Central Exchange Ltd (ACN 000 742 843) v Rivkin Financial Services Ltd

THE ISSUES IN THE PROCEEDING 9 By its Amended Originating Process, Central claims a declaration that the purported resolution of the Board to postpone the meeting called by the Notice of Meeting is invalid. In the course of argument, two reasons were advanced as follows:

• Clause 13.4 of the Constitution cannot, as a matter of law, and does not as a matter of construction, apply to a meeting convened pursuant to s 249F of the Act;
• By the operation of s 195(1) of the Act and clause 9.4 of the Constitution, none of the Directors of the Company was entitled to be present at the meeting of the Board purportedly held on 6 October 2004 and, accordingly, no quorum was present at that meeting. 10 On 20 October 2004, Central moved ore tenus for leave to amend further the Originating Process. By the proposed amendment, Central would claim a declaration that any power of postponement contained in clause 13.4 cannot be exercised to the extent that it would frustrate a proper purpose of a meeting called under s 249F and a declaration that, in the facts that have happened, the purported postponement of the meeting by the Board would frustrate a proper purpose of the meeting, that purpose being to permit the members of the Company to consider the composition of the Board in circumstances where the Company has undertaken and is undertaking material transactions under the management of the current Board. I refused the leave for reasons that I gave yesterday. I considered that the amendment would give rise to a significant factual enquiry as to whether, inter alia, the Company has undertaken and is undertaking material transactions under the management of the current Board. 11 Ancillary relief in relation to the alleged invalidity of the resolutions is also claimed by Central. In addition, Central claims declarations of validity pursuant to s 1322(4)(a) of the Act in the event that the Notice of Meeting is held to be invalid by reason of other matters raised by the Company in its Interlocutory Process filed on 11 October 2004. 12 By that Interlocutory Process, the Company claims relief as follows:
• An order that, by reason of contraventions by Central of ss 249R and 249F(2) of the Act, Central be restrained from holding the meeting purportedly called by the Notice of Meeting;
• A declaration that, by reason of the failure to give at least 28 days' written notice in compliance with clause 13.3 of the Constitution, the Notice of Meeting is invalid and of no force and effect;
• An order pursuant to s 1322(4) of the Act that the meeting called by Central be held on 29 November 2004;
• A declaration that the chairman of the meeting called by the Notice of Meeting is not obliged to put to the shareholders: (a) resolutions 4, 5 and 6, by reason of the failure to comply with clause 3.5 of the Constitution; and (b) resolution 7, by reason of the fact that such resolution would be invalid. 13 The questions raised in the proceeding may be stated as follows:
• Does the power of the Board, under clause 13.4 of the Constitution, to postpone, or change the place for, a meeting of members apply to a meeting called pursuant to s 249F of the Act?
• Did the Directors of the Company have a material personal interest, within the meaning of s 195(1) of the Act, in the postponement of the meeting called by the Notice of Meeting, such that there was no quorum at the meetings of 6, 12 and 19 October 2004?
• Should the chairman of the meeting called by the Notice of Meeting be restrained from exercising the power conferred by clause 14.9 of the Constitution to adjourn a meeting of members?
• Did the Notice of Meeting constitute the giving of at least 28 days' written notice, within the meaning of clause 13.3 of the Constitution, of the meeting proposed for 3 November 2004? If not, should an order be made under s 1322(4)(a) of the Act that the Notice of Meeting is valid?
• Did the Company receive both a nomination of the three persons named in resolutions 4, 5 and 6 and a consent to act as a director signed by those three persons at least 35 business days before 3 November 2004 within the meaning of clause 3.5 of the Constitution?
• Is Resolution 7 in the Notice of Meeting defective in seeking the removal of directors who have not yet been appointed and, therefore, cannot be named?
• Having regard to: (a) the proximity of the annual general meeting to be held on 29 November 2004, (b) the currency of a proceeding listed for hearing in this Court to commence on 25 October 2004 involving questions as to whether substantial shareholdings in the Company of Sofcom Ltd ('Sofcom') and other members should be divested, and (c) the need to make full disclosure of all facts that are material to enable the members of the Company to decide on the seven resolutions raised by the Notice of Meeting, does the Notice of Meeting contravene the requirement of s 249R of the Act that a meeting of members of a company must be held at a reasonable time and place, such that the holding of the proposed meeting should be postponed by the Court? 14 The significance of some of those questions falls away depending upon how certain of the other questions are answered. Nevertheless, I shall deal with each question, since all have been argued in full.

