Zimmerman Holdings Pty Ltd v Cooney
[2002] NSWSC 387
•3 May 2002
CITATION: Zimmerman Holdings Pty Ltd v Cooney [2002] NSWSC 387 CURRENT JURISDICTION: Equity Division FILE NUMBER(S): SC 5093 of 2001 HEARING DATE(S): 3, 4, 18 April 2002 (written submissions to 2 May 2002) JUDGMENT DATE: 3 May 2002 PARTIES :
Zimmerman Holdings Pty Limited (Plaintiff)
Dennis Cooney (Defendant)JUDGMENT OF: Master McLaughlin
COUNSEL : R. Harper (Plaintiff)
J. Darvall (Defendant)SOLICITORS: Massey Bailey Solicitors (Plaintiff)
Ashlars Lawyers (Defendant)CATCHWORDS: Corporations - Statutory demand - Application by company to set aside demand - Challenge to retainer of solicitors - Notice of directors' meeting not given to one of two directors - Quorum not present at meeting - Validity of purported appointment of additional director - Whether meeting can be treated as a general meeting of company - Whether one of two directors has authority to commit or bind company - Possibility of subsequent ratification of appointment of director and retainer of solicitors - Whether proceedings should be stayed pending possible ratification or should be dismissed. LEGISLATION CITED: Corporations Act CASES CITED: AW & LM Forrest Pty Ltd v Beamish (1998) 146 FLR 450
Adams v London Motor Builders [1921] 1 KB 495
Re Australian Koyo Limited (1984) 8 ACLR 928
Grant v John Grant & Sons Pty Limited (1950) 82 CLR 1
Halliday v High Performance Personnel Pty Ltd (1993) 113 ALR 637
Halliday v SACS Group Pty Ltd (Dawson J, 23 December 1992, unreported)
Harry S Bagg's Liquidation Warehouse Pty Ltd v Whittaker (1982) 44 NSWLR 421
Knox Street Apartments Pty Ltd v Flexman [2002] NSWSC 107
Morris v Kanssen [1946] AC 459
Omega Estates Pty Limited v Ganke (1963) NSWLR 1416DECISION: (1). I order that the proceedings be dismissed as incompetent; (2). I order that Massey Bailey, Solicitors, pay the costs of the Defendant of the notice of motion filed by the Defendant on 3 April 2002 and of the proceedings.
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
MASTER McLAUGHLIN
Friday, 3 May 2002
5093/01 ZIMMERMAN HOLDINGS PTY LIMITED -V- DENNIS COONEY
JUDGMENT
1 MASTER: By Originating Process filed on 17 October 2001 the Plaintiff Zimmerman Holdings Pty Limited seeks an order that the statutory demand dated 27 September 2001, served upon it by the Defendant, Dennis Cooney, be set aside.
2 By that statutory demand the Defendant claims the sum of $150,000, which sum is described in the schedule to the demand as follows,
Description of the Debt Money Lent to the Company
Unpaid Account for Money Lent to the Company $150,000Amount of Debt $150,000
3 The Originating Process was returnable on 15 November 2001 before the Registrar. Having been adjourned on several occasions, it was referred to me on 5 February 2002, when it was specially fixed to be heard by myself on Wednesday, 3 April 2002, two days being reserved for the hearing (3 and 4 April).
4 At the outset of the hearing Counsel for the Defendant raised the matter of the retainer of the solicitors on the record to institute and prosecute the proceedings on behalf of the Plaintiff. This question of a challenge to the solicitors’ retainer had apparently been raised when the matter was mentioned on 5 February 2002 for the purpose of fixing a hearing date. Nevertheless, the Defendant had done nothing of a formal nature concerning this matter during the intervening period.
5 Counsel for the Plaintiff opposed the matter being raised in the fashion in which it had, and was desirous of proceeding with the hearing of the substantive claim of the Plaintiff for the setting aside of the statutory demand.
