Windsor, P.G. v National Mutual Life Association of Australasia Ltd
[1992] FCA 139
•23 MARCH 1992
Re: PETER GRENFELL WINDSOR
And: THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED
No. V G3007 of 1991
FED No. 139
Corporations
(1992) 10 ACLC 509, (1992) 7 ASCR 210
(1992) 106 ALR 282
(1992) 34 FCR 580
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Black C.J.(1), Beaumont(1) and Ryan(2) JJ.
CATCHWORDS
Corporations - arrangements, reconstruction and amalgamation - change of status of company - limited by guarantee to limited by shares and guarantee - whether case governed by Companies (Victoria) Code or Corporations Law (Cth) - Scope of s.69 Companies (Victoria) Code - whether scheme of arrangement procedure can achieve change of status - Court's power to sanction schemes of arrangement - Scope of s.315 Companies (Victoria) Code - meeting convened pursuant to requisition of shareholders - whether s.247 Corporations Law can be displaced by inconsistent articles - effect of s.140 Life Insurance Act - whether proposed resolution to change status of company could lawfully be passed - obligation of company to inform members of meeting where resolution to be put could not lawfully be passed.
Companies (Victoria) Code: s.69; s.241; s.315.
Corporations Law: s.246; s.247(4).
Life Insurance Act 1945: s.140.
Australian Securities Commission v SIB Resources NL and Ricla Holdings Pty Ltd (1991) 30 FCR 221.
Re Bamboo Goldmines Ltd (1987) 5 ACLC 631.
Re Insight Mining Pty Ltd and the Companies (SA) Code (1987) 44 SASR 495.
Re International Harvester Co of Australia Pty Ltd (1953) VLR 669.
Re Tillers Pty Ltd and the Companies Act 1961 (1970) 3 NSWR 202.
Re Brian Cassidy Electrical Industries Pty Ltd (1984) 9 ACLR 140.
Turner v Berner (1978) 1 NSWLR 66.
Isle of Wight Railway Co v Tahourdin (1883) 25 Ch D 320.
NRMA v Parker (1986) 11 ACLR 1.
Queensland Press Ltd v Academy Instruments No 3 Pty Ltd (1987) 11 ACLR 419.
Re Totex-Adon Pty Ltd (1980) 1 NSWLR 605.
L.C. O'Neil Enterprises Pty Ltd v Toxic Treatments Ltd (1986) 4 NSWLR 660.
Vision Nominees Pty Ltd v Pangea Resources Ltd (1988) 14 NSWLR 38.
HEARING
MELBOURNE
#DATE 23:3:1992
The appellant appeared in person.
Counsel and Solicitors Mr R.A. Finkelstein QC with
for the respondent: Mr C.M. Scerri instructed by Arthur
Robinson and Hedderwicks
ORDER
Appeal and cross-appeal dismissed.
Costs reserved.
NOTE: Settlement and entry of orders is dealt within O.36 of the Federal Court rules.
JUDGE1
In order to understand the issues which arise in this appeal, it will be necessary to refer first to some of the background to the litigation.
The background
The respondent, The National Mutual Life Association of Australasia Limited, ("National Mutual"), was incorporated in Victoria in 1869 as a company limited by guarantee. On 12 September 1990, a special resolution of National Mutual resolved that the status of the company be changed, pursuant to the provisions of s.69(1) of the Companies (Victoria) Code, to a company limited both by shares and by guarantee. Pursuant to the provisions of s.69(2) of the Code, the conversion was effected on 4 October 1990 when the Commissioner for Corporate Affairs issued a new certificate of incorporation.
