Convening and conduct of directors' meetings
34 Ordinarily, less formality is required for a directors' meeting than a meeting of members of a corporation. In this case, rule 8.7(a) of the constitution provides that the directors may meet together to attend to business and adjourn or otherwise regulate their meetings as they decide.
35 There is no legal magic in the word 'board'. The legislation in fact does not use the term 'board'. A 'board meeting' is a meeting of directors: Magner ES, Joske's Law and Procedure at Meetings in Australia, 11th ed [26.10].
36 By rule 8.8 any director may call a meeting of the directors whenever they think fit. Further, a secretary must, if requested by a director, call a meeting of directors. A director could validly convene a meeting of directors by advising all other directors of the time and place of the meeting. By rule 8.9(a), notice must be given to each director or an alternate director where appointed.
37 By rule 8.9(b) a notice of a meeting may be given in person or by post or by telephone, fax or other electronic means. The notice must specify the time and place of the meeting. Notice may, if necessary, be given immediately before the meeting (I note that the fact that notice may be given immediately prior to a meeting is of some importance in this case).
38 The notice must be reasonable: Toole v Flexihire Pty Ltd (1991) 6 ACSR 455; Re Homer District Consolidated Gold Mines; Ex parte Smith (1888) 39 Ch D 546; and Geelong School Supplies Pty Ltd v Dean [2006] FCA 1404. 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. What is required by way of notice may ultimately need to be resolved by reference to the nature of the business to be dealt with at a particular meeting.
39 By rule 8.9(b), the notice of the meeting need not state the nature of the business to be transacted at the meeting. This mirrors the position at common law: Bell v Burton (1993) 12 ACSR 325. Although it is not essential that a director be given notice of the business to be conducted at the meeting, 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; and Wilson v Manna Hill Mining Company Pty Ltd [2004] FCA 912 at [26]. The rationale for the position that notice of the business to be conducted may not be required is that directors have a duty to the company to go to a meeting of directors when there is business to be done: La Compagnie De Mayville v Whitley.
40 The following extract from Toole v Flexihire addresses the two issues of notice of business and notice of calling of a meeting:
By the regulations, the directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings as they think fit: reg 79. For almost 100 years, it has been the law that, at a properly convened meeting, directors may transact all business within their powers though no notice has been given to the members of the board that special business is to be transacted: Compagnie de Mayville v Whitley [1891] 1 Ch 788; Eastern Resources of Australia Ltd v Glass Reinforced Products (GRP) Pty Ltd [1987] 2 Qd R 31 at 35.
A director may at any time and the secretary shall on the requisition of a director summon a meeting of the directors: reg 79. While there are specific time limits prescribed in the regulations in respect of the calling of meetings of the company, there is no time prescribed for the calling of meetings of the directors. In circumstances like that, the law requires that the notice be fair and reasonable; Re Homer District Consolidated Gold Mines; Ex parte Smith (1888) 39 Ch D 546. In deciding what is fair and reasonable the practice of the directors of the particular company is an important factor.
41 However, where the purpose of a meeting is notified, the meeting will be limited to addressing the specified business: Dhami v Martin [2010] NSWSC 770; (2010) 241 FLR 165.
42 In Dhami, the plaintiff's former wife (Mrs Dhami) circulated a notice of directors' meeting outlining the purposes of an upcoming meeting as being to 'discuss' an upcoming transaction. Based on the limited scope of the stated purposes, certain directors who considered Mrs Dhami's appointment invalid chose not to attend the meeting. Mrs Dhami and another director who attended the meeting passed a resolution which gave Mrs Dhami authority to act alone on the company's behalf in relation to that transaction.
43 Barrett J held that the resolution was void. Whilst acknowledging the general principle that directors should come together whenever called on notice of reasonable length and without any expectation of being told why they are being summoned to a meeting, his Honour held that by notifying the meeting's purpose Mrs Dhami went beyond the legal requirement and thereby brought different considerations into play, being that a director receiving the notice would have thought that the director summoning the meeting had done so with a view exclusively to the stated purposes (at [48]).
44 His Honour states:
[51] Where there is a requirement that the notice convening a meeting state the purpose of the meeting or the business proposed to be transacted, the position is as stated in McLure v Mitchell (1974) 24 FLR 115 at 140:
'The purpose of a notice of a meeting is to enable persons to know what is proposed to be done at the meeting so that they can make up their minds whether or not to attend. The notice should be so drafted that ordinary minds can fairly understand its meaning. It should not be a tricky notice artfully framed (Henderson v Bank of Australia (1890) 45 Ch.D. 330 at 337)'.
[52] The position must be the same where the person summoning the meeting chooses to state what is proposed to be done at the meeting, even though there is no requirement that he or she do so and the meeting would have been properly convened by a notice that did not state a purpose. A statement of purpose actually included by the summoning person, whether or not required, is put forward in order that those entitled to attend can decide whether or not to do so. Indeed, in the context of a board of directors where there is no requirement that the proposed business be stated, there is no other conceivable reason for a statement of purpose. The implied message conveyed by the statement of purpose and its inclusion is that the meeting is being summoned not to do anything and everything that the board of directors has power to do and may decide to do but for the particularly defined and limited purpose notified. The need for the statement to convey a fair description of the purpose on which a decision to attend or not may reliably be based is therefore both emphasised and obvious.