6 Nevertheless, it was obvious that the challenge to the retainer of the Plaintiff’s solicitors had to be dealt with before the hearing of the substantive proceedings for the setting aside of the statutory demand. At my instigation, the Defendant ultimately prepared a notice of motion for the purpose of raising in a formal fashion this challenge to the retainer. I allowed that notice of motion to be filed in Court on the afternoon of Wednesday, 3 April. By that notice of motion the Defendant sought the following orders,
2. The solicitors, namely Massey Bailey Solicitors, pay the Defendant’s costs.1. An order that the proceedings be dismissed as incompetent.
7 Despite the various objections raised by Counsel for the Plaintiff to the challenge to the retainer being dealt with, as he described it, “on the run”, nevertheless I appointed Thursday, 4 April 2002, not before 10:30am, for the hearing of the notice of motion filed by the Defendant on 3 April 2002.
8 On 4 April the matter proceeded as a hearing of the notice of motion which had been filed by the Defendant on the preceding day.
9 The accepted view in New South Wales is, and for many years has been, that if a solicitor’s retainer is challenged it is for the solicitor to establish his or her authority: see Harry S Bagg’s Liquidation Warehouse Pty Ltd v Whittaker (1982) 44 NSWLR 421 at 430. I note, however, that in Knox Street Apartments Pty Ltd v Flexman [2002] NSWSC 107 Gzell J queried whether that view was justified on the balance of authorities. His Honour, however, did not have to decide the issue and did not do so. His Honour cited various authorities, some supporting that the onus is on the solicitor to establish his or her retainer and others supporting that the onus is on the party asserting a lack of authority. See AW & LM Forrest Pty Ltd v Beamish (1998) 146 FLR 450; Adams v London Motor Builders [1921] 1 KB 495 (Court of Appeal); Halliday v SACS Group Pty Ltd (Dawson J, 23 December 1992, unreported); Halliday v High Performance Personnel Pty Ltd (1993) 113 ALR 637 at 639 per Mason CJ.
10 In the instant case my decision is not based upon a preference for one party or the other needing to discharge that onus. Whilst I prefer the foregoing accepted view of longstanding, my conclusions would be no different even if I considered it necessary for the Defendant to establish an absence of such authority in the solicitors.
11 On 4 April 2002 the Plaintiff filed in Court further affidavit evidence. That evidence included an affidavit of Yaqob (also known as Jack) Rajwan sworn 4 April 2001. Mr Rajwan is a director of the Plaintiff company.
12 According to Mr Rajwan he originally had a meeting with Daniel Massey and Marion Bailey, the principals of Massey Bailey (who are the solicitors on the record for the Plaintiff in the present proceedings) on 10 September 2001. Also present at that meeting was Mr Rajwan’s father, Mr Baruch (also known as Barry) Rajwan, who, according to Mr Yaqob Rajwan “is also a director of Zimmerman”. Mr Yaqob Rajwan said in his affidavit that at that meeting on 10 September 2001 he instructed Massey Bailey to act for Zimmerman in proceedings 4586 of 2001 in the Equity Division of the Supreme Court, relating to a residential development at Botany.
13 I would here interpolate that, although the present Plaintiff and the present Defendant are each parties to those proceedings, those proceedings include various other parties who are not parties to the present proceedings.
14 I would also, for completeness, note that the Court file discloses that on 2 April 2002 the Plaintiff made application to Justice Bryson for an order that the hearing specially fixed to commence before me on the following day, 3 April, be vacated, and that the present proceedings be heard together with or immediately after proceedings 4586 of 2001. His Honour dismissed that application with costs.
15 It is usual for an application to vacate the hearing date of a special fixture to be made to the judicial officer before whom the proceedings have been fixed to be heard. The Plaintiff did not notify me or my Associate that the Plaintiff proposed to make such an application that the date fixed by myself for the hearing of the matter by myself should be vacated. The Plaintiff did not thereafter inform me or my Associate of the fact that such an application had been made, or of the outcome of that application.
16 The statutory demand which is the subject of the present proceedings was served on 28 September 2001. Mr Yaqob Rajwan said in his affidavit that he telephoned Marion Bailey some time in early October 2001 concerning that statutory demand, and that a meeting was held on or about 10 October 2001 at the offices of Massey Bailey concerning that statutory demand. Present at that meeting were Mr Massey, Miss Bailey, Mr Yaqob Rajwan and Mr Baruch Rajwan. According to Mr Yaqob Rajwan, he instructed Massey Bailey to issue proceedings to set aside the statutory demand and that Barry Rajwan also agreed to appoint Massey Bailey solicitors to act for Zimmerman.