On 18 December 1990, a members' requisition for a general meeting of National Mutual was lodged with the company. The requisition was forwarded under cover of a letter written by Peter Grenfell Windsor, the appellant. More than 300 members of National Mutual signed the requisition, which was in the following terms (save only that the sub-headings "Part A" and "Part B" have been added to facilitate this discussion):
"We the undersigned members hereby request the Directors to convene a general meeting of the Company enabling every policyholder registered as a member to consider: (Part A)
the Information Memorandum dated 6 August 1990; the conduct of the proceedings of 12 September 1990; the Capital Raising Plan; the synopsis of Price Waterhouse advice; reports by the Actuary, the Auditor, the Directors and their duties to members; the Company's liabilities through subsidiaries acting as trustees and the effects as could be shown in the Company's financial statements; the Directors' benefits, remuneration and position particularly in relation to investments by the Company and its subsidiaries; a review of the eligibility to hold office of each Director; removal and appointment of Directors at the Annual General Meeting; relevant correspondence and legal opinions tabled for inclusion in the minutes;
(Part B)
and for the object of passing, if the members deem fit, the following members' resolution intended to be proposed as a Special Resolution -
'That if the motions to change the status of the Company proposed by the Board of Directors on 12 September 1990 at 123 Collins Street, Melbourne constitute resolutions, they be rescinded and renounced as never having had any effect, because they involved: (Emphasis added)
(1) no change to the Company's Memorandum, due to a written notice of a general meeting specifying the intention to propose a special resolution to alter the Memorandum not being posted to all members whose names were, at the time of posting of the notice, known to the Company as required by sub-section 73(6) of the Companies (Victoria) Code, and Court dispensation from this requirement not being obtained under sub-section 73(7), thus the manner of the proposed alteration to the Memorandum was otherwise than as provided by the Code as dealt with by sub-section 72(1), and therefore the proposal failed to comply with sub-section 69(7);
(2) delibertately keeping the members uninformed specifically, 99% of members were denied any detailed information on the proposed motions through conscious neglect of arrangements required to be made under Section 140 of the Life Insurance Act 1945, and apart from agents and employees, those members with notice of the proposed motions, received such inadequate information that it would be extraordinary for them to understand the implications or to cast properly informed votes, either personally or by proxy;
(3) ambitions at the expense of duties to members, as members were not informed how the proposed motions would effectively remove certain of their rights and the Directors could appropriate control of the Company, to the detriment of the role of members and the extent of their participation in a mutual society;
(4) no professional endorsement in particular, there was no independent expert advice recommending the proposed motions to the members, and the Directors did not disclose any independent expert advice or legal opinion which commends the proposed motions or their manner of implementation; and because
(5) unilateral action by the Directors presuming authority namely on the day, none of the members had the opportunity to collectively hear, consider and vote, in a way which would reflect their informed preferences at a general meeting of members."
The requisition was purportedly made pursuant to s.241 of the Code. From 1 January 1991, the Corporations Law came into force and s.246 of that law is in similar terms to s.241 of the Code. The primary judge treated the requisition as made under s.246 of the Corporations Law, but nothing seems to turn on this. By s.246 of the Corporations Law it is provided, relevantly, as follows:
"(1) The directors of a company, notwithstanding anything in its articles, shall, on the requisition in writing of:
(a) in the case of a company having a share capital - at least 100 members holding shares in the company on which there has been paid up an average sum, per member, of at least $200;
(b) in the case of a company not having a share capital - at least 200 members; or
(c) in either case - a member who is entitled, or members who are together entitled, to at least 5% of the total voting rights of all the members having at the date of the deposit of the requisition a right to vote at general meetings; as soon as practicable convene a general meeting of the company to be held as soon as practicable but, in any case, not later than 2 months after the date of the deposit of the requisition."
(No shares had then been issued by National Mutual, but nothing appears to turn on this for present purposes.)
"(2) The requisition shall state the objects of the meeting and shall be signed by the requisitioning member or members and deposited at the registered office of the company...
(3) If the directors do not, within 21 days after the date of the deposit of the requisition, proceed to convene a meeting, the requisitioning member, or, where there are 2 or more requisitioning members, those members or any of them representing more than 50% of the total voting rights of all of them:
(a) may, in the same manner as nearly as possible as that in which meetings are to be convened by directors, convene a meeting; and
(b) for the purposes of convening a meeting as provided by paragraph (a), may request the company to supply a written statement setting out the names and addresses (so far as they are known to the company) of the persons who, at the date of the deposit of the requisition, were entitled, under subsection 247(4) or a provision of the articles of the company, to receive notice of general meetings of the company.
(4) Where a request for a statement is made to a company under paragraph (3)(b), the directors of the company shall send the statement to the person or persons who requested the statement within 7 days after the day on which the request is made.
(5) A meeting convened by a requisitioning member or requisitioning members in accordance with subsection
(3) shall not be held more than 3 months after the date of the deposit of the requisition.
(6) Any reasonable expenses incurred by the requisitioning member or members by reason of the failure of the directors to convene a meeting shall be paid to that member or those members by the company, and any sum so paid shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration in respect of their services to such of the directors as were in default. ..."
