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[2005] NSWSC 1005
Supreme Court of NSW
2005-06-10
Palmer J
Original judgment source is linked above.
Reported Decision : 55 ACSR 185 (2005) 23 ACLC 1859
CITATION : Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005
DECISION : Special resolution declared invalid; plaintiff to be restrained from further breaches of shareholders agreement.
CATCHWORDS : CORPORATIONS - MEETINGS - PROXIES - POWER OF ATTORNEY - Whether a power of attorney can be a proxy for the purposes of the Corporations Act - whether a proxy is "signed" for the purposes of CA s.250A(1) if it is executed under a power of attorney or by an agent - whether a proxy is valid under s.250A(1)(b) if it does not expressly state the name of the company but incorporates the name by reference - MEETINGS - VOTING - CONTRACT - Whether a shareholder's right to vote can be taken away by contract - whether a vote cast at a meeting in breach of contract is invalid - MEETING - RULINGS - Whether chairman's ruling as to admission of proxies correct - whether ruling binding and conclusive - whether erroneous ruling effective to take away member's right to vote - MEETINGS - PROCEDURAL IRREGULARITY - SUBSTANTIAL INJUSTICE - Meaning of procedural irregularity discussed - meaning of substantial injustice discussed - whether special resolution should be validated under CA s.1322(4)(a) - FINANCIAL ASSISTANCE - VALIDITY - DECLARATION - Whether, if financial assistance was provided contrary to CA s.260A(1) a declaration should be made declaring it validated by CA s.260D(1) - whether declaration hypothetical - WRONGDOING - Limits of maxim "a party cannot take advantage of own wrongdoing" discussed.
Cordiant Communications (Australia) Pty Ltd - Plaintiff PARTIES : The Communications Group Holdings Pty Ltd - Defendant
D.B. Studdy - Plaintiff COUNSEL : T.F. Bathurst QC, M.A. Jones - Defendant
Allens Arthur Robinson - Plaintiff SOLICITORS : Clayton Utz - Defendant
1 The Plaintiff ("Cordiant") is a shareholder of the Defendant ("TCGH"). At a general meeting of members of TCGH held on 18 November 2004 (the "Meeting") a special resolution was passed approving transactions of which Cordiant disapproved ("Special Resolution"). The Special Resolution was passed by counting votes attaching to a proportion of Cordiant's shares in TCGH in respect of which Cordiant had given an irrevocable Power of Attorney to nominees of TCGH (the "Attorney Shares"). Cordiant appointed a proxy and attended the Meeting itself by its appointed representative and asserted that it was entitled to vote on the Special Resolution in respect of all of its shares, including the Attorney Shares. 2 If Cordiant's assertion had been accepted, the Special Resolution would have been defeated. However, the chairman of the Meeting ruled that the irrevocable Power of Attorney given by Cordiant in respect of the Attorney Shares meant that Cordiant could not vote in respect of those shares and that only the persons appointed under the Power of Attorney could vote in respect of those shares. Accordingly, after a poll in which the votes attaching to the Attorney Shares were counted in favour of the Special Resolution, the chairman declared the Special Resolution to have been passed. 3 Cordiant now seeks:
is the Special Resolution invalid because the procedural irregularity "has caused or may cause substantial injustice that cannot be remedied by any order of the Court" : CA s.1322(2);
has Cordiant committed a breach of contract in attempting to vote at the Meeting in respect of the Attorney Shares;
is a breach of contract relevant to the application of CA s.1322(2);
should orders under CA s.1322(4)(a) be made validating the Special Resolution and the financial assistance provided by TCGH in reliance on it;
6 The essential facts are not in dispute; some of them are set out in a Statement of Agreed Facts (Exhibit P2). The relevant facts may be summarised as follows. 7 At all material times Cordiant held 29.9% of the issued share capital of TCGH. 8 The Shareholders Agreement dated 28 May 2003 was entered into by Cordiant, TCGH and others. The terms of the Shareholders Agreement which are relevant for present purposes are as follows:
(a) If there is a Change in Control in Cordiant, then … Cordiant must execute and deliver to the Company the power of attorney attached to this Agreement as Annexure B. For the avoidance of doubt, if there is a Change of Control, Cordiant will no longer have the right to appoint a Director to the Board under Schedule 1 and shall procure that the Cordiant Directors immediately resign as Directors.