POSTPONEMENT OF SECTION 249f MEETING 15 There are two bases on which Central seeks to impugn the validity of the resolutions of the Board purporting to postpone the meeting called by the Notice of Meeting. The first involves a question of general principle, as well as the construction of the Constitution, as to the power of the Directors to postpone, and change the place for, a meeting called under s 249F of the Act. The second involves the question of whether, assuming the Directors of the Company have power to postpone, the current Directors were disqualified from exercising the power in the present case.

CAPACITY OF THE DIRECTORS TO POSTPONE 16 It is important to note that Central expressly eschews any suggestion of impropriety, in the sense of abuse of power, on the part of the Directors in purporting to postpone and change the place for the general meeting called by the Notice of Meeting. That is to say, there has been no suggestion in this proceeding that, in passing the resolutions at the meetings of 6, 12 and 19 October 2004, the Directors were motivated by an improper or irrelevant purpose. Rather, the question is whether, as a matter of law, a power to postpone and change the place of general meetings, such as is contained in clause 13.4 of the Constitution, is capable of being exercised in relation to a meeting called pursuant to s 249F. 17 Directors exist to manage the business of a company and they are therefore suitable people to perform the mechanical steps of convening meetings when that is convenient. However, under the general law, it is the members, not the directors, who would have the right to convene a meeting of members, assuming there is no applicable legislation or provision in a company's constitution. It is the members who are to meet and it would not be remarkable for them to have the power to convene their own meetings: see Vision Nominees Pty Ltd v Pangea Resources Ltd (1988) 14 NSWLR 38 at 49. 18 Nevertheless, in the absence of provisions of the constitution of a company conferring the right to convene meetings on some of the members, or on some other organ of the company, such as the directors, unanimity of the members may be required. That would be very inconvenient in the case of a listed company. Hence, company legislation has for many years contained a mechanism whereby some proportion of the members can have a meeting convened. Prior to 1998, the statutory right of members of a company to convene a general meeting of the members was subordinated to the requirements of the constitution of the company. It was only with the enactment of the precursor of s 249F that the statutory right of members to convene a meeting was no longer expressed to be conditional upon the company's constitution not making other provision. In one sense, therefore, s 249F may be considered to introduce a substantive departure from previous legislative provisions. 19 Section 249F provides as follows: '(1) Members with at least 5% of the votes that may be cast at a general meeting of the company may call, and arrange to hold, a general meeting. The members calling the meeting must pay the expenses of calling and holding the meeting.

(2) The meeting must be called in the same way - so far as is possible - in which general meetings of the company may be called.

(3) The percentage of votes that members have is to be worked out as at the midnight before the meeting is called.' 20 Section 249F thus gives certain members the right to call and arrange to hold a general meeting. The right conferred by s 249F may not be abrogated by the constitution of a company. Notwithstanding that the constitution of a company takes effect under s 140 of the Act as a contract between each member and each other member, as a contract between the company and each member and as a contract between the company and each director, that right cannot be taken away by the constitution of the company. Any ambiguity as to that question would be removed by consideration of the explanatory memorandum published in connection with the Company Law Review Bill 1997, pursuant to which s 249F was enacted. Par 10.22 of that explanatory memorandum stated that '[a] company will no longer be able to displace its members' right to call a general meeting themselves by adopting a contrary provision in the constitution.' 21 Central contends that to permit a provision such as clause 13.4 of the Constitution to apply in respect of a meeting of members called pursuant to s 249F is tantamount to displacing the right of members to call a general meeting conferred by s 249F. In essence, Central contends that a meeting of members called pursuant to s 249F is in a category different from all general meetings convened or called by any other means. Central says that, to the extent that rules are required for the conduct and regulation of meetings of members called pursuant to s 249F, which might otherwise be found in the constitution of a company, those rules are to be found in the general law. 22 Section 249F falls within Division 2 of Part 2G.2 of the Act. Part 2G.2 is headed 'MEETINGS OF MEMBERS OF COMPANIES'. It contains eight divisions as follows: Division 1 - Resolutions without meetings Division 2 - Who may call meetings of members Division 3 - How to call meetings of members Division 4 - Members' rights to put resolutions etc at general meetings Division 5 - Holding meetings of members Division 6 - Proxies and body corporate representatives Division 7 - Voting at meetings of members Division 8 - AGMs of public companies 23 Division 2 contains rules for calling meetings of members as follows:

• 249C - a director may call a meeting of members (replaceable rule);
• 249CA - a director may call a meeting of the members of a listed company (despite anything in the company's constitution);
• 249D - the directors of a company must call and arrange to hold a general meeting at the request of members with at least 5 per cent of the votes or at least 100 members who are entitled to vote;
• 249E - members with more than 50 per cent of the votes of all of the members who make a request under s 249D may call and arrange to hold a meeting if the directors do not do so within 21 days after the request under s 249D;
• 249F - members with at least 5 per cent of the votes may call and arrange to hold a general meeting;
• 249G - the Court may order a meeting of members to be called if it is impracticable to call a meeting in any other way. 24 Division 3 of Part 2G.2 deals with such things as:
• amount of notice of meetings;
• amount of notice of meetings of listed companies;
• notice of meetings to members and directors;
• notice to auditors of meetings of members;
• contents of notice of meetings of members;
• notice of adjourned meetings (replaceable rule). There is no reason to assume that any of those provisions would not apply to a meeting called in any of the ways referred to in Division 2, including one called pursuant to s 249F. Similarly the provisions of Divisions 4, 5, 6 and 7 of Part 2G.2 must be taken to apply equally to all meetings of members, however called. I consider that the constitution of a company must be considered in a similar vein. 25 The Constitution was adopted on 15 September 2000, after the enactment of the precursor of s 249F. Articles 13, 14, 15, 16 and 17 of the Constitution are concerned with meetings of members and the proceedings at such meetings under the following headings: 13 MEETINGS OF MEMBERS 14 PROCEEDINGS AT MEETINGS OF MEMBERS 15 PROXIES, ATTORNEYS AND REPRESENTATIVES 16 ENTITLEMENT TO VOTE 17 HOW VOTING IS CARRIED OUT 26 Article 13 contains clauses dealing with the following matters:
• 13.1 Annual general meeting
• 13.2 Calling meetings of members
• 13.3 Notice of meeting
• 13.4 Postponement or cancellation
• 13.5 Fresh notice
• 13.6 Notice to joint holders of shares
• 13.7 Technology
• 13.8 Accidental omission
• 13.9 Class meetings 27 Article 14 deals with the following topics:
• 14.1 Member present at meeting
• 14.2 Quorum
• 14.3 Quorum not present
• 14.4 Chairing meetings of members
• 14.5 Attendance at meetings of members
• 14.6 Members rights suspended while call unpaid
• 14.7 Chairman's powers at a meeting of members
• 14.8 Admission to general meetings
• 14.9 Adjournment
• 14.10 Business at adjourned meetings 28 None of those provisions is exceptional or unusual. Similar provisions are to be found in the constitutions of most listed companies. The vast majority of the provisions are to ensure the efficient and convenient conduct of meetings of members. As a matter of the construction of the Constitution, there is no reason to limit those provisions to meetings other than meetings called pursuant to s 249F. There is no rationale for treating such a meeting differently from a meeting convened pursuant to any other method provided for in the Act or the Constitution. Indeed, it would be highly inconvenient for a meeting called by members pursuant to s 249F to be regulated by a regime totally divorced from the contractual provisions of the Constitution. 29 Clause 13.4 of the Constitution provides as follows: 'Subject to sections 249D(5) and 250N, the Board may: (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.' 30 Section 249D(5) provides that the directors of a company must call a meeting within 21 days after a request is given to the company under s 249D(1). Section 250N provides that a company must hold an annual general meeting within 18 months after its registration and must hold an annual general meeting in each calendar year and within 5 months after the end of its financial year. Thus, the qualification at the start of clause 13.4 simply recognises mandatory provisions of the Act. The failure to mention s 249F does not signify any intention that the clause was not intended to apply to a meeting called pursuant to s 249F. If anything, it signifies the contrary. 31 The recognition in s 249F(2), that the meeting must be called in the same way, so far as possible, in which general meetings of the Company may be called, indicates that the provisions of the constitution of a company are to apply, so far as is possible, to the calling of a meeting pursuant to s 249F. Were it otherwise, the right could be very easily frustrated. For example, in the absence of a rule dealing with such matters as accidental omission to give notice, quorum, chairman's powers and the like, the calling of a meeting of a listed company could be well nigh impracticable. 32 I do not consider that the presence of clause 13.4 is inconsistent with the provisions of s 249F. Clause 13.4 does not of itself derogate from the right conferred by s 249F(1) of the Act. Further, I consider that, as a matter of construction of the Constitution, clause 13.4 of the Constitution applies to the meeting convened by the Notice of Meeting. The mere existence and exercise of the power does not, of itself, necessarily abrogate the right of members to call a meeting: see Pinnacle VRB Ltd v Ronay Investments Pty Ltd [2000] VSC 330; (2000) 35 ACSR 240. 33 On the other hand, 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 to frustrate the right conferred by s 249F. 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 for the meeting. Nevertheless, the powers exist. The question is whether they have been validly exercised in the present case.

