the question of the validity of the postponement
27 The applicant says that the board validly postponed the EGM purportedly convened by the first respondent, pursuant to reg (or cl) 36 of the applicant's constitution. This regulation provides as follows:
36.1 Subject to this Regulation the Directors may, by advertisement published in a newspaper circulating in each capital city of every Australian State or Territory, on or before the day of a proposed General Meeting, cancel a proposed General Meeting convened by them.
36.2 Where a proposed General Meeting was requisitioned by Shareholders pursuant to the Corporations Law, that Meeting may only be cancelled by the Directors if a written notice of withdrawal of the requisition signed by the requisitioning Members has been deposited at the Office.
36.3 (a) The Directors shall, in addition to publication of advertisements in accordance with
this Regulation endeavour to notify each Member of cancellation of a proposed General Meeting by posting a notice to the address of each Member as stated in the Register.
(b) Failure to post such notice to any Member or the non-receipt of such notice by any Member does not affect the validity of the cancellation of the proposed General Meeting.
36.4 The Directors may, by advertisement published in a newspaper circulating in each capital city of every Australian State or Territory, on or before the day of a proposed General Meeting, postpone the proposed General Meeting for a period not exceeding 28 days or vary the venue of the proposed General Meeting, but no business may be transacted at any proposed Meeting other than the business stated in the notice to Members of the postponed General Meeting.
36.5 (a) The Directors shall, in addition to publication of advertisements in accordance with this Regulation, endeavour to notify each Member of postponement or variation of venue of a proposed General Meeting by posting a notice to the address of each Member as stated in the Register.
(b) Such notice shall include details of the day, time and place on and at which the postponed General Meeting will be held or in the case of variation of venue, details of the new venue.
(c) Failure to post such notice to any Member or the non-recipient of such notice by any Member does not affect the validity of the postponement or variation of venue of the proposed General Meeting.
36.6 A proposed General Meeting may not be postponed on more than 2 occasions.
28 The clause that the parties have particularly focussed on here is cl 36.4 which provides, in effect, that the directors may postpone the proposed general meeting for a period not exceeding 28 days or vary the venue of the proposed general meeting. The directors in fact not only postponed the meeting but also varied the venue.
29 The respondents contend that, first, this regulation does not apply in circumstances where a member has convened a general meeting pursuant to s 249F of the Corporations Act. In other words, unless it is possible to source the postponement power and variation power within the Corporations Act itself, there is no such power and the powers contained in the constitution are overridden by s 294F of the Act.
30 Secondly, the respondents contend that, in any event, the rules do not confer a power to both postpone and vary. In effect, the directors must decide to either postpone or vary, but cannot do both.
31 A third issue is also raised as to whether or not the resolution of the directors to postpone and vary was regular, when by regulation or cl 64 of the constitution a resolution in writing (as was purportedly signed here) requires signature by all the directors or their respective alternate directors.
32 The applicant relies on the rules and a beneficial construction of the powers to postpone and vary, and denies any irregularity as a matter of fact. In any event, it draws attention to reg or cl 74 which provides for the validation of irregular acts and states that notwithstanding anything in the constitution:
if it be found that some formality required by this constitution to be done (other than a matter required to be done to comply with the listing rules) and has been inadvertently omitted, or has not been carried out, such omission does not invalidate any Resolution, act, matter or thing, which but for such omission would have been valid unless it is proved to the satisfaction of the directors or majority of them that such omission has directly prejudiced any member financially. The decision of the directors is conclusive, final and binding on all members.
33 The predominant view appears to be that the powers created by the constitution of a company may continue to operate in relation to a meeting called under s 249F of the Corporations Act. In Central Exchange v Rivkin Financial Services Ltd [2004] FCA 1546; (2004) 213 ALR 771 (Central Exchange), Emmett J in this Court considered that the powers in the constitution could continue to apply in such circumstances. At [32], his Honour stated that he did not consider that the presence of the power in the constitution was inconsistent with the provisions of s 249F. It did not, of itself, derogate from the right conferred by the statutory provision. He also considered as a matter of construction, that the relevant clause of the constitution in that case applied to the meeting convened by the notice of meeting.
