Whitlam v Australian Securities and Investments Commission - [2003] NSWCA 183

NEW SOUTH WALES COURT OF APPEAL

CITATION: Whitlam v. Australian Securities & Investment Commission [2003] NSWCA 183

FILE NUMBER(S):
40709/02
41057/02

HEARING DATE(S): 27, 28, 29 and 30 May 2003

JUDGMENT DATE: 10/07/2003

PARTIES:
Nicholas Richard Whitlam - appellant
Australian Securites & Invesment Commission - respondent

JUDGMENT OF: Hodgson JA Ipp JA Tobias JA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): ED 4421/01

LOWER COURT JUDICIAL OFFICER: Gzell J

COUNSEL:
Mr. R.J. Ellicott QC with Mr. A.J.L. Bannon SC and Mr. J.H. Stephenson for appellant
Mr. M.A. Pembroke SC with Mr. J.W.J. Stevenson for respondent

SOLICITORS:
Watson Mangioni, Sydney for appellant
ASIC, Sydney for respondent

CATCHWORDS:
APPEALS - Questions of fact - Whether appellable error
CORPORATIONS - General meetings - Votes of members - Chairman appointed proxy - Chairman fills out and lodges, but does not sign, poll paper - Votes counted - Whether chairman failed to vote - Whether breach of Corporations Law s.250A.
CORPORATIONS - Directors - Duties of directors - Director appointed proxy for members - Whether action pursuant to proxy appointment an exercise of a director's powers or a discharge of a director's duties
PROCEDURE - Pleading - Surprise - Natural justice - No allegation by respondent of possible bases for finding as to directors' duties - Whether Court should itself formulate and determine such bases

LEGISLATION CITED:
Corporations Law 1998, ss.180(1), 232, 250A, 1317E, 1317S
Corporations Act 2001 (Cth), ss.180(1), 250A, 1317E, 1317S
Supreme Court Rules Pt.15, rr.7, 13

DECISION:
1. Appeal allowed with costs, and cross-appeal dismissed with costs. 2. Orders of primary judge set aside. 3. In lieu thereof, proceedings dismissed with costs. 4. Application for leave to appeal dismissed, with no order as to costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40709/02
CA 41057/02
HODGSON JA
IPP JA
TOBIAS JA
Thursday 10 July 2003

WHITLAM V. AUSTRALIAN SECURITIES & INVESTMENTS
COMMISSION

HEADNOTE

FACTS
The case involved allegations of breaches of the Corporations Law 1998 (the Law) by the appellant, the President of NRMA, in connection with the 1998 NRMA Annual General Meeting (AGM) and a board meeting of the NRMA Insurance Group Limited (NIGL) of 11 August 2000.

The 1998 AGM
The appellant, as chairman of the 1998 AGM, received proxy votes. According to the rules applicable to the meeting, a proxy vote would only constitute a valid vote if it had been signed. Mr Whitlam filled out but did not sign the poll paper with respect to 3,973 votes against resolution 6. Resolution 6, which the appellant supported, proposed amendments to the Articles of Association of NRMA concerning the remuneration of directors. However, following receipt of legal advice, the 3,973 votes were counted and the resolution was defeated.

The primary judge held that the omission to sign the poll paper was a deliberate and premeditated action. He held that it constituted a failure to vote as required by s250A(4)(c) of the Law. Further, he held that this was a breach of the appellant’s duty as a director, and amounted to breaches of ss 232(2) and 232(6) of the Law. The judge imposed a pecuniary penalty of $20,000, and ordered that the appellant be prohibited from managing a corporation for five years.

Board Meeting of 11 August 2000
On 11 August 2000, the board of directors of NIGL considered whether it should approve a remuneration package for the appellant. Draft minutes of the meeting were prepared for circulation among the directors for board approval at its next meeting.

At the trial, it was argued that the appellant caused certain revisions to be made to the draft, so that the minutes incorrectly indicated that the board had resolved to approve one recommendation relating to the appellant’s remuneration package, whereas the meeting merely noted the topic for further consideration.

The primary judge accepted that the appellant had altered the draft minutes and had thereby acted without due care and diligence in breach of s 180(1) of the Law. However, the primary judge held that the appellant had acted honestly, and relieved him of any liability for that breach.

Appeal
The appellant appealed against the findings of breaches of the Law. The respondent cross-appealed from so much of the trial judge’s decision relating to the board meeting of 11 August 2000 as excused the appellant from being penalised for contravening of s 180(1) of the Law.

HELD:
1. The primary judge was in error in finding that, in altering the draft minutes, the appellant acted without due care and diligence, and the evidence was not sufficient to support that finding.

2. The evidence was sufficient to support a possible finding that the appellant’s failure to sign the poll paper was deliberate, but the primary judge’s finding to that effect was vitiated by certain errors of fact.

3. By filling out and lodging the poll paper, albeit unsigned, the appellant did vote, and accordingly did not breach s 250A of the Corporations Law.

4. The primary judge was in error in finding that the appellant had acted to gain, directly or indirectly, an advantage for himself, and the evidence was not sufficient to support that finding; and accordingly the appellant did not breach s 232(6) of the Law.

5. In acting as a proxy for members, a director is not necessarily exercising a director’s powers or discharging a director’s duties, although there may be circumstances in which a director acting as proxy is discharging such duties.

6. Where a remedy is claimed in reliance on an allegation that what a director did was an exercise of a director’s powers or a discharge (or otherwise subject to) a director’s duties, then, unless the matter is obvious, the basis on which this is alleged must be made clear prior to the hearing, by allegation of material facts and/or clear specification of its legal basis. The only basis advanced by the respondent in this case was that the appellant became chairman and proxy through his position as director; and this was not sufficient.

7. There were possible bases which could possibly have supported a finding that the appellant was discharging his duties as a director when he dealt with the poll paper, but these bases were never advanced in any appropriate way by the respondent and have not been the subject of sufficient argument; and in those circumstances it would not be right for the court to consider and rule upon some new basis which it has itself formulated.

8. Accordingly, on the way the case was pleaded and presented, the appellant could not have been found in breach of s 232(2) of the Law.