17 Massey Bailey sent to the Plaintiff a letter, described as a retainer letter, on 11 October 2001.
18 It was the assertion of the Plaintiff that on 10 September 2001 a general retainer was given by the Plaintiff to Massey Bailey in respect to all disputes relating to a residential development at Botany, and that on 10 October 2001 a specific retainer was given by the Plaintiff to Massey Bailey in respect to the statutory demand and to the proceedings for the setting aside of that statutory demand.
19 It is interesting to note that the challenge by the Defendant to the retainer of the solicitors is supported by Mr Elie Barel, who is (and at all relevant times was) a director of the Plaintiff company, and who has sworn an affidavit in support of the Defendant in the present proceedings. Mr Barel was cross-examined during the hearing before me.
20 It will be appreciated that Massey Bailey could be retained by the Plaintiff only if the persons who purported to effect such retainer had the authority of the Plaintiff to do so.
21 The case presented for the Plaintiff is that Mr Yaqob Rajwan and Mr Baruch Rajwan were two of the three directors of the Plaintiff (Mr Eli Barel being the third director) and that they as such directors had authority to retain Massey Bailey on behalf of the Plaintiff.
22 It is not disputed that at all relevant times up to and including 27 August 2001 there were two directors of the Plaintiff company, being Mr Yaqob Rajwan and Mr Elie Barel.
23 It was the case for the Plaintiff that on 28 August 2001 a meeting of directors of the Plaintiff appointed Baruch Rajwan a director of the Plaintiff. The validity of that appointment has been challenged by the Defendant.
24 It will be appreciated that if Mr Baruch Rajwan had not been validly appointed a director of the Plaintiff, then at the time of the various meetings on 10 September 2001 and 10 October 2001 at which the Plaintiff purported to retain Massey Bailey as its solicitors, both generally in respect to disputes arising out of the property development at Botany, and specifically in respect to the statutory demand which is the subject of the present proceedings, only one of the two directors of the Plaintiff was in attendance (that being Yaqob Rajwan), and any instructions given to Massey Bailey were given only by that single director. Those instructions were given in the context that, according to Mr Barel (who is a Defendant to proceedings 4586 of 2001), he, as the other director of the Plaintiff, did not have any knowledge of, let alone agree to, the purported retainer of Massey Bailey in the present proceedings. In his affidavit of 3 April 2002 Mr Barel stated that he does not, and has not, consented to, nor authorised, the Plaintiff bringing the present proceedings.
25 It follows, therefore, that a number of vital questions present themselves for determination. Those questions include: Firstly, who were the directors of the Plaintiff on 10 September 2001 and 10 October 2001? Secondly, if Mr Baruch Rajwan was a director of the Plaintiff on either or both of those dates, were Mr Yaqob Rajwan and Mr Baruch Rajwan enabled to act on behalf of the Plaintiff to retain Massey Bailey as solicitors for the Plaintiff?
26 At the conclusion of the reception of affidavit evidence and oral evidence (the hearing in respect of the challenge to the retainer not having concluded on 4 April and having thereafter occupied 18 April 2002), and after submissions as to the further procedure to be followed, I then made directions for the lodgement of written submissions by Counsel for the respective parties. I also adjourned the hearing of the substantive proceedings to a date to be fixed.
27 I have now had the benefit of receiving written submissions from Counsel for the Plaintiff (dated 18 April 2002, but delivered to my Chambers on 24 April 2002) and from Counsel for the Defendant (dated 29 April 2002 and delivered to my Chambers on that date). Subsequently, although no direction had been made in this regard, written submissions in reply were received from Counsel for the Plaintiff (dated 1 May, but delivered to my Chambers on 2 May 2002).