On 8 January 1991, National Mutual caused to be published in several newspapers in Australia and New Zealand the following statement:
"On 18 December 1990 National Mutual received a requisition under section 241 of the Companies (Victoria) Code signed by in excess of 200 policyholders requiring a general meeting of the Company.
The requisition contains a proposed resolution, the substantive part of which is that the change in status of the Company effected after the Extraordinary General Meeting held on 12 September 1990 be 'rescinded and renounced'. National Mutual has received legal advice that this resolution cannot properly be put to a general meeting of the Company because the relevant legislation does not permit a company limited both by shares and by guarantee, as National Mutual now is, to convert its status to a company limited by guarantee alone.
Accordingly, the requisitioned General Meeting can consider only that part of the requisition which may properly be dealt with in general meeting.
The Directors of National Mutual have resolved to convene a General Meeting in accordance with the Members' Requisition for the purpose of considering such of the matters referred to in the first part of the Members' Requisition (which, excluding references to the proposed resolutions, is set out in the notice below) as may be properly put to the meeting. The General Meeting will be held on the first floor, 447 Collins Street, Melbourne, Victoria, Australia on 23 January 1991 at 4.00pm.
Baillieu Myer, Chairman
Notice of Meeting
Notice is given that in pursuance of a requisition by members under section 241 of the Companies (Victoria) Code, a General Meeting of The National Mutual Life Association of Australasia Limited will be held on the first floor, 447 Collins Street, Melbourne, Victoria, Australia on 23 January 1991 at 4.00pm.
The terms of the first part of the Requisition are as follows:
(Part A, above, was set out)
The object of the General Meeting shall be to consider such of these matters as may properly be the subject of a general meeting of the Company.
By order of the Board
B.P. Strong, Secretary, 8 January, 1991 (Proxies were then dealt with)"
None of the requisitionists attended the meeting. The matters in Part A of the requisition were dealt with by the chairman of the meeting referring those present to the topics mentioned and inviting discussion. This invitation was not accepted and there was no discussion.
On 1 February 1991, Mr Windsor caused a notice to appear in "The Australian" newspaper and "The Dominion" newspaper in Wellington, New Zealand, in the following terms:
"NATIONAL MUTUAL LIFE ASSOCIATION
On 18 December 1990 National Mutual received a requisition under Section 241 of the Companies (Victoria) Code signed by in excess of 300 policyholders requiring a General Meeting of the Company for the object of passing, if the members deem fit, a members resolution intended to be proposed as a special resolution. On 23 January 1991 National Mutual held a meeting, but did not give such notice of the meeting as is required by law in the case of special resolutions. That meeting is therefore deemed by law not to be duly convened by the directors for the purpose of the requisition. Also on 29 January 1991 National Mutual held an Annual General Meeting, but did not give notice of ten other special resolutions intended to be proposed by members. Accordingly the requisitionists are now proceeding to convene a meeting as provided for by law in such circumstances.
NOTICE OF MEETING
Notice is given that in pursuance of a requisition by members, a general meeting of the National Mutual Life Association of Australasia Limited will be held in the Conference Room of the Wilson Centre, 6l Railway Street, Gatton, Queensland, Australia on 23 February at 8.30pm. The business of the meeting shall be:
1. To consider (Part A, above, was set out)
2. To consider and if the members deem fit, pass a members resolution as a special resolution, the substance of which is that if the motions to change the status of the Company proposed by the Board of Directors on 12 September 1990 at 123 Collins Street, Melbourne constitute resolutions, they be rescinded and renounced as never having had any effect for reasons including: The members were not properly informed about the Directors proposals, no independent professional endorsement for their proposals was available to members, and the memorandum of association was not changed to give effect to their proposal because all members were not served notice in writing of a general meeting for that purpose.
3. To consider and if the members deem fit, pass special resolutions, the substance of which are to
(a) Direct the Company to serve notice on every member in writing no later than 1 May 1991 of a General Meeting to be held for the purpose of deciding: If the status of the Company is to be converted from a Company Limited by guarantee to a Company Limited both by shares and by guarantee: and, if the memorandum of association should be amended as proposed by the Directors on 12 September 1990;
(b) Ratify all proper and correct acts by the Directors anticipating the change of status and amendments to the memorandum, if the resolutions forecast by (a) are carried;
(c) include in the articles of association to be presented for adoption by the general meeting convened pursuant to the resolution outlined in
(a), articles to delineate the rights of members in relation to the performance by Directors of their fiduciary duties, and to provide safeguards for members effectively enforcing performance of such duties, and to safeguard the company;
(d) implement an independent investigation of the application of Company assets, the report of which is to be represented for consideration by the members in general meeting later in 1991;
(e) determine what liabilities should be disclosed on the Company's balance sheet in relation to superannuation trusts controlled by the Company;
(f) Remove all Directors from their office of Director;
(g) Appoint Messrs Windsor, O'Brien and Stott as Directors.