9. There should not be a new trial, and the proceedings should be dismissed.

**********

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40709/02
CA 41057/02
HODGSON JA
IPP JA
TOBIAS JA
Thursday 10 July 2003

WHITLAM V. AUSTRALIAN SECURITES AND INVESTMENTS
COMMISSION

Judgment

THE COURT: The main factual issue in this case, namely whether or not the appellant’s failure to sign a document was deliberate, is on the face of it a simple question. However, its resolution depended on consideration of a number of difficult and quite complex factual issues. Furthermore, the outcome of the case also depended on a difficult legal question concerning the function the appellant was performing when completing this document. The primary judge’s decision was careful and comprehensive, but we consider that it contained three errors which vitiated his finding against the appellant on the main factual issue. Furthermore, because of the view we take on the legal question, we consider that the case brought against the appellant did not identify any basis on which it could be found that the appellant was relevantly exercising his powers as a director or discharging the duties of his office of director. The factual case against the appellant would have been sufficiently strong to justify the ordering of a new trial; but we consider that, by reason of our view on the legal question, a new trial on the case as brought by the respondent would fail. For that reason, our opinion is that the proceedings against the appellant should now be dismissed.
On 23 July 2002, in proceedings brought by the respondent (ASIC) against the appellant, Gzell J in the Equity Division made the following declaration and order:
1. The Court declares that:
(a)By failing to sign the poll paper with respect to his appointment as proxy by 3,973 members of NRMA Limited (now called National Roads and Motorists' Association Limited) who instructed him to vote against resolution 6 at the annual general meeting held on 28 October 1998, Nicholas Richard Whitlam:
(i)In contravention of s232(2) of the Corporations Law (Cth), failed to act honestly in the exercise of his powers and the discharge of his duties as an officer of NRMA Limited;
(ii)In contravention of s232(6) of the Corporations Law (Cth), made improper use of his position as an officer of NRMA Limited to gain an advantage for himself and for other directors of that company; and
(iii)Contravened s250A(4)(c) of the Corporations Law (Cth).
(b)By revising the draft minutes of the meeting of the board of directors of NRMA Insurance Group Limited (now called Insurance Australia Group Limited) held on 11 August 2000 relating to his remuneration package, by causing the revised minutes to be circulated to the other directors and by entertaining their adoption at the meeting of the board of directors held on 6 September 2000, Nicholas Richard Whitlam:
(i)In contravention of s180(1) of the Corporations Act 2001 (Cth) failed to exercise his duties as a director with the degree of care and diligence that a reasonable person would exercise if he or she were a director of a corporation in the circumstances of NRMA Insurance Group Limited and occupied the office held by and had the same responsibilities within NRMA Insurance Group Limited as did Nicholas Richard Whitlam; but
(ii)Acted honestly, nonetheless, and in all circumstances ought fairly to be excused for the contravention.
2. The court orders that Nicholas Richard Whitlam be relieved wholly (except as to costs) from any liability to which he might otherwise be subject or that might otherwise be imposed upon him because of the contravention referred to in paragraph 1(b)(i) above.
On 21 August 2002, Gzell J made the following further orders:
The Court orders that:
1.Pursuant to section 1317EA (3) (a) of the Corporations Law (1998), as incorporated pursuant to section 1401 of the Corporations Act (2001), the Defendant, Nicholas Richard Whitlam, be prohibited from managing a corporation for a period of five (5) years.
2.Pursuant to section 1317EA (3) (b) of the Corporations Law 1998 as incorporated pursuant to section 1401 of the Corporations Act [2001], the Defendant, Nicholas Richard Whitlam, pay to the Commonwealth of Australia a pecuniary penalty of an amount of twenty thousand dollars ($20,000).
3.The remainder of the Originating Process filed on 6 September 2001 be dismissed.
4.There be no order as to costs.
The appellant appeals against Order 1 made on 23 July and Orders 1-4 made on 21 August 2002. The respondent cross-appeals against Order 2 made on 23 July.
The appellant has also applied for leave to appeal, in case this Court should take the view that leave is necessary.
CIRCUMSTANCES
The case involves disputed questions of fact, and there is a substantial challenge to the primary judge’s approach to and decision of some of these questions. Before considering the issues raised by this appeal, it is convenient first to outline some basic facts which appear not to be in dispute.
1998 ANNUAL GENERAL MEETING
First, we will outline the events relevant to the declaration 1(a) made on 23 July 2002, concerning what is referred to as “Resolution 6” put at the Annual General Meeting of NRMA Limited (NRMA) on 28 October 1998.
Resolution 6 proposed amendments to the Articles of Association of NRMA concerning the remuneration of directors, and it was supported by the appellant. A similar resolution had been put at the previous Annual General Meeting, and had narrowly failed to achieve the necessary 75% vote. Article 31 of NRMA’s Articles of Association entitled the President of NRMA to take the chair at each meeting of members. The appellant was a director and also the President of NRMA, and he took the chair at both the 1997 and 1998 Annual General Meetings.
Deloitte Touche Tohmatsu (Deloitte) held a contract with NRMA to provide returning officer services to the company. Nicholas Peter Hullah was the partner responsible for carrying out these duties. One of the tasks performed by Mr. Hullah’s staff was to prepare documents to be used by proxy holders in order to cast votes. The practice prior to the 1998 meeting had been to prepare a sheet of paper for each resolution, containing the resolution number and the name of the proxy, and contained on the left-hand side the number of votes directed in favour, directed against, and not directed, and the total number of votes. The proxy would then record on the right-hand side of the paper the number of votes actually cast in favour, the number of votes cast against and the total number of votes. The proxy was also required to insert his or her surname, initials, membership number, postal address and signature.
