:00pm today:
• notice of intention to move resolutions to remove directors under section 203D;
• cover letter to the section 203D notice. This cover letter informs TGA that we will serve a request to call a general meeting under section 249D next week. In that meeting we will move resolutions to remove three TGA directors and to appoint Vas and myself as directors; and
• form 603 notifying TGA that our shareholder group is a substantial holder in TGA.
Because of a technical legal matter, we are serving the attached documents on TGA in advance of the section 249D and section 249P notices, which we will serve on Monday.
Please let me know urgently if you have any comments in respect of this email or the attachments.
24 By email of 28 August at 12:30 pm to Mr Holzer, Mr Homewood attached two single execution pages, both numbered 2, signed by him for Ace Property Holdings and stated: ‘Signed pages and all good with me’.
25 By email of 28 August 2020 at 2:18 pm to Ms Rose, TGA’s general counsel (copied to Mr Piperoglou), Mr Holzer attached the covering letter and 203D Notice.
26 On the same day, a letter attaching the 203D Notice was sent by ordinary post to TGA. The notice consisted of the page numbered 1 (being the page with the notice and proposed resolutions) to which was stapled five execution pages, being two pages numbered 2 and three pages numbered 3. The six pages comprising the 203D Notice are described as follows:
(a) The first page notified TGA that it was proposed to move the following resolutions:
RESOLUTION 3 – That Mr Allan Clive Sullivan be REMOVED as a director of Thorn Group Limited as of the close of the meeting
RESOLUTION 4 – That Mr Warren John McLeland be REMOVED as a director of Thorn Group Limited as of the close of the meeting
RESOLUTION 5 - That Mr Kent Mathew Bird be REMOVED as a director of Thorn Group Limited as of the close of the meeting
RESOLUTION 6 - That any director of Thorn Group Limited appointed during the period commencing on 28 August 2020 and ending on the date of this meeting, be REMOVED as of the close of the meeting
(b) The second page was the first page numbered 2 and was executed by Vaspip and Narlack.
(c) The third page was the second page numbered 2 and the photographed signature of Mr Homewood was applied as execution by Ace Property Holdings.
(d) The fourth page was the first page numbered 3 and was executed by Vanward Investments.
(d) The fifth page was the second page numbered 3 and consisted of one of the photographs of page 3 with signatures by Mr Sauer and a witness.
(e) The sixth page was the third page numbered 3 and consisted of a photograph of page 3 executed by Permanent Capital.
27 By letter dated 31 August 2020 to the directors of TGA, Mr Piperoglou enclosed the Requisition (a copy of which is Appendix A to these reasons), the 249P Notice (a copy of which, excluding the members’ statement, is Appendix B to these reasons) and signed notices of consent to act as directors.
28 With respect to the Requisition, it consisted of six pages stapled together as follows:
(a) The first page requested that the directors of TGA call a general meeting, and gave notice of the six resolutions to be proposed at the meeting.
(b) The second to sixth pages were the execution pages completed in a similar manner to the 203D Notice described in paragraph 26 above.
29 With respect to the 249P Notice, it consisted of 10 pages stapled together as follows:
(a) The first page requested that TGA give all members a copy of the attached statement.
(b) The second to sixth pages were the execution pages completed in a similar manner to the 203D Notice described in paragraph 26 above.
(c) The seventh to tenth pages were numbered 4 to 7 and consisted of the members’ statement.
Relevant statutory provisions
30 The notices were issued under the following provisions of the Act.
31 Section 203D provides a mechanism for removing directors of a public company by resolution as follows:
Resolution for removal of director
(1) A public company may by resolution remove a director from office despite anything in:
(a) the company’s constitution (if any); or
(b) an agreement between the company and the director; or
(c) an agreement between any or all members of the company and the director.
If the director was appointed to represent the interests of particular shareholders or debenture holders, the resolution to remove the director does not take effect until a replacement to represent their interests has been appointed.
Note: See sections 249C to 249G for the rules on who may call meetings, sections 249H to 249M on how to call meetings and sections 249N to 249Q for rules on members’ resolutions.
Notice of intention to move resolution for removal of director
(2) Notice of intention to move the resolution must be given to the company at least 2 months before the meeting is to be held. However, if the company calls a meeting after the notice of intention is given under this subsection, the meeting may pass the resolution even though the meeting is held less than 2 months after the notice of intention is given.
