Wilson v Manna Hill Mining Co Pty Ltd
[2004] FCA 912
•14 JULY 2004
FEDERAL COURT OF AUSTRALIA
Wilson v Manna Hill Mining Company Pty Ltd
[2004] FCA 912CORRIGENDUM
WAYNE STEPHEN WILSON & ANOR v MANNA HILL MINING COMPANY PTY LTD & ORS
No S 3004 of 2003
LANDER J
14 JULY 2004 (CORRIGENDUM 26 JULY 2004)
ADELAIDE
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 3004 OF 2003
BETWEEN:
WAYNE STEPHEN WILSON
FIRST APPLICANTGAYLE LAWTON
SECOND APPLICANTAND:
MANNA HILL MINING COMPANY PTY LTD
(ACN 075 590 644)
FIRST RESPONDENTDAVID GERALD MOORE
SECOND RESPONDENTGRAHAM DESMOND HAGGER
THIRD RESPONDENTEAST ADELAIDE COMPANY PTY LTD (ACN 010 070 612)
FOURTH RESPONDENTDENE ROBERT SPRATT
FIFTH RESPONDENTSTEPHEN JOHN EWEN
SIXTH RESPONDENTHODGEMORE PTY LTD (ACN 092 397 629)
SEVENTH RESPONDENTMANNA HILL GOLD PTY LTD (ACN 106 678 540)
EIGHTH RESPONDENT
JUDGE:
LANDER J
DATE:
14 JULY 2004
PLACE:
ADELAIDE
CORRIGENDUM
1.On page 22 paragraph 136 of the reasons for judgement, after the word “director” at the end of the first sentence, insert the words “in regard to the events to that date. They have sought a declaration that her removal ‘as a director of Manna Hill Mining Company Pty Ltd on or about 10 June 2003 is void and of no effect’. I will address the events of that day later”.
I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment of his Honour Justice Lander. Associate:
Dated: 26 July 2004
FEDERAL COURT OF AUSTRALIA
Wilson v Manna Hill Mining Company Pty Ltd
[2004] FCA 912
CORPORATIONS LAW – meetings of directors – extraordinary general meetings – notice of meetings – quorum at meetings – compliance with constitution and Corporations Act – where no notice or inadequate notice of meetings given to some directors – where no quorum at meetings – whether meetings validly convened – effect on resolutions purportedly passed at meetings – directors – removal of directors – procedure under constitution – constructive resignation.
Corporations Act 2001 (Cth)
Browne v La Trinidad (1887) 37 Ch D 1
In Re Portuguese Consolidated Copper Mines Ltd (1889) 42 Ch D 160
Young v Ladies’ Imperial Club Ltd (1920) 2 KB 523
In Re Merchants and Shippers SS Co Ltd (1916) 17 SR NSW 21
Mitropoulos v The Greek Orthodox Church and Community of Marrickville and District Ltd (1993) 10 ACSR 134
Bell v Burton (1994) 12 ACLC 1037
Roden v International Gas Applications (1995) 18 ACSR 454
Toole v Flexihire Pty Ltd (1991) 6 ACSR 455
In Re Homer District Consolidated Gold Mines; Ex Parte Smith (1888) 39 Ch D 546
Barron v Potter (1914) 1 Ch 895
La Compagnie De Mayville v Whitley (1896) 1 Ch 788
Clamp v Fairway Investments Pty Ltd (1973) ACLC 40-077
Ryan v Edna May Junction Gold Mining Co NL (1916) 21 CLR 487
Devereaux Holdings Pty Ltd v Parry Corporation Ltd (1985) 9 ACLR 837
Re Cawley (1889) 42 Ch D 209
Australian Hydrocarbons NL v Green (1985) 10 ACLR 72
Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956
NRMA Ltd v Gould (1995) 13 ACLC 1518
Sydney Aussie Rules Social Club Ltd v Superintendent of Licences (1989) 7 ACLC 991
Magnacrete Ltd v Douglas-Hill (1988) 15 ACLR 325WAYNE STEPHEN WILSON & ANOR v MANNA HILL MINING COMPANY PTY LTD & ORS
No S 3004 of 2003
LANDER J
14 JULY 2004
ADELAIDE
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 3004 OF 2003
BETWEEN:
WAYNE STEPHEN WILSON
FIRST APPLICANTGAYLE LAWTON
SECOND APPLICANTAND:
MANNA HILL MINING COMPANY PTY LTD
(ACN 075 590 644)
FIRST RESPONDENTDAVID GERALD MOORE
SECOND RESPONDENTGRAHAM DESMOND HAGGER
THIRD RESPONDENTEAST ADELAIDE COMPANY PTY LTD (ACN 010 070 612)
FOURTH RESPONDENTDENE ROBERT SPRATT
FIFTH RESPONDENTSTEPHEN JOHN EWEN
SIXTH RESPONDENTHODGEMORE PTY LTD (ACN 092 397 629)
SEVENTH RESPONDENTMANNA HILL GOLD PTY LTD (ACN 106 678 540)
EIGHTH RESPONDENTJUDGE:
LANDER J
DATE OF ORDER:
14 JULY 2004
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.The applicants bring in short minutes of the declarations and orders sought to reflect the Court’s reasons.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 3004 OF 2003
BETWEEN:
WAYNE STEPHEN WILSON
FIRST APPLICANTGAYLE LAWTON
SECOND APPLICANTAND:
MANNA HILL MINING COMPANY PTY LTD
(ACN 075 590 644)
FIRST RESPONDENTDAVID GERALD MOORE
SECOND RESPONDENTGRAHAM DESMOND HAGGER
THIRD RESPONDENTEAST ADELAIDE COMPANY PTY LTD (ACN 010 070 612)
FOURTH RESPONDENTDENE ROBERT SPRATT
FIFTH RESPONDENTSTEPHEN JOHN EWEN
SIXTH RESPONDENTHODGEMORE PTY LTD (ACN 092 397 629)
SEVENTH RESPONDENTMANNA HILL GOLD PTY LTD (ACN 106 678 540)
EIGHTH RESPONDENT
JUDGE:
LANDER J
DATE:
14 JULY 2004
PLACE:
ADELAIDE
REASONS FOR JUDGMENTTHE PARTIES AND THE TRIAL
The applicants were directors of the first respondent, Manna Hill Mining Company Pty Ltd (Manna Hill Mining). The first question in these proceedings is to determine whether they are still directors of Manna Hill Mining.
The second respondent, Mr Moore, was, and is, a director of Manna Hill Mining and the seventh respondent, Hodgemore Pty Ltd.
The third respondent, Mr Hagger, was appointed a director of Manna Hill Mining on 12 June 2003 and resigned as a director of that company on 7 July 2003. He is a director of, and effectively controls, the fourth respondent, East Adelaide Company Pty Ltd.
The fifth respondent, Mr Spratt, and the sixth respondent, Mr Ewen, claim to be directors of Manna Hill Mining. They also claim to hold shares in Manna Hill Mining. The second question in this case is to determine whether those shares were validly issued and allotted on 12 June 2003 and 19 January 2004, and whether Mr Ewen and Mr Spratt were validly appointed as directors on 19 and 20 January 2004.
Mr Hagger and East Adelaide Company Pty Ltd have advised the Court that they will abide by any decision of the Court. The applicants called Mr Hagger as a witness.
Manna Hill Mining may or may not be in administration. That depends on the answers to the first two questions and is the third matter to be determined in these proceedings.
Mr Moore was unrepresented and attended each and every day of the trial. He cross-examined the applicants’ witnesses and gave evidence himself and submitted himself to cross-examination.
Mr Spratt attended on the first three days of the trial. The trial was adjourned for a period between 23 February 2004 and 5 April 2004. Shortly before the resumption of the trial, on 5 April 2004, Mr Spratt provided a copy of a medical report from his medical practitioner which indicated that he was unable to attend the hearing due to a medical condition. He did not seek an adjournment. He did not attend on 5, 6, 7, 8 April. He, in fact, attended when the matter was adjourned, once again, on 19 April for part of that day. He attended on 20 and 21 April when he was cross-examined by counsel for the applicants. He made short submissions at the end of the trial.
On a number of occasions I asked Mr Spratt whether he indeed wished to defend these proceedings and take a position adverse to the applicants. I asked him whether it would not be better if he simply abided the orders of the Court. In his final submission, he said he would abide the order of the Court. However, I am not confident that he was still not asserting that he was entitled to hold the share and act as a director of Manna Hill Mining.
Mr Ewen did not attend on any day of the trial. I am informed that he has a serious medical condition which requires treatment several days per week.
Mr Moore tendered affidavits of Mr Spratt and Mr Ewen in his case. I received those affidavits subject to the deponents submitting themselves to cross-examination. Mr Spratt did but Mr Ewen failed to do so and, in due course, I revoked the tender of Mr Ewen’s affidavit. Mr Moore did not object to that course of action.
THE APPLICANTS’ CLAIMS
I have identified three questions that are required to be answered in these proceedings. Broadly, the applicants’ claim relief under s 232 and s 233 of the Corporations Act 2001 (Cth) (the Act). They claim that the affairs of Manna Hill Mining are being conducted in a manner which is contrary to the interests of the members as a whole and/or oppressive and unfairly prejudicial to or discriminatory against the interests of the applicants who are shareholders and were, until the conduct complained about, directors of the first respondent.
The applicants have sought a number of declarations and orders relating to a series of meetings of directors of Manna Hill Mining and seek orders setting aside share allotments and appointments of persons as directors at those meetings. The applicants claim that the resolutions purportedly passed at those meetings are void and of no effect. The applicants also seek a declaration that the resolutions purportedly passed at an extraordinary general meeting held on 20 January 2004 are void and of no effect. Fifteen separate declarations and ten separate orders are sought.
For the reasons which follow, this is the clearest case for the relief sought.
THE LAW
It is convenient, before examining the facts relevant to the various meetings, to identify the principles applicable to directors’ meetings and general meetings.
Directors’ Meetings
Ordinarily, less formality is required for a directors’ meeting than a meeting of members of a corporation.
A directors’ meeting must be convened in accordance with the company’s constitution. In this case, Manna Hill Mining’s constitution does not provide for any particular procedure to be followed in convening a meeting. Article 96 provides:
‘The Directors may meet together for the despatch of business and adjourn and otherwise regulate their meetings as they think fit. At the request of any Director the Secretary of the Company shall call a meeting of Directors. If there is only one director business may be despatched by that director alone.’
The constitution of the company does not provide what notice or the contents of the notice which needs be given to the directors prior to the meeting. Section 249C of the Act, which is a replaceable rule and which empowers a director to call a meeting of the company’s members, does not apply. The replaceable rules do not apply to Manna Hill Mining which was incorporated before 1 July 1998 and has not thereafter repealed its constitution: s 135 of the Act.
Any director of Manna Hill Mining is entitled to convene a meeting of directors by requesting the secretary (Mr Moore) to call a meeting. A director could validly convene a meeting of directors by advising all other directors of the time and place of the meeting. Because the constitution does not say otherwise, notice can be given orally or in writing: Browne v La Trinidad (1887) 37 Ch D 1. If oral, it could be given by telephone.
Each director, within reach of notice, must individually be given notice of the meeting: In Re Portuguese Consolidated Copper Mines Ltd (1889) 42 Ch D 160; Young v Ladies’ Imperial Club Ltd (1920) 2 KB 523. A director is within reach of notice where ‘his place of residence and the ordinary means of communicating with him are such that, if notice had to be given to him as provided for by the articles of association, this would involve such delay as seriously to hamper the transaction of business’: In Re Merchants and Shippers SS Co Ltd (1916) 17 SR NSW 21 at 27-28 per Street J; Mitropoulos v The Greek Orthodox Church and Community of Marrickville & District Ltd (1993) 10 ACSR 134.