Article 47 of NRMA’s Articles of Association required an instrument appointing a proxy to be deposited at the registered offices of the company not less than 47 hours before the time for the meeting. The 1998 Annual General Meeting was to be held on Wednesday 28 October at 9am.
On Friday 23 October 1998 at 5.48pm, Mr. Hullah sent a report to Lisa Storrs, one of the assistant secretaries of NRMA, concerning proxies received to that time. In relation to Resolution 6, it stated that 14,272 members had lodged instruments appointing proxies, of which 4,162 directed their proxy to vote against the resolution. The fax noted “25%: 3,568”, thus drawing attention to the fact that the “No” vote was in excess of 25% of these proxy votes, and indicating that it was unlikely that the 75% necessary to pass the resolution would be achieved.
The time for lodging the instruments appointing proxies expired at 10am on Monday 26 October. Some time later, there was a telephone conversation between Mr. Hullah and the appellant. There is a dispute as to its terms, but it was common ground that the appellant raised the question whether Mr. Hullah could prepare separate sheets to be used by him as proxy holder in respect of proxies directed to the chairman, with one sheet for votes directed in favour, a separate sheet for votes directed against, and a third sheet for undirected votes. According to the appellant, he requested that this be done in that conversation. According to Mr. Hullah’s evidence in the proceedings, the appellant enquired about the possibility of separating the proxy votes on 26 October, but requested that it be done during a second conversation on 27 October.
On 27 October, Anne Mackenzie of Minter Ellison faxed to Mr. Hullah a copy of s.250A of the Corporations Law, ss.(4) of which made it mandatory for a proxy who is chairman of a meeting to vote on a poll and to vote in the way directed by the member giving the proxy. Mr. Hullah said he gave the appellant a copy of this section at the rehearsal of the Annual General Meeting on 27 October; but the appellant denied that this happened.
Also on 27 October, Mr. Hullah prepared a final report addressed to the chairman of the meeting on votes for which proxy holders were appointed, showing that, of the 15,165 such votes concerning Resolution 6, 4,429 were directed against the resolution, that is somewhat more than 29%. A copy of this report was placed in each of two envelopes, one addressed to the appellant at his office at 131 Macquarie Street, Sydney, and the other to the NRMA’s Secretariat, and both were hand-delivered.
On the morning of the Annual General Meeting, the appellant picked up his poll papers at the meeting venue. As requested by the appellant, Mr. Hullah’s staff had prepared three papers for each resolution in respect of proxies directed to the chairman, identified as such, except for the last resolution (Resolution 8), in respect of which there were no undirected votes, so that only two papers were prepared. They had also prepared the same number of papers for each resolution in respect of proxy forms with no effective nomination of the proxy (which went to the chairman by default), but only one paper for proxies directed to the appellant by name. Thus the appellant had seven papers for each of the first seven resolutions and five papers for the last resolution.
At the meeting, there was a deal of interruption and heckling, at least early on. The meeting was adjourned for order to be restored. There was then debate on the first five resolutions, following which the appellant directed that a poll be held on each of them. Dr. Gaye Morstyn, who was Group Secretary and General Counsel of the NRMA Group, gave instructions on how to complete poll cards and proxy poll papers for each of the resolutions with the aid of slides. Her instruction to proxy holders included an instruction to sign the poll paper, and a statement “If you don’t sign the poll paper your proxy votes will be invalid”. After votes were taken on the first five resolutions, there was debate on Resolutions 6 to 8, and again the appellant directed that a poll be held on each of them. Dr. Morstyn repeated the instructions previously given.
When the polls closed (recorded as 4.06pm) the appellant announced that the results would be posted in the NRMA office at 10am next morning, and in newspapers on Saturday 31 October 1998. The appellant then declared the meeting closed, subject to declaration of the polls.
In casting his votes as proxy, the appellant completed 54 poll papers, and signed all of them except the one for Resolution 6 concerning 3,973 votes directed against the resolution. The most significant factual issue in the case was whether, as alleged by the respondent, this omission was deliberate, or, as alleged by the appellant, it was an inadvertent mistake.
Shortly after 4pm on 28 October, during the counting of the votes, Mr. Hullah was given the unsigned poll paper, and he then had a conversation about it with the appellant. There is a conflict as to the terms of this conversation, but it is common ground that there was reference to the votes being invalid or not countable; and also that Mr. Hullah did not ask the appellant to sign or make any other suggestion as to what should be done, and the appellant did not offer to do anything about it.
The Annual General Meeting of NRMA Insurance Limited was scheduled to commence at 6.30pm on that day. After the conversation between the appellant and Mr. Hullah, the appellant went to Tattersalls Club to have a swim, and Mr. Hullah sought advice from Ms. Mackenzie and also Mark Standen, a partner of Minter Ellison. The advice then received was that the votes on the unsigned poll paper should not be counted. Subsequently, Mr. Hullah spoke to Dr. Morstyn, who told him not to declare the result because she was to seek further legal advice.
The appellant returned to the meeting room at about 5.30pm, and was approached by Dr. Morstyn; and they then had a discussion with Mr. Standen. It appears that Mr. Standen repeated his advice that the votes could not be counted, and the appellant indicated that this advice should be followed. This was conveyed to Mr. Hullah, and he concluded his report on this basis (at about 9pm). The report on Resolution 6 showed total votes cast of 11,262, with spoilt papers of 3,995, with only 456 proxy votes and 26 votes in person against.