…
32 Section 249D provides a mechanism for shareholders with at least 5% voting power to force directors to call a general meeting of the company as follows:
(1) The directors of a company must call and arrange to hold a general meeting on the request of members with at least 5% of the votes that may be cast at the general meeting.
(2) The request must:
(a) be in writing; and
(b) state any resolution to be proposed at the meeting; and
(c) be signed by the members making the request; and
(d) be given to the company.
(3) Separate copies of a document setting out the request may be used for signing by members if the wording of the request is identical in each copy.
(4) The percentage of votes that members have is to be worked out as at the midnight before the request is given to the company.
…
33 Section 249P allows shareholders with at least 5% voting power to require the company to distribute a statement ahead of a general meeting as follows:
(1) Members may request a company to give to all its members a statement provided by the members making the request about:
(a) a resolution that is proposed to be moved at a general meeting; or
(b) any other matter that may be properly considered at a general meeting.
(2) The request must be made by:
(a) members with at least 5% of the votes that may be cast on the resolution; or
(b) at least 100 members who are entitled to vote at the meeting.
…
Issues
34 The issues I am required to determine are the answers to the following questions:
(1) Was the Requisition served on TGA ‘signed by the members making the request’ in accordance with s 249D(2)(c) of the Act?
(2) If no to question 1, is Vaspip entitled to relief under sub-ss 1322(2) or (4) of the Act?
35 The validity of the 249P Notice will follow from the answers to the above questions.
Was the Requisition served on TGA ‘signed by the members making the request’ in accordance with s 249D(2)(c) of the Act?
Relevant authorities
36 The following two authorities are instructive as to the approach to be adopted by the Court in determining whether a request under s 249D of the Act complies with sub-s (2)(c).
37 In Gratton v Carlton Football Club Ltd, Mandie J considered an application under s 249D for an order that the directors of Carlton Football Club Ltd (‘Carlton’) convene a general meeting following a requisition of members. The relevant facts were as follows:
(a) Carlton was served with a letter which stated that there was appended ‘a petition, signed by the required number of registered members of [Carlton], calling for a general meeting of the Club to vote on the (3) three resolutions which are included in the petition’.
(b) With the letter were 33 separate sheets of paper ‘in a bundle held together only by a bulldog clip’. Twenty-three of those sheets bore identical printed text and there was a table of handwritten names, addresses, corresponding signatures and membership numbers under the text. Each of the remaining 10 sheets bore no printed text, but only a table of handwritten names, addresses, signatures and membership numbers.
(c) The sheets which bore the printed text were each relevantly headed ‘Notice for request for general meeting and notice of resolutions’ and called for a general meeting to consider a motion of no confidence in the board of directors.
(d) The 23 sheets of paper contained an insufficient number of members’ signatures, without the additional 10 sheets.
38 Mandie J rejected the application and accepted the submission that the 10 sheets of paper not bearing the printed text could not be counted as part of the request, for the following reasons:
(a) He rejected extrinsic evidence of the fact that persons who signed the 10 pages were acquainted with the text before signing, stating:
The question whether a request satisfying the requirements of s 249D has been made must be answered by having regard to the nature of the physical document or documents given to the company and not with regard to extrinsic evidence or assertions as to the circumstances in which various sheets of paper, said to constitute the request, were signed.
(b) He found that s 249D of the Act required ‘either one document containing both the request and the requisite number of signatures, or a series of signed documents each containing the same request’. He further stated:
Nor is it possible to treat each of the individual sheets as forming part of one document (or series of documents) because none of the offending sheets are securely fixed or fastened to any sheet bearing the printed text (assuming, without deciding, that this would have been sufficient to meet the requirements of the section).
…
I would add that the defendants’ point is no mere technicality because the Directors cannot objectively determine, solely from an inspection of the sheets of paper submitted to the company, whether the signatures on the 10 sheets bearing no printed text relate to, or were intended to relate to, any particular request.
39 In Khan v Khan; Re Islamic Association Western Suburbs Sydney Inc, Black J considered the validity of a requisition under cl 26 of the constitution of Islamic Association Western Suburbs Inc (‘Association’), which provided that a request of members for a special general meeting:
(a) shall state the purpose or purposes of the meeting,
(b) be signed by the members making the requisition,
(c) shall be lodged with [the] secretary of the executive council and,
(d) may consist of several documents in a similar form, each signed by one or more of the members making the requisition.