MATERIAL PERSONAL INTEREST 34 Section 195(1) of the Act provides that a director of a public company who has a material personal interest in a matter that is being considered at a meeting of directors must not: (a) be present while the matter is being considered at the meeting; or (b) vote on the matter.

However, under s 195(1A), that prohibition does not apply if the interest does not need to be disclosed under s 191. Section 191(1) provides that a director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest unless s 191(2) says otherwise. Section 191(2) provides that a director does not need to give notice of an interest under s 191(1) in relation to a number of matters specified in that provision. Those matters do not include the question of removal of directors. 35 Clause 9.4 of the Constitution provides that each director must comply with s 195 in relation to being present, and voting, at a Board meeting that considers a matter in which the Director has a material personal interest. Clause 9.4 provides that, subject to s 195, a Director may be counted in the quorum at a Board meeting that considers, and may vote on, any matter in which that Director has an interest. 36 Article 12 of the Constitution is headed 'BOARD MEETINGS'. Clause 12.5 provides that, unless the Board decides otherwise, the quorum for a Board meeting is two Directors and a quorum must be present for the whole meeting. 37 Central contends that each of the present Directors has a material personal interest in the matter of whether the meeting convened by the Notice of Meeting should be postponed. It says that, because the agenda for the proposed meeting includes the removal of the Directors, each of them has a material personal interest in postponing the holding of the meeting. 38 As I have said, each of the present Directors is required to retire at the next annual general meeting of the Company, which must take place no later than 30 November 2004. In fact, the directors have now resolved to call the meeting for 29 November 2004. Thus, the most that could be said of the consequence of postponement of the proposed meeting to 29 November 2004 is that each of the present Directors would remain in office for an additional 26 days by reason of the postponement. 39 It is difficult to see why, absent some specific benefit that flows from remaining in office for an additional 26 days, the question of whether the directors should be permitted to do so would constitute a matter in which the directors have a material personal interest. Nothing has been advanced by Central to suggest that there is some specific benefit that would flow to the present Directors from remaining in office until 29 or 30 November 2004 rather than 3 November 2004. For example, there is no evidence of loss of remuneration payable to them as Directors of the Company by reason of their removal. I do not consider that the interest of the Directors in remaining in office for that period is a material interest in the circumstances of the present case. I do not consider that the postponement of the proposed meeting constitutes a matter in which the Directors have a material personal interest within the meaning of s 195. 40 Even so, there are reasons why, even if the Directors did have a material personal interest in that matter, the resolutions passed at the meetings of 6, 12 and 19 October 2004 were nevertheless valid. Thus, s 195(5) provides that a contravention by a Director of s 195 does not affect the validity of any resolution. Similarly, clause 12.10 of the Constitution provides that each resolution passed with the participation of a person acting as a Director is valid, even if it is later discovered that the person was disqualified from voting on the resolution.

ADJOURNMENT UNDER CLAUSE 14.9 41 If the Directors have power to postpone a meeting of members under clause 13.4 of the Constitution, as I have concluded, there is no reason why the chairman of a meeting called pursuant to s 249F could not exercise the power conferred by clause 14.9 of the Constitution to adjourn that meeting, so long as the exercise of the power is otherwise proper in all respects. No basis has been advanced for the granting of an order restraining the exercise of the power other than supposed inconsistency with s 249F.

28 DAYS WRITTEN NOTICE 42 Section 249F(2) provides that a meeting called under s 249F(1) must be called in the same way, so far as is possible, in which general meetings of the Company may be called. Clause 13.3 of the Constitution provides that at least 28 days' written notice of a meeting of members must be given individually to:

• each member;
• each director; and
• the auditor. Under clause 13.3, notice of meeting may be given in any manner permitted by s 249J(3). Section 249J provides that a company may give notice of a meeting to a member:
• personally;
• by sending it by post;
• by sending it to a facsimile number or electronic address;
• by any other means that the company's constitution, if any, permits. 43 Clause 35.3 of the Constitution then provides that a notice to a person by the Company is regarded as given and received: (a) if it is delivered personally or sent by facsimile or electronic message; (i) by 5 pm on a business day - on that day; (ii) after 5 pm on a business day or on a day that is not a business day - on the next business day; and (b) if it is sent by mail -1 business day after posting.