Dr. Morstyn created a diary note shortly after her meeting with the appellant and Mr. Standen, as follows:
FILE NOTE RE AGM 1998 - PROXY POLL ON RESOLUTION 6
The Returning Officer approached me at around 4.30 pm on 28.10.98 and informed me that the Chairman had forgotten to sign a number of proxies and that this would result in resolution 6 being recorded as carried, rather than not carried. He said that he had discussed the issue with Mark Standen and the Chairman. I then approached the Chairman and Mark Standen around 5.45 pm on 28.10.98 to discuss the matter.
I said that the Returning Officer had spoken to me about the Chairman not having signed some proxies which would mean that the result of Resolution 6 of the last meeting was going to change from not being carried to being carried. I said I was worried because I thought that the result may be open to a legal challenge, but that my impression from speaking to the Returning Officer was that Minters had given advice that the appropriate course of action was not to count the votes, since the proxy poll papers had not been signed.
Mark Standen said that the Returning Officer had spoken to him and Anne McKenzie about the unsigned proxy poll papers and that the Returning Officer had also spoken to the Chairman.
Mark Standen said that counting those votes where the proxies were not signed by the chairman would not be consistent with the announced rules of the meeting which had been read out repeatedly at the meeting. He also raised the issue of whether we should now act contrary to those rules. He said that while the Corporations Law placed a personal obligation on the Chairman to vote the proxies in the manner directed by the member, there were no provisions covering procedural errors such as someone forgotting (sic) to sign the proxy poll paper and the error being discovered after the polls had closed. He concluded by saying that, taking into account all the relevant issues, it was his opinion that it was appropriate not to count the votes on the unsigned proxy poll papers in accordance with the announced rules of the meeting.
There was no further discussion on this issue at this meeting and the meeting concluded at approximately 5.55pm.
On 29 October 1998, there was an all-day meeting of directors of NRMA. It appears that the matter of the appellant’s failure to sign the poll paper was not raised at this meeting.
That evening, Dr. Morstyn did some legal research, and found the case of Link Agricultural Pty. Ltd. v. Shanahan & Pivot Ltd. [1999] 1 VR 466, in which the Victorian Court of Appeal, in somewhat analogous circumstances, held that the votes directed to be cast by the proxy should be counted, notwithstanding a procedural failure by the proxy.
On 30 October 1998, Dr. Morstyn telephoned the appellant, and told him that the legal advice they had been given was not correct, and that it seemed that the company did have an obligation to count the votes; but that it was probably something that needed Senior Counsel’s advice. It appears that the appellant replied to the effect “We should try to have the results withdrawn”, and asked that Mr. Hullah be contacted. However, it was too late to remove the announcement from the newspapers, which published the results on Saturday 31 October, showing Resolution 6 as having been carried.
Mr. Hullah prepared a record of his version of what had happened, which he commenced on 30 October (or possibly 29 October) and finished on Monday 2 November. This record was as follows:
NRMA LIMITED
ANNUAL GENERAL MEETINGS
28 OCTOBER 1998
Introduction
I was appointed as the Returning Officer for the 1998 annual general meeting of NRMA Limited at a meeting of the Board in July.
My responsibilities included supervision of the counting of proxy votes. The proxy forms were lodged by members in reply paid envelopes which were directed to an Australia Post box over which I had control. This process concluded 47 hours before the commencement of the meeting, at 10.00am on Monday 26 October.
The counting of the votes lodged by proxy concluded on the 26 October and I issued the attached report of the result of those votes on 27 October. This report was delivered to a member of the NRMA Corporate Secretariat and a copy was also delivered to the President of the NRMA, Mr N R Whitlam.
The second part of my responsibilities as Returning Officer was to officiate at the Annual General Meeting which was held at the Wesley Centre on 28 October 1998. At this meeting, I was responsible for supervising any voting conducted by a show of hands, and polls called on the resolutions to be considered at the meeting and any other procedural matters which arose during the meeting.
There were no matters determined by a show of hands which I had to count. All eight resolutions which were included in the notice of meeting were determined by poll. Counting of these polls concluded on the evening of 28 October and I rendered the attached report on these counts to the Company Secretary, Ms Gaye Morstyn that evening.
Potential irregularity in voting
A potential irregularity arose in relation to voting on resolution number 6. A comparison of the first report (that based purely on proxy votes) and the record of voting at the meeting shows that there were a considerable number of spoiled votes. This principally arose because one proxy holder, the Chairman, failed to properly complete his proxy holder voting paper and I was obliged to rule it invalid and therefore the votes covered by that proxy holder report were spoiled. A copy of this proxy holder poll paper is attached and from that it can be seen that it was in respect of 3,973 votes cast against the resolution and that it was unsigned. Failure to sign the proxy holder poll paper was the reason that I declared it invalid.
Matters leading up to the meeting
Upon receipt of the first report, being that which dealt with proxy votes, I received a call from Mr Whitlam. We discussed various issues in relation to how proxy holders must lodge their voting papers and in what circumstances such proxy holder could fail to acquit his/her responsibilities properly causing the votes not to be counted. This included various scenarios whereby a proxy holder could miscount what he/she had to lodge, the proxy holder leaving the meeting prior to the poll being called, and a failure to sign the proxy holder report.
Mr Whitlam made a request which I considered somewhat unusual as I had never received such a request in the past. This request was to prepare the proxy holder report relating to those votes which had been directed for the Chairman of the Meeting to vote, to be prepared on three separate pieces of paper. On the first piece of paper would be the votes which had been lodged in favour of the motion, on the second piece of paper would be the votes which had been lodged against the resolution and on the third piece of paper would be the votes which were undirected and left to the Chairman to direct either for or against the motion. This contrasts with the normal situation where one piece of paper is prepared for each resolution and contains information about votes in favour, against and undirected (see attached example). Furthermore Mr Whitlam requested that the reports for the Chairman be the only ones prepared in this fashion. The proxy holder reports for all other proxy holders and for himself in his own name were to be prepared in the normal fashion.
Whilst I deemed this request somewhat unusual, I concluded that it was perfectly acceptable to prepare the report in this fashion if that was the wish of the Chairman of the Meeting and accordingly I instructed that that is how the reports should be prepared.
Subsequent discussion with Mr Whitlam
As a result of my discussion with Mr Whitlam, I became concerned as to what would be my legal situation if he did not lodge the proxy holder report containing the votes lodged against Resolution No.6. I therefore telephoned Ms A McKenzie of Minter Ellison, the NRMA's corporate solicitors, to request her advice in this matter. Having outlined my concerns, Ms McKenzie drew my attention to a new provision of the Corporation's Law which was inserted effective 1 July 1998. This is paragraph 250A(4)(c) which states "if the proxy is the chair - the proxy must vote on a poll, and must vote that way;" Ms McKenzie then faxed to me this section of the Corporations Law as it was not included in my copy of the Corporations Law because it did not include the latest amendments.
Ms McKenzie and I agreed that, consequent upon the insertion of this new section of the Corporations Law, it would be illegal for the Chairman not to lodge the proxy form.
I considered this sufficiently important to phone back Mr Whitlam and to make him aware of this new requirement of the Corporations Law. This I did immediately having spoken with Ms McKenzie on the afternoon of 27 October.
Matters arising at the meeting
The meeting was conducted in a very highly charged atmosphere as a result of vigorous protests by disaffected policy holders from the Wollongong area who had had their claims for storm/flood damage denied. They interrupted the President's address to such an extent that an adjournment had to be called. However, after this adjournment, the meeting, despite constant noisy interjections, proceeded normally and after the debate on the financial statements, the meeting moved to consider the resolutions as per the notice of meeting.
The meeting was organised so that the first five resolutions were discussed in cognate debate and then a poll called on those five resolutions. I supervised the collection of these votes by my staff. The meeting then proceeded to consider the next three resolutions which were also covered by a cognate debate and thereafter the polls were called and my staff collected the votes.
The meeting concluded, subject to the announcement of the results of the polls at approximately 4,00pm. At this stage, the Chairman announced that the results of the poll would be posted for public viewing at 10.00am at the offices of NRMA and would be published in the Sydney Morning Herald and The Daily Telegraph, on Saturday 31 October. Having made that announcement, the Chairman closed the meeting.
At this stage, my staff commenced counting the votes cast on the remaining three votes and shortly thereafter a member of my staff, Ms C McCabe, drew to my attention that the proxy holder report of the Chairman for Resolution No. 6 for the votes against was unsigned. I took the proxy holder report out of the Tally Room and went in search of the Chairman, Mr Whitlam. I encountered Mr Whitlam at the rear of the auditorium and pointed out to him that his report was unsigned and asked whether this was a deliberate action on his behalf. He did not directly answer this question but I recall that he said "I realise that this makes the vote invalid. I am acting in the best interests of the organisation. You can see that this place is ungovernable." It was clear to me that he did not wish to redress the situation by signing the proxy holder report. I did not ask him to sign the report.