In determining whether a director is within reach of notice, regard must be had to the modern means of communication and the ability of a director to be present at a meeting of directors by telephone. A director resident in Queensland of a company registered and carrying on business in South Australia would not be out of reach.
There can be no question in this case that any of the directors to whom notice had to be given was not within reach of notice.
Each and every director of Manna Hill Mining was entitled to notice of any meeting of directors: Bell v Burton (1994) 12 ACLC 1037.
Notice of the meeting can be waived or dispensed with if all directors attend and if all directors treat the meeting as a meeting of directors: Roden v International Gas Applications (1995) 18 ACSR 454 at 456 per McLelland CJ.
The notice must be reasonable: Toole v Flexihire Pty Ltd (1991) 6 ACSR 455; In Re Homer District Consolidated Gold Mines; Ex parte Smith (1888) 39 Ch D 546. In determining what is reasonable, the practice usually adopted by the Board is a relevant consideration. If reasonable notice is not given to all directors the meeting is not valid unless all directors are present: Barron v Potter (1914) 1 Ch 895.
It is not essential that a director be given notice of the business to be conducted at the meeting, although it may be preferable and prudent to give notice of any special business: La Compagnie De Mayville v Whitley (1896) 1 Ch 788; Toole v Flexihire Pty Ltd (supra).
Where the company’s constitution provides for the number of directors to constitute a quorum, that number must be present. Any resolution purportedly passed at a directors’ meeting in the absence of a properly constituted quorum will be void: Clamp v Fairway Investments Pty Ltd (1973) ACLC 40-077 at 27613. In the case of Manna Hill Mining, the constitution does not require the directors to be physically present. They can be present by telephone: Article 100(c).
The replaceable rules provide that the remaining directors can act for the purpose of appointing directors to fill a vacancy or vacancies to constitute a quorum: s 201H(i). For the reasons already given, that section does not apply to this company.
If the directors refuse, or there are insufficient directors to form a quorum to appoint additional directors, the members can in general meeting appoint additional directors: Barron v Potter.
General Meetings
Articles 61-84 of Manna Hill Mining’s constitution govern the convening and conduct of general meetings.
The directors may, if they think fit, convene an extraordinary general meeting: Article 62.
Every member is entitled to notice of a general meeting whether it is annual or extraordinary. Article 63 provides:
‘Where it is proposed to pass a special resolution twenty-one clear days’ notice and in other cases fourteen clear days’ notice specifying the place and hour of meeting and in the case of special business the general nature of such business shall be given to the members entitled to vote by notice sent by post or otherwise served as hereinafter provided; provided always that if all the members entitled to attend and vote at any meeting so agree a resolution may be proposed and passed at such meeting even if shorter notice than abovementioned or no notice shall have been given.’
In this case, an extraordinary general meeting was said to have taken place on 20 January 2004 when resolutions were put and passed to remove both applicants as directors. A special resolution is needed to remove a director before the expiration of his or her period of office: Article 89. A special resolution requires the agreement of 75 per cent of members entitled to vote.
Not only does notice need to be given by virtue of Article 63, but s 249J of the Act also requires written notice of a meeting of a company’s members to be given individually to each member entitled to vote at the meetings and each director.
Because the resolution to be put to the meeting was a special resolution, which required 75 per cent of the votes cast by members entitled to vote on the resolution to agree, the notice must set out an intention to propose the special resolution and state the resolution: s 249L(c).
The notice must give ‘a fair and reasonable intimation of what is actually proposed to be done’: Ryan v Edna May Junction Gold Mining Co NL (1916) 21 CLR 487 at 500 per Isaacs J; Devereaux Holdings Pty Ltd v Parry Corporation Ltd (1985) 9 ACLR 837 at 842.
The meeting would be validly convened if notice was sent by post to all of the members entitled to vote at least 21 days before the meeting. The notice needs to stipulate the time and date of the meeting and the general nature of the business to be considered.
The resolutions could still be considered even if no notice or insufficient notice in time or content had been given if all members entitled to vote and attend agree that the resolutions may be proposed and passed.
Resolutions, therefore, may be considered and passed at a general meeting which has been convened otherwise than in accordance with Article 63 only if all members entitled to vote, attend and agree.
The Article does not contemplate a resolution being passed at a general meeting unless notice has been given to all members or unless all members are present, notwithstanding notice was not given: Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956.
Article 66 of the constitution provides for a quorum of members at any general meeting. If the company has more than one member, two members must be present ‘in person’. If, and only if the company has one member can the meeting be conducted with only one member present.
Article 63 must be read subject to s 249H.
Section 249H(1) provides:
‘249H(1) General rule. Subject to subsection (2), at least 21 days notice must be given of a meeting of a company’s members. However, if a company has a constitution, it may specify a longer minimum period of notice.’
In this case, the constitution specifies the same time – 21 days.
However, s 249H(2) provides:
‘249H(2) Calling meetings on shorter notice. A company may call on shorter notice:
(a)an AGM, if all the members entitled to attend and vote at the AGM agree beforehand; and
(b)any other general meeting, if members with at least 95% of the votes that may be cast at the meeting agree beforehand.
A company cannot call an AGM or other general meeting on shorter notice if it is a meeting of the kind referred to in subsection (3) or (4).’
Section 249H(2) only applies as an exception to s 249H(1) if, in the case of an AGM, all members agree and, in any other case, members with at least 95 per cent of the votes agree beforehand. However, all members must be given notice of the meeting. Section 249H(2)(b) does not enable a company to convene a meeting having only first given notice to the 95 per cent of members who support a shorter period for the calling of the meeting.
Minutes
Section 251A(1) requires the company to keep minute books in which it records within one month, the proceedings and resolutions of members’ meetings and directors’ meetings.
In Re Cawley (1889) 42 Ch D 209 at 226, Lord Esher MR said:
‘Minutes of board-meetings are kept in order that the shareholders of the company may know exactly what their directors have been doing, why it was done and when it was done ….’
The Statutory scheme to rectify irregularities
Subsections 1322(2), (3) and (3A) of the Act provide:
‘1322(2) [Proceeding not invalidated] 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.
1322(3) [Invalidation of meetings] A meeting held for the purposes of this Act, or a meeting notice of which is required to be given in accordance with the provisions of this Act, or any proceeding at such a meeting, is not invalidated only because of the accidental omission to give notice of the meeting or the non-receipt by any person of notice of the meeting, unless the Court, on the application of the person concerned, a person entitled to attend the meeting or ASIC, declares proceedings at the meeting to be void.
1322(3A) [Member’s participation] If a member does not have a reasonable opportunity to participate in a meeting of members, or part of a meeting of members, held at 2 or more venues, the meeting will only be invalid on that ground if:
(a) the Court is of the opinion that:(i)a substantial injustice has been caused or may be caused; and
(ii)the injustice cannot be remedied by any order of the Court; and
(b)the Court declares the meeting or proceeding (or that part of it) invalid.’
‘Proceeding’ is widely defined and includes a meeting: Australian Hydrocarbons NL v Green (1985) 10 ACLR 72. ‘Proceeding’ and ‘procedural irregularity’ are defined in subsection 1322(1):
‘1322(1) [“proceeding” and “procedural irregularity”] 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.’
The purpose of s 1322 is to avoid persons’ substantive rights being eroded as a result of a procedural irregularity. The provision is remedial and should be applied liberally: NRMA Ltd v Gould (1995) 13 ACLC 1518 at 1520-1521 per Young J.
Subsection 1322(3) refers to a particular aspect of a meeting where notice is required to be given in accordance with the Act and s 1322(3A) only refers to a meeting of members.
Section 1322 validates what otherwise would be void or invalid: Sydney Aussie Rules Social Club Ltd v Superintendent of Licences (1989) 7 ACLC 991.
Section 1322(3) would apply where a director has not been given notice of a directors’ meeting because of an accidental omission. It would also apply to a meeting of members where a member has not been given notice of the meeting by reason of an accidental omission. Subsection (3A) addresses the pre-conditions to declare a meeting invalid where the member does not have a reasonable opportunity to participate.
Section 1322(3) does not apply where the person who has convened the meeting has deliberately refrained from giving notice to the director or member.
Subsection (6) identifies the preconditions that must be met before an order may be made.
Subsection (4) provides for the orders which may be made, and subsection (5) elucidates the scope of the power to make orders.
Those subsections provide:
‘1322(4) [Court may make orders] Subjection 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.
1322(5) [Scope of power] An order may be made under paragraph (4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence.
1322(6) [Pre-conditions to making orders] 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.’
Essentially, where notice has not been given or received, the meeting is not invalidated if the failure to give notice was an accidental omission and, in the case of a members’ meeting, the Court is of the opinion that a substantial injustice has not been caused and any injustice can be remedied by an order of the Court.
For the reasons which follow, the respondents are not entitled to claim the benefit of any of these provisions. The failures in this case, which I will shortly address, were not accidental but deliberate. A substantial injustice would be caused to the applicants if the meetings were validated.
In other cases, where there is a procedural irregularity in the convening or conduct of a meeting, the Court must have regard to the preconditions in s 1332(6).
I am not satisfied that the person concerned in the contraventions, Mr Moore, has acted honestly. In my opinion, it would not be just and equitable to make any orders validating the irregularities in these proceedings.
I will not address this section again. It will be apparent from my reasons why I think it has no application in those proceedings.
EARLY HISTORY
Manna Hill Mining was incorporated on 1 October 1996.
Its constitution provides that it shall have not less than one and not more than ten directors. The directors have power, from time to time, to appoint any person as a director either to fill a casual vacancy or as an additional member of the board: Article 88. The company can in general meeting by special resolution remove any director before the expiration of the director’s period of office: Article 89. The directors can appoint one of their body to be managing director: Article 93. The managing director can be dismissed or removed by the directors: Article 94.
The directors are entitled to regulate their meetings of directors as they think fit: Article 96. They may elect a chairman who, if there is an equality of votes, has a second and casting vote: Articles 97 and 99.
Directors’ meetings can be held with one or more of the directors taking part by telephone: Article 100(c).
The directors have the usual powers given to directors of companies of this kind.
After acquisition of the company, Mr Moore was an original shareholder and director of Manna Hill Mining.
On 21 January 1999, Mr Moore transferred one share to Ms Lawton. The consideration was stated to be $4,500 on the share transfer. However, on the share certificate the stated consideration is ‘$1.00 nominal plus 0.25 cents’ per share.
On 20 January 2000, Manna Hill Mining was placed into voluntary administration under Mr Peter Ivan Macks, Chartered Accountant (the administrator).
On 19 April 2001, Ms Lawton was appointed a director.
On 27 April 2001, Manna Hill Mining entered into a Deed of Company Arrangement to which Mr Moore, the administrator and Bentlee International Pty Ltd were parties.
The Deed provided for payments of money and the allotment of shares. The relevant clause of the Deed is clause 9, which provides:
‘9.PAYMENT BY DAVID MOORE AND/BENTLEE INTERNATIONAL AND BANK ACCOUNT
Payment by David Moore and Bentlee International
9.1David Moore has in accordance with his obligations under the Proposal paid the sum of $23,000 to the Administrator on or before 10 May 2000 receipt of which is acknowledged by the Administrator.
9.2Bentlee International has paid to the Administrator the sum of $25,000 on 18 April 2001 receipt of which is acknowledged by the Administrator.
9.3Bentlee International agrees to take up and apply for and Manna Hill Mining agrees to issue and allot to Bentlee International 477 fully paid ordinary shares in the capital of Manna Hill Mining in consideration of Bentlee International making payment to Manna Hill Mining of the total amount of $242,413 (inclusive of the amount referred to in clause 9.2) (exclusive of GST).