40 The relevant special general meeting was purportedly requisitioned by the following two documents:
(a) A requisition dated 6 January 2014, which:
(i) stated:
Take notice that we the undersigned Foundation Members (more than five per cent of [the] Association) in compliance with the provisions stipulated in clause 26 of the Constitution of the Association, hereby ask you to call a Special General Meeting of All the members of the Association … ;
(ii) set out several matters to be decided at the special general meeting, including the dissolution of the current executive council and the appointment of an interim committee; and
(iii) was signed in the handwriting of a Mr Bajwa ‘for and on behalf of’ 20 named persons who were identified as members of the Association, and referred to ‘Annex B’ which was the petition referred to below.
(b) A petition consisting of several pages with many signatories, which stated:
We the members of the [Association]
This Petition and the Requisition are in pursuant (in compliance) [sic] with the provisions of Clause 26 of the Constitution of the [Association]. We immediately request you to call A SPECIAL GENERAL MEETING (SGM) OF THE [ASSOCIATION].
…
We are seriously concenred [sic] that there is a lack of transparency of the [Association’s] affairs and financial transparency and accountability. We need open forum. The system needs REFORM the sooner the better in the administration and management of the Association. Time has come for a CHANGE, therefore we CALL A SGM – Special General Meeting or the Executive Committee [sic] should resign for with [sic].
41 Black J found that the requisition was invalid because the signature of one member on behalf of 20 printed names did not satisfy the requirement that the requisition ‘be signed by the members making the requisition’. Black J observed:
It can scarcely be contemplated that, if a requisition contained the printed names of 50, 100 or 500 members of a company or association, and required the calling of a meeting within a relatively short time period, a company or association should have to make individual inquiries to determine whether each of those persons had authorised the application of his or her name to the document, in printed form, by an agent. … By contrast, the Court will ordinarily not have regard to extrinsic evidence to determine the validity of a requisition: Re Carlton Football Club Ltd; Gratton v Carlton Football Club Ltd [2004] VSC 379; (2004) 51 ACSR 29 at [10].
…
[T]he existence of a handwritten signature will be important in allowing a company or incorporated association to verify that the requisitionist in fact supports the convening of the meeting, which would otherwise not be apparent from a printed list of names, where the company or incorporated association would ordinarily not have ready access to any authority given by the persons identified by printed names for the application of their names. The approach for which [counsel for the defendants] contends, in respect of printed signatures on a requisition, has the difficulty that it would require the Association in the first instance, and ultimately the Court, to determine the validity of the entity that received a requisition, if the relevant authorities were not provided to that entity at the same time as the requisition, by reference to extrinsic evidence or assertions as to the circumstances in which those authorities were given. The use of extrinsic evidence for that purpose would be contrary to the approach of determining that matter on the face of the relevant requisition that was preferred in Re Carlton Football Club Ltd; Gratton v Carlton Football Club Ltd above.
42 Accordingly, he found that the requisition was signed by less than 5% of the Association’s members because it was only signed by Mr Bajwa.
43 Black J also found that:
(a) the petition, when read as separate document, was an invalid requisition because it did not ‘state the purpose or purposes of the meeting’; and
(b) the requisition could not be treated as the same document or as in a similar form. Accordingly the petition’s failure to state the purpose of the meeting could not be remedied by reference to the purposes stated in the requisition.
44 However, Black J considered that the ‘several deficiencies’ in the petition and the requisition, including that:
(a) the requisition and the petition were separate instruments that did not take effect together as a requisition; and
(b) the signatures to the petition did not take effect as signatures of the requisition,
were procedural irregularities within the meaning of s 1322(1) of the Act.
45 He found that these matters did not, individually or collectively, cause substantial injustice in circumstances where:
(a) a draft of the resolution was shown to persons signing the petition;
(b) there were cross-references between the two documents; and
(c) there was clear evidence that the signatories to the petition also supported the requisition and the calling of a special general meeting,
and would therefore be validated, without an order of the Court, under s 1322(2) of the Act.
46 He stated:
It was plain enough that the persons who had signed the Petition intended to indicate their assent to the Requisition, from its terms, and the Plaintiffs had the ability to confirm that matter by reviewing the terms of and the handwritten signatures to the Petition.
47 Similarly, he found that the fact that the requisition and the petition did not comprise documents in a similar form, within the meaning of cl 26(d) of the Association’s constitution, was a procedural irregularity that did not cause substantial injustice, and would be validated under s 1322(2).