Clause 35.5 provides that, if a specified period must pass after a notice is given before an action may be taken, neither the day on which the notice is given nor the day on which the action is to be taken may be counted in reckoning the period. 44 Clauses 35.3(a)(ii) and 35.3(b) use different language. The expression 'the next business day' clearly signifies the day after delivery personally or by facsimile or electronic message. The expression '1 business day after posting', used in juxtaposition with the first expression, must be taken to have a different meaning. I consider that it must be construed as meaning a clear business day. A notice delivered personally or by facsimile or electronic message is to be regarded as received earlier than a notice sent by mail. It follows that in circumstances where the Notice of Meeting was sent by mail, it is to be regarded as given and received one clear business day after posting. 45 The Notice of Meeting was sent by mail, at the earliest, on Friday, 1 October 2004. Monday, 4 October 2004 was a public holiday in New South Wales and, accordingly, was not a business day for the purposes of the Constitution. Since Tuesday, 5 October 2004 was the next business day after posting of the Notice of Meeting, one clear business day after posting would be Wednesday, 6 October 2004. 46 Since the Notice of Meeting is to be regarded as given and received no earlier than 6 October 2004, it follows that members to whom the Notice of Meeting was sent by mail on 1 October 2004 were not given at least 28 days' written notice of a meeting to be held on 3 November 2004. Accordingly, s 249F(2) has not been complied with, because clause 13.3 of the Constitution has not been satisfied. 47 It is necessary, therefore, to consider whether it is appropriate to make an order under s 1322(4) of the Act in relation to any deficiency of time in calling the proposed meeting, on the assumption that the Notice of Meeting was posted on 1 October 2004. Section 1322(4) provides as follows: '…the Court may, on application by any interested person, make all or any of the following orders … :

(a) an order declaring that any act, matter or thing purporting to have been done … in relation to a corporation is not invalid by reason of any contravention of the provision of this Act or a provision of the constitution of a corporation.

(d) an order extending the period for doing any act, matter or thing … in relation to a corporation … or abridging the period for doing such an act, matter or thing …

and may make such consequential or ancillary orders as the Court thinks fit' 48 However, under s 1322(6), the Court must not make an order unless it is satisfied: '(a) in the case of an order referred to in paragraph (4)(a):

(i) that the act, matter or thing …is essentially of a procedural nature;

(ii) that the person or persons concerned in or party to the convention or failure acted honestly; or

(iii) that it is just and equitable that the order be made; and

(c) in every case - that no substantial injustice has been or is likely to be caused to any person.' 49 While there is no evidence as to the location of members of the Company, I consider that it is reasonable to assume that they are located in all States of Australia, including those States in which 4 October 2004 was a public holiday. If the Notice of Meeting was posted to members on 1 October 2004, it is possible that some members may have received it within the time fixed by the Constitution. However, there is no evidence concerning the likelihood that the members received the Notice of Meeting before 6 October 2004. There is, therefore, no reason to conclude that the majority of members are likely to have received more than 27 days' notice of the proposed meeting. 50 Section 203D(1)(a) of the Act provides that a public company may by resolution remove a director from office despite anything in the company's constitution. However, under s 203D(2), notice of intention to move such a resolution must be given to the company at least two months before the meeting is to be held, unless the company calls a meeting after notice of such intention is given. Section 203D(3) provides that the company must give the director a copy of the notice as soon as practicable after it is received and s 203D(4) provides that a director is entitled to put his or her case to members by giving the company a written statement for circulation to members and speaking to the motion at the meeting. 51 However, Central intends to achieve the proposed removal of the current Directors of the Company under clause 3.10 of the Constitution. By that provision, the Company, by ordinary resolution, may remove a Director from office. The powers to remove a Director under clause 3.10 are expressly stated to be 'in addition to section 203D'. 52 None of the safeguards referred to in s 203D is provided for in clause 3.10. Nevertheless, the fact that the Act confers the power on members subject to those safeguards is a factor to be taken into account in determining whether the Court should be satisfied that no substantial injustice has been or is likely to be caused to any person. The onus is on Central to satisfy the Court that, notwithstanding that the requirements of the Constitution have not been complied with, albeit to the extent of only one day, no substantial injustice has been or is likely to be caused by the non-compliance. 53 But for the postponement of the proposed meeting, there may have been some doubt as to whether I would have been satisfied that no substantial injustice is likely to be caused to any person by abridging to 27 days the period of notice required to be given by Central for the proposed meeting. However, in the light of the postponement of the proposed meeting by the Directors, I am satisfied that no substantial injustice has been or is likely to be caused to any person by the deficiency in time in the Notice of Meeting. Accordingly, to the extent that it is necessary, it would be appropriate to make an order under s 1322(4) in relation to any deficiency in the Notice of Meeting.