34 However, at [33], his Honour considered that the circumstances in which it will be proper for the board to postpone or change the place for a meeting called pursuant to s 249F, or to cancel such a meeting, "will be limited" and such powers must, of necessity, be exercised "extremely sparingly so as not frustrate the right conferred by s 249F". His Honour added:
If the directors change the place, as well as the time, they must have some justification for doing so. The directors cannot arbitrarily postpone or change the place of the meeting. Nevertheless, the powers exist. The question is whether they have been validly exercised in the present case. [Emphasis in original]
35 The circumstances in this case and the terms of reg or cl 36 of the constitution in question are very much the same as those considered by Emmett J in Central Exchange. While I am not bound by any doctrine of precedent to apply his Honour's approach, it is now well understood that a principle of comity applies, such that unless I as a judge at first instance am convinced that a judgment of another judge at first instance, is wrong, I should follow it: see Hicks v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 757, French J at [74]-[77]. I am confirmed in adopting the approach of Emmett J by decisions to similar effect in Colbern Nominees Pty Ltd v Prime Minerals Ltd [2009] WASC 289; (2009) 74 ACSR 236 and Pinnacle VRB Ltd v Ronay Investments Pty Ltd [2000] VSC 330; (2000) 35 ACSR 240.
36 While counsel for the respondents has put forward a valiant argument as to why that approach should be rejected, my own view is that the view expressed by Emmett J is strongly supported and it should be considered at this point an overwhelmingly correct one, despite some historic debate concerning its strength. Unless a Full Court decision was to find otherwise, it should be followed.
37 The respondents further argue, as noted, that if the reg 36.4 of the applicant's constitution is to be relied upon, then as a matter of construction, it limits directors to deciding whether to postpone a general meeting or to vary the place at which it is to be held; they cannot do both. The applicant contends that such a literal construction in the context plainly is nonsensical.
38 In my view, the literal textual argument put forward on behalf of the respondents, while arguable, is weak. In my view, there is a overwhelmingly strong case that read beneficially, reg 36.4 permits the directors to both postpone a meeting, to vary a meeting place, or do both. In the context in which the word "or" is used, it signifies the power to do both things and at the same time.
39 In that regard the relevant clause considered by Emmett J in Central Exchange (cl 13.4 of the constitution) provided a power to the board to:
(a) postpone a meeting of members;
(b) cancel a meeting of members; or
(c) change the place for a general meeting,
by written notice given to ASX.
A similar argument would have been available that they were entirely disjunctive powers and could not all be exercised at the same time. In fact, the board in that case postponed and changed the place for the meeting and his Honour plainly proceeded on the basis that the power to do that was available under that particular clause.
40 In my view, there is but a very weak literal textual case for the construction contended for on behalf of the respondents. As I say, the applicant's preferred construction is overwhelmingly strong.
41 The third issue raised by the respondent concerns whether the power to postpone has been, in the words of Emmett J, "exercised sparingly" and for a proper purpose.
42 The respondent draws attention to the circular resolution of the directors which provides three reasons why the meeting should be postponed:
Having regard to all of these matters, the directors are of the view that it is in the interests of the members of CPN as a whole for HBC's Meeting (scheduled for 23 November 2010) to be postponed because:
(a) it is not in the interests of the members as a whole for HBC's Meeting to take place whilst OAG Fund Ltd and International Investments Ltd are restrained by the Injunction from voting and the postponement will provide an opportunity for a further ruling to be made in relation to the Injunction;
(b) all members should be free to cast their votes on the resolutions proposed by HBC without fear of penalty or legal ramifications; and
(c) the postponement of HBC's Meeting will avail CPN of the opportunity to disclose to members those matters that have been omitted from the Meeting Notice, if that disclosure is not made by HBC.
43 The respondents contend that postponement for the reason in (a) is improper as it "unilaterally ignores the validity of the court order" - that is to say the Nevis court order.
44 The respondents say that reason provided in (b) is also invalid as there is "no suggestion that some shareholders will not be free to exercise their voting rights at the 23 November 2010 meeting due to the threat of legal proceedings". The respondents say it is not because of any threat that Energo Holdings Corporation is unable to cast their shares at the meeting. It is because there is a court order in the Caribbean.
45 In my view, these arguments overlook the reality that an ex parte order has been made in the Nevis proceedings to be dealt with in that court on 26 November 2010. It is not an issue before me whether the existing interim injunction has application in Australia, but it is plain enough that it may have some effect on the voting intentions of the members concerned.
46 In my view, it was reasonable on the face of it for the directors of the applicant's board to postpone the general meeting to a time following the consideration by the Nevis court of the terms of the current injunction. On the face of it, to do so cannot in any relevant sense be considered improper. That there is obviously a commercial rivalry between the entities that control the 47% block of shares and the respondents does not in my view alter the position.
47 To insist that the current scheduled meeting convened by the first respondent should go ahead on 23 November 2010 when it would, or might, prevent approximately 47% of the voting rights in the applicant from being exercised is a relevant consideration. On the face of it, such an outcome would not be conducive to the proper management of the company under its present shareholding arrangements. Whatever the respondents' views might be concerning the financial management of the company, that is not a matter that this Court can be called upon to deal with, at least at this time in a proceeding such as this. The Court is not, in effect, to become an independent director of the company to make such decisions on sparing information in the course of urgent interlocutory proceedings.