9.4David Moore agrees to take up and apply for and Manna Hill Mining agrees to issue and allot to David Moore 197 fully paid ordinary shares in the capital of Manna Hill Mining and the Wilson Family Trust agrees to take up and apply for and Manna Hill Mining agrees to issue and allot to the Wilson Family Trust 265 fully paid ordinary shares in the capital of Manna Hill Mining.’
The Deed also provided for the appointment of Mr Wilson as a director.
Manna Hill Mining came out of administration and the shares referred to in clause 9 were issued to Bentlee International Pty Ltd (Bentlee) and to Mr Wilson’s family trust. Mr Wilson was appointed a director on 27 April.
In due course, a dispute arose between Mr Wilson’s family trust and Bentlee, Mr Wilson contending that the shares which had issued to Bentlee ought to have been issued to his family trust and that Bentlee was not entitled to the issue of any shares.
On 23 May 2001, Mr Moore was appointed managing director. Article 93 allows for the appointment of a managing director. Article 94 empowers the directors to dismiss or remove a managing director appointed under Article 93.
On 23 May 2001, the directors resolved to cancel the shares issued to Bentlee and to allot to Mr Wilson’s family trust the same number of shares. Present at that meeting were Mr Moore, Mr Wilson (by telephone) and Ms Lawton. Mr Wilson disclosed his interest in the subject matter of the resolution and did not vote. The directors also noted that three associates of Bentlee had not been properly elected as directors of Manna Hill Mining.
Those resolutions led to litigation in the Supreme Court of South Australia.
Bentlee brought proceedings against Manna Hill Mining and Mr Moore claiming that its shares in Manna Hill Mining had been wrongly cancelled. Later, Ms Lawton and Mr Wilson and his wife were joined as defendants.
On 23 November 2001, Bentlee was ordered to pay $100,000 into the Supreme Court suitors’ fund. Half of that sum was paid to the solicitors of Manna Hill Mining as part of a compromise which was reached in early 2002.
It was agreed by the parties that all the shares referred to in clause 9.3 which were allotted to Bentlee were entitled to be held by Mr Wilson’s family trust and that the share register should be amended accordingly. Consent orders were made in the Supreme Court on 29 January 2002. Thereafter, Mr Wilson’s family trust held 742 shares. Mr Moore held 212 shares. Ms Lawton held one share. A further 105 shares were held by the other shareholders.
The proceedings in the Supreme Court involved Manna Hill Mining, Mr Moore and Mr Wilson. Significant costs were incurred which were paid by Mr Wilson. It was agreed, and on 11 March 2002 the directors resolved accordingly, that Manna Hill Mining would treat his payment of the costs as a debt due by the company to him. It was also agreed and resolved that Mr Wilson had made an initial contribution to working capital which should also be recognised as a loan. The total of the loans was recorded in the sum of $236,442.25.
Mr Moore has continually asserted in these proceedings that the first applicant had, through Bentlee International Pty Ltd, agreed to provide $400,000 for the issue of the shares, some of which was to be used as working capital by Manna Hill Mining. He also claims that, contrary to the resolution of 11 March 2002, Mr Wilson has not contributed $100,000 of that sum. Whether he is right or wrong about that is not an issue in these proceedings and is not relevant to any issues in these proceedings.
After the proceedings were settled, Mr Wilson’s family trust held 70 per cent of the shareholding and Mr Moore, 20 per cent. The remaining 10 per cent was distributed between 17 other shareholders, who all held a relatively insignificant number of shares.
Thereafter, Mr Wilson, Mr Moore and Ms Lawton held office as the directors of Manna Hill Mining.
Ms Lawton and Mr Moore lived in a de facto relationship beginning near the end of 1997, early 1998 and lasting for about four or five months. Thereafter, they had a working relationship. After the de facto relationship ended, Mr Moore continued to live in the house that Ms Lawton rented at Tennyson. Manna Hill Mining conducted its business from that address.
Manna Hill Mining was always short of working capital. Some time, in late 2002, Mr Moore determined to sell a 50 per cent interest in an exploration licence to Eastgate Corporation Ltd (Eastgate). That company was controlled by an associate of Mr Moore, Mr Nardelli, who was a fellow shareholder and director in Manna Hill Resources Pty Ltd.
Ms Lawton did not believe that the sum being paid for the exploration licence reflected its true value and was not agreeable to the transaction. Mr Moore and Ms Lawton discussed selling the exploration licence over six to eight months. Eventually, she said she was overborne by Mr Moore and agreed, albeit unwillingly, to the transfer of the interest in the exploration licence. She said she signed it after an argument with Mr Moore when he had been drinking heavily: ‘He was abusing me, yelling. My children were home and they were upset so, in the end, I just signed it’.
I accept her evidence in that regard.
Between late 2002 and early 2003, Ms Lawton was under significant personal pressures. She rented the premises in which she and her two children lived and in which Mr Moore also lived. I think it is probably clear that Mr Moore and Ms Lawton’s children did not get on well together. That also aggravated their working relationship.
In my opinion, one of the factors which caused the deterioration of the working relationship was the dispute between Ms Lawton and Mr Moore in relation to the sale of the interest in the exploration licence by Manna Hill Mining to Eastgate on 27 February 2003. I will return to that matter.
THE WITNESSES
I have had the opportunity of observing Mr Moore whilst he was giving his evidence, cross-examining witnesses and putting his arguments during the trial of these proceedings.
Mr Moore is a very determined man. He is consumed by Manna Hill Mining’s activities and the activities of two other mining companies, Manna Hill Resources Pty Ltd and Manna Hill Gold Pty Ltd. He is a shareholder and director of all three companies. He worked extremely hard to take Manna Hill Mining out of administration and to resume trading. He is so consumed by the groups’ activities that he will allow nothing to stand in his way.
He has a strong personality which he uses to dominate others. He is an aggressive and overbearing man. As I have said, he will allow nothing to stand in his way. I assess him as being ruthless and fearless. He is also, unfortunately, unprincipled.
For reasons which follow, I am of the opinion that the breakdown of his working relationship with Ms Lawton led him to claim, untruthfully, that Ms Lawton had resigned as a director of Manna Hill Mining on 24 March 2003. Because of the events on 27 May 2003, which I shall address in some detail, he determined to strip Mr Wilson of his control of Manna Hill Mining which he purported to do on 12 June 2003 and 19 January 2004. He then, methodically and ruthlessly, took steps to remove Mr Wilson as a director of Manna Hill Mining culminating in an extraordinary general meeting on 20 January 2004. He then attempted, on 6 February 2004, to put Manna Hill Mining’s assets beyond the reach of Mr Wilson, even if Mr Wilson was successful in these proceedings. Lastly, he purported to put Manna Hill Mining into administration on 11 February 2004 to frustrate Mr Wilson’s claims.
Mr Moore was a very poor witness. He prevaricated. He refused to address questions directly where a direct answer would embarrass his case. He was garrulous when it suited him. He was also untruthful when it suited him so to be. I am not prepared to act on any of his evidence, unless his evidence is corroborated or consistent with the evidence of the applicants and their witnesses. Wherever his evidence is in conflict with the evidence of any other witness, including the evidence of Mr Spratt, I prefer the evidence of those other witnesses. Wherever his evidence is contradicted by any document, I reject his evidence.
I was impressed by Mr Wilson as a witness and I accept his evidence. Ms Lawton gave evidence in trying circumstances. She was subjected to a vigorous cross-examination by Mr Moore. He consistently interrupted her answers and spoke over her. He ignored a number of my directions to allow her to answer the questions which he had put. Ms Lawton handled herself with dignity. I accept her evidence.
Mr Hagger was called by the applicants. I think he attempted to assist me. I accept his evidence. I also accept the evidence of Mr Nicholas Iles, the applicants’ solicitor.
Mr Moore argued that I should reject the applicants’ evidence and that of their witnesses because all four witnesses were untruthful. He did not suggest that there was any other reason for the conflict of his evidence and theirs except that the applicants and their three witnesses were liars. I reject that contention. I find that the applicants and Messrs Hagger and Iles were honest witnesses, and their evidence may be relied upon.
I think, by and large, Mr Spratt’s evidence can also be accepted. I think he has an imperfect memory of some events but I think he was mainly a truthful witness. In any conflict, I would prefer the evidence of Mr Wilson but I do not think there are conflicts of any moment that require me to reject Mr Spratt’s evidence.
THE RELEVANT HISTORY
I earlier mentioned that on 27 February 2003 Ms Lawton agreed unwillingly to the transfer of Manna Hill Mining’s interest in an exploration licence to Eastgate. Eastgate was controlled by Mr Nardelli, who was an associate of Mr Moore’s and held shares in Manna Hill Resources Pty Ltd.
An instrument of transfer was executed on 27 February 2003 and the company seal of Manna Hill Mining was affixed in the presence of Mr Moore and Ms Lawton. The instrument provided for the transfer of a 50 per cent interest in exploration licence 2553 for a consideration of $6000 to Eastgate Corporation Pty Ltd.
I have already made findings about the circumstances in which that document came to be signed. Ms Lawton said at the time she did not tell Mr Wilson of the transaction. She said she was too embarrassed to tell him. I accept that evidence.
The company records claim that a meeting of the board of directors took place on 27 February 2003.
The minutes record Mr Moore and Ms Lawton in attendance. The minutes also record:
‘Mr Moore advised that Mr Wilson had been informed of proposed Joint Venture and so had Ms Lawton. It was stated by Chairman that due to financial constraints, the company did not have the resources to continue as 100% holder of the E.L. and be responsible for future financial commitments. It was tabled all the file of PIRIA and commitments necessary of the E.L. It was resolved by the directors to enter Joint Venture with Mr Nardelis’s Company, EASTGATE CORPORATION, thus our company still retained an interest (50%) in a possible very valuable asset. It was resolved to affix the company’s common seal to Form 19 of PIRIA there being no further business, the meeting declared closed.’
There is also a note at the top of the minutes:
‘Mr Wilson phoned earlier by Mr Moore and approved joint venture and seal.’
Mr Wilson said that he was not advised of the meeting. He never knew of the transaction. Ms Lawton never told him. I accept that he was not told by Mr Moore or Ms Lawton. Mr Wilson was not advised of the meeting, or of the transaction involving Eastgate, because Mr Moore knew that he would not agree. Ms Lawton disputed that that meeting ever took place. She said that no meeting ever took place on that day. I also accept Ms Lawton’s evidence.
I find that no meeting of the board of directors took place on 27 February 2003. The minutes are fictitious.
The sum of $6000 was never paid. Mr Nardelli paid $1,600 for the annual licence fee.
The records of Manna Hill Mining also claim that there was a meeting of the board of directors at the offices of Richards Commercial Lawyers, Victoria Square, Adelaide on 7 March 2003 at 3.30 pm. At that time, Mr Moore was negotiating with Mr Stephen Hunt, who represented an Austrian company, DCM Mining and Marketing (DCM) for the sale of Manna Hill Mining’s interest in its leases to that company. Those negotiations were known to Mr Wilson and Ms Lawton. An agreement was entered into with DCM on 7 March 2003.
The minutes of that meeting of 7 March 2003 claim that Mr Moore and Mr Wilson were present. The minutes record:
‘It was noted that Gayle Lawton had told directors that she did not wish to attend this meeting with Rob Richards and as such is not present.’
Ms Lawton said she was never advised of such a meeting. Her evidence was that she learnt of the meeting only very shortly before she gave her evidence in the trial. I accept her evidence. I find that she was not given notice of a meeting of directors of Manna Hill Mining held on 7 March 2003.
Mr Wilson denies being present at that meeting or having any knowledge of it. I accept his evidence. There is evidence to support his statement that he was not present at the meeting. Mr Wilson lives on the Gold Coast. The applicants tendered letters from Qantas and Virgin Blue to establish that Mr Wilson did not travel to Adelaide during March of 2003.