(b) Cordiant hereby irrevocably appoints any two Investor Directors [i.e. nominees of TCGH] jointly as its attorney to execute the power of attorney attached as Annexure B, in the event that a signed copy of this power of attorney referred to in clause 16.9(a) is not delivered by Cordiant to the Company within 30 days of a Change of Control occurring.
(c) an Investor Director can vote as Cordiant's attorney, at any shareholders' meeting, in respect of such number of Shares as is calculated as: A-B, where A equals such number of Shares as is then held by Cordiant, and B equals such number of Shares that constitute 24.9% of the Share Capital, provided that if A-B is a negative number then the power of attorney will not apply; and
(d) the power of attorney will not apply to a proposed resolution under which all Shareholders are not treated equally." 9 The Power of Attorney prescribed by Schedule B is, relevantly, in the following terms, omitting formal parts: " 1 Definitions A word or expression defined in the Shareholders Agreement between the Principal, the Investors (as defined therein) and others, dated on or about 16 May 2003 has the same meaning in this deed poll.
2 Appointment For consideration received, the Principal irrevocably appoints any two Investor Directors (each an Attorney) jointly as the attorney of the Principal for the Appointment Period. The Appointment Period means the period beginning on the date of this deed and ending on the date on which neither the Principal or any Related Corporation of the Principal holds any shares in the Company. The term Related Corporation has the meaning given to the term related body corporate in the Corporations Act.
3 Powers The Attorney is empowered to vote at any shareholders' meeting (and agree to any meeting being held at short notice), in respect of such number of Shares as is calculated as A-B, where A equals such number of Shares as is then held by the Principal and B equals such number of Shares that constitute 24.9% of the Share Capital, provided that: (1) if A-B is a negative number then the power of attorney will be deemed to have been terminated and any exercise of the power granted hereunder will, after such date, be invalid; and
(2) all Shareholders are treated equally under the proposed resolution. If this is not the case then the attorney granted hereunder will not apply.
4 Use of name The Attorney may exercise its powers under this deed poll in the name of the Principal or in the name of the Attorney and as the act of the Principal.
5 Benefit to Attorney The Attorney may exercise its powers under this deed poll even if the Attorney benefits from the exercise of that power.
6 Ratification The Principal undertakes to ratify and confirm any act of the Attorney in the lawful exercise of its powers under this deed poll." 10 There is no dispute that on 1 August 2003 there was a Change of Control (as defined in the Shareholders Agreement for the purposes of clause 16.9) and that the provisions of clause 16.9 were then engaged. 11 By 6 October 2004, Cordiant had not executed and delivered a Power of Attorney to TCGH in accordance with clause 16.9(a). 12 On or about 6 October 2004, Messrs Gardell and Sims, being Investor Directors as defined for the purposes of clause 16.9(b), executed a Power of Attorney in the name of Cordiant, in the form prescribed by the Shareholders Agreement and pursuant to clause 16.9(b). There is no dispute that the Power of Attorney was validly executed by Messrs Gardell and Sims and that it remains binding. 13 On 22 October 2004, TCGH gave to Cordiant notice that a general meeting of members of TCGH would be held on 18 November 2004 for the purpose of considering and, if thought fit, approving as a special resolution a resolution that for the purposes of CA s.260B(3) and all other purposes, approval be given to TCGH and specified companies to enter into certain transactions which might constitute financial assistance under CA s.260A. 14 By 12 November 2004, Cordiant had formed the view that it would vote against the Special Resolution. On that date it advised all Australian-based Investor Directors that although it was bound by the Power of Attorney it directed the persons appointed under the Power of Attorney to vote against the Special Resolution. 15 On 16 November 2004, Cordiant's solicitors wrote to TCGH's solicitors enclosing for lodgement at the Meeting a proxy form completed by Cordiant appointing Mr Domenic Pagano as its proxy and an appointment under CA s.250D appointing Mr Pagano as Cordiant's representative to exercise all of its powers at the Meeting. 16 At the Meeting on 18 November 2004, at which Mr Pagano was present representing Cordiant, the chairman ruled that the Power of Attorney was valid in respect of the Attorney Shares so that Cordiant was entitled to vote only in respect of 24.9% of TCGH's issued shares. The Special Resolution was put and a poll was called for. As a result of the chairman's ruling, 24.9% of the shares in TCGH were voted by Cordiant against the Special Resolution and 75.1% of the shares, including the Attorney Shares, were voted in favour. The chairman accordingly declared the Special Resolution passed. 17 There is no dispute that the chairman, in making his ruling, acted in accordance with legal advice and in good faith. 18 On 6 December 2004, certain financial assistance was given by TCGH for the acquisition of companies, pursuant to and in reliance upon the Special Resolution which had been passed at the Meeting on 18 November. The financial assistance involved a considerable borrowing upon security. 19 On 10 December 2004, these proceedings were commenced by Cordiant. 20 On 31 January 2005, further financial assistance was provided by TCGH for the acquisition of companies, pursuant to and in reliance upon the Special Resolution.