NOMINATION AND CONSENT OF DIRECTORS 54 Clause 3.5 of the Constitution provides that the Company in general meeting cannot validly elect a person as a Director unless: (a) the person retires under the Constitution and seeks re-election; (b) the Board recommends the appointment, or (c) at least 35 days before the meeting at which the relevant resolution will be considered, the Company receives both: (i) a nomination of the person by a member, and (ii) a consent to act as a Director signed by the person. 55 Under cover of a letter dated 5 July 2004, Sofcom sent to the Company a request under s 249D of the Act for the Directors of the Company to call and arrange to hold a general meeting of the Company. The purpose of the proposed meeting was to consider and, if thought fit, to pass resolutions for the removal of two of the then Directors and the election of Messrs Khan, Ryan and Cato as Directors. Attached to that letter were three documents in similar terms, whereby each of Messrs Khan, Ryan and Cato consented to act as a Director of the Company and the three members of the Company nominated each of those three individuals as a Director of the Company. However, that request was not pursued because the members making the request were not members with at least 5 per cent of the votes. 56 On 12 August 2004, Sofcom wrote to the Directors of the Company saying: 'We enclose consents to act as a Director of [the Company] from Farooq Khan, Christopher Ryan and Simon Cato and nominations from… Sofcom Limited, for the election of Messrs Khan, Ryan and Cato at the next Annual General Meeting of [the Company] in accordance with clause 3.5(c) of the Constitution of [the Company].' [Emphasis added] With that letter there were three documents, in the same form as each other, entitled 'NOMINATION AND CONSENT TO ACT AS DIRECTOR'. Each document contained consent by one of Messrs Khan, Ryan and Cato together with the nomination of that individual by Sofcom as a Director of the Company. There was no reference in the documents to the annual general meeting of the Company. 57 No other nomination or consent to act has been received by the Company in respect of Messrs Khan, Ryan and Cato. In particular, Central has not itself nominated any person to be a Director of the Company. Central, however, intends to rely upon the documents enclosed with the letter from Sofcom of 12 August 2004. 58 The Company contends that Central is not entitled to rely upon the documents sent with the letter of 12 August 2004. It says that, because the documents were submitted to the Company as nominations and consents to act in respect of the annual general meeting, they are irrelevant for any other meeting. The Company says that the documents cannot be regarded as nominations and consents 'at large' but should be limited to the specific meeting referred to in the covering letter. That conclusion is reinforced, it says by the previous submission of the documents enclosed with the letter of 5 July 2004, which related to the meeting to be called pursuant to the request under s 249D. 59 I do not consider that the nominations and consents enclosed with the letter of 12 August 2004 should be treated as limited only to the next annual general meeting of the Company. The documents themselves are unqualified. Clearly, at the time when the letter of 12 August 2004 was sent, the annual general meeting was the first general meeting of the Company at which the election of Messrs Khan, Ryan and Cato could take place. I do not consider there is any warrant for reading the covering letter as a statement that the nominations and consents were to be effective only for the next annual general meeting and for no other general meeting at which an election could take place. Accordingly, if the meeting proposed for 3 November 2004 has been properly convened, the provisions of clause 3.5(c) of the Constitution have been satisfied in relation to that meeting in respect of Messrs Khan, Ryan and Cato.