Legal advice
It was clear to me that the admission or otherwise of the Chairman's proxy holder report for the votes against would determine whether or not Resolution No. 6 was won or lost. I was aware that solicitors from Minter Ellison & Co and NRMA's corporate legal advisers were present at the meeting and I therefore sought out Ms McKenzie of Minter Ellison. I explained to Ms McKenzie that I had a proxy holder report from the Chairman which was unsigned and that this had a determining effect on whether Resolution No. 6 had been carried or not. I sought Ms McKenzie's advice on whether I should admit the unsigned form or not. Ms McKenzie consulted with Mark Standon, the other solicitor from Minter Ellison present at the meeting. Their verbal advice to me was that I had the responsibility as the Returning Officer to rule upon the admissibility of votes but that my rules, which had been declared before the meeting and were clearly specified on the proxy holder poll paper required that the form be signed. They made the point that if I accepted an unsigned poll paper from one member then I was obliged to accept all unsigned poll papers and proxy holder poll papers. Based upon this advice and my own belief in the matter, I ruled that the unsigned proxy holder paper from the Chairman was invalid and should be treated as a spoiled paper.
As a result of the advice received from Minter Ellison I instructed my staff to treat the proxy holder report carrying the votes against for Resolution No. 6 and lodged with the Chairman to be treated as invalid.
Discussions with NRMA Corporate Secretariat
As I was aware that my above ruling would cause Resolution No.6 to be passed and that this would come as a considerable surprise to anyone who had seen the first report on the proxy votes only, I decided that it was important to speak to these people. I made this decision as I was unsure of what actions they may take if they were not forewarned and, in view of the potential gravity of the situation, I considered that the knowledge would be best not made generally known. The NRMA Corporate Secretariat staff who were aware of the proxy voting results were Ms Lisa Storrs, Ms Clare Craven and Ms Gaye Morstyn.
I therefore contacted Ms Clare Craven to alert her to these circumstances. Ms Craven expressed grave concern at this information and advised me she would explain the situation to the Company Secretary, Ms Morstyn.
I then returned to the tally room to continue with the counting process. Shortly thereafter Ms Craven came to the door of the tally room and asked me to accompany her and Ms Morstyn to a separate room, being that in which the registration of the directors was conducted. This room was unoccupied apart from Ms Karen O'Halligan who left the room at our request. I then explained to Ms Craven and Ms Morstyn again that there would be a considerable discrepancy between the initial proxy votes and the result of the voting at the meeting. I did not just refer to the votes lost as a result of the Chairman's action but I also referred to some other votes which were lost as a result of proxy holders not actually lodging their proxy holder reports or doing so incorrectly. I did not indicate that I believed that the Chairman had intentionally failed to sign his report. During the course of this discussion, Mr Whitlam came into the room to register for the NRMA Insurance Meeting which was following the NRMA Annual General Meeting. We advised him that registration was not yet ready to commence (it being only 5.45pm at that time and registration was due to commence at 6.00pm). Mr Whitlam then left the room but obviously was, at the least, intrigued that I was having a private meeting with the Company Secretariat. Ms Morstyn and Ms Craven then advised me that they wished to seek legal advice on this matter and they requested that I do not in any way declare the result of the counts until they had had that opportunity. It is now obvious to me that they also discussed this matter with Ms Storrs.
At the conclusion of the NRMA Insurance Meeting, at approximately 8.30am, I sought out Ms Craven to enquire as to whether they had obtained their necessary legal advice. She advised me that they had not had the opportunity to do so but that they would do that immediately and would come back to me as soon as possible. It was clear to me that they were intending to consult the company solicitors, Ms A McKenzie and Mr Mark Stanton of Minter Ellison in the same fashion that I had.
Approximately twenty minutes later, when I had returned to the tally room, Ms Craven came to the door and requested to speak with me. She advised me that they now had their legal advice and I was cleared to announce the result of the count.
Subsequent events
On 29 October I was telephoned by Ms Storrs to enquire as to whether or not, in my opinion, the Chairman was aware of the results of the counting of the votes of all resolutions, in particular in relation to Resolution No.6. I advised her that whilst I had not discussed the final results with the Chairman, it would not come as a surprise to him and he would therefore not be surprised when he saw the results published.
On the following day, 30 October, I was telephoned by Ms Craven who said that they had now received independent legal advice on this matter. I took "they" to mean herself and Ms Storrs and possibly Ms Morstyn. I understood that if it was not already in written form then it was certainly their intention that that would be the case. I also understood from Ms Morstyn that this advice was contrary to that which was provided by Ms McKenzie and Mr Mark Stanton in a verbal form at the meeting. Ms Craven recommended that I seek my own separate legal advice.
Following this advice from Ms Craven, I attempted to contact Mr John McCombe of Corrs Westgarth who has advised me in the past on NRMA issues. I was advised that he was in Melbourne and I left a message for him to call me on Monday 2 November. At approximately 7.15pm I received a phone call from Ms Morstyn who advised me that she had been discussing the voting at the Annual General Meeting with the Chairman and that he "wished to declare the vote invalid". Ms Morstyn was enquiring from me how this could be effected. I said that I had no prior experience of such a matter. We discussed the fact that the results of all Resolutions had already been made public by way of display in the offices of the NRMA at 151 Clarence Street and at the new branch in King Street. I had also been informed by Ms Craven that a copy of the results of the resolutions had been sent to Mr Ian Scandred (a member) and I mentioned this as well to Ms Morstyn. Ms Morstyn seemed unsure as to the proper way to proceed and suggested that I should speak to Mr Whitlam, which I then did.
Mr Whitlam confirmed that he now wished for the Resolution No. 6 to be "treated as invalid". He recounted his recollections of some of the matters which occurred on the day, including our conversation when I had pointed out to him that he had failed to sign the proxy holder report. He said that it was his recollection that whilst I did point it out to him, I did not request him to sign the form. He made reference to the number of forms that he had had to sign that day and the difficulties of ensuring it was done correctly in the environment of some tension as a result of the activities of Mr Parker in particular.
Mr Whitlam went on to say that he had sought legal advice on the day from Mark Stanton and this advice had confirmed that his proxy holder report was invalid. Mr Whitlam went on to say that he was now, within one hour of having been made aware of the fact that there are those who wished to overturn the decision, taking action to redress the situation. He made reference to the fact that there would seem to be some people who may be suggesting that his actions may be deliberate and they would need to be extremely careful as he had his reputation to defend. I advised Mr Whitlam that I had taken legal advice from Ms McKenzie and Mark Stanton in the course of the afternoon of the 26th and that also I had made Ms Morstyn and Ms Craven aware that the final result of the poll on Resolution No. 6 would be different to what their expectations might otherwise be, having seen the results of proxy voting.
After some discussion I indicated to Mr Whitlam that the most important thing to do at this stage would be to ensure if possible that the reports did not appear in the Daily Telegraph and the Sydney Morning Herald carrying the results of the resolutions. Mr Whitlam agreed and I understood from him that he would be taking what action he could to achieve this. He furthermore confirmed to me that the results were not to be published in The Australian and therefore there was no need to consider that newspaper.
I said that I was going to obtain my own legal advice on this issue. Mr Whitlam said that he was seeking to contact Mark Stanton to obtain proper legal advice. I said that we required this advice to assist us to properly proceed. I said that I was unaware, not having ever been placed in similar circumstances in the past, as to whether the poll should be reopened and a new result announced or whether the poll should be treated as irregular and therefore invalid.
Mr Whitlam made some comments about perhaps redressing the situation by now signing the poll paper or by getting board approval to not implement the result of the Resolution but he was clearly unsure as to what was the appropriate action.
I asked Mr Whitlam whether he would advise Ms Morstyn of our conversation and he said he would be doing so. I said that I had an obligation, following my earlier conversation with her, to go back to her to also clarify my position. Therefore, some twenty minutes after concluding my conversation with Mr Whitlam I called Ms Morstyn and advised her of the outcome of my discussions with Mr Whitlam, ie that he was to try and pull the reports from the newspapers and he would seek what legal advice he could on the way forward. When I spoke to Ms Morstyn she confirmed having heard from Mr Whitlam and that she was trying to get hold of Mark Stanton for legal advice but was unable to do so at the moment.
Telephone Conversation with Caithlin McCabe, 1 November 1998
I called Ms McCabe on I November to advise her of the general outline of the conversations that I had on the Friday evening with Mr Whitlam and Ms Morstyn. I asked Ms McCabe to prepare a file note of her recollections of the events which had occurred at the NRMA Annual General Meeting.