21 Mr D. Studdy of Counsel, who appears for Cordiant, in his able argument submits that the Power of Attorney was ineffective as a matter of law to transfer the voting rights of Cordiant to a third person. He submits that the Power of Attorney could only have been effective to transfer voting rights if it had fulfilled the requirements of a proxy under CA s.250A and s.250B and, he says, it did not do that in a number of respects. I shall deal with each of the alleged non-compliances in due course. 22 However, the starting point of all of Mr Studdy's arguments on the invalidity of the Power of Attorney as a proxy is the submission that a shareholder has no right at common law to vote at shareholders meetings either by proxy or by an attorney; if a shareholder has such a right it is to be found only in statute, i.e. the Corporations Act , and in the company's constitution. This submission is undoubtedly correct: see e.g. Harben v Phillips (1883) 23 Ch D 14, at 35-36 per Bowen LJ; Cousins v International Brick Company Ltd [1931] 2 Ch 90, at 100 per Lord Hanworth MR ( "Cousins" ); Totally & Permanently Incapacitated Veterans' Association of NSW Ltd v Gadd (1998) 28 ACSR 549, at 557 per Young J (as his Honour then was); New South Wales Henry George Foundation Ltd v Booth (2002) 54 NSWLR 433, at 436 per Gzell J ( "Booth" ) 23 I do not think that there could be any doubt that TCGH's constitution recognises that a shareholder has a right to vote by a proxy and that the proxy may be given by means of a Power of Attorney: see clauses 32, 43.1, 44.5, 44.6, 46.1, 47. 24 CA Part 2G.2 Div 6 expressly provides for shareholders to vote by proxy (s.249X(1)) and by representative if the shareholder is a corporation (s.250D). The Corporations Act , however, says nothing expressly about voting by an attorney. Nevertheless, both parties accept, as do I, the correctness of the decision of Gzell J in Booth that the reference to "proxy" in the Corporations Act is broad enough to encompass an attorney: Booth [21]. In support of this proposition, Gzell J cites a statement by Lindley LJ in Re English, Scottish, & Australian Chartered Bank [1893] 3 Ch 385, at 409 to the effect that a proxy simply means some agent properly appointed. To that authority may be added an observation of Lord Hanworth MR in Cousins at 100: "What then is meant by a proxy? A person representative of the shareholder who may be described as his agent to carry out a course which the shareholder himself has decided upon." 25 I accept, therefore, that TCGH's constitution permits voting by the appointment of an attorney, provided that the appointment complies with the requirements for a valid proxy contained in CA s.250A and s.250B: Booth [20]-[22].
26 Mr Studdy submits that the Power of Attorney in the present case does not comply with the requirements of CA s.250A(1) in a number of respects. Section 250A relevantly provides: " 250A Appointing a proxy
(1) An appointment of a proxy is valid if it is signed, or otherwise authenticated in a manner prescribed by the regulations, by the member of the company making the appointment and contains the following information:
(c) the proxy's name or the name of the office held by the proxy;
(d) the meetings at which the appointment may be used.