28 Those written submissions will be retained in the Court file.
29 There was placed in evidence (Exhibit 1) a document which purported to be minutes of a meeting of directors of the Plaintiff held at Level 1, 185 Great North Road, Five Dock, on 28 August 2001. That document identifies as being present “Yaqob Rajwan – Chairman”. It then records a resolution that the “Minutes of the last Director’s [sic] Meeting” be confirmed. Under the heading “New Directors” appears the following,
IT WAS RESOLVED that the following person be appointed as Director of the Company
The company secretary was instructed to inform the Australian Securities & Investments Commission of the above changes.BARUCH REJWAN [ sic ]
30 The document concludes, in handwriting,
- In Attendance: Baruch Rajwan Vincent Russo.
31 At the foot of the document appears a signature (apparently that of Yaqob Rajwan) under the designation “Chairman”.
32 Mr Yaqob Rajwan was cross-examined on his affidavit evidence, both on 4 April and on 18 April.
33 It clearly emerged from the evidence of Mr Yaqob Rajwan that at the date of the purported appointment of his father, Baruch Rajwan, on 28 August 2001 the only directors of the Plaintiff company were Yaqob Rajwan and Elie Barel. (That evidence was consistent with the Historial Company Extract in respect of the Plaintiff, which is annexure A to Mr Yaqob Rajwan’s affidavit bearing date 4 April 2001 [sic].) Mr Barel did not participate in – indeed he had not been given notice of – the purported meeting of directors held on 28 August 2001, which purported to appoint Mr Baruch Rajwan as a director of the Plaintiff company.
34 Mr Yaqob Rajwan appeared to be maintaining a grievance directed at Mr Barel, on account of the fact that, according to Mr Rajwan, Mr Barel had placed himself in a position where he was incommunicado on 28 August 2001. Nevertheless, it emerged from the cross-examination of Mr Rajwan that it was only on that day itself that any attempt was made by him to communicate with Mr Barel. No attempt had been made by Mr Rajwan (or, indeed, by any other person on behalf of or associated with the Plaintiff) before that date to communicate with Mr Barel about the meeting proposed to be held on that date to appoint Mr Baruch Rajwan as a director. Further, it would appear that the only medium of communication which Mr Yaqob Rajwan attempted to utilise was the telephone. He made no attempt to give written notification (by way of a letter, or facsimile transmission, or the like) to Mr Barel.
35 Both Mr Yaqob Rajwan and Mr Baruch Rajwan confirmed that no notice of meeting had been given to Mr Barel.
36 Evidence was also given by Mr Baruch Rajwan, father of Mr Yaqob Rajwan, both by way of affidavit and under cross-examination. The affidavit contained a certificate by an interpreter that it had been read to Mr Baruch Rajwan in the Hebrew language. The oral evidence of Mr Baruch Rajwan was given in Hebrew through an interpreter.
37 It was the evidence of both Mr Yaqob Rajwan and Mr Baruch Rajwan that the meeting on 28 August 2001 was a meeting held at the address at 185 Great North Road, Five Dock, referred to in the minutes of that meeting and that three persons were physically present, being Mr Yaqob Rajwan, Mr Baruch Rajwan and Mr Vincent Russo.
38 Mr Russo is an accountant employed by John P. Natoli & Associates, which firm are the accountants retained by the Plaintiff as the company accountant. Mr Russo was formerly the secretary of the Plaintiff company. His office is located at 185 Great North Road, Five Dock.
39 Evidence was given by Mr Russo that his involvement in the meeting was by telephone, he being located in his office at the Five Dock address, and the other two persons (Mr Yaqob Rajwan and Mr Baruch Rajwan) being at the end of a telephone line (presumably located somewhere else). Mr Russo also confirmed that Mr Barel did not attend the meeting, and that he did not attempt to telephone Mr Barel to notify him of the meeting, and that he did not give any notice of the meeting to Mr Barel.
40 To the extent that it be necessary for me to do so, I would here express the view that I regarded Mr Yaqob Rajwan as a totally unsatisfactory and unreliable witness. Many of the questions which he was asked under cross-examination were responded to by statements that he could not remember or that he could not recall. For example, he said that he could not recall whether he had ever called a meeting of the company to ratify the appointment of the solicitors in the present proceedings. Since he was aware of the attitude of Mr Barel, at least to the extent that Mr Barel was declining to co-operate in the institution and prosecution of the present proceedings, an attempt at ratification might have been regarded as being of some relevance to Mr Rajwan. Mr Yaqob Rajwan also said, on 4 April, that he did not think at that time that there was an argument about the validity of the appointment of his father as a director. Where uncorroborated evidence of Mr Yaqob Rajwan is in conflict with evidence of Mr Barel, I prefer that of Mr Barel.