4. Such other matters arising out of the foregoing which any member present in person or by proxy, raises for consideration by the meeting.
THIS NOTICE IS GIVEN BY P.G. WINDSOR
CHAIRMAN OF THE NMLA POLICYHOLDERS COMMITTEE AND PROXY FOR THE REQUISITIONING MEMBERS
1 FEBRUARY 1991
(PROXIES were then dealt with)"
The proceedings at first instance
By its application dated 7 February 1991, in proceedings instituted against Mr Windsor and George Henry Hallas, one of the requisitionists, as respondents, National Mutual sought declarations (1) that the meeting to be held on 23 February 1991 would not constitute a general meeting of National Mutual; (2) that the meeting was not convened pursuant to s.246(3) of the Corporations Law; (3) consequential relief.
Before the learned primary Judge, National Mutual contended that it was not legally possible for a company limited by shares and guarantee to convert itself into a company limited by guarantee; that directors had no obligation to call a general meeting to deal with business which could not be legally effectuated at the meeting so that the directors were under no obligation to submit the matters contained in Part B of the requisition to the meeting on 23 January 1991 or to give notice of them; and that National Mutual did convene the meeting insofar as it was legally required to do and that the pre-condition for a meeting convened by requisitionists under s.246(3) did not exist because the directors had, in fact, convened a meeting. National Mutual did not seek to restrain the requisitionists' meeting proceeding on 23 February 1991 as advertised but sought an early ruling from the Court that the meeting would not constitute a meeting convened pursuant to s.246(3) of the Corporations Law. Alternatively, National Mutual argued that the advertisement of 1 February 1991 could not validly convene a meeting because of certain defects in form and service. It also challenged the authority of Mr Windsor, who did not sign the requisition himself, to convene the meeting.
Mr Windsor and Mr Hallas argued that, by reason of the provisions of s.247(4) of the Corporations Law, the mere advertisement of the meeting is not enough and that actual service of the notice is required. They also said that the meeting could validly deal with the proposed resolutions in Part B of the requisition, or at least some of them, and that the directors acted wrongly in not giving notice of such resolutions when convening the meeting. It followed, the argument ran, that the meeting of 23 January 1991 was not validly convened, with the consequence that the requisitionists were entitled, by virtue of s.246(3) of the Corporations Law, themselves to convene the meeting of 23 February 1991.
On 21 February 1991, the primary Judge granted the relief sought by National Mutual.
The reasoning of the primary JudgeThe Judge held that it was not open to a company limited by shares and guarantee to convert to a company limited by guarantee. His Honour also held that proper notice had been given of the meeting held on 23 January 1991. The Judge further rejected the respondents' contention that matters were wrongly withheld from the meeting of 23 January 1991. He said:
"...if National Mutual was correct in the view that the change of status could not be legally reversed, as I think it was, it was entitled to refrain from giving notice of the matters in Part B or putting them to the meeting."
The appeal
Mr Windsor now appeals from the whole of the judgment at first instance. He appeared before us unrepresented. Mr Hallas did not appeal.
The arguments advanced in support of the appealAs we followed Mr Windsor's submissions, every conclusion of the primary Judge is now challenged.
Were the provisions of s.241(1) of the Code applicable?Logically, the first question which arises is whether the provisions of s.241(1) of the Code applied. The similar provisions of s.246(1) of the Corporations Law have been set out above. As has been said, as at 18 December 1990, although National Mutual was a company limited both by shares and by guarantee, no shares had been issued. It has been assumed in argument, and accepted by National Mutual, that the requisitionists fell into one of the categories (a), (b) and (c) of s.241(1).
Was National Mutual entitled to omit Part B from the notice of the requisitioned meeting?The initial matter that arises here is whether it is possible for a company limited both by shares and by guarantee to convert to a company limited by guarantee. In the first instance, reference should be made to the provisions of s.69 of the Code, which deal with change of status. (Here also the matter, ultimately, fell to be regulated by the Corporations Law, but nothing appears to turn on this since its relevant provisions are similar.) By s.69(1)(c), it is provided that a company limited by shares may convert to a company limited both by shares and by guarantee. By s.69(1)(d), a company limited by guarantee may convert to a company limited both by shares and by guarantee, as National Mutual did in September 1990. Other changes of status are provided for in s.69 but none is presently material. There is no express power in s.69 for a company limited both by shares and by guarantee to convert to a company limited by guarantee. In the absence of any express power, we can see no basis for implying such a power in s.69.