The minutes record that the directors resolved to affix the company seal to two agreements with DCM.
I find that the meeting of 7 March 2003 did not take place. The minutes are fictitious. I find that Mr Moore prepared the minutes. Of course, he knew that no such meeting had ever taken place.
No relief is sought in respect of the meeting of 7 March 2003, nor is any needed.
THE CLAIM THAT MS LAWTON RESIGNED
There were no doubt a number of factors which gave rise to the breakdown of the relationship between Mr Moore and Ms Lawton, none of which need be explored. In the end result, the break-up was quite acrimonious and involved a number of arguments over a number of days. Mr Moore described the breakdown in the relationship as a series of rolling arguments over a period between 21 and 24 March 2003.
Mr Moore addressed Ms Lawton’s ‘resignation’ in his affidavit of 16 February 2004. He also gave oral evidence on the topic. Mr Moore said that during those arguments and, in particular, on Monday, 24 March 2003, Ms Lawton resigned her position as a director of Manna Hill Mining.
He said that she said:
‘Well, yes?---Gayle had told me that in all these – the arguments probably commenced late Friday and then rolled through the Saturday and Sunday, through the Monday morning, and several times she said that she wanted nothing to do with the company. Get the stuff out of the house and basically, “No, I don’t want any more directorships. Nothing to do with you, the companies or anything.”
What did you say about directorship?---She had said words---
What did she say?---She said, “Fuck the directorships, too, and I don’t want anything fucking to do with those either,” in amongst---
When did she say that? Over that weekend?---Yes, several times in amongst saying, you know, “Get the fuck out of the house,” and dah dah dah dah, so – I was concerned also with my own safety in a sense because there’s teenage children there and I had talked to Rick Goode, a chartered accountant, on the Monday morning about 10 or 11 o’clock about it all and he said, “You’d better get out of there,” and later that afternoon I did.’
Ms Lawton denied saying that, or anything to that effect. She did admit that on Friday, 21 March 2003, she said to him during an argument: ‘I can no longer work with you. I want you and the company out of my house’. She also said: ‘I can’t fucking work with you any more, David’. She said that she did not use the words ‘resign’ or ‘resignation’.
This argument, which continued over the weekend, arose because of Ms Lawton’s dissatisfaction with the way in which Mr Moore was running the company. Ms Lawton was still unhappy about the Eastgate transaction and kept reminding Mr Moore of that.
She said that on 24 March 2003 Mr Moore asked to borrow her car. She agreed but told him to return it by 5.30 pm. He returned at 6.00 pm and Ms Lawton told him he was late. She left with her children to go out to dinner and, when she returned, Mr Moore was ‘loading all his stuff and the company’s stuff into the taxi’. Nothing was said by either of them. There was no argument, she said, on the Monday evening.
Mr Moore said there was never any dispute between Ms Lawton and him about the Eastgate transaction. He said she willingly signed the transfer.
I prefer Ms Lawton’s evidence to Mr Moore’s. I accept her evidence that there were a number of arguments about Eastgate. I accept her evidence there was no argument on the afternoon or evening of 24 March 2003. I accept that she said that she could no longer work with him and that she wanted him and the company out of the house. I reject his evidence that she said:
‘Fuck the directorships, too, and I don’t want anything to do with those either.’
Mr Moore asserts that, with the words which he said she used, Ms Lawton resigned as a director of Manna Hill Mining to take effect immediately.
I specifically find that she said nothing which amounted in fact to a resignation or could have led Mr Moore to think that she had resigned.
In my opinion, even if she said what Mr Moore ascribes to her, it would not amount to a declaration, to which she could be held, that she was resigning as a director of the Manna Hill Mining.
Article 108 of the company’s constitution provides for the circumstances in which the office of a director shall become vacant. It provides:
‘108. The office of a Director shall become vacant if he:-
(a)ceases to be a Director by virtue of the Corporations Law or is prohibited from being a Director by an order made under the Law
(b)becomes bankrupt
(c)becomes physically or mentally incapable of performing his duties
(d)is absent from the Directors’ meetings (without appointing any alternative Director) for a period of three calendar months without leave of the Directors or
(e)resigns by notice in writing to the Company.’
It may be that a director could resign without tendering a notice of resignation in writing. A director could, by conduct, constructively resign. Article 108(d) effectively provides for a constructive resignation. A director could make it plain that he or she was resigning but refuse to reduce the resignation to writing.
I have no doubt that Ms Lawton did not intend to resign. Nor did she intend Mr Moore to think that she was resigning.
In my opinion, whatever was said, Mr Moore did not believe or think that Ms Lawton was resigning.
When he left Ms Lawton’s Tennyson house on 24 March 2003, Mr Moore was very angry with Ms Lawton. She had evicted him and Manna Hill Mining from her house. He was determined to ensure that she played no further part in the company’s affairs.
Mr Abbott QC, who led for the applicants, asked me to find that the fictitious minutes of 26 February 2003 and 7 March 2003 were part of a plan by Mr Moore to remove Ms Lawton as a director using Article 108(d). He contended that Mr Moore had determined to take that course of action because of Ms Lawton’s opposition to the Eastgate transaction. That might be right, but that was not put directly to Mr Moore and, because he has not had an opportunity of answering the charge, I will not make the finding.
In summary on this topic, I find that Ms Lawton did not resign as a director at any time but, in particular, on 21 March or 24 March 2003. I find that Mr Moore did not believe or think that she had resigned.
The applicants have not sought any relief in respect to Ms Lawton’s status as a director. However, I think, subject to hearing Mr Moore and Mr Spratt, that it would be appropriate to make a declaration that Ms Lawton did not resign as a director. Mr Abbott submitted that if I found that Ms Lawton had not resigned that finding would be enough to decide all of the issues after 24 March 2003. He argued that Ms Lawton did not receive notice of any directors’ meeting after that time. Therefore, he said that all directors’ meetings after that time had to be invalid and all business transacted at these meetings void or of no effect. I think that is right, but it still would be appropriate to examine all of the events after that time and until 11 February 2004.
THE BOARD MEETING OF 26 MARCH 2003
Mr Moore said that a board meeting took place on 26 March 2003, two days after Mr Moore was asked to leave Ms Lawton’s Tennyson house. Ms Lawton disputed that there was ever such a meeting. I accept Ms Lawton’s evidence that she was not advised that such a meeting was to be held. Mr Moore did not claim to have advised her. But that is not surprising. His case was that she was not entitled to notice of the meeting because she had resigned. The minutes, of course, do not record Ms Lawton being present. Because I have found that she was a director, it follows that, if such a meeting were to be held, she was entitled to notice: Bell v Burton (1994) 12 ACLC 1037.
The minutes claim that Mr Wilson was present by telephone. Mr Wilson denied that he attended a meeting of directors by telephone that day. The minutes record:
‘Chairman: D Moore took the chair for this meeting.
Business:
The directors unanimously ratified and approved the company seal being affixed to contract with our company and DCM.
Mr Hunt advised of new office move, as at the 11.00 am meeting in his office informed Wayne Wilson and myself approved seal and signing. Further Mr Hunt informed left Tennyson and Gayle Lawton resigned as director and not wanting to work any more in group.
Mr Hunt now taking contract overseas.’The time in the minutes has been altered to record a meeting at 12.00 pm. It is not possible to discern the original time on the minutes. The minutes say Mr Wilson was present at the directors’ meeting. There is an endorsement on the top right hand corner of the minutes:
‘S Hunt phone [sic] Wayne from his office.’
When one reads the minutes carefully, it appears that Mr Wilson was not at the meeting. Indeed, he could not have been present by telephone. There was then no telephone at the address at which the meeting was said to have been held.
What in fact occurred, on Mr Moore’s account, was that Mr Hunt spoke to Mr Wilson about the contract earlier in the day and Mr Moore treated the conversation between Mr Hunt and Mr Wilson as entitling him to claim that Mr Wilson was present at a meeting of directors. In my opinion, there was no meeting of directors on 26 March 2003: Magnacrete Ltd v Douglas-Hill (1988) 15 ACLR 325 at 333.
I accept, because Mr Wilson said so, that at some stage he had a conversation with Mr Moore about the desirability of Manna Hill Mining entering into the contract with DCM, but I reject Mr Moore’s claim that there was a directors’ meeting or that the resolution recorded was ever put or carried.
The minutes, like the minutes of the previous ‘two meetings’, are fictitious.
In this case, they were created, not for the purpose of recording the resolution, which was indeed uncontroversial, but for the purpose of recording Ms Lawton’s ‘resignation’.
A meeting of directors could not have taken place in the absence of Mr Wilson or Ms Lawton.
Article 98 of Manna Hill Mining’s constitution provides:
‘Until otherwise determined by the Company in general meeting, the quorum for every meeting of the Directors shall be:-
(a) one Director if the company has only one Director or
(b) two Directors in any other case.’
The company had three directors at the time. On Mr Moore’s own case it had two directors. In those circumstances, a quorum required at least two directors to be present. Mr Moore purported to hold a meeting at which he was the only director in attendance. The meeting was invalid and any resolutions passed void and of no effect.
No relief was sought in respect of the meeting of 26 March 2003 and, again, none is needed.
THE EVENTS BETWEEN 24 MARCH AND 27 MAY 2003
Mr Moore and Ms Lawton met twice between 24 March and 27 May 2003. The first occasion was on 15 April 2003 at 12.30 pm. It was a short meeting. Her evidence was:
‘… I said I wanted to talk to him about my position in the company and he said, “As far as I’m concerned you don’t fucking have one.” And I said, “Mr Wilson might see things differently.” He said, “You’re nothing but a fucking bitch and a troublemaker.” And I said, “Well, let’s phone Wayne now and organise a meeting.” He wouldn’t pick the phone up and I said, “David, I want you to phone Wayne now to organise a meeting for the three of us.” And he just said, “Get out of my fucking office,” so I left.’
The second meeting was on 28 April 2003. Ms Lawton said that Mr Moore spoke to her about a meeting because Mr Wilson had told Mr Moore that he wanted Ms Lawton involved somehow in the company. Mr Moore offered Ms Lawton work with Mr Stephen Hunt, who by then had apparently been appointed ‘marketing manager’.
Curiously, Mr Moore took Ms Lawton to the offices of Duncan Basheer Hannon, solicitors for Manna Hill Resources Pty Ltd, to be briefed on High Court proceedings in which that company was involved. As at 24 March 2003 Ms Lawton was also a director of Manna Hill Resources Pty Ltd. Mr Moore said she resigned all directorships on that day. However, Mr Moore took her to Manna Hill Resources Pty Ltd’s solicitors for a briefing. Not only that, when he filed a ‘Change to Officeholders’ with ASIC on 10 June 2003, he asserted that she had ceased to hold the office of director of Manna Hill Resources Pty Ltd on 5 May 2003.
He also filed a Change of Officeholder with ASIC on 10 June 2003 in relation to Manna Hill Mining claiming that Ms Lawton had ceased to be a director of that company on 24 March 2003. He was confronted, in his evidence, with the obvious inconsistency in the documents. He said that Ms Lawton had, in fact, resigned from Manna Hill Resources Pty Ltd on 24 March 2003 in the circumstances previously described but, because that company needed three directors, he had therefore recorded her resignation as occurring later. That was an instance of Mr Moore’s use of the truth or otherwise when it suited him.
On 28 April 2003, Mr Moore also took Ms Lawton to meet Stephen Hunt. Little or nothing was discussed. I think that meeting occurred only to satisfy Mr Wilson’s insistence that Ms Lawton continue to be involved with the company.
Between 26 March and 27 May 2003, the applicants spoke to each other about Manna Hill Mining’s fortunes.