41 I have already referred to the evidence of Mr Vincent Russo, the accountant of the Plaintiff, and a former secretary of the Plaintiff. Mr Russo does not speak or read Hebrew. He said that he was able to communicate with Mr Baruch Rajwan in English and that on the occasions of such communication Mr Baruch Rajwan does not use an interpreter.
42 The Memorandum of Association and the Articles of Association of the Plaintiff (under its former name, Pronto Panel Beaters Pty Limited) were in evidence (Exhibit B). The Plaintiff is a company limited by shares, incorporated on 28 February 1997. The powers of the Plaintiff concerning appointment of directors are contained in articles 58 and 62. Article 58 is as follows,
- The Director(s) or the Company in a General Meeting may at any time appoint any person to be a Director, either to fill a casual vacancy or as an addition to the Board.
43 In not dissimilar terms, article 62 provides that the directors or the company in a general meeting may at any time remove a director from office and appoint another person in his stead. There has been no suggestion in the instant case of removal of a director. The power of the company to appoint Mr Baruch Rajwan as a director must therefore be that contained in article 58.
44 By article 73, the quorum for a meeting of directors is two.
45 I have already recorded that up to the purported meeting on 28 August 2001 there were only two directors of the Plaintiff, being Mr Yaqob Rajwan and Mr Elie Barel. Since only one of those directors was present, the purported meeting lacked a quorum. In my conclusion the purported meeting of directors held on 28 August 2001 was not a meeting of directors of the Plaintiff. Further, the purported appointment at that meeting of Mr Baruch Rajwan as a director of the Plaintiff was of no effect.
46 It was submitted, however, on behalf of the Plaintiff that, as a general rule, a company in general meeting has power to appoint further directors in the exercise of its inherent power to direct the control of the company, and the Plaintiff points to the express preservation to the company in a general meeting of that power, by article 58.
47 It should be recognised, however, that the purported meeting held on 28 August 2001 purported to be a meeting of directors of the Plaintiff, not a general meeting of the company. Further, article 41 makes provision for a notice of a general meeting, and contemplates the giving of such a notice. I have already recorded that no notice of the meeting proposed by Mr Yaqob Rajwan for 28 August 2001 was given to Mr Barel, who as well as being a director is also a member and a shareholder in the Plaintiff.
48 The meeting which purported to be held on 28 August 2001 did not purport to be a general meeting of the company. But even if it had purported to be a general meeting, in my conclusion it was not such a general meeting, since no notice had been given to Mr Barel.
49 The circumstances surrounding the purported appointment of Mr Baruch Rajwan as a director of the Plaintiff are not such as would fall into the category of an otherwise valid appointment which suffers from some procedural defect, and which can be validated by, for example, the provisions of section 1322(2) and (3) of the Corporations Act. See, in this regard, the decision of the House of Lords in Morris v Kanssen [1946] AC 459, where Lord Simonds, at 471, pointed out that there is a vital distinction between (a) an appointment in which there is a defect, or, in other words, a defective appointment, and (b) no appointment at all. That decision was quoted with approval by the High Court of Australia in Grant v John Grant & Sons Pty Limited (1950) 82 CLR 1 at 34 per Williams J. Kitto J said, at 52,
- The actual decision in Morris v Kanssen was that where a person assumes to act as a director without any purported appointment the section and article do not operate to validate his acts. But the passage quoted by my brother Williams from the speech of Lord Simonds, with which the whole House agreed, shows, I think, that the case justifies a broader proposition. The passage points out that the section and article relate only to the case where a slip has been made in appointing a director, and it draws a distinction between such a case and a case in which substantive provisions relating to an appointment have been ignored or overridden. The reason for the distinction is, I think, that a defect in an appointment can be said to exist only where some requirement has been neglected in exercising a power to make an appointment. The section and the article presuppose an appointment in fact made by a person or body having power to appoint, and they refer to a slip in the making of the particular appointment in question. It is therefore necessary to distinguish between the defective exercise of a power to appoint and the non-exercise or non-existence of such a power. The proposition which I think is justified by Morris v Kanssen is that where a person acts as a director, either without being appointed or in pursuance of a purported appointment made by a person or body not authorised to make an appointment, neither the section nor the article operates to validate his actions.