On its face, s.69 gives an indication of an exhaustive code in the field of the changes of status of this kind (cf. s.70). Section 69 specifies only five out of a larger number of possible changes of status and the section is in a division of the Code entitled "Legal Capacity, Powers and Status" which deals generally with those subject matters. Apart from the text and context of the provision, there are also policy considerations which would suggest that no such implication should be made. The elimination of the share capital involved in the process of any such conversion would by-pass the provisions of the Code designed to protect creditors in the case of a reduction of capital (see s.123(3)). It is unlikely that such a result could have been intended. In our opinion, s.69 does not provide any right in a company limited both by shares and by guarantee to convert to a company limited by guarantee only. See Australian Securities Commission v SIB Resources NL and Ricla Holdings Pty. Ltd. (1991) 30 FCR 221.
Is there any other statutory source of the right to convert in this way? Mr Windsor relies upon the decision of Vincent J. in the Supreme Court of Victoria in Re Bamboo Gold Mines Ltd. (1987) 5 ACLC 631. It was there held that the scheme of arrangement procedure provided by s.315 of the Code could achieve a change in status from that of a limited company to that of a no liability company. But in Re Insight Mining Pty. Ltd. and the Companies (SA) Code (1987) 44 SASR 495, Johnston J., in the Supreme Court of South Australia, took a contrary view.
In our opinion, the scheme of arrangement provisions were not available here and in any event it is plain that any proposal for a scheme of arrangement was outside the object of the meeting.
In Re International Harvester Co. of Australia Pty. Ltd. (1953) VLR 669, a scheme of arrangement was proposed between a proprietary company, incorporated under the Companies Act 1910 (Vic.), and its shareholders. The object of the scheme was to put the company in the same position as if it had been incorporated as a proprietary company under the provisions of the Companies Act 1938 (Vic.). The company petitioned the Court, pursuant to s.153 of the Companies Act 1938, which enabled the Court to sanction schemes of arrangement, for its sanction to the scheme. It was held that the Court had no power under s.153 to sanction the scheme and that the company could only attain its object by following the procedure set out in s.6 of the Companies Act 1938 which gave the Court power to sanction an amendment to the company's memorandum of association.
Lowe A.C.J. said (at 672):
"It is now plain that the word 'arrangement' is not restricted in its meaning by its association with 'compromise'... The word has been given a liberal meaning and, generally speaking, unless the arrangement is ultra vires the company ... or seeks to deal with a matter for which a special procedure is laid down ... or to evade a restriction imposed by the Act (e.g., sec. 5(6) and sec.26(4) of the Companies Act) almost any arrangement otherwise legal which touches or concerns the rights and obligations of the company or its members or creditors may be come to under sec. 153."
Smith J. said (at p 675):
"...sec. 153 is to be construed liberally, and it is wide enough to include schemes altering the provisions in a memorandum relating to the share capital of a company; and it may be that it extends so far as to cover schemes altering other provisions in a memorandum. But however widely the language of sec. 153 may be construed, it cannot, of course, operate to enable a company to escape from compliance with those provisions of the Act which, either expressly or by implication, lay down a special and exclusive procedure for effecting certain kinds of alterations to the memorandum."
In Re Tillers Pty. Ltd. and Companies Act 1961 (1970) 3 NSWR 202, Street J. said (at p 203):
"It is well-settled that s.181, either in its terms or in the discretionary administration of the jurisdiction thereby conferred, does not, or should not, fill the place of proceedings for which specific provision is made elsewhere in the Companies Act. The present scheme infringes this principle."
See also Re Brian Cassidy Electrical Industries Pty. Ltd. (1984) 9 ACLR 140 at 142.
In our opinion, s.69 lays down a special procedure which must be followed in this area. By s.69(2), provision is made for application to be made by the company to the Commission for a change of status and for the lodgement of prescribed documents with the Commission (see also s.69(4)). Provision is also made by s.69(2) for the issue by the Commission of a new certificate of incorporation in certain circumstances. By s.69(3), notice of change of status shall be published by the company in such manner, if any, as the Commission directs. By s.69(8), it is provided that a change in the status of a company does not operate, in the respects there specified, to affect the company's rights or liabilities.