Mr Wilson came to realise that little or no efforts were being made to advance the company’s interests and, in particular, to bring the company to a position where it could exploit its mine.
THE EVENTS OF 27 MAY 2003
Mr Wilson said that, several days prior to 27 May 2003, he telephoned Mr Moore seeking to have a meeting on 27 May. Mr Wilson said that he asked Mr Moore to attend a meeting on 27 May and to put aside the day for it. Mr Moore denied that any such conversation took place, or that he agreed to have such a meeting, or that he had any notice of that meeting. I reject his evidence. His diary shows an appointment with Mr Wilson at 9.30 am on 27 May and a line through the rest of the day. That is consistent with Mr Wilson’s evidence. Mr Wilson’s evidence was given prior to Mr Moore discovering his diary. The diary entry is corroborative of Mr Wilson’s evidence and, in my opinion, strong evidence contrary to Mr Moore’s evidence.
Shortly prior to 27 May, the applicants spoke to each other about Mr Moore. Mr Wilson deposed in his affidavit of 9 August 2003 tendered at the trial:
‘8.As a result of discussions in May 2003 between Ms Lawton and myself, I formed the view that it was no longer in the interests of the shareholders of Manna Hill that the first respondent, Mr David Gerald Moore (“Mr Moore”), continue as a director or secretary of Manna Hill. In particular, I had formed the view that Mr Moore’s conduct had had, and would continue to have, a deleterious affect [sic] on the capacity of Manna Hill to enter into contracts with third parties for the provision to Manna Hill of much needed working capital and/or sales by Manna Hill to third parties of the albite/feldspar deposits constituting Manna Hill’s mining operations.’
The applicants determined that Mr Moore should cease to be the managing director of Manna Hill Mining. They agreed that Mr Wilson should become managing director and that Ms Lawton and Mr Hunt should become manager and marketing manager respectively. They intended to convene a meeting of the board on 27 May 2003 and, at that meeting, to resolve to remove Mr Moore as the managing director: Article 94. There is no doubt that they would have had power to divest him of his position as managing director. The directors, however, could not resolve to remove a fellow director at a directors’ meeting. The organ which had the capacity to remove a director was the shareholders: Article 89. That Article provided that the company could, in general meeting by special resolution, remove a director.
The applicants also intended to obtain the company’s records including its statutory records. Originally, Mr Hunt was to accompany them, but eventually they decided to make the meeting a directors’ meeting so they telephoned Mr Hunt and told him not to attend. Mr Moore was given no notice of a proposed directors’ meeting.
A short meeting, or perhaps it could be better described as a confrontation, took place on the morning of 27 May. The applicants and Mr Wilson’s wife, Mrs Patti Wilson, attended at Opal House, the premises to which Mr Moore had removed himself and Manna Hill Mining after the separation from Ms Lawton. Mrs Patti Wilson was not a director. I am not sure how she would have been entitled to be present at a directors’ meeting.
Mr Spratt was present at the premises and so also was a woman who was employed by a secretarial agency, who had been hired by Mr Moore to do some work on that day.
When the applicants and Mrs Wilson arrived, Mr Moore was on the telephone. They waited until he had finished on the telephone and entered his office.
Shortly after entering the office, Mr Moore said one of the applicants told him that the applicants had agreed that he was no longer to be the managing director or a director of Manna Hill Mining. Mr Wilson denied having said this.
Mr Moore said that he was shocked. That part of his evidence I accept. Between 24 March and 27 May 2003, he had denigrated Ms Lawton to Mr Wilson for the purpose of undermining her position. I am sure he did not expect Mr Wilson and Ms Lawton agreeing between them that he should cease to hold office in the company. It was a complete shock to him that Mr Wilson had taken her part and, indeed, had taken the position that Mr Moore should cease to hold office. I am sure he thought that he had complete control of the company, even though he held only 20 per cent of the company’s shares. In my opinion, he thought he could control both Mr Wilson and Ms Lawton, and thereby control the company.
Mr Wilson said that Mr Moore became very agitated and threatened to throw the parties out of his office. He was yelling, swearing and wandering around the room. The meeting ended when Mr Moore threatened to call the police. I find that Mr Moore became very cross during the meeting.
There was no meeting of directors on 27 May 2003. Even if Mr Moore had not reacted as he had, there could have been no valid meeting. Mr Moore would have been entitled to fair and reasonable notice of the meeting and, in this case, the business to be discussed, which the other directors had resolved upon in his absence. The applicants readily admit that no notice was given. To be fair, the applicants did not contend that a meeting of directors was held on 27 May 2003.
Later that day, the applicants and Mrs Wilson attended at Attards Transport Service Pty Ltd (Attards) at Wingfield. Attards transport and store goods. On 15 March 2003 Attards had received some samples of albite ore taken from Manna Hill Mining’s mine. Attards was still holding those ore samples from Manna Hill Mining’s mine. The applicants went to Attards for the purpose of securing the albite samples. They did that, making two payments due to Attards. On 27 May 2003, Mr Wilson paid $66 in cash for the cartage costs. Two days later, on 29 May 2003, Ms Lawton paid $88 for the storage of the pallet for a period of eight weeks.
Whilst they were at Attards on 27 May, the applicants instructed Attards not to allow the release of the samples without reference to Ms Lawton.
Mr Moore has vigorously complained of the applicants’ conduct in relation to the securing of the albite ore samples. He has rightly pointed out that the ore samples are the property of Manna Hill Mining and not the property of any individual or any director.
However, I am sure that the applicants did what they did in an endeavour to preserve the company’s property. The albite samples were important to the company. If the company were to market its ore, it needed the samples to show to potential purchasers. That was the purpose of obtaining the samples.
Whilst I accept that individual directors could not appropriate the company’s property, that was not the purpose, in my opinion, of the applicants’ conduct on 27 May 2003. The purpose was, and I so find, to preserve the company’s assets.
Mr Spratt contacted Mr Wilson later that day and asked to meet with him at the Radisson Hotel.
I have no doubt that Mr Moore instigated that contact. I am sure that Mr Moore wanted Mr Spratt to ascertain how determined the applicants were in relation to removing him as managing director and taking effective control themselves. He may well have also wanted to mend bridges.
Mr Spratt met with Mr and Mrs Wilson at the hotel but the meeting came to an abrupt end when Mr Moore entered the hotel. Mr and Mrs Wilson left immediately.
Mr Moore’s arrival at the hotel, in my opinion, supports the finding that Mr Spratt was being used for the two purposes which I have mentioned. I think Mr Moore hoped that, by the time he arrived, it would have been possible to communicate with Mr Wilson.
On 27 May 2003, Mr and Mrs Wilson also attended upon Iles Selley, solicitors, and although there is no evidence of what communications were had between Mr and Mrs Wilson and the solicitors, I think I can infer that the solicitors were retained to act in relation to the dispute between Mr Wilson and Mr Moore. That inference arises from the date of the meeting and from a letter dated 30 May 2003 written by Iles Selley to Mr Moore.
EVENTS BETWEEN 27 MAY AND 12 JUNE 2003
Iles Selley had acted for the defendants in the Supreme Court proceedings instigated by Bentlee. Thus, they had acted for Manna Hill Mining, Mr Wilson, Ms Lawton and Mr Moore. Mr Iles, a principal in the firm, was well known to Mr Moore. They were on first name terms.
The letter of 30 May 2003, which was addressed ‘Dear David,’ was said to have been written on behalf of the ‘Wilson Family Trust’ on the instructions of Wayne and Patti Wilson.
The relevant terms of the letter are:
‘Both Wayne and Patti have grown increasingly frustrated at your failure and/or inability to progress the Manna Hill Mine to an operational stage or to effect the realisation of the company’s interests in that mine, whether by way of sale or joint venture.
The concerns which Wayne and Patti have are shared with Gayle Lawton.
I am instructed that recently Wayne, Patti and Gayle attended at the offices of Manna Hill Mining in King William Street and demanded that you:
(a)cease representing the interests of Manna Hill Mining in further discussions/negotiations with parties interested in developing the mine and its significant asset;
(b)hand over to Gayle the statutory books and records of the company.
I am instructed that you refused to do either and, in fact, asked them to leave the office and even threatened to call the Police unless Wayne, Patti and Gayle did so.
Wayne and Patti do not believe that you can continue in the role of Director of Manna Hill Mining or that your continuing to do so is in the best interests of the company and its shareholders.
Both of them recognise that it may be necessary to force an Extraordinary General Meeting of shareholders to have you removed as a Director. If that can be avoided, they would prefer that you stand down consensually and the purpose of this letter is to secure your resignation in order to avoid that prospect.
I have enclosed a pro forma letter which I would grateful [sic] if you would sign and return to me, together with the statutory books and records, within the next seven days.
In addition to lodging the necessary Change of Office Holders/Address with ASIC, I would anticipate that the Board of Manna Hill Mining would then convene for the purposes of appointing a new Director.
As you know, you are a 20% holder of Manna Hill Mining. Both Wayne and Patti believe that this stop will assist all shareholders in maximising the true value of this company and its significant albite resource.
You as a shareholder will benefit in that.
I would be grateful if you would carefully consider your position, execute the attached letter of resignation and forward it to me as soon as possible and, in any event, within the next seven days.’
A notice tendering Mr Moore’s resignation was attached to the letter for him to sign.
The events of 27 May 2003 had made Mr Moore extremely angry. I accept his evidence that the receipt of the letter of 30 May 2003 heightened his anger. He was not only angered by the further invitation to resign as a director, but he was also extremely angry that Iles Selley had consented to act for Mr and Mrs Wilson and take a position adverse to his.
Mr Moore complained about Iles Selley acting for the applicants in this matter. Initially, he sought to have them cease acting. He abandoned that application. However, in the trial he renewed his complaints about those solicitors acting for the applicants without seeking to have them cease acting.
Because it is not relevant to these proceedings, I offer no opinion as to whether those solicitors should have acted for the applicants.
On 3 June 2003, Mr Moore and Mr Hagger visited Attards with the intention of obtaining access to the albite samples. Whilst at those premises, they were told by Attards’ staff that the samples could not be released to Mr Moore because they had been told that he was no longer a director of the company.
Mr Moore became very angry. Mr Hagger telephoned Ms Lawton and told her that the samples were company property and that they belonged to the company. During that conversation, Ms Lawton could hear Mr Moore yelling in the background and she asked to speak to him. He refused. She heard him yelling: ‘I am fucking managing director and I’m fucking chairman of this fucking company and I can do what I want with them’.
Mr Moore put to Ms Lawton that her evidence in that regard was a fabrication. She responded by saying that Mr Moore could call the female receptionist at Attards. He indicated that she would probably be called. She was not. Mr Hagger, who was at Attards with Mr Moore on 3 June 2003, recalled speaking to Ms Lawton in Mr Moore’s presence, but said he did not recall much of the conversation. His evidence was that Mr Moore was ‘shocked’ by what transpired at Attards.
I accept Ms Lawton’s evidence of the conversation she had with Mr Hagger and what she heard Mr Moore say.
Her evidence is consistent with the surrounding facts. Mr Moore was becoming increasingly angry at the conduct of the applicants.
The end result was that Mr Hagger and Mr Moore did not get access to the samples. They were later removed by Ms Lawton and stored elsewhere. Mr Moore claims that the removal of the samples involves some criminal offence. Again, in my opinion, the ore samples were removed by Ms Lawton in order to preserve them. She was concerned that the samples should not be lost whilst the dispute between the applicants and Mr Moore remained unresolved.
In June 2003, and probably on 4 June 2003, Mr Moore spoke with Mr Peter Humphries, solicitor of Duncan Basheer Hannon, and instructed that firm to act.
Mr Spratt approached Mr Iles requesting him to meet with Mr Moore and himself. That contact was again instigated by Mr Moore.