(7) A later appointment revokes an earlier one if both appointments could not be validly exercised at the meeting." 27 Mr Studdy says that the Power of Attorney cannot be a proxy complying with CA s.250A(1) because it is not "signed … by the member of the company making the appointment" , i.e. Cordiant. The common seal of Cordiant is not affixed to the Power of Attorney; it is executed by Messrs Gardell and Sims as Cordiant's attorneys appointed pursuant to clause 16.9(b) of the Shareholders Agreement. Mr Studdy says that s.250A(1) requires that the "proxy", i.e. the Power of Attorney, be "signed" , i.e. executed, by Cordiant itself and not by any attorney or agent on its behalf. 28 It will be recalled that under clause 16.9(b) of the Shareholders Agreement Cordiant irrevocably appointed two Investor Directors as its attorneys to execute the Power of Attorney if Cordiant itself failed to execute and deliver the Power of Attorney within thirty days - as it has, in fact, failed to do. 29 There is no dispute that Messrs Sims and Gardell have validly executed the Power of Attorney on Cordiant's behalf pursuant to clause 16.9(b): the question is whether, in order to qualify as a proxy under CA s.250A(1), the Power of Attorney must be executed by Cordiant itself. 30 This argument can hardly be described as meritorious: it would not have been available to Cordiant at all but for its failure to perform its obligations under clause 16.9(a) of the Shareholders Agreement to execute and deliver the Power of Attorney to TCGH. Nevertheless, as Mr Studdy correctly submits, the question is one purely of construction of the Corporations Act and does not admit of consideration of the respective merits of the parties. 31 In my opinion there is no substance in this argument. It is well established that where a statute or regulation provides that a document is to be signed by a particular person, prima facie such a provision does not exclude the common law rule that the act of the agent is taken as the act of the principal so that if the person who is required to sign authorises another to sign on his or her behalf, the signature of the person so authorised is equivalent to the signature of the person giving the authority. An intention to exclude this common law rule must appear from the language of the statute or regulation or from its subject matter and character: see e.g. R v Justices of Kent (1873) LR8QB 305, at 307; Re Whitley Partners Ltd (1886) LR 32 Ch D 337, at 340-341; Furnivall v Hudson [1893] 1 Ch 335; Grahame v Commissioner for Railways (1946) 46 SR(NSW) 430, at 435 per Jordan CJ; McRae v Coulton (1986) 7 NSWLR 644, 663 per Hope JA. 32 There is nothing in the terms of CA s.250A or in Pt 2G.2 Div 6 which excludes the operation of the rule. On the contrary, s.250B expressly contemplates that a proxy may be validly signed for the purposes of s.250A by an attorney since subsection (1)(b) requires delivery of a proxy to the company within the prescribed time accompanied by "the authority under which the appointment was signed … or a certified copy of the authority" " if the appointment is signed … by the appointor's attorney" . Clause 46.2 of TCGH's constitution mirrors the provisions of s.250B(1). 33 Neither CA s.250A nor TCGH's constitution excludes the operation of the common law rule that an instrument signed by a person's attorney or agent is taken to be signed by that person. The Power of Attorney is, therefore, not invalid as a proxy under s.250A(1) merely because it is signed by Cordiant's duly authorised attorneys rather than executed by Cordiant itself: see Re NRMA Insurance Ltd (No 1) (2000) 33 ACSR 595, at 649, per Santow J (as his Honour then was), applying McRae v Coulton (supra).
34 Mr Studdy submits that the Power of Attorney is invalid as a proxy because, contrary to the requirements of CA s.250A(1)(b), it does not contain the name of TCGH; he says, correctly, that the Power of Attorney nowhere contains the words "The Communications Group Holdings Pty Ltd (ACN 104 455 003) " . The Power of Attorney appoints attorneys for "the Principal" (defined in the Power of Attorney as Cordiant) during such time as Cordiant holds any shares in "the Company" (clause 2) and empowers the attorneys to vote in respect of a certain percentage of the "Shares" . 35 Clause 1 of the Power of Attorney incorporates by reference terms defined in the Shareholders Agreement. "The Company" is defined in the Shareholders Agreement as TCGH and "Shares" is defined therein as meaning shares in the capital of TCGH. 36 It is clear that the Power of Attorney refers to the name of TCGH by incorporating the definitions in another document. Mr Studdy, however, submits that incorporation of TCGH's name by reference is not enough to satisfy the requirements of s.250A(1)(b): he says that the words "contains … the company's name" mean that the proxy document must expressly state the name of TCGH on its face. 37 I am unable to accept this submission. Mr Studdy has not supported it by reference to any authority. Indeed, neither of the parties has referred me to any decision on the point. However, I think that assistance may be derived from a number of authorities. 