48 However, he opined that substantial injustice within the meaning of s 1322(2) may have been established if:
(a) the petition was read as a separate document, because it did not state the purpose of the meeting; or
(b) the requisition and petition, taken together or separately, had not been signed by at least 5% of the members.
49 Ultimately, Black J refused relief under s 1322(2) because what had been done at the requisitioned meeting departed substantively from what had been identified as the purposes in both the requisition and the petition, which he concluded resulted in injustice.
50 On the basis of the above authorities, I consider (and counsel for each party accepted) that:
(a) the Court should not have regard to extrinsic evidence about the execution of the document;
(b) the question of whether a requisition satisfies the requirement under s 249D(2)(c) must be answered by reference to the physical document given to the company; and
(c) a requisition under s 249D would be invalid unless persons in the position of the company directors would be reasonably satisfied that, on its face, the requisition was signed by the members making the request.
Vaspip’s submissions
51 Vaspip submitted that a request under s 249D, compiled by stapling execution pages provided by shareholders, was valid for the following reasons:
(a) There was no other realistic way of compiling such a document with shareholders being based around the world and therefore the legislature must have contemplated that a requisition could be signed in this manner.
(b) The Act does not mandate that the signing comply with any particular standard of formality.
(c) Section 249D(3) is facilitative and permissive and does not, expressly or by implication, provide that other forms of documents are unacceptable.
52 Vaspip further submitted that persons in the position of TGA’s directors would have been reasonably satisfied that, on its face, the Requisition was signed by the members making the request, for the following reasons:
(a) The document was presented as a single stapled document.
(b) The execution pages are numbered so that the reader could see that the document as circulated consisted of three pages and that the execution pages numbered 2 and 3 had been separately executed.
53 It was further submitted that this case was distinguishable from Carlton Football Club, on the following grounds:
(a) The pages constituting the Requisition were stapled, rather than being held together by a bulldog clip. Mandie J specifically did not decide whether a stapled document would have been sufficient to satisfy the requirement of sub-s 2(c).
(b) The numbering of the pages indicated that it emanated from copies of the same 3 page document.
(c) The documents were given to TGA with a covering letter from a solicitor.
TGA’s submissions
54 TGA submitted that compiling a request by stapling execution pages provided by shareholders did not comply with s 249D(2)(c) because the Act provided for two methods of compliance, being either:
(a) the signing of a single document; or
(b) the provision of separate copies of a document setting out the request, where the wording of the request is identical in each copy.
55 TGA further submitted that a person in the position of TGA’s directors would not have been reasonably satisfied that the Requisition was, on its face, signed by the requisite number of members because the fact that the document was a compilation of pages from various separate documents, rather than being a single document, was apparent from the face of the document.
Conclusion
56 There is no question that the Requisition did not comply with s 249D(3). Accordingly, the issue that arises is whether, under s 249D(2)(c), the document containing the request given to the company:
(a) must be signed by each of the relevant members; or
(b) may be signed by members each signing separate documents or execution pages, which can then be compiled into a single stapled document.
57 In my opinion, the former construction is to be preferred for the following reasons:
(a) the former construction is more consistent with the text of the Act, which requires that the request given to the company is ‘signed by the members making the request’. On the latter construction, members may sign a request (possibly in identical form) but it is not physically the request that is given to the company.
(b) In sub-s (3), the legislature made provision for how a request under s 249D could be signed by persons in different places and separate copies given to the company. Such a provision would hardly have been necessary if the legislature had intended that a request could be compiled in accordance with the latter construction.
(c) If a shareholder wished to require the company to call and arrange a general meeting, strict compliance with s 249D is required for the same reasons that apply in the calling of a meeting under s 249F.
(d) As was observed by Black J in Khan and Mandie J in Carlton Football Club, the more liberal latter construction does not allow company directors to objectively determine, from an inspection of the document, whether the subsequently compiled signing pages were attached to a request in identical form at the time of signature.
58 On the premise that a request compiled in accordance with the latter construction is not valid, I do not consider that a person in the position of the company directors could have reasonably been satisfied that, on its face, the request was signed by members with at least 5% of the votes. A person in the position of the company directors would, looking at the face of the document, infer that the signed pages had been separately signed and subsequently compiled, as in fact it was.