Mr Spratt wrote to Mr Iles on 4 June 2003 enclosing some papers. He advised Mr Iles that at the proposed meeting:
‘… we will explain the considerable activity carried out in recent weeks to protect the mine and the interests of the company. The mining lease assets are potentially at risk. This has been explained to Wayne Wilson before on several occasions.’
Mr Moore’s solicitors were aware of the meeting. They wrote to Mr Iles on 5 June 2003 acknowledging that the meeting would take place.
Mr Iles agreed to a meeting which took place on 10 June 2003 at Opal House. Mr Moore, in the presence of Mr Hagger and Mr Spratt, prepared some handwritten notes for the purpose of meeting with Mr Iles on 10 June 2003. The handwritten notes were circulated to the persons in attendance. Those attending the meeting were Mr Moore, Mr Spratt, Mr Iles and Ms Felicity Kerr, a solicitor in Mr Iles’ office. Mr Moore left the meeting for a short period of time, probably between 20 and 30 minutes. His absence during that time is irrelevant.
Mr Moore’s notes raised a number of diverse topics. It was proposed in the notes that Mr Hagger become financial director and Mr Hunt, marketing/sales director. Mr Moore’s duties were set out. Mr Wilson would remain a director. There would be meetings of directors every two months. The samples at Attards should be returned to the company. The notes indicate that Mr Moore was advised by Attards: ‘no longer a director and no longer involved’.
The notes include the following:
‘David Moore told by Gayle Lawton in March she no longer wanted to be involved, resigned as a director and further reiterated this point early April and refused to work here in the offices.’
The notes make reference to the company’s involvement with DCM. The notes include a complaint that the company never received the $100,000 of working capital. They conclude:
‘David Moore and/or nominee offers Wayne Wilson $500,000 for his share holding.’
It was Mr Moore’s evidence which was supported by Mr Spratt that all of the matters in the notes were discussed.
Ms Kerr made notes of the topics raised at the meeting and of the comments by the various parties. I find that her notes are an accurate record of the matters discussed at the meeting.
Relevantly, she has noted that Mr Spratt said:
‘Changes that will occur in the company is that Graham Haggart [sic] who is a chartered accountant and involved with Hodgemore Pty Ltd is prepared to become an adviser.’
Hodgemore Pty Ltd was appointed by the Federal Court as the corporate trustee of a native title claim over land upon which the mine was located. Hodgemore Pty Ltd was under the control of Mr Hagger and Mr Moore. The meeting was not advised of that matter.
There were a number of matters discussed, which are not relevant for the purpose of determination of the issues in this case.
However, the notes record that:
‘David Moore makes a serious offer for Wayne’s shareholding. Offers $500,000.’
The last matter recorded by Ms Kerr is:
‘Before any direct action is taken in relation to removing Mr Moore from the Board his position needs to be made concrete and the start up and working capital problem needs to be resolved.’
I accept Mr Iles’ evidence that nothing was resolved at the meeting. I accept his evidence that the matters in Ms Kerr’s notes were discussed.
As I have already noted, on the same day, 10 June 2003, Mr Moore filed a Notice of Change to Officeholders of Manna Hill Mining and Manna Hill Resources Pty Ltd with ASIC claiming that Ms Lawton had resigned as a director on 24 March 2003 and 5 May 2003 respectively.
On or about 11 June 2003, Mr Moore met with Mr Hagger over a period of between three and five hours.
The purpose of the meeting was to identify resolutions which needed to be put at a directors’ meeting which Mr Moore intended to convene the next day. Mr Spratt was present, from time to time, at the meeting.
It was both Mr Moore and Mr Hagger’s intention that a meeting of directors would be convened on 12 June 2003. Mr Moore did not intend to give notice to Ms Lawton, whom he considered was no longer a director. It was his intention to call a meeting without warning to Mr Wilson, have himself appointed chairman, have Mr Hagger appointed a director, and then to put the necessary resolutions which would strip Mr Wilson of his majority shareholding and leave him a minority shareholder. I find that the purpose of the meeting between Mr Hagger and Mr Moore was to identify precisely the resolutions and the order in which the resolutions needed to be put to a meeting of directors, so as to obtain Mr Hagger’s appointment as a director and the passing of other resolutions which would strip Mr Wilson of his majority interest in the company.
That finding can be made without any difficulty. Mr Moore himself said what was done was calculated and cold blooded. That part of his evidence, I accept.
THE MEETING OF 12 JUNE 2003
All four persons who were present at the meeting of 12 June 2003 have given evidence. Before addressing the evidence, it is necessary to say something about how the meetings came about.
Ms Lawton was not given any notice that there was to be a meeting. That is hardly surprising because Mr Moore wrongly claimed that she was not a director of Manna Hill Mining. Of course, it suited him to say that she had ceased to be a director. If it were otherwise, any meeting which he called, and of which all directors were given notice, would leave him in a minority. He needed her not to be a director, because then if he were appointed chair of the meeting, which invariably he was, he could use his casting vote to his advantage and Mr Wilson’s disadvantage.
Because of my finding that Ms Lawton was a director of Manna Hill Mining, she was entitled to have proper and adequate notice of any proposed meeting of directors.
Mr Wilson was not given any proper notice of the meeting. At about 2.35 pm, Mr Moore telephoned Mr Wilson on Mr Wilson’s mobile telephone. During this conversation, which lasted only a few seconds, Mr Wilson told Mr Moore that he was on his other telephone. Mr Moore asked him to ring back and Mr Wilson agreed.
Mr Wilson rang back. The second call lasted 2 minutes 17 seconds. It is Mr Moore’s contention that the second telephone call constituted a meeting of the board of directors of Manna Hill Mining. If it was a meeting of directors then it was called and convened in circumstances where one director had no notice of the meeting and the other director had inadequate notice.
Mr Moore wrote up minutes of the meeting after the meeting. On 10 July 2003, both Mr Hagger and Mr Spratt signed page 2 of the minutes – in Mr Spratt’s case, under the words ‘True and Correct Record’, and in Mr Hagger’s case opposite those words. One thing is certain and that is that they are not a true and correct record of the meeting. Mr Moore acknowledged that in his cross-examination. However, it would be appropriate to set out the minutes and address the matters raised:
‘Minutes of the Meeting of the Directors of Manna Hill Mining Company Pty Ltd held at 1st floor, Opal Field House 29-31 King William Street Adelaide on 12 June 2003 at 2.35pm
PRESENT: David Moore Dene Spratt (present)
Wayne Wilson (by telephone)
Graham Hagger (by invitation)CHAIRMAN: David Moore took the chair for this meeting
APPOINTMENT OF DIRECTOR: In the best interests of the Company it was RESOLVED that GRAHAM DESMOND HAGGER be hereby appointed a DIRECTOR of the Company. The Secretary to attend and update ASIC records.
ALLOTMENT OF SHARES: In the best interests of the Company it was RESOLVED to allot and issue to the persons described below and to subsequently enter those details in the Register of Members:
●EAST ADELAIDE COMPANY PTY LTD as the holder of 400 ORDINARY SHARES NUMBERED 1558 to 1957 (INCLUSIVE) at an issue price of $1— per share.
●HODGEMORE PTY. LTD as the holder of 400 ORDINARY SHARES NUMBERED 1958 to 2357 (INCLUSIVE) at an issue price of $1— per share.
●DENE ROBERT SPRATT as the holder of 1 ordinary share numbered 2358 at an issue price of $1— per share.
●STEPHEN JOHN EWEN as the holder of 1 ordinary share numbered 2359 at an issue price of $1— per share.
●GRAHAM DESMOND HAGGER as the holder of 1 ordinary share numbered 2360 at an issue price of $1— per share.
REGISTERED OFFICE: RESOLVED that the Registered Office continue to be at Level 1, OPAL FIELD HOUSE, 29-31 KING WILLIAM STREET, Adelaide S.A. The SECRETARY, MR MOORE, had recently advised ASIC of CHANGE.
ISSUE OF SHARE CERTIFICATES: It was RESOLVED to issue NEW SHARE CERTIFICATES and for the Common Seal of the Company to be affixed in accordance with the CONSTITUTION.
RESIGNATION OF DIRECTOR; The CHAIRMAN informed that GAYLE LAWTON RESIGNED as a DIRECTOR on 24 MARCH 2003 AND THAT THE SECRETARY HAD ADVISED ASIC (FORM 304) on 10 June 2003.
PREVIOUS MINUTES: The MINUTES of the previous meeting were READ and at the DIRECTION of the Meeting signed by the CHAIRPERSON as a correct record.
OTHER BUSINESS: THERE BEING NO further business the Meeting was declared CLOSED.’
Mr Hagger swore an affidavit and was called by the applicants to give evidence. He was cross-examined by Mr Moore.
Mr Moore complained, on a number of occasions, about Mr Hagger’s and Mr Iles’ conduct. He asserted that Mr Iles had threatened and intimidated Mr Hagger from a time immediately after the 12 June 2003 meeting with the result that Mr Hagger had co-operated with the applicants and had given false evidence in support of their case. Mr Hagger told Mr Moore that he thought that Mr Iles’ telephone calls were intimidatory.
The evidence discloses that Mr Iles contacted Mr Hagger immediately after the 12 June meeting. He had what Mr Iles described as a frank discussion with Mr Hagger. I have no doubt that Mr Iles made Mr Hagger aware that he considered the 12 June meeting invalid and the resolutions purportedly put and carried as void and of no effect. I have no doubt that Mr Iles told Mr Hagger that his instructions would be to bring proceedings against Mr Hagger and that Mr Hagger would be at risk for costs.
I do not think, however, that Mr Iles’ conduct can be described as threatening or intimidatory. I accept that Mr Hagger co-operated with the applicants because he thought that otherwise he would be at the risk of costs in defending the proceedings. I do not think, however, that his evidence was coloured or affected by any conduct of Mr Iles or for any other reason. I thought Mr Hagger was a good witness and, as I have previously said, I accept his evidence.
Mr Hagger is a chartered accountant and a shareholder and director of the fourth named respondent, East Adelaide Company Pty Ltd. He has known Mr Moore for more than 20 years.
Some time early in 2003, he was approached by Mr Moore seeking his assistance to deal with representatives of the Adnyamathanha people on whose lands Manna Hill Mining and Manna Hill Resources Pty Ltd have mining tenements. He was asked by Mr Moore to become a director of Hodgemore Pty Ltd, which he did on 3 April 2003.
ASIC documents show that he ceased to be a director of Hodgemore Pty Ltd on 22 July 2003. He has never resigned as a director. It is likely that Mr Moore advised ASIC that Mr Hagger had resigned following events on 9 July 2003 to which I will refer later.
The minutes do not record the date of the next meeting. In fact, the next meeting took place on 19 January 2004.
There is a reason why Mr Moore pretended that four separate meetings were held on 30 July, 29 August, 30 October and 24 November 2003. Article 108 of the constitution provides that the office of a director shall become vacant if he/she is absent from the directors’ meetings (without appointing any alternative director) for a period of three calendar months without leave of the directors.
In the minutes of each of the meetings, it is noted that Mr Wilson is absent, that he has not appointed an alternative director, and that he does not have the leave of the directors to be absent.
The purpose of these pretended meetings was to lay the ground for the removal of Mr Wilson as a director pursuant to Article 108 which, in due course, occurred. I find that none of the meetings occurred. I find that neither Mr Wilson nor Ms Lawton were given notice of any of the meetings. If the meetings did take place, I find that each meeting lacked a quorum.
All four meetings either did not take place or, if they did, they were invalid. No resolutions were passed at any of the meetings.