50 In the instant case, in my conclusion, the purported appointment by Mr Yaqob Rajwan of Mr Baruch Rajwan as a director cannot be categorised as a defective exercise of a power validly reposing in Yaqob Rajwan to effect such an appointment. It must properly be categorised as being no appointment at all, since Mr Yaqob Rajwan had no power to make such an appointment.
51 The purported appointment is not saved by the provisions of section 1322 of the Corporations Act (relating to procedural irregularity or the accidental omission to give notice of a meeting).
52 It was further submitted on behalf of the Plaintiff that, whatever defects may have existed in the appointment of Baruch Rajwan as at 28 August 2001, after that date he had at all times acted as a director, and that, in consequence, he comes within the statutory definition of director in section 9 of the Corporations Act, where, relevantly, director is defined to mean,
- (b) unless the contrary intention appears, a person who is not validly appointed as a director if:
- (i) they act in the position of a director; or
- (ii) the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.
53 The legislative history of that definition is set forth in the judgment of Aickin J in Corporate Affairs Commission v Drysdale (1978) 141 CLR 236.
54 Even if the submission of the Plaintiff that Mr Baruch Rajwan has acted as a de facto director of the Plaintiff be accepted, the effect of section 9 is not to appoint him a director for all relevant purposes, but merely to impose upon him the duties, obligations, and liabilities of a director.
55 The approach of Mr Baruch Rajwan to his involvement in the Plaintiff company was manifest by his statement under cross-examination, “Me and my son have the decision: sixty-six percent. We can do whatever we like with the company.”
56 The Plaintiff, in the alternative, sought to rely on section 201M of the Corporations Act, with the effect, so it was submitted, that, despite any invalidity in Mr Baruch Rajwan’s appointment, the retainer by him and Mr Yaqob Rajwan of Massey Bailey must be treated as effective.
57 It was acknowledged on behalf of the Plaintiff that section 201M is directed to the internal affairs of the company, as between the company and its members. In the instant case, of course, the question of the retainer of Massey Bailey impacts upon the Defendant, who is not a member of the company. I am not persuaded that the purported retainer by a single director of the Plaintiff can, in the circumstances of the instant case, be treated as a retainer by the Plaintiff. (The relevant circumstance include the fact that the only other director was not aware of this purported retainer before the solicitors were retained, and when he did become aware, he actively opposed the proceedings which the solicitors had instituted.)
58 The Plaintiff further relied upon what was described as the implied authority of Mr Yaqob Rajwan to engage Massey Bailey as solicitors for the company. It must be appreciated that, in the light of the attitude of Mr Barel to the conduct by Yaqob Rajwan and Baruch Rajwan in respect to the Botany development project, the practicalities of the situation do not support the existence of any such implied authority.
59 Since I have already expressed my conclusions, firstly, that Mr Baruch Rajwan was not validly appointed a director of the Plaintiff; and, secondly, that, in consequence, the purported retainer of Massey Bailey by Mr Yaqob Rajwan and Mr Baruch Rajwan did not constitute a retainer of that firm by the Plaintiff, it is not necessary for me to express a concluded view concerning the submission made on behalf of the Plaintiff in respect to what was described as “an informal decision by directors as constituting a resolution of the directors”. My preliminary view, however, is that I am in agreement with the submission on behalf of the Plaintiff that a minute in writing of a resolution to such effect is not essential to the retainer of a solicitor by a company (although, of course, for evidentiary purposes, such a minute would usually be desirable).