38 A proxy form is a commercial document and must be read in the way that commercial people may be expected to read it, i.e. in accordance with business common sense. In my opinion, a proxy form "contains the company's name" if it either expressly states the name of the company or else refers to the name of the company in a way which, as a matter of commercial practicality, is readily identifiable by the parties directly concerned with the exercise of the proxy, namely, the appointor, the proxy holder and the company. The means of identification of the company's name may be by reference to another document or record which is available to all concerned. 39 These propositions emerge from a consideration of a number of long standing authorities. 40 In Bombay-Burmah Trading Corporation, Limited v Dorabji Cursetji Shroff [1905] AC 213, a company's articles of association specified a form of proxy which required that the appointee be "named" therein. A shareholder purported to vote by proxy, the form of proxy being, in fact, a general power of attorney which appointed as the attorneys the partners of a firm for the time being. The managing partner of the firm was entered in the register of proxies of the company as the person who would use the proxy conferred by the power of attorney but the objection was taken that the power of attorney was not a valid proxy because the managing partner was not "named" in it, as the company's articles required. The Privy Council rejected the argument. 41 Delivering the opinion of the Judicial Committee, Lord Lindley observed (at p.218) that the name of the person who was actually going to use the proxy could be found in another document, the proxy register, to which all interested parties could easily refer. Further, all concerned actually knew who was going to exercise the proxy. Those circumstances were enough to result in their Lordships concluding that the person appointed to exercise the proxy had been "named" in the proxy form "for all business purposes" . 42 The Bombay-Burmah Trading case was referred to with apparent approval by Williams J in The City of Perth v Crystal Park Ltd (1940) 64 CLR 153, at 167. 43 In re Land Credit Company of Ireland (1873) LR 8 Ch App 831 is another case showing that a pragmatic and commercial construction is put upon requirements that a person be "named" in documents required by companies legislation. 44 In that case, a firm was sought to be made liable as a contributory in a company being wound up under the English Companies Act, 25 & 26 Vict. c.89. Section 38 of that Act made past and present "members" liable as contributories and s.23 provided that a person "whose name is entered on the register of members" was deemed to be a member. 45 The appellant contended that it was not a "member" of the company because its name did not appear on the register of members. However, the names of none of the company's shareholders, apart from the original subscribers, appeared in the company's share register. The register itself contained an explicit reference to another book in which appeared the names of those who had become shareholders. That record book, which was readily available for inspection, gave all of the information which the Act required to be contained in the register of members. 46 The Court of Appeal held that the reference in the register of members to the second book containing the names of shareholders was sufficient to comply with the requirements of s.23 and that the appellant was sufficiently "named" in the register to constitute it a member liable for contribution. 47 For modern instances of the application of business common sense to the interpretation of notices given pursuant to contract or statute, see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, at 771, and Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303 per McColl JA at [148]. The test is: does the notice - here, a proxy - leave a reasonable recipient in no reasonable doubt as to the fact or circumstance which is required to be notified. 48 In the present case, there could not be the slightest doubt in the mind of any of the parties concerned in the granting and exercise of the Power of Attorney as a proxy that "the Company" referred to in the Power of Attorney is TCGH, in accordance with the definitions contained in the Shareholders Agreement, which are incorporated by reference in the Power of Attorney. Cordiant and TCGH were parties to that agreement and the grantees or proxy holders appointed by the Power of Attorney are any two of the four directors of TCGH, their names being specified in Schedule 1, paragraph 3.1 of the Shareholders Agreement. 49 In the light of the authorities to which I have referred, I hold that the Power of Attorney, in referring to "the Company" , defined as TCGH in the Shareholders Agreement, contained the name of TCGH for the purposes of CA s.250A(1)(b). The Power of Attorney is, therefore, not invalid as a proxy on this ground.
Was Cordiant disentitled to vote the Attorney Shares?