In our opinion, as a matter of statutory interpretation, the general provisions of s.315, even if widely construed, cannot travel into the area of the change of a company's status. The status of a company is, of course, fundamental and owes its existence to the provisions of the statute. In our view, s.69 was intended to cover the field in this area. Section 315 deals with arrangements between a company and its creditors or between a company and its members. But the status of a company is a more fundamental matter. Its status will affect persons including members and creditors, but others may also be affected: for instance, the Commission and the general public may be affected by a change of status. This is not a matter which only concerns members or creditors. We think that the legislative intention was to permit a change of status to be effected in the circumstances described in s.69 but in no other circumstances. It follows that s.315 cannot be used for this purpose. It further follows that the resolution proposed in Part B of the requisition could not lawfully be passed.
As has been seen, National Mutual decided to omit Part B from the notice of the requisitioned meeting. National Mutual did so on the basis that, "if an object of the requisition cannot be lawfully effectuated at the meeting, then the directors are at least entitled to omit that object from the notice of the meeting" (per Needham J. in Turner v. Berner (1978) 1 NSWLR 66 at 72).
By s.241(2) of the Code, it is provided that the requisition shall state the objects of the meeting.
In Isle of Wight Railway Company v Tahourdin (1883) 25 Ch D 320, Fry L.J. said (at 334):
"If the object of a requisition to call a meeting were such, that in no manner and by no machinery could it be legally carried into effect, the directors would be justified in refusing to act upon it. But if the object stated in the requisition be such that by any form of resolution or by any machinery sanctioned by the Act, it can be carried into effect, then it is the bounden duty of the directors to call the meeting."
What was the object of the present requisition? It will be recalled that the requisition requested the directors to convene a meeting -
"enabling every policyholder registered as a member to consider (the documents and matters there specified) and for the object of passing, if the members deem fit, the following members' resolution intended to be proposed as a Special Resolution -
1. That if the motions to change the status of the company proposed by the Board of Directors on 12 September 1990...constitute resolutions, they be rescinded and renounced as never having had any effect, because they involved (the various matters then alleged)."
In our opinion, properly construed, the requisition had a single object only. This object was the passing of the proposed resolution. The matters set out before the reference to this object were, we think, no more in the circumstances than prefatory or introductory matters. Their proposed discussion did not, in our view, constitute a distinct or separate object. It is true that, for reasons of clarity of expression in these reasons, the requisition has been divided into two sections, Parts A and B. But whether it is appropriate to divide up the document in this way is not the question here. It is necessary, for present purposes, to identify the object or objects of the requisition. In truth, in our opinion, there was only one object, that of passing the resolution proposed.
In NRMA v Parker (1986) 11 ACLR 1, McLelland J. said (at 5):
"It has been held, and this was not challenged on behalf of the defendant, that if one object of a requisition by members of a company for an extraordinary general meeting is an object which cannot be lawfully effectuated at such a meeting, the directors are entitled to omit that object from notice of the meeting...
It follows, in my opinion, that if such an object is the sole object of such a requisition, then the directors are entitled to decline to act on the requisition at all..."
See also Queensland Press Ltd. v Academy Instruments No. 3 Pty. Ltd. (1987) 11 ACLR 419 at 422.
It follows, in our opinion, that the requisition was wholly ineffective and its deposit at the registered office of the company imposed no obligation upon National Mutual, by virtue of s.241 of the Code, or otherwise, to convene a meeting. It must follow, in our view, that the appeal fails.
The cross-appealThe learned primary Judge made no order as to costs. National Mutual cross-appealed against this part of the judgment but abandoned the cross-appeal during the course of argument.
Costs of the appeal and cross-appealIn all the circumstances, we propose that costs of the appeal and cross-appeal be reserved and that each of the parties have leave to file and serve, within 21 days, a written submission with respect to costs.
Proposed ordersWe propose the following orders:
1. Appeal and cross-appeal dismissed.Costs reserved.
JUDGE2
The facts giving rise to the orders made at first instance, as far as they are relevant to the present appeal, have been fully and clearly set out by Black C.J. and Beaumont J. I agree with them that the object of the requisition lodged on 18 December 1990 was to procure the rescission of the special resolution changing National Mutual to a company limited both by shares and by guarantees. The effect of that rescission, if achievable, would have been to cause National Mutual to revert to the status of a company limited solely by guarantee. I also agree for the reasons explained in the joint judgment that such a reversion could not lawfully be effectuated.