[53] Directors who propose that a company's members (as distinct from directors) take a particular course of action are under a duty to make full disclosure of all facts within their knowledge which are material to enable the members to determine what action to take. This duty 'arises as part of the fiduciary duties of the directors to the company and its members in relation to proposals to be considered in general meeting'; and information must be given 'such as will enable members to judge for themselves whether to attend the meeting and vote for or against the proposal or whether to leave the matter to be determined by the majority attending and voting at the meeting: Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 466 per Black CJ, von Doussa J and Cooper J.
[54] An individual director convening a meeting of the board under a provision such as Ace's article 89 does so in his or her capacity as a director. The constitution confers the convening power on a single director in the obvious expectation that any director choosing to exercise it will, as in all other matters, act in the interests of the company. The power is a fiduciary power. The interests of the company require, in the particular context, that the steps taken be such as to facilitate collective deliberation and informed decision-making of the board as a whole. The power to convene given to each director is not a personal proprietary right to be used for the director's own ends. It is a power to facilitate the obtaining of an expression of the will of the board of directors.
[55] The notice given by Mrs Dhami on 21 May 2010 was such as to engender in its recipients the expectation that, in relation to Toukley, there would be no more than discussion at the meeting of 26 May 2010. No proposed resolution was set out. Nothing beyond the exchange of views that discussion entails was foreshadowed. Knowing that Mr Martin and Mrs Martin had been given that expectation and that they would almost certainly have objected to any decision that Mrs Dhami be invested with Ace's authority to act alone in any way in relation to Toukley, the two new directors present purported to cause the company to confer that authority on her. It may be inferred (and I find) that Mrs Dhami had it in mind to seek the authority when she issued the notice of 21 May 2010, assuming that circumstances at the meeting seemed conducive to success in that endeavour. Having thus abstained from telling the other directors (at least Mr Martin and Mrs Martin) what she intended, Mrs Dhami then pressed ahead with the proposal in their absence, knowing that they would almost certainly have objected and quite likely attended to vote against if aware of what was to transpire. The notice of meeting given by Mrs Dhami was thus misleading.
[56] The consequence of a breach of duty in the form of materially misleading conduct in the convening of a meeting is that the consequent unfairness of the convening process infects the proceedings as a whole or, at least, the parts of it affected by the misleading conduct, which are therefore void. This is because the apparent decision is not a properly informed decision. That then is the fate of the purported appointment of Mrs Dhami as representative at the meeting of the directors of Ace on 26 May 2010.
45 By rule 8.7(b), a meeting may be conducted by contemporaneous telephone call or other electronic means of sufficient directors to constitute a quorum. By rule 8.7(c) such a meeting is taken to be held at the place where the chairperson is or decides, as long as at least one of the directors involved was at that place for the duration of the meeting.
46 Where the company's constitution provides for the number of directors to constitute a quorum, that number must be present. If the requisite quorum is not present, the meeting is irregular and cannot transact business, although lack of a quorum may comprise a procedural irregularity that can be remedied (eg s 1322(1) and s 1322(2) of the Corporations Act). In the case of Keybridge, by rule 8.10(b), unless the directors decide differently, two directors constitute a quorum (and no quorum issue arises on the facts in this case).
47 By rule 8.12, if a quorum is present, then the directors may exercise any powers and discretions vested in them as directors. Questions arising at a meeting must be decided by a majority of votes cast by the directors present and entitled to vote. If the votes are equal, then the chairperson has a casting vote in addition to their deliberative vote (unless there are only two directors present, in which case there is no second casting vote and if the votes are equal the vote is taken to be lost).
48 I add that whist it will obviously be convenient for directors to make decisions at meetings called in accordance with the rules provided by the constitution so that procedural advantages might apply (for example as to quorum and casting votes), decisions may also be made by directors reaching concurrence at an informal meeting and provided they are acting in their capacity as a director: Poliwka v Heven Holdings (1992) 7 ACSR 85 at 90-91; Re East Norfolk Tramways Co [1877] 5 Ch D 963 at 966-967.
49 The following extract from Swiss Screens (Australia) Pty Ltd v Burgess (1987) 11 ACLR 756 at 758 is instructive:
To my mind any event, even most fleeting, in which two directors who are married to each other and are the company's only directors reach concurrence in taking some course in the company's affairs can be part of their management of the business of the company, and can be described with accuracy as a meeting of the directors and as a proceeding at such a meeting. In the course of human affairs it is not to be expected that a recognisable meeting would often take place in which somebody took the chair, there was a call to order, a resolution was made, seconded, debated and voted on. What does seem to me to be essential is that they should both concur in some decision in the management of the business of the company. If they do, and the event is recorded in a minute which accurately states what they concurred in as their decision, the meeting and the minute are no less effectual because the minute is formally expressed and appears to be an account of a much more solemn event than in fact took place.
50 The principle is not limited to directors who are married to each other and has been applied more broadly. Relevant cases are usefully collected in Mercanti v Mercanti [2016] WASCA 206; (2016) 50 WAR 495 at [175]-[178].