It appears that, at least by about 30 October or possibly 2 November, the appellant had become aware of a possible suggestion that his failure to sign the document may have been deliberate, and it also appears that the appellant said to various people, probably including Mr. Hullah, that if anybody suggested that he had acted deliberately, they should be prepared “to put their house on it”.
On 2 November 1998, oral advice was taken from Richard Conti QC, to the effect that the chairman was justified in publishing an amended result showing that Resolution 6 had not been carried. A meeting of the Board to discuss the matter was arranged for 5 November 1998. Mr. Conti confirmed his advice in writing on 4 November 1998. This advice was accepted, and arrangements were made to alter the results previously announced and to give effect to the position that Resolution 6 had not been carried.
During November 1998, the appellant prepared a file note as follows:
At about 5.30 pm on Wednesday 28 October, Gaye Morstyn approached me and asked me to meet with Mark Standen of Minter Ellison. She had become acquainted with the fact that I had inadvertently omitted to sign one of the proxy papers for Resolution 6 at the Limited AGM, as had Standen. The meeting was relatively brief, probably no more than five minutes, but I recall Standen's advice to be, certainly, that not counting these unsigned proxies was "an appropriate course of action". In giving this advice he reminded us that Gaye, as Secretary, had said on several occasions during the AGM that unsigned proxies could not be counted. Gaye, for her part, said "There may be legal challenge to such a course of action". My recollection is that each of us understood this to be the case, but that Standen's advice was unqualified and therefore I resolved that it was appropriate not to count the votes.
He prepared a further file note in December 1998, which contained the following:
Shortly after the close of the Limited AGM on Wednesday 28 October, Nick HuIIah asked to speak to me. He walked me into the auditorium and produced from his suit jacket pocket one of the proxy forms for the NRMA Limited AGM. He pointed out that it was one of mine, that it related to Resolution 6 and covered nearly 4,000 proxies which had been directed to me as chairman to vote ‘no' and that they had been completed correctly in all respects except one which was that the document was unsigned. It was not clear to me whether Hullah was asking me to sign it then or not. He certainly did not say anything or indicate that. He did say words to the effect that "you realise that an unsigned proxy cannot be counted". I confirmed that that was my understanding. I rhetorically asked what can I do. He did not reply. I remember then walking off muttering something like "You have just seen that AGM, which some people tried to make a farce. This place is becoming ungovernable. What can I do?"
At about 5.30 pm, Susan Ryan, speaking for six colleagues (Anne Keating, Stewart Geeson, Maree Callaghan, Mary Easson, Dominique Collins and Tim Gavin) asked me to meet with that group of seven after the NRMA Insurance AGM which was to start at 6.30 that evening. The subject was the election for President of the NRMA, it being the first agenda item scheduled for the following day's board meetings.
Soon afterwards Gaye Morstyn approached me and asked for me to meet with Mark Standen of Minter Ellison. She had become acquainted with the situation, as had Standen. The meeting was relatively brief, probably no more than five minutes, but I recall Standen’s advice to be, certainly, that not counting these unsigned proxies was "an appropriate course of action". In giving this advice he reminded us that Gaye, as secretary, had said on several occasions during the AGM that unsigned proxies could not be counted. Gaye, for her part, said "There may be legal challenge to such a course of action". My recollection is that each of us understood this to be the case, but that Standen's advice was unqualified and therefore I resolved that it was appropriate not to count the votes.
Immediately prior to the opening of the NRMA Insurance AGM at about 6.30, Richard Talbot came up to me and told me that Jane Singleton had asked hum during the Limited AGM whether he would vote for her as President of the NRMA since she intended to run again.
Not long after 8.30, the NRMA Insurance AGM closed and eight directors (Maree Callaghan, Dominique Collins, Mary Easson, Tim Gavin, Stewart Geesson, Anne Keating, Susan Ryan and Nicholas Whitlam) retired to meet at 151 Clarence Street. I was told that it was "not convenient" for Jane Singleton to have the election for President take place the next day and that the seven others were asking me to not have it dealt with the next day. I agreed. We continued to meet until after 11.00.
The scheduled NRMA board meetings on 29 October lasted from 9.00 am to 5.30 pm. Not long after 10 am, the results of the polls, as determined by the Returning Officer for the previous day's AGMs, were handed to the and circulated to all directors present.
On Friday 30 October, during the afternoon, Gaye Morstyn left a message for me to cal her urgently. We did not speak until about 5.45 pm, at which time she told me that a recent case ("the Link case") could allow me as chairman of the NRMA Limited AGM on 28 October, to have the disallowed 'no' proxies related to Resolution 6 counted. I immediately asked that the publication of the results in the weekend's press be suspended, the Returning Officer be informed and that senior counsel's advice be obtained. Later that evening I left a message for the Deputy President, mentioning only another matter, asking her to call me that weekend since I wanted to inform her of the situation.
On Saturday morning, 31 October, I spoke again to Gaye Morstyn. She informed me that she had attempted to contact Mark Standen the previous evening and had only that morning spoken to him, informing him of the Link case. Standen at this point mentioned to her a possible breach of S.250A. It was the first I had heard of S.250A. She also informed me that, through Minter Ellison, it was proposed to obtain advice from Richard Conti QC, on the matter.
On Monday 2 November, Gaye Morstyn informed me that Conti had confirmed the view she had formed with respect to Section 250A, although his written advice was yet to be received. I asked her to inform all directors of the situation, which she did that day.
Upon receiving Mr Conti's advice on 3 November, I resolved to amend the previously declared outcome of Resolutions 6 and 7. Before formally doing so, I thought it appropriate to allow the board to discuss the matter. I decided to do this, not because I expected that anything any board member said would cause me to change my decision, but rather out of respect for them and because I had been informally advised that as the directors were the only parties with any legal status in my decision, it was correct to do so. The meeting was called for 5 November and it unanimously resolved to note and accept the opinion of Mr. Conti QC dated 5 November. With that, I revised my earlier ruling, and caused the previously "invalid" votes to be counted.
A senior manager of NRMA, Jon Tyers, was appointed by the Board of NRMA to report on the proxy voting on Resolution 6 at the 1998 Annual General Meeting. He submitted a draft report to Mr. Hullah, and requested that Mr. Hullah sign an attached certificate to confirm the factual accuracy of the report so far as it represented statements and/or file notes provided by him. Mr. Hullah did so on 23 February 1999, noting one exception not here relevant. We will refer to this report later.
BOARD MINUTES OF 11 AUGUST 2000
The events relevant to declaration 1(b) made on 23 July 2002 concerned a revision made by the appellant to draft minutes of a Board Meeting of NRMA Insurance Group Ltd. (NIGL) held on 11 August 2000.
On 10 August 2000, there was a meeting of a committee of the Board of NIGL, in preparation for a meeting of the full Board to be held on 11 August. That meeting was to be the first since demutualisation. There were five directors present at the committee meeting, including the appellant, E.R. Dodd (the CEO), Geoffrey Ashton Cousins and N.D. Hamilton. This meeting was also attended by Dr. Morstyn. One of the matters discussed was the appellant’s remuneration package, and the appellant absented himself from the meeting whilst this was discussed. The second draft of the minutes of this meeting were in evidence, and were apparently accepted as accurate. They contained the following:
... Messrs Whitlam and Dodd and Ms Morstyn returned to the meeting at 5.25 pm.
The full meeting was informed that it was resolved to recommend to the Board that it pay a base fee of $70,000 to each non-executive director of the company with the Chairman to be paid three times that amount together with a continuing fee of $90,000 for his chairmanship of the IMA Board and that in recognition of the Chairman's specific responsibilities and on-going duties, that shareholders be asked to grant to the chairman 50% of any allocation to the Chief Executive Officer under the proposed employee share plan.
Graeme Phillip Blackett was one of the company secretaries of NRMA and NIGL in August 2000. One of his duties was to take notes and to prepare minutes of meetings of the boards of directors within the NRMA Group. The usual practice was for a member of his staff to prepare draft outline minutes in advance of the meeting based on the material in the board papers. Mr. Blackett then attended the meeting and took notes. After the meeting, he dictated the minutes using the outline and his notes. He would then circulate the draft minutes for correction and comment to the appellant, Mr. Dodd and Dr. Morstyn. After incorporation of any amendments suggested by these three, Mr. Blackett would send the final draft to the appellant for his final review. Once any additional changes by the appellant had been made, that version of the draft minutes was inserted in the board papers for the next meeting.