48 In my view, there is on the face of it nothing improper in the board exercising the power of postponement as it did. There is also nothing to suggest that the change of venue is anything but sensible in that it now means, in all likelihood (if ASIC consents to the extension of the AGM date), both the AGM and EGM will be held in the same place on two consecutive days.
49 The reasons set out in (c) of the resolution are no longer currently relevant as the information has been supplied to members.
50 There remains an additional question concerning procedural irregularity. As noted above, as an alternative form of final relief the applicant seeks a declaration pursuant to s 1322(4) of the Corporations Act that in events which have happened the meeting purportedly convened has been validly postponed. The respondents submit the residual claim for such relief should be rejected as the pre‑conditions for relief cannot be met.
51 By s 1322(4)(a) the Court may on an application by an interested person make an order declaring that any act, matter or thing, purporting to have been done under the Act or in relation to a corporation is not invalid by reason of any contravention of a provision of the Act or a provision of the constitution of the corporation. By s 1322(6), the preconditions to making such an order are set out in (a) and are that:
(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.
52 Further, in every case, as provided for in (c) of subs (6), the Court must be satisfied that "no substantial injustice has been or is likely to be caused to any person".
53 In my view, whether the relief sought should be considered "substantive", as the respondents claim, or "procedural" as the applicant contends, is not something that needs be ruled on now. Final relief in these terms is not sought. The proposition is arguable that
s 1322(4) applies in any event.
54 I note the applicant does not accept there was any irregularity in the decision by the directors to postpone the EGM and only out of an abundance of caution seeks to invoke s 1322(4)(a) relief.
55 In my view, whether under the power of the directors to validate an irregular act under reg or cl 74 of the constitution, or under s 1322 of the Corporations Act, any possible irregularity might be dealt with. At this stage, the suggestion by the respondent is that either the circular resolution was not unanimous or that the board lacked the requisite number of directors, including Australian based directors, at material times. Whatever may be the final correct factual position, it seems to me that there is a serious issue to be tried in favour of the applicant that the resolution to postpone is currently valid and not invalid by reason of irregularity and that, in any event, it would be open to the Court to give relief from any irregularity, although the question whether or not such an order would constitute substantive or procedural relief in terms of s 1322(4) remains open.
56 There is also a question whether the respondents would be entitled to claim that they would suffer substantial injustice, for the purposes for s 1322(6)(c), if such an order were made, in the sense that they might be deprived of their "right" to take advantage of the possible inability of the holders of 47% of the voting rights from voting at the currently proposed meeting on 23 November 2010. Whether the loss of an opportunity to benefit from the Nevis court order in these circumstances might properly be considered a "substantial injustice", as that term should properly understood in that provision, need not be ruled on now.
57 On the basis that it seems to me that there is a strong case to be argued on behalf of the applicant concerning the validity of the postponement resolution of the directors of the applicant, a question arises whether the balance of convenience in a case such as this should lead to the grant of an interlocutory injunction. In this case, the interlocutory relief sought, to uphold the postponement of the general meeting convened by the first respondent, is in effect in the nature of final relief. If interlocutory relief is granted, then the substantial commercial dispute between the parties will have been resolved and the applicant's plans to hold the EGM on the day before the proposed AGM will in all likelihood be realised.
58 In these circumstances, as the applicant accepts, the likelihood that the applicant will succeed if the action goes to trial must be considered in weighing the risks of injustice resulting if the decision on the application goes one way or another: see Kolback Securities Ltd v Epoch Mining NL (1987) 18 NSWLR 533 at 536.
59 In my view, this is one of those cases where the position contended for by the applicant ought to be considered both in principle and also in relation to the justice of the case overall. Unless an injunction is granted in terms of the interlocutory injunctions sought, the general meeting convened by the first respondent will go ahead on 23 November 2010, with the real possibility that the members holding approximately 47% of the voting rights will be precluded from voting. While there is no particular evidence before me that the members would consider themselves bound by or not bound by the interim injunction made naming them in the Nevis proceedings, the respondents plainly believe the shareholders affected should not vote. That is a real issue that needs to be considered.
60 In all of the circumstances, it seems to me to be entirely just and equitable that interlocutory injunctions should go to ensure as far as possible that all members of the company have the proper opportunity to vote on the matters to be considered at the EGM. To effect that outcome, the adjournment of the EGM proposed by the directors of the applicant should, in effect, be supported. To that end, the interlocutory injunctions proposed will maintain the status quo proposed by the directors and support the general understanding underlying the management of all corporations that all members should have a proper say concerning their direction and management.
61 For these reasons, I would grant the interlocutory relief sought.