THE MEETING OF 19 JANUARY 2004
The minutes record that ‘a meeting’ occurred at 5.40 pm at 1st floor, Opal Field House, 29-31 King William Street. The minutes include the statement in the previous minutes that Mr Wilson was not present, has not appointed an alternate director and has not been given leave to not attend, and go on to say: ‘I consider his office as director is vacant’.
The minutes then record the purported appointment of Mr Ewen as a director.
I set out paragraphs 1, 2 and 3 of the minutes:
‘1. BUSINESS: ABSENT DIRECTOR
Mr Wayne Wilson is not here & given past non attendances of directors meetings, that he has never appointed an alternate director & that I have not for those meetings given leave for him to not attend, I consider his office as director is vacant.
2.APPOINTMENT OF DIRECTOR
Mr Steve Ewen consented to be a director on Saturday 17th January by telephone with Mr Moore at about 4.00 pm. Mr Ewen had previously consented to be a director in writing on 22 December 2003 and this consent was & is still valid. It was resolved by David Moore as director and chairman, in the best interests of the Company, that since Mr Stephen Ewen (Stephen John Ewen) had consented to act as a director of the Company, that he be appointed. During Mr Moore’s telephone conversation on Saturday 17 January 2003 from about 3.50 pm to 4.10 pm (some 15 minutes) he explained the problems facing the Company, how Company paralysed (no ore samples, lack of capital, attitude of Mr Wilson, Court matters etc) & how it may be possible to break the gridlock from this perilous position the Company finds itself. I explained how Mr Wilson had not attended any meetings since 12 June 2003. Also positive position of (MHG) Manna Hill Gold Pty Ltd, where Mr Stephen Duncan is chairman, Mr Frangakis a director and Mr Ewen & myself as directors aware of MHG potential to help develop & assist Manna Hill Mining to go forward in the best interests of the Company. David Moore has tabled his notes attached to minute. Mr Ewen has extensive mining experience & particularly native title issues (some 20 years in the S.A. Mines Dept. & thereafter about 2 years with Normandy Group).
Mr Ewen assisted David Moore to get the albite mining leases granted, in particular assisting negotiations with the Aboriginal Elders. The appointment of Mr Ewen, makes a quorum as so needed.
3.It was resolved by the directors that Mr Wilson’s office as director had become vacant according to the constitution of the Company, in particular section 108, and also under the Corporations Law. It was noted that the directors have not removed Mr Wilson as a director by resolution.’
No notice of this meeting was given to Mr Wilson or to Ms Lawton. It is to be noted that there was no quorum at the commencement of the meeting at 5.40 pm. The only person present was Mr Moore. The meeting is invalid for those two reasons.
The purported appointment of Mr Ewen was made in Mr Ewen’s absence. The resolution appointing Mr Ewen is void and of no effect.
The meeting continued after Mr Ewen’s purported appointment with Mr Ewen still absent.
Even if Mr Ewen was validly appointed, the meeting continued with less than the required number of directors.
The minutes claim that ‘the directors resolved to allot and issue shares’. There was only one director present.
The minutes record that 2,000 ordinary shares were allotted to Stephen John Ewen, 2,000 ordinary shares to Mr Moore, and 56,000 ordinary shares to Manna Hill Gold Pty Ltd. In all cases, shares were allotted and issued at an issue price of $1 per share but paid only to 1 cent.
In my opinion, the shares were not validly allotted. The meeting was not regularly held as notice had not been given to Mr Wilson and Ms Lawton. There was not a quorum of directors present. Mr Ewen’s purported appointment did not cure either of those defects.
In those circumstances, I do not have to consider whether the purported allotment and issue were in the best interests of the company. The purported allotment had the effect of giving complete control of the company to Manna Hill Gold Pty Ltd for an immediate cash injection of $600. Manna Hill Gold Pty Ltd did not have any cash or resources to develop Manna Hill Mining. The allotment was in respect of a company that, only a few months before, Mr Moore had offered $500,000 for Mr Wilson’s shareholding.
In summary, therefore, the meeting was invalid; the resolution appointing Mr Ewen a director was void and of no effect; and the resolutions issuing and allotting shares to Stephen John Ewen, Mr Moore and Manna Hill Gold Pty Ltd were void and of no effect.
The minutes do not disclose when the next meeting of directors was to be held.
THE FIRST DIRECTORS’ MEETING OF 20 JANUARY 2004
In fact, another two meetings of directors were held the next day at 1st floor, Opal Field House, 29-31 King William Street.
The minutes of the meeting of directors of Manna Hill Mining held on 20 January 2004 at 2.42 pm disclose that Mr Moore was present and Mr Ewen was present by telephone. It is permissible, under the constitution of the company, for a director to be present by telephone: Article 100(c). However, for the reasons already given, in my opinion, Mr Ewen’s appointment was not valid. For that reason, only one director was actually present – Mr Moore.
On 20 January 2004, Mr Moore and Mr Ewen purportedly resolved to appoint Mr Spratt as a director of the company. The resolution appointing Mr Spratt, in my opinion, was void and of no effect. The only validly appointed director (as at 20 January 2004) present at the meeting on 20 January 2004 was Mr Moore. Mr Wilson and Ms Lawton, in my opinion, were also validly appointed directors but they had not been given notice. The failure to give notice invalidates the meeting. Moreover, however, because there was more than one director, any meeting of directors required at least two directors to be present: Article 107(b). The meeting was not a valid meeting of directors. The meeting was invalid.
The minutes record that following upon the purported appointment of Mr Spratt as a director:
‘2.The chairman was advised present in attendance were also shareholders with at least 95% of the votes (& directors of companies) that may be cast at an extraordinary general meeting of shareholders and that all present were all in agreement to call such a meeting on shorter notice pursuant to section 249H(2) at which the resolutions below are to be considered:
A.“That Wayne Stephen Wilson be removed as director with immediate effect.”
B.“That Gayle Lawton be removed as director with immediate effect.”
It was resolved to convene an extraordinary general meeting of the members of the Company, to be convened immediately at the conclusion of this meeting, to consider given s249H(2) of the Corporations Act (2001) (Cth) and, Articles 62 and 63 of the Company’s constitution at which the director of the Company, David Gerald Moore, shall propose the following special resolutions in accordance with Articles 2 and 89 of the Company’s Constitution and section 9 of the Corporations Act 2001 (Cth):
A.“That Wayne Stephen Wilson be removed as director with immediate effect.”
B.“That Gayle Lawton be removed as director with immediate effect.”
OTHER BUSINESS: There being no further business the meeting was declared closed.’
The shareholders with at least 95 per cent of the vote presumably included Manna Hill Gold Pty Ltd. No resolution was ever tendered to establish Mr Moore’s authority to vote on behalf of Manna Hill Gold Pty Ltd. However, there was even a more fundamental difficulty with the first resolution in paragraph 2. This was a meeting of directors, not of shareholders. If it were also a meeting of shareholders, then all of the other shareholders needed to be given notice. No notice was given to Mr Wilson or Ms Lawton, either as directors or as shareholders. No notice was given to the other shareholders who held 105 of the issued shares. It was never established that notice had been given to East Adelaide Pty Ltd, which was purportedly a shareholder following upon the meeting of 12 June 2003.
The constitution of the company and the Act provides that at least 21 days notice must be given of a meeting of a company’s members: s 249H(1).
Section 249H(2) permits a company to call a meeting on shorter notice if members, with at least 95 per cent of the votes cast at the meeting, agree beforehand.
It was Mr Moore’s case that notice to the other shareholders could not have affected the result. Manna Hill Gold Pty Ltd had 56,000 shares, and Mr Ewen 2,001. Mr Moore held 2,212 shares and those shares comprised 97 per cent of the 61,863 valid shares.
In my opinion, s 249H(2) could not apply to shorten the time within which the company could hold its extraordinary general meeting unless notice was given to all of the shareholders prior to passing of the resolution authorising the shortening of the meeting.
It is curious that Mr Moore considered it necessary to hold an extraordinary general meeting for the purpose of the shareholders removing Ms Lawton as a director. On his case, she had resigned on 24 March 2003.
In my opinion, the minutes of the purported meeting of 20 January 2004 establish that, contrary to Mr Moore’s evidence, Ms Lawton had not resigned on 24 March 2003.
The minutes indicate that the shareholders resolved to hold a meeting on shorter notice, being immediately after the conclusion of the meeting of directors.
The meeting of directors was invalid. No notice of the meeting had been given to the two other directors, Mr Wilson and Ms Lawton. As well, the quorum required by the company’s constitution was not present. The resolutions purportedly passed at that meeting appointing Mr Spratt a director and convening an extraordinary general meeting were void and of no effect.
THE EXTRAORDINARY GENERAL MEETING OF 20 JANUARY 2004
An extraordinary general meeting was purportedly held at 2.50 pm on Tuesday, 20 January 2004, eight minutes after the directors’ meeting had opened at 1st floor, Opal Field House, 29-31 King William Street.
For the reasons already given, the meeting was not validly convened. Nevertheless, I will address the circumstances surrounding the purported meeting.
The minutes claim that Mr Moore was present in two capacities. First, as a shareholder and, secondly, as a managing director of Manna Hill Gold Pty Ltd. Also said to be present were Mr Spratt and Mr Ewen.
The minutes of the directors’ meeting claim that Mr Ewen was present at the directors’ meeting but only by telephone. If the minutes of the extraordinary general meeting are accurate, then Mr Ewen must have travelled to this meeting after he had finished the telephone meeting which commenced eight minutes earlier.
The minutes claim that the persons present represented 97.3 per cent of the voting stock. Mr Moore was elected chairman. He noted there were no proxies. It is hardly surprising that there was an absence of proxies. No one else had been advised of the meeting.
The minutes record that the members purportedly resolved to remove both Mr Wilson and Ms Lawton as directors with immediate effect. Both resolutions were apparently carried unanimously.
No other shareholders, apart from Mr Moore, Mr Spratt and Mr Ewen, were advised of the meeting.
Mr Moore argued in these proceedings that s 249H(2) allowed for calling of a meeting without notice to the remaining shareholders if 95 per cent of shareholders agreed.
Section 249H(2) says nothing of the kind. It allows for the company to hold an extraordinary general meeting with less than 21 days notice if 95 per cent of shareholders agree. Section 249H does not entitle the company not to give notice to persons who are entitled to be present at the meeting.
The meeting was not validly convened. No valid resolution of the directors had been passed authorising the calling of an extraordinary general meeting. Nor were the parties present entitled to vote. Mr Spratt is not and was not a shareholder. Mr Ewen is not and was not a shareholder, and Manna Hill Gold Pty Ltd also is not and was not a shareholder.
No notice had been given to the shareholders. The resolutions purportedly passed removing Mr Wilson and Ms Lawton as directors are void and of no effect.
THE SECOND DIRECTORS’ MEETING OF 20 JANUARY 2004
Manna Hill Mining’s records disclose that a further meeting of directors was held at 4.20 pm on 20 January 2004. Present were said to be David Moore and Dene Spratt, and Mr Ewen, again by telephone. For some reason, after the extraordinary general meeting, Mr Ewen must have left the premises. Like the other two meetings, this meeting was held at 1st floor, Opal Field House, 29-31 King William Street, Adelaide. No notice was given to Mr Wilson and Ms Lawton.
The only business at the meeting was Mr Wilson’s debt. The minutes record:
‘1. WILSON DEBT - $236,442.55?
It was resolved that the amount of $236,442.55 described as Wilson debt (Wayne Wilson) with reference to previous directors minute dated 11/3/2002, is not a company debt, based upon recent professional advice given to the chairman. As such the company does not acknowledge the sum & is not responsible for payment.’
Of course, the purported resolution was to no effect. If there was an amount owing by the company to Mr Wilson or Mr Wilson’s family trust, then no resolution of the company could alter that fact. If, on the other hand, there was no debt to Mr Wilson or Mr Wilson’s family trust, then a resolution of the kind passed took the matter nowhere.