59 The fact that a person who authorises a signing page to be attached to a contract may be bound by a contract is not to the point of whether a document signed in such a manner complies with s 249D any more than is the ‘authenticated signature fiction’. I consider that whether the signatory might be bound because of ‘[a]ssumptions people dealing with companies are entitled to make’ under Part 2B.2 of the Act, or application of the indoor management rule, does not determine whether a request complied with the requirements of s 249D(2).
If no to question 1, is Vaspip entitled to relief under sub-ss 1322(2) or (4) of the Act?
60 Vaspip sought relief from any non-compliance under sub-ss 1322(2) and (4), which relevantly provide as follows:
1322 Irregularities
(1) In this section, unless the contrary intention appears:
(a) a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and
(b) a reference to a procedural irregularity includes a reference to:
(i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme; and
(ii) a defect, irregularity or deficiency of notice or time.
(2) A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.
…
(4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;
(b) an order directing the rectification of any register kept by ASIC under this Act;
(c) an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a);
(d) an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding;
and may make such consequential or ancillary orders as the Court thinks fit.
…
(6) The Court must not make an order under this section unless it is satisfied:
(a) in the case of an order referred to in paragraph (4)(a):
(i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;
(ii) that the person or persons concerned in or party to the contravention or failure acted honestly; or
(iii) that it is just and equitable that the order be made; and
(b) in the case of an order referred to in paragraph (4)(c)—that the person subject to the civil liability concerned acted honestly; and
(c) in every case—that no substantial injustice has been or is likely to be caused to any person.
Vaspip’s submissions
61 Vaspip submitted that the Requisition is validated by s 1322(2) of the Act because:
(a) the giving of the notice under s 249D is a proceeding within the meaning of the section;
(b) any invalidity in the giving of the notice was a procedural irregularity; and
(c) the irregularity has not caused any substantial injustice, much less one that cannot be remedied by any order of the Court.
62 Further, Vaspip submitted that, if necessary, s 1322(4) would apply because:
(a) the irregularity was of a procedural nature;
(b) the Requisitioning Shareholders acted honestly; and
(c) it is just and equitable that an order be made.
63 It was further submitted that the Court should be satisfied that:
(a) the Requisitioning Shareholders all authorised the request substantially in the form given to TGA and any changes were immaterial; and
(b) the method adopted by the Requisitioning Shareholders was unsurprising in the ‘context of both the tyranny of distance and the current environment having regard to COVID-19’.
TGA’s submissions
64 TGA submitted that s 1322(2) was not applicable for the following reasons:
(a) The giving of the Requisition was not a ‘proceeding under this Act’. If a meeting is purportedly called under s 249D in response to an invalid notice, s 1322(2) may validate the meeting, but not the notice.
(b) The deficiencies in the Requisition did not give rise to a ‘procedural irregularity’. The composite document compiled from various other documents did not merely constitute a departure from the prescribed manner in which the thing is to be done. Rather, it changed the substance of the thing to be done.
65 Further, it was submitted that the deficiencies could not be cured under s 1322(4) for the following reasons:
(a) The validating power under the subsection can only relate to things ‘purporting’ to have been done. Vaspip did not ‘purport’ to provide the request to TGA, it in fact provided it.
(b) The orders that Vaspip seeks are not orders to ‘give validity to something which at the time it was done was invalid’, but to give something a character which it does not have, being to cause requests that had no legal effect to have a legal effect.
(c) The subsection only validates a ‘contravention’ of a provision of the Act (or of the company’s constitution). The failure to comply with s 249D did not constitute a contravention of the Act.
66 It was further submitted that if s 1322(4)(a) is capable of validating the request, the Court should decline to make the order in the exercise of its discretion, for the following reasons:
(a) The making of an invalid request can be easily cured by subsequently making a valid request.
(b) The members’ statement accompanying the 249P Notice described Mr Holzer as ‘a corporate and commercial lawyer and an accredited specialist in business law’. As such, the Requisitioning Shareholders were sophisticated parties who ought to have known better and the Court should not grant an indulgence.
(c) If the request was validated and TGA was required to call a general meeting it would create substantial costs and difficulty for TGA.
Conclusion
Was the giving of the Requisition a proceeding under the Act?
67 Section 1322(1)(a) specifically provides that a ‘proceeding’ is not limited to a legal proceeding. It is well established that a proceeding extends to every type of procedure which might be undertaken by a company or in relation to a company’s affairs, including a procedure the Act required to be taken if a company or its members wish to successfully achieve certain legal consequences.