Mr. Blackett attended the meeting of the Board of Directors of NIGL on 11 August 2000. There were nine directors present at that meeting, and also several others in attendance, including Mr. Blackett and Dr. Morstyn. Mr. Blackett’s handwritten notes noted that the meeting commenced at 9.03am. On pages 27-29 of the 30 pages of Mr. Blackett’s handwritten notes, there appears the following:
NRW then left the meeting @ 2.16pm.
GC assumed chair.
Chair’s Remuneration
3 x base
= 70K x 3
= $210K
– Continues to get
IMA fees (and then illegible)
– Same committee fees as others
Recommendation
When option scheme in place, in principle perf rem of chair tied to perf rem of CEO, - Chair gets 50% of option scheme in place for the CEO, whatever is in place which must be agreed by the board.
At this point there is a marginal note “+ subject to a plan moving forward.” The handwritten notes then continue:
Final scheme to be brought back to the board for sign off.
– board approves
– fees – 3 x +IMA fees+
– an additional option scheme relating to retirement allowance
Carried
NRW returned @ 2.41pm
GC is Mr. Cousins, and NRW is the appellant.
About a week after the meeting, Mr. Blackett prepared draft minutes and sent them to the appellant, Mr. Dodd and Dr. Morstyn. The earliest version of the draft minutes which is in evidence is a version first sent out by Mr. Blackett on Friday 1 September with the board papers for the Board Meeting on 6 September. This contained 19 pages of typing, and on pages 15-18 there appeared the following:
Remuneration
Mr Whitlam then reported on the Board Committee's deliberations in relation to the remuneration and provided the following recommendations:
• each non-executive director (excluding the Chairman) is to receive a base fee of $70,000 per annum, such fee to include service on wholly owned subsidiary boards and their committees;
• the Audit Committee, Compliance Committee and Board Committee will pay the following fees:
Chairman - $15,000 per Committee per annum Member - $10,000 per Committee per annum
• the Remuneration Committee will pay the following fees: Chairman - $10,000 per annum
Member - $8,000 per annum
• attendance at business stream Committees will attract a per diem rate to be determined by Mr TV Egan of Egan Associates;
• subject to, and upon the implementation of, an equity participation plan, that directors be required to take up 20 per cent of their directors' fees in the form of shares;
• the expenses policy currently in place for NRMA Insurance Limited to (sic) adopted by NIGL and to be further reviewed, with the Chief Executive Officer to sign off on the Chairman's costs;
Mr NR Whitlam then left the meeting at 2.16pm to enable discussion of remuneration arrangements in place for the Chairman.
Mr GA Cousins assumed the Chair in the absence of the Chairman.
The following points in relation to the Chairman's remuneration were then noted:
• that, according to industry practice, the Chairman's fee be three times the base fee, that is $210,000 per annum;
• the Chairman continues to receive fees for serving on the board of Insurance Manufacturers' of Australia Pty Limited;
• the Chairman is entitled to Committee fees on the same basis as all other non-executive board members;
• when an equity participation plan is in place, in principle, the performance remuneration of the Chairman be tied to the performance remuneration of the Chief Executive Officer so that when the Chief Executive Officer's remuneration is considered by members, members be asked to grant the Chairman 50% of any shares allocated to the Chief Executive Officer.
Mr NR Whitlam returned to the meeting at 2.41pm and resumed the Chair.
Directors' Fees
Having regard to the recommendations of the Board Committee and having noted that the members in General Meeting had approved a cap of $1.5 million per annum in directors' fees and further that, notwithstanding material personal interests of all non-executive directors in this issue, the recently amended Sections 191(2)(a)(ii) and 195(1) of the Corporations Law provide that directors may vote on a resolution in relation to their remuneration, IT WAS RESOLVED that each director, with the exception of the Chairman, receive $70,000 per annum (payable monthly) and the Chairman receives $210,000 per annum (payable monthly) for services on the board of the Company, such fees to include services on the board on any wholly owned subsidiary within the NRMA Insurance Group.
IT WAS FURTHER RESOLVED to instruct Mr JV Egan of Egan Associates to determine an applicable per diem rate for services by board members on each of the "stream" committees.
Board Committee
Messrs NR Whitlam and ND Hamilton then left the meeting. Mr IF Stanwell assumed the Chair in Mr Whitlam's absence. Having noted that services on the Board Committee constitute additional or special duties for the company, IT WAS RESOLVED to remunerate non-executive members of that committee at the following levels:
• Chairman - $15,000 per annum (payable monthly)
• Member - $10,000 per annum (payable monthly) Messrs Whitlam, Astbury and Hamilton then returned to the meeting.
Mr NR Whitlam resumed the chair.
Compliance Committee
Mrs MC Callaghan and Mr IF Stanwell left the meeting.
Having noted that services on the Compliance Committee constitute additional or special duties for the company, IT WAS RESOLVED to remunerate non-executive members of that committee at the following levels:
• Chairman - $15,000 per annum (payable monthly)
• Member - $10,000 per annum (payable monthly)
Mrs Callaghan and Mr Stanwell returned to the meeting.
Remuneration Committee
Mr NR Whitlam, Mrs M Easson, Mr ND Hamilton, Ms AJ Keating and Mr IF Stanwell left the meeting.
Mr GA Cousins assumed the Chair in Mr Whitlam's absence.
Having noted the services on the Remuneration Committee constitute additional or special duties for the company, IT WAS RESOLVED to remunerate non-executive members of that committee at the following levels:
• Chairman - $10,000 per annum (payable monthly)
• Member - $8,000 per annum (payable monthly)
Mr Whitlam, Mrs Easson, Mr Hamilton, Ms Keating and Mr Stanwell then returned to the meeting.
Mr NR Whitlam resumed the Chair.
On Monday 4 September, the appellant sent to the NRMA Secretariat a copy of these minutes with handwritten alterations. These were seen by Dr. Morstyn and probably by Mr. Blackett, and they were incorporated into a further version of the draft minutes, which was sent out, apparently at 5.34pm on 5 September under cover of a memorandum to the directors, expressed to be from Mr. Blackett. However, it seems clear that Mr. Blackett had gone home sick about the middle of that day, and that this memorandum was finalised by Dr. Morstyn. The memorandum commenced with the following note about the minutes of the board meeting of 11 August:
Enclosed are the draft NIGL minutes for its meeting on 11 August 2000, marked to show changes from an earlier draft which was circulated with the Board papers. The enclosed incorporates changes as a result of the Board committee meeting held last week and corrects other minor typographical errors in the minutes.
The memorandum contained instructions inter alia to discard the previous minutes as circulated, and to replace them with the amended draft. This amended draft was of 20 pages, and contained many alterations in all parts of the draft. The only significant alterations affecting the remuneration of directors appeared on page 18 of the draft, and was as follows:
Mr. GA Cousins assumed the Chair in the absence of the Chairman.
The following points in relation to the Chairman's remuneration were recommended by the Board Committee: then noted:
• that, according to industry practice, the Chairman's fee be three times the base fee, that is $210,000 per annum;
• the Chairman continues to receive fees for serving on the board of Insurance Manufacturers' of Australia Pty Limited;
• the Chairman beis entitled to Committee fees on the same basis as all other non-executive board members;
• when an equity participation plan is in place, in principle, the performance remuneration of the Chairman be tied to the performance remuneration of the Chief Executive Officer so that when the Chief Executive Officer's remuneration is considered by members, members be asked to grant the Chairman 50% of any shares allocated to the Chief Executive Officer.
IT WAS RESOLVED to accept these recommendations.
It was these alterations, and in particular that relating to the fourth item concerning an equity participation plan, that were the subject of complaint by the respondent.
The minutes of the Board meeting held on 6 September 2000 show that it commenced at 2.05pm and concluded at 6.35pm. Just after an event noted at 3.50pm, the minutes record discussion of the 11 August meeting, as follows:
Minutes of the previous meeting of the board held on 11 August 2000 were noted.
In particular the board discussed that part of the item "Committees-Update" relating to the remuneration of the Chairman appearing on page 18. In relation to that section, it was noted that at the board meeting on 11 August 2000, the last point listed on page 18 of the draft minutes in relation to an equity participation plan were not correct. The first three points were approved by the board and the fourth in relation to a broad based share option plan would be examined further and referred back to the board for its consideration both in relation to quantum and as to the best way to proceed.
In addition, in the item "Committees-Update" under the section headed "Board Committee" on page 19, it was noted that the minutes should be further amended to reflect that in addition to Mr NR Whitlam and Mr ND Hamilton, Mr GA Cousins and Mr JF Astbury also left the meeting and that all four directors returned together upon which Mr NR Whitlam resumed the Chair.
IT WAS THEN RESOLVED to confirm the minutes of the meeting of the board held on 11 August 2000, and subject to the amendments noted above, approve them for signing by the Chairman as a correct record.