In any event, the meeting was invalid. The resolution was void and of no effect.
Manna Hill Gold Pty Ltd’s records show that a meeting of directors of that company took place on 30 January 2004. The directors present were Mr Moore and Mr Ewen.
THE MEETING OF 31 JANUARY 2004
That meeting of Manna Hill Gold Pty Ltd’s directors, if it occurred, anticipated the business of the next meeting of Manna Hill Mining which was held on 31 January 2004 when the directors present, Mr Moore and Mr Spratt, purported to carry the following resolution:
‘BUSINESS:
In the best interests of the company (MHM) it was resolved that the company transfers (and or assigns) the rights to mine on all mining leases to Manna Hill Gold (MHG) Pty Ltd for the consideration of $A1—, and Manna Hill Gold Pty Ltd agrees to pay the price of $A20— per tonne. At the 1st January each year, the price per tonne is to increase by 4%, representing inflationary pressures. It was resolved that this sole exclusive right to mine the Feldspar ore (albite & other) will be terminated if Manna Hill Gold does not extract any ore within the first 12 months from today, being 31st January 2004.The company has received $1— from Manna Hill Gold Pty Ltd.
It was resolved that Manna Hill Gold will make payment within 30 days of each 6 month period commencing 1st February 2004.
It was resolved this exclusive transfer of right to conduct mining operations applies to all existing Feldspar mining leases and all future leases of the company. It was resolved that Manna Hill Gold Pty Ltd in conducting mining operations is subject to the provisions of the Mining Act 1971 and the terms and conditions of the lease (and or leases). This mining right conferred by a lease is represented by clause or section 39(a) “confers an exclusive right upon the holder of the lease to conduct mining operations subject to the provisions of this Act and the terms and conditions of the lease for the recovery of minerals from the land comprised in the lease;-“
It was resolved that the company accept a penalty if the company in any way breaches and or terminate this agreement. The company will incur a penalty of $A2,000,000—, and this penalty will be due and payable within 30 days from the notice filed on the company from Manna Hill Gold of such a breach. The breach must be material and standing. It is resolved that the company will keep leases in good order.’
It is impossible to see how the directors could resolve to pay a penalty of $2 million and, at the same time, claim that it was in the best interests of the company.
In any event, the resolution is void and of no effect. Notice was not given to two of the directors, Mr Wilson and Ms Lawton. Mr Spratt was not validly appointed as a director. Because only one director was present, there was no quorum for the holding of the meeting. I am prepared to make a declaration that the ‘meeting’ of directors on 31 January 2004 was invalid, and that any resolutions purportedly passed at that meeting are void and of no effect.
On 31 January 2004, Mr Moore submitted an account to Manna Hill Mining for consulting fees for the period 1 January 2004 to 31 January 2004 in the sum of $6,400. Payment was due within seven days.
On 6 February 2004, Mr Moore wrote to Mr Wilson, with a copy to Mr Iles, advising that Manna Hill Mining believed that the sum of $236,442.55 was not a company debt ‘and as such does now not acknowledge it and nor is the company responsible to pay such an amount to Mr Wilson (and/or his trust and/or his family)’.
THE MEETING OF 6 FEBRUARY 2004
On the same day, the company records disclose that yet another board meeting took place at which Mr Moore, Mr Spratt and Mr Ewen were present. It was resolved that the company would indemnify all directors (Mr Moore, Mr Ewen and Mr Spratt) ‘against all legal and other costs presently involving the Court case before Justice Lander No S3004 of 2003’.
It is not clear how this resolution was in the best interests of Manna Hill Mining but I do not need to decide that matter because no notice was given to either of the applicants and, as a result, the meeting was not validly convened. It follows that the resolution is void and of no effect.
THE MEETING OF 11 FEBRUARY 2004
The last meeting of the board of directors of Manna Hill Mining was said to have been held on 11 February 2004. It is said that Mr Moore was present and Mr Spratt was present by telephone. Mr Terry Frangakis was said to be present by invitation.
The minutes disclose:
‘IT WAS RESOLVED that, in the opinion of the Directors, the Company is insolvent or is likely to become insolvent at some future time.
IT WAS FURTHER RESOLVED that Administrators be appointed to the Company pursuant to s 436A of the Corporations Act.
IT WAS FURTHER RESOLVED that the attached document entitled “Instrument of Appointment of Administrators” be executed.’
The document referred to was executed by Mr Moore and the common seal was affixed but not in conformity with the constitution of the company. John Ronald Hart and Martin David Lewis of Ferrier Hodgson, chartered accountants, were appointed administrators of the company.
Mr Spratt has no recollection of the meeting, although he does have a recollection of speaking to Mr Moore about the company’s solvency or otherwise.
That meeting, like all of the other meetings after 12 June 2003, was invalidly convened and lacked a quorum. The meeting was, therefore invalid. The resolutions passed were void and of no effect.
In their final submissions, the applicants sought other declarations and orders:
‘A Declarations that Mr David Moore:
(i)Has engaged in conduct which amounts to the falsification of the books and records relating to the affairs of the company contrary to section 1307(1) of the Corporations Act, 2001;
(ii)Has in a document required to be lodged with the ASIC made a statement which to his knowledge was false and misleading in a material particular and as such has engaged in conduct contrary to section 1308(2) of the Corporations Act, 2001.
(iii)Has failed to take reasonable steps to ensure that in a document required to be lodged with ASIC that statement was not false or misleading and as such has engaged in conduct contrary to section 1308(4) of the Corporations Act, 2001.
(iv)Has engaged in conduct forbidden by the Corporations Act, 2001 and as such has engaged in conduct in contravention of section 1211(1) of the said Act;
BA Declaration pursuant to section 1317E that Mr David Moore has contravened section 180 of the Corporations Act, 2001.
CThe Calling of an Extraordinary General Meeting by the Court
(i)Pursuant to section 249G of the Act, this Court has the power to order that a meeting of the company’s members be called where it is impracticable to call the meeting in any other way. In addition pursuant to section 249G(2) of the Act, such an order may be made on the application by any director or any member who would be entitled to vote at the meeting.
(ii)It is submitted that the Applicants are directors within the meaning of section 249G(2)(a), and both Applicants are members of the company within the meaning of section 249G(2)(b).
(iii)In the light of the purported resolutions passed at the various invalid meetings held by Mr Moore, it would be impracticable for the meeting to be called in any other way.
(iv)Further, pursuant to section 1319 of the Act, this Court has power to give directions with respect to the issues of the convening, holding, or conduct of the meeting including ancillary or consequential directions in relation thereto as it thinks fit.
(v)In circumstances it is submitted by the applicant that this Court should give the following directions:
1.date for the meeting to be held, namely within 21 days of the date of the order made;
2.an order that all members be notified of the meting in proper form together with notice of the business to be conducted thereat;
3.an order that the business to be conducted at the EGM include the proposed removal of Mr Moore as a director of the company;
4.and otherwise directions that the meeting be held in accordance with the Constitution of the company.
5.That Mr Spratt, Mr Ewen, and Mr Hagger are neither directors nor members of the company; and
6.That neither Hodgemore Pty Ltd nor Manna Hill Gold Pty Ltd are members of the company for the purposes of such a meeting.
D Orders Sought in Relation to the Correction of the ASIC Register
(i)Pursuant to section 1322(4)(b) this Court has the power to rectify any register kept by ASIC under the Act.
(ii)Further, it is submitted that pursuant to section 1322(6)(c), no substantial injustice will be caused or is likely to be caused to any person if the ASIC Registers at issue are rectified. In particular it is submitted that the following rectification orders ought to be made:
(iii)that ASIC document 019158507 (“NJI12”) be removed from the Register. That document purports to be a document lodged by Mr David Moore at ASIC on 12 June 2003 whereby he purported to notify ASIC of a change to the officeholders of the company. It is submitted that the purported document was not lodged upon the making of any valid resolution. In particular it is submitted that the purported resolution passed at the meeting of directors of 12 June 2003 whereby Mr Hagger purportedly appointed was not a valid resolution. For these reasons and for the reasons referred to above, it is submitted that Mr Moore had no or no proper authority to lodge the said document;
(iv)that ASIC document 019333364 (“NJI11”) be removed from the Register. By that document Mr David Moore purported to notify ASIC of a change to officeholders, namely the cessation to hold office by Ms Gayle Lawton. As referred to above, it is submitted that there was no or valid authority in Mr Moore to lodge the said document. Further, as submitted above, at no stage did Ms Lawton resign as a director in writing as required by the Constitution or indeed at all. It is submitted that there will be no injustice caused to any person if such a rectification order were made.
(v)that ASIC document 019212322 (“NJI13”) be removed from the Register. It is submitted that Mr David Moore had no authority to lodge the said document. It is submitted further for the reasons mentioned above that the purported meeting of the directors at which the same share issue was made was an invalid director’s meeting and any business transacted thereat, or any resolution passed thereat, is void and or of no effect. As such, it is submitted that any share issue is not a valid share issue and that as such the said document should be removed from the Register.’
The orders sought in paragraph A are directed only to Mr Moore’s conduct. Mr Moore was not put on notice at any time prior to the final submissions that such declarations would be sought.
It would seem to me that he was entitled to have notice of the declarations sought prior to his giving evidence and, certainly, much earlier than in the applicants’ final addresses.
The same comments apply, in my opinion, to paragraph B of the orders sought. I am not prepared to make those orders.
I am not prepared to make orders calling an extraordinary general meeting. The effect of the declarations and orders which will be made will mean that all three directors will be entitled to meet together and, if a majority is of the opinion that it is in the best interests of the company that the resolution proposed in paragraph C(v)3 be put to an extraordinary general meeting, then the majority can so resolve. As I have already indicated, any one director can convene a meeting of directors provided the director complies with the director’s obligations in giving notice to the other directors of the time and place of meeting, and, I would have thought in this case, of the business to be considered.
Lastly, the applicants sought an order pursuant to s 249G(1) that there be a meeting of the members of Manna Hill Mining and that a chartered accountant practising in Adelaide be appointed chairman and that the meeting consider the resolution:
‘That Mr David Gerald Moore be removed as Director and Secretary of Manna Hill Mining company Pty Ltd with immediate effect.’
For the reasons already given, in my opinion, it would be appropriate that the directors, if that is their view, convene a meeting to consider that resolution.
There is an urgent need for the directors to meet. The directors must consider whether the company is solvent or otherwise. They must consider whether or not the resolution appointing the administrator which, for the reasons given, I have found is void and of no effect, should be reconsidered.
That will depend upon whether the company is able to pay its debts as and when they fall due, and that will, of course, depend upon the level of support offered to the company by the directors and members.
I am prepared to make the orders contemplated in paragraphs D(iii), (iv) and (v). Those orders are consistent with the orders and declarations which would follow from my reasons and would give effect to those declarations and orders.
I direct the applicants to bring in short minutes of orders to reflect these reasons.
I certify that the preceding three hundred and eighty-four (384) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. Associate:
Dated: 14 July 2004
Counsel for the Applicants: M Abbott QC with D Agresta Solicitor for the Applicants: Iles Selley Counsel for the First Respondent: No appearance Counsel for the Second Respondent: D G Moore in person Counsel for the Third Respondent: G D Hagger in person Counsel for the Fourth Respondent: G D Hagger in person Counsel for the Fifth Respondent: D R Spratt in person Counsel for the Sixth Respondent: No appearance Counsel for the Seventh Respondent: No appearance Counsel for the Eighth Respondent: No appearance Date of Hearing: 17, 18, 19, 20 February 2004; 5, 6, 7, 8, 19, 20, 21 April 2004 Date of Judgment: 14 July 2004
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