RESOLUTION 7 60 As I have said, s 203D of the Act has not been satisfied in the circumstances of the present case. However, clause 3.10 of the Constitution provides that, whether or not a director's appointment was expressed to be for a specified period: (a) the Company by ordinary resolution; or (b) members holding a majority of the issued shares of the Company conferring the right to vote, by writing delivered to the Company,

may remove a director from office. The powers to remove a director under clause 3.10 are in addition to those conferred by s 203D of the Act. 61 Resolution 7 seeks the removal of any person who may be appointed as a director of the Company after 1 October 2004. At present, there is no such person. There may never be any such person. Clearly, however, Central is signalling to the members that it is going to invite them to elect its nominees and not to suffer any other person to remain as a director. 62 Under clause 3.4, the Company may elect Directors by ordinary resolution. Further, under clause 3.3 of the Constitution, the directors may appoint a person to be a director at any time, except during a general meeting. There is no other way under the Constitution in which directors can be appointed. 63 There is a safeguard for members to the extent that any director appointed by the Board must retire automatically at the next annual general meeting. Thus, whatever might be done by the Board by way of appointing new Directors, it will not be beyond the power of members to remove such Directors no later than the next annual general meeting of the Company. 64 I consider that, in that context, clause 3.10 contemplates the removal of a named individual who is a Director at the time when a meeting is convened for the purposes of considering a resolution for removal of that individual. Resolution 7 is not authorised by clause 3.10 of the Constitution.

CONTRAVENTION OF S 249R 65 Section 249R of the Act provides that a meeting of a company's members must be held at a reasonable time and place. The Company contends that, having regard to various matters to which I shall refer, 3 November 2004 is not a reasonable time for the holding of a general meeting of the members of the Company. The parties have proceeded on the basis that 'time' in s 249R refers to the day, as well as the time of day, when a meeting is to be held. 66 In a covering letter sent by Central to shareholders of the Company with the Notice of Meeting, Central said that it was calling the proposed meeting for the following reasons: · Central has concerns over significant investments made by the Company in Network Limited and the transfer of $2,000,000 in cash and loans from the Company to Network Limited, a company in which Mr Davis, the current managing director and chief executive officer of the Company, has had and continues to have business dealings. · The current Board of the Company has spent a significant amount of the Company's funds in legal expenses. · None of the current Directors of the Company has been elected by members but the Board has already undertaken significant investments and incurred significant expense. · Certain shareholders of the Company desire to have an active say in the future direction of the Company. In addition, Central points to the following matters: · There was a previous attempt in July 2004 to convene a meeting to consider the composition of the Board of the Company. · The Company sought to extend the time for holding its annual general meeting, although that application was rejected by the Australian Securities and Investment Commission ('the Commission'). · As at 1 October 2004, the Company had not confirmed when its annual general meeting was to be held. None of those matters suggests that there is any particular urgency to have the composition of the Board of the Company determined on 3 November rather than on 29 November 2004. 67 Generally, the calling of a general meeting within a very short time prior to the time already fixed for another general meeting would offend the requirement that the second meeting to be called be held at a reasonable time. In the ordinary scheme of things, it is undesirable for two general meetings of the members of a Company to be within a short time of each other. A fortiori, when the business to be conducted at one of two meetings to be held in close proximity to each other is substantially the same as part of the business to be conducted at the other, it would be undesirable to have two meetings. 68 Under clause 3.3 of the Constitution, each of the present Directors of the Company must retire at the next annual general meeting of the Company, which, by the operation of the Act, must be held no later than 30 November 2004 in any event. Any other person who may be appointed as a Director by the Board of the Company prior to the annual general meeting would also be required to retire. 69 The Company has received the requisite nomination and consent forms for the election of Messrs Khan, Ryan and Cato. The consequence is that, but for the Notice of Meeting, the substance of Resolutions 1 to 6 proposed in the Notice of Meeting, being the question of the future composition of the Board, would be part of the business of the annual general meeting to be held 26 days after the proposed meeting of 3 November 2004. 70 The shareholders may be put to inconvenience by having to attend two meetings on different days. There is likely to be confusion by reason of there being two notices in respect of different meetings dealing with much the same subject matter, namely the composition of Board. More particularly, shareholders will have only 27 days in which to consider resolutions for removal of directors. In the ordinary course, under s 203D of the Act, a resolution for the removal of directors of a company, in the absence of any provision in the constitution of the company, requires a minimum of two months' notice. Even if there is provision in the constitution of a company, the provision may not reduce the period below 28 days. Holding the proposed meeting on 3 November 2004 may deprive members of ample opportunity to consider balanced information concerning the composition of the Board. 71 The Company has commenced a proceeding in the Court against Sofcom and two other members ('the Substantive Proceeding') claiming a declaration that certain acquisitions of shares in the Company constituted contraventions of s 1043A of the Act. That section prohibits a person from acquiring shares in a company if the person possesses inside information that the person knows is not generally available and, if generally available, would have a material effect on the price of the shares. The Company also claims consequential relief, including orders vesting the shares in the Commission and restraining Sofcom and the other two members from exercising rights in respect of the shares in question. 72 Sofcom and its co-defendants in the Substantive Proceeding have filed a cross-claim alleging that the affairs of the Company have been conducted contrary to the interests of members as a whole and that the conduct of the affairs of the Company has been oppressive to, unfairly prejudicial to or unfairly discriminatory against members of the Company. They claim declarations to that effect, damages and an order that the Company discontinue the Substantive Proceeding. 73 The Substantive Proceeding is presently fixed for hearing before me for two weeks commencing on 25 October 2004 and ending on 5 November 2004. Mr Davis, who is one of the cross-defendants, has filed a substantial affidavit and could be expected to be taking a keen interest in the Substantive Proceeding. The meeting proposed for 2.00 pm on 3 November 2004 would take place within the period of the hearing and might be thought to constitute a significant distraction for someone in the position of Mr Davis, defending serious allegations in the Substantive Proceeding. I should note that Central has indicated its willingness to have the proposed meeting adjourned to 4.30 pm. 74 The Company also complains that information that has been put into the public domain by Central and others is potentially misleading in a number of respects, including the following:

• Central suggested in its circular letter to members of the Company of 1 October 2004 that the Company is spending large sums of money on litigation against Sofcom and others. However, the letter omits to say that the case brought by the Company is a limited one concerning insider trading and that the larger part of the proceeding set down for hearing on 25 October 2004 concerns the oppression and insider trading allegations brought by Sofcom and others against the Company and other cross-defendants.
• An implication from the information provided by Central is that Central became a substantial shareholder in the Company and subsequently formed concerns about the Company, which then led it to form an alliance with Sofcom and the other defendants in the Substantive Proceeding. However, Central did not become a substantial shareholder in the Company until 6 September 2004 and has never been a shareholder independently of Sofcom and the other defendants. 75 Where the directors of a company are advising or urging a particular action, or course of action upon members of the company, the directors are under a duty to make full disclosure of all facts, within their knowledge, which are material to enable the members to determine upon their action. If the directors fail to do so, a resolution passed at their urging, or on their advice, may be voidable: Bulfin v Bebarfalds Limited (1938) 38 SR(NSW) 423. That is because failure to provide full disclosure amounts to a breach of the fiduciary duty that directors owe when acting in their capacity as directors. 76 While that principle may not apply to members of a company who call a meeting with a view to urging a particular course on fellow members, the Directors may well be under an obligation to ensure that all members are provided with the full and correct information necessary to enable them to have an understanding and form a judgment upon the business to be transacted at a meeting called by some of the members. In any event, under s 249P, a member is entitled to request a company to give to all members a statement provided by the member making the request about a resolution proposed to be moved at a general meeting. Further, each of the Directors would be entitled to a reasonable opportunity to formulate a response to a proposal for his removal. The sending of information to shareholders concerning the business for the proposed meeting of 3 November 2004 as well as the sending of information for the annual general meeting 26 days later would involve additional cost that would be avoided if the two meetings were to be held on the same day. 77 Under s 1324 of the Act, where a person has engaged or is engaging in conduct that would constitute a contravention of the Act, the Court may grant an injunction, on such terms as the Court thinks fit, restraining the person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing. That provision may authorise the Court to make an order restraining Central from holding the proposed meeting on 3 November 2004 and requiring Central to call and arrange for the meeting to be held on some later date, if the Court were persuaded that the calling of the meeting for 3 November 2004 involved a contravention of s 249R of the Act. 78 If I had concluded that the postponement of the proposed meeting for 3 November 2004 was not effective, I may have been disposed to conclude, on balance, that, having regard to all of the circumstances outlined above, 3 November 2004 was not a reasonable day on which to hold the proposed meeting when, as Central acknowledged in its circular to members, the annual general meeting had to be held no later than 30 November 2004. 79 However, the question of whether the Court should intervene in relation to the holding of the proposed meeting of 3 November 2004 is academic if the Board has effectively postponed the proposed meeting. For the reasons I have indicated, I consider that the resolutions of 6, 12 and 19 October 2004 are valid to postpone the proposed meeting to a time prior to the proposed annual general meeting. Accordingly, there is no need to consider the exercise of any power conferred on the Court to restrain the holding of the meeting called by Central.

CONCLUSION 80 The parties should bring in short minutes of orders to reflect the conclusions that I have reached. I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate: Dated: 26 November 2004 Counsel for the Plaintiff: N.Cotman SC

Counsel for the Defendant: J Gleeson, J.R.J. Lockhart