In our opinion, a finding of breach of s.232(2) was not open on the way the case was put by the respondent. This was a charge of serious misconduct, and as such had to be formulated with precision. Neither of the two possibilities we have raised was canvassed in the case, either in the pleadings or during the twelve-day hearing before the primary judge. Even now, they have not been advanced by the respondent, either in a Notice of Contention or in any other appropriate way. In relation to them, natural justice has not been afforded to the appellant. It would not in those circumstances be right for this Court to consider and rule upon some new basis which it has itself formulated, such as these two possibilities.
In those circumstances, our conclusion must be that, even if the appellant had been found to have deliberately failed to sign the poll paper, this could not, on the way the case was pleaded and conducted, have been found to be a breach of s.232(2). Accordingly, we do not think it would be appropriate to order a new trial on this issue.
OTHER QUESTIONS OF LAW
It remains to mention two other questions of law which were raised on the appeal.
First, it was alleged that the appellant owed no duty to exercise care and diligence in relation to the draft minutes, because there was no real risk of harm to the company if there were errors in the draft minutes as circulated to the directors. It was submitted that the minutes were only circulated as draft minutes, that they would be considered by Mr. Blackett and/or Dr. Morstyn before being circulated, and that they were only being put forward as matters for consideration by the Board as to whether they did or did not properly reflect what happened at the previous meeting. On the other hand, there is some risk that draft minutes will be adopted, particularly where the minutes are lengthy and there might not be detailed scrutiny and discussion of each item in them. It is not necessary to decide this question.
Second, there is the question whether the primary judge was obliged to make a declaration of breach of s.180(1), where, in the primary judge’s view, the matter was trivial and the proceedings should never have been brought. It was put for the respondent that s.1317E made it obligatory for a court satisfied of a contravention of s.180(1) to make a declaration of contravention. For the appellant, it was submitted that s.1317S authorised the Court to relieve the appellant wholly from a liability to which he would otherwise be subject, including a liability to have declared against him a contravention of s.180(1). Again, we need not determine this question.
CONCLUSION
It follows from what we have said that, in our opinion, the appeal should be allowed with costs, the decision and orders of the primary judge should be set aside, and the proceedings should be dismissed with costs. We do not think an application for leave to appeal was necessary, and we would propose to dismiss that application, with no order as to costs.
The result is not entirely satisfactory. On the one hand, we are not able to find that the appellant did not deliberately fail to sign the poll paper. On the other hand, the effect of dismissing the proceedings is to rule out the possibility that the appellant will, by reason of the subject events, be subject to being precluded from being a director of a corporation or corporations; and this could be considered as not being in the public interest in circumstances where the question of whether or not the failure to sign was deliberate has not been properly determined.
However, the following considerations are relevant.
1.We have found, in the appellant’s favour, that he was not shown to have breached his duty as director by reason of the alterations to the draft minutes.
2.We have also found that he was not in breach of s.250A of the Law, because he did in fact vote.
3.We have found in the appellant’s favour that he was not shown to have been motivated by considerations of personal gain in his support of Resolution 6.
4.The appellant would in fact have received less remuneration if Resolution 6 had been passed.
5.The appellant’s failure to sign the poll paper did not result in the relevant proxy votes not being counted.
6.The deliberate conduct alleged against the appellant could not have been effectual unless the failure to sign was noticed: that is, not only was no object of financial gain or actual financial gain established, but also concealment of the failure would have been impossible or self-defeating.
7.The evidence would not have been sufficient to establish guilt on the standard applied to criminal charges.
8.Although proceedings such as these are meant, inter alia, to protect the public from persons unfit to act as directors, they are adversary proceedings, and natural justice requires that charges of serious misconduct be precisely formulated.
9.The conduct alleged against the appellant was serious, but it was not shown to have been conduct in his capacity as a director; and in any event the allegation was not in our opinion such as would justify further proceedings against the appellant, in which the respect in which he was alleged to have been exercising his powers as a director, or discharging the duties of his office of director, would for the first time be precisely formulated by the respondent (after 12 days of hearing at first instance and 4 days of hearing on appeal).
In our opinion, the following orders should be made:
1.            Appeal allowed with costs, and cross-appeal dismissed with costs.
2.            Orders of primary judge set aside.
3.            In lieu thereof, proceedings dismissed with costs.
4.            Application for leave to appeal dismissed, with no order as to costs.

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LAST UPDATED: 10/07/2003