In my view, notice of the meeting of 23 January 1991 was properly given in accordance with Articles 53 and 156 of National Mutual's Articles of Association which "make other provision" within the meaning of s.247(4) of the Corporations Law. Section 247(4) provides:
"So far as the articles do not make other provision, notice of every meeting shall be served on every member having a right to attend and vote at the meeting in the manner in which notices are required to be served by Table A."
Article 53 specifically incorporates by reference the manner of giving notice of every general meeting which is stipulated in Article 156. Those two articles are in the following terms:
"53. Subject to the provisions of the Code as to short notice, at least 14 days' notice of a general meeting or, in the case of a general meeting convened for the purpose of considering a special resolution, at least 21 days' notice shall be given to the members in the manner provided by Article 156.
156. Subject to the Life Insurance Act, notice of every general meeting shall be given by the Association to members by advertisement in at least one daily newspaper published in each of the capital cities of the States of Australia and in Wellington New Zealand."
In Re Totex-Adon Pty Ltd (1980) 1 NSWLR 605 Needham J. was concerned to apply s.138(1) of the Companies Act 1961 which provided:
"So far as the articles do not make other provision in that behalf, two or more members holding not less than one-tenth of the issued share capital or, if the company has not a share capital, not less than five per centum in number of the members of the company may call a meeting of the company."
The effect given by his Honour to the introductory words of that sub-section was stated thus, at 610:
"In my opinion, s.138(1) should be construed in the following manner. One should look at the articles of the company and ascertain whether they make provision for the calling of a meeting of the company other than the provision made by s.138(1). If they do, then s.138 does not apply. If the provisions made by the articles are frustrated by the facts of the case, then one cannot resort to s.138(1); but must resort to s.142, or, in the case of default in calling an annual general meeting, s.136(4)."
In L.C. O'Neil Enterprises Pty Ltd v Toxic Treatments Ltd (1986) 4 NSWLR 660, McLelland J. found it necessary to construe s.242(1) of the Companies (New South Wales) Code which corresponded to s.138(1) of the Companies Act 1961. His Honour identified the question of construction of s.242(1) and a contingent question of construction of the relevant article in these terms, at 661:
"This raises a question of construction of s.242(1), namely, whether the power thereby conferred is exercisable only if the articles do not make any provision as to who may call a meeting of the company or whether, on the other hand, the power is exercisable unless the articles make some provision which is inconsistent with the existence of that power. If the latter is the true construction of the subsection, a second question arises as to the construction of article 56, namely, whether the provision thereby made is inconsistent with the existence of the power conferred by s.242(1). An inconsistency would arise if on its true construction article 56 evinces an intention to "cover the field" as to whom may call a general meeting, or by implication excludes the calling of a meeting except by the persons and in the circumstances there stated."
His Honour then reached the following conclusion, at 662, which he regarded as essentially the same as that expressed by Needham J. in Re Totex-Adon Pty. Ltd (supra);
"Turning first to s.242(1), I am of the opinion that the power to call a meeting thereunder is excluded if there is any provision in the articles specifying who may call a general meeting, regardless of whether that provision is inconsistent with the existence of the power conferred by s.242(1). The expression "other provision" in s.242(1) must necessarily mean other provision as to who may call a meeting of the company, but I see no sufficient basis for implying a further qualification to the effect that the "other provision" must be inconsistent with the existence of the power conferred by the subsection. That expression in its natural sense carries the connotation not of inconsistency between two provisions, but only of difference between them."
When McLelland J.'s judgment in L.C. O'Neil Enterprises Pty. Ltd v Toxic Treatments Ltd was reviewed by the Court of Appeal the construction of s.242(1) which he and Needham J. had preferred did not find favour with Kirby P. (dissenting in the result) who considered that it did not give due weight to the presence of the word "other" in the qualification "so far as the articles do not make other provision ...". Hope J.A. expressly found it unnecessary to resolve the controversy although he did say, at 670, of the construction adopted by Needham and McLelland JJ.:
"I must respectfully say that as at present advised, I have reservations about the correctness of this construction."