60 It is also appropriate that I should here record that the question of a challenge to the retainer of Massey Bailey was a matter to which Miss Marion Bailey, one of the principals of that firm, gave some consideration. Indeed, it was her evidence that at the initial meeting she had with the Rajwans on 10 September 2001, there was discussion concerning disputes between the directors of the company, and that she subsequently sought the advice of Senior Counsel in this regard. Presumably acting on that advice, Miss Bailey then, in the absence of any formal challenge to her retainer, proceeded to act for the Plaintiff company.
61 Nevertheless, the matter of a challenge to the retainer of Massey Bailey was raised at directions hearings held in November 2001 and December 2002, and was also raised on 5 February 2002, when the present hearing was fixed to commence on 3 April 2002.
62 I summarise, therefore, my foregoing conclusions.
63 The purported appointment of Mr Baruch Rajwan as a director of the Plaintiff on 28 August 2001 was of no effect, Mr Yaqob Rajwan having no power to make such appointment. The purported meetings of directors on 28 August 2001 was not a meeting of directors of the Plaintiff, no notice thereof having been given to the other director, Mr Barel, and no quorum being present. The purported retainer was effected by a decision of Mr Yaqob Rajwan and Mr Baruch Rajwan, purporting to act as directors of the Plaintiff. Only one of those persons was at any relevant time a director of the Plaintiff, that being Mr Yaqob Rajwan. He, as only one of the two directors of the Plaintiff, had no authority to commit or bind the Plaintiff company. In consequence, the company did not retain Massey Bailey to act for it in the present proceedings. It follows, therefore, that the institution of the present proceedings was not authorised by the Plaintiff, and that therefore the proceedings must be dismissed as incompetent. A further consequence is that the solicitors Massey Bailey, must pay the costs of the Defendant of the proceedings. Doubtless, however, they will be entitled to look to those who instructed them in this matter, being Mr Yaqob Rajwan and Mr Baruch Rajwan for reimbursement of those costs.
64 There is one further matter to which I should refer. In the face of opposition by the Defendant, on 18 April 2002 I admitted into evidence an affidavit of Yaqob Rajwan sworn 17 April 2002, which stated that a general meeting of the company had been called for Monday, 6 May 2002, for the purpose, of ratifying both the appointment of Mr Baruch Rajwan as a director and the retainer of Massey Bailey as solicitors for the Plaintiff in the present, and other, proceedings.
65 It was submitted on behalf of the Plaintiff that, on account of that imminent general meeting, I should not make any orders which would in effect now terminate the proceedings, and that the appropriate procedure should be that the proceedings be stayed until such time as ratification has taken place.
66 The authorities upon which the Plaintiff seeks to rely in this regard (Re Australian Koyo Limited (1984) 8 ACLR 928; and Omega Estates Pty Limited v Ganke (1963) NSWLR 1416) appear to deal with situations where, unlike the present, there was no dispute between the members or between the directors of the company, and where the proposed ratification was expected to be unanimous.
67 In the instant case, however, I have a considerable degree of doubt as to whether the Plaintiff in general meeting can effect ratification retrospectively of acts which at the time when they were purported to be done were a nullity, those acts being the appointment of a director, the retainer of solicitors to institute proceedings on behalf of the company, and the institution of those proceedings. Further, despite the evidence concerning the shareholding in the company, the Court is presently being asked to assume that the meeting of 6 May will make decisions in the manner submitted on behalf of Yaqob Rajwan and his father. Moreover, it should not be assumed that there will be no challenge to the validity of the proposed general meeting. Despite the requirement of article 41, the notice does not specify the geographical location of the place of the general meeting; it merely gives notice of such a meeting “at the offices of John P. Natoli & Associates at 10AM on Monday 6th May 2002.”
68 I have considerable doubt as to whether, if the proceedings were incompetently constituted at their inception (as, in my conclusion, they were), any purported ratification some seven months later can retrospectively cure the fundamental defect.
69 I am not disposed to grant any stay. Accordingly, I make the following orders:
(2). I order that Massey Bailey, Solicitors, pay the costs of the Defendant of the notice of motion filed by the Defendant on 3 April 2002 and of the proceedings.
(1). I order that the proceedings be dismissed as incompetent.
70 It follows from the foregoing orders that it will not be necessary for any date to be fixed for the adjourned hearing of the substantive proceedings.
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