68 In this case, the Requisitioning Shareholders wished to achieve the legal consequence of requiring TGA’s directors to call a general meeting. To do so, they were required by the Act to adopt the statutory procedure for giving such a request, which they purported to do. Accordingly, I consider that the purported giving of the Requisition under s 249D was a proceeding under the Act.
Was the defect in the Requisition a procedural irregularity?
69 In Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd, Palmer J formulated the following propositions for the purposes of determining whether an irregularity was procedural or substantive under s 1322 of the Act:
• what is a ‘procedural irregularity’ will be ascertained by first determining what is ‘the thing to be done’ which the procedure is to regulate;
• if there is an irregularity which changes the substance of ‘the thing to be done’, the irregularity will be substantive;
• if the irregularity merely departs from the prescribed manner in which the thing is to be done without changing the substance of the thing, the irregularity is procedural.
70 In my opinion, the thing to be done in this matter, being the request for the calling of a meeting, has not been changed substantially by the irregularity in the Requisition. Rather, the irregularity merely departs from the prescribed manner in which such a request is to be given under s 249D.
71 As indicated by Black J’s decision in Khan, irregularities relating to signatures for a notice to call a general meeting are likely to be procedural in nature. Of course, as his Honour also observed, this does not mean that some irregularities may not cause substantial injustice.
72 I agree with the approach of Black J and consider that the deficiency in the Requisition was a procedural irregularity.
Has the procedural irregularity caused or is it likely to cause substantial injustice?
73 In determining whether there has been or may be substantial injustice, the Court is concerned with the effect of the procedural irregularity and not with what might be said to be the best interests of the company in the commercial sense. There must be a nexus between the procedural irregularity and the matters of prejudice relied upon as constituting injustice.
74 TGA did not point to any substantial injustice that had been caused by the irregularity in the Requisition. The cost and inconvenience of calling of a general meeting cannot, on any view, be said to be a substantial injustice caused by the irregularity.
75 Accordingly, I propose to declare that the Requisition is not invalidated. For the same reasons I will declare that the 249P Notice is not invalidated.
Section 1322(4)
76 In my opinion, Vaspip would also have been entitled to relief under s 1322(4) for the following reasons:
(a) In my opinion, the failure of the Requisitioning Shareholders to comply with the requirements under s 249D(2) was a contravention of a provision of the Act within the meaning of s 1322(4)(a). In Weinstock v Beck, French CJ rejected the contention, (similar to TGA’s contention in this case), that a contravention involved disobedience of a prohibition of non-compliance with an obligation, stating:
It was submitted on behalf of Tamar that the ordinary meaning of contravention is an ‘infringement’, ‘violation’ or ‘transgression’ of some negative prohibition or positive requirement. Section 1322(4)(c) was said to reinforce that construction. That proposition should not be accepted. Section 1322(4)(c) empowers the Court to relieve a person from civil liability by reason of a contravention or failure of a kind referred to in s 1322(4)(a). There is no reason to limit the construction of the term ‘contravention’ by reference to a subset of contraventions which attract civil liability nor by reference to that subset which can be characterised as a ‘failure’ to do something. … The proffered distinction, which is at best difficult, would require finegrained analysis quite at odds with the remedial and practical purpose of the provision.
(b) There was no submission or evidence suggesting that the Requisitioning Shareholders had not acted honestly.
77 In my opinion, it would be just and equitable to make an order under s 1322(4) because there is no relevant prejudice or injustice caused by the irregularity. I do not consider:
(a) the fact that an experienced solicitor did not anticipate a strict construction of s 249D(2); nor
(b) the fact that another request could be made,
means that I cannot be satisfied that it is just and equitable to make the order sought. In this respect I note that, despite requests, TGA did not disclose the basis upon which it contended the notice was invalid prior to Vaspip filing this proceeding and the matter coming on for hearing on 30 September 2020.
Orders
78 I declare as follows:
(a) Pursuant to s 1322(2) of the Act, the Requisition is not invalid by reason of procedural irregularity, being non-compliance with s 249D(2) of the Act.
(b) Pursuant to s 1322(2) of the Act, the 249P Notice is not invalid by reason of procedural irregularity, being non-compliance with s 249P(3) of the Act.
79 I grant liberty to Vaspip to apply for the relief referred to in paragraphs 1 to 3 of the originating process.
80 I order that TGA pay Vaspip’s costs of the proceeding, including reserved costs, on a standard basis.
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