However, Hope J.A. was able to avoid the difficulty inherent in the competing constructions to which he drew attention by categorising s.242 not as a provision as to who might call a meeting of the company, but as a provision for the calling of a meeting of the company upon the requisition of members of the company. On that narrower basis, his Honour was able to regard article 56 in the light of s.241 of the Code, as making "other provision" in the sense used in s.242(1). The other member of the Court of Appeal in L.C. O'Neil Enterprises Pty. Ltd v Toxic Treatments Ltd., Priestley J.A., contented himself with saying, at 672:
"On what Hope J.A. has referred to as the wider view of the construction of the words `so far as the articles do not make other provision' in s.242(1), I have not formed any opinion."
The differences of judicial opinion as they had been revealed after the judgments of the Court of Appeal in L.C. O'Neil Enterprises Pty. Ltd v Toxic Treatments Ltd were later analysed by Bryson J. in Vision Nominees Pty. Ltd. v Pangea Resources Ltd (1988) 14 NSWLR 38. In that case, his Honour concluded that he ought to apply the view expressed by Needham J. in Re Totex-Adon Pty. Ltd as explained by McLelland J. in L.C. O'Neil Enterprises and construed as making "other provision" within the meaning of s.242(1), an article in these terms:
"60. The directors may whenever they think fit and they shall upon the requisition in writing of members holding at the date of the deposit of the requisition not less than one-tenth of such of the paid up capital as at the date of the deposit carries the right to vote at general meetings of the company forthwith convene an extraordinary meeting of the company and in the case of any such requisition the provisions of s.137 of the Companies Act shall apply."
I characterize s.247(4) of the Corporations Law as a provision for the giving to members of notice of every meeting of the company whether convened by the directors of their own motion, or pursuant to a requisition by members, or in accordance with some other requirement in the articles. The section makes that provision in two ways; by specifying first that notice must be given to every member entitled to attend and vote at the meeting and secondly that the manner of giving notice is to be that stipulated in Table A for the service of notices generally i.e. by personal service or by prepaid post to the address as shown in the register of members or the address supplied by the member to the company for the giving of notices to him. Accordingly, any provision in the articles which prescribes a different manner of giving notice e.g. by newspaper advertisement, telephone or facsimile transmission pro tanto displaces the operation of s.247(4). I do not regard the qualification imported into National Mutual's articles by the phrase "subject to the Life Insurance Act" as affecting the extent to which the article can make "other provision" for the giving of notice of meetings of members generally. The only provision of the Life Insurance Act which has been suggested as bearing on the matter is s.140 which provides:
"(1) Notwithstanding anything contained in the instruments constituting, or in the articles of association or other rules of, any company not having shareholders, the company shall, within one year after it is registered under this Act, make arrangements for -
(a) the establishment of a postal voters' roll in relation to voting in contested elections of directors of the company or on questions as to the alteration of the instruments constituting the company or of the articles of association or other rules of the company;
(b) the enrolment on the postal voters' roll of any members of the company entitled to vote in such elections or on such questions who applies to be so enrolled;
(c) the voting by post in any such election or on any such question by every member so enrolled; and
(d) the making of inspections of the postal voters' roll and the taking of copies of, or extracts from, the roll, on and after the close of nominations and before the close of the voting in any such election, by any person nominated for election as a director of the company, and all regular votes of members given in pursuance of any such arrangements shall be valid and effectual for all purposes.
(2) Where a member of a company enrolled on the postal voters' roll of the company fails to exercise his right to vote by post on three consecutive occasions on which he is entitled so to vote, the company may remove his name from the roll, but the member shall be eligible for re-enrolment.
(3) This section does not apply to a company which is incorporated outside Australia."
It will be seen that s.140 is concerned to create a facility whereby members entitled to vote in elections of directors or on questions as to the alteration of the memorandum, articles or other rules of the company can ensure that they are given an opportunity to exercise by post their right to vote. It follows that any members whose names remain on a postal voters' roll must be advised of the identity of the candidates seeking election, or of the question as to the alteration of the memorandum, articles or rules, in such a way as to render effectual the right of those members to vote by post. However, s.140 in my view, says nothing about meetings of members at which elections of directors are not to occur, or a vote on a question as to the alteration of the memorandum, articles or rules is not to be taken, or, as here, cannot lawfully be taken.
For these reasons, I conclude that the meeting of 23 January 1991 was validly convened in response to the members' requisition lodged on 18 December 1990. I therefore agree that the appeal and cross-appeal should be dismissed. I also agree that the question of the costs of the appeal and cross-appeal should be reserved to afford the parties an opportunity to make written submissions on those questions.
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