50 Mr Studdy submits that even if the Power of Attorney was a proxy, nevertheless it could not be irrevocable in such a way as to disentitle Cordiant itself from attending the Meeting, in the person of Mr Pagano as its representative appointed under CA s.250D, and voting in respect of all of its shares in TCGH. 51 Mr Studdy relies upon s.249Y(3) which provides: " Effect of member's presence on proxy's authority
A company's constitution (if any) may provide for the effect that a member's presence at a meeting has on the authority of a proxy appointed to attend and vote for the member. However, if the constitution does not deal with this, a proxy's authority to speak and vote for a member at a meeting is suspended while the member is present at the meeting." 52 Further, Mr Studdy says that every proxy is, by its nature, revocable, so that the proxy contained in the Power of Attorney was revoked when Cordiant later appointed Mr Pagano as its proxy to attend the Meeting. Mr Studdy relies on s.250A(7), which provides: "A later appointment revokes an earlier one if both appointments could not be validly exercised at the meeting." 53 Mr Bathurst QC, who appears with Mr Jones for TCGH, answers both these arguments in the same way. He submits:
It is said that by giving proxies they were prevented from attending personally and voting, that having set in motion the proxy provisions they had disabled themselves from voting personally. The articles might be so drawn as to produce that result, but when I examine these three articles I find no such exclusion of the personal right of the shareholder to vote. Article 74 states that there are the alternative rights of voting in person or by proxy. The subsequent articles define the channel along which the proxy system is to flow, but do not negative the use of the alternative right of voting personally. It follows that the personal right to vote is not taken away and, indeed, it would be strange if a person in the position of an agent could say to his principal: 'You have entrusted to me a power which I will not allow to pass back to you, although you demand the right to exercise it.'
In the absence of clear words taking away the shareholder's personal right to vote after he has put in force the proxy system, that personal right remains and the shareholder is able to attend and give his own vote according to his own volition and the proxy has no right to prevent it." 59 Lawrence LJ was of the same opinion. His Lordship found nothing in the articles of the company which precluded a shareholder from exercising his right to vote personally because he had already appointed a proxy. At p.102, his Lordship said: "Every proxy is subject to an implied condition that it should only be used if the shareholder is unable or finds it inconvenient to attend the meeting. The proxy is merely the agent of the shareholder, and as between himself and his principal is not entitled to act contrary to the instructions of the latter. As between these persons and the company, the shareholder is under article 74 entitled to exercise his option to vote in person or by proxy at the time when the occasion for its exercise arises, that is to say, when the vote is taken and if the proxy insists on voting notwithstanding that the shareholder himself attends and votes and thus a double vote is given at the meeting in respect of the same shares, it is the duty of the chairman to reject the vote of the proxy as the personal vote is an unequivocal exercise on the part of the shareholder of his option to vote in person." 60 Romer LJ agreed. At p.103 his Lordship said: "It was no doubt contemplated by article 76 that the proxy was to be revoked by notice in writing, but when a shareholder appears at the meeting and says he prefers to vote in person, he is not revoking the proxy previously given, but doing an act which does away with the necessity of the proxy ever being exercised at all. A proxy is always subject to an understanding that the shareholder giving it does not elect to give his vote in person and when he in fact gives a vote in person he is not revoking the proxy but taking a step which obviates the necessity of the proxy being used at all." 61 Cousins was referred to with approval by the Judicial Committee of the Privy Council in Coachcraft Ltd v SVP Fruit Co Ltd (1980) 28 ALR 319. There, the appellant had made a take-over offer for a company. However, the company's articles provided that no one shareholder could own more than 10,000 shares. The appellant's take-over offer required accepting shareholders to sign a power of attorney in respect of the shares which they sold. By reason of acceptance of the offer, the appellant, while not appearing on the register of members as the holder of more than 10,000 shares, acquired the right to vote under the powers of attorney in respect of a much greater number of shares. The question was whether the proxies constituted by the powers of attorney could validly be exercised. 62 The Privy Council held that the appellant could not validly vote in respect of the shares the subject of the powers of attorney. This was because the articles of the company entitled it to have regard to beneficial as well as legal ownership of shares for the purposes of ascertaining entitlement to vote. 63 However, their Lordships went on to say at p.328 that the powers of attorney were not, in fact, proxies at all. The powers of attorney were part of the contracts for the sale of the take-over shares to the appellant and enabled the appellant to vote in respect of those shares in its own interest as beneficial owner, not as representative of the vendors. 64 Coachcraft and Cousins were considered by Ipp J (as his Honour then was) in NT Power Generation Pty Ltd v Trevor (2000) 23 WAR 482. At p.489, his Honour said: "Of course, a proxy giver may authorise the proxy holder to carry out a course in his or her absolute discretion. But that must be in the context of the proxy holder representing the interests of the person giving the proxy. It is of the essence of an agency relationship that the agent act on the principal's behalf and in the principal's interests. Where A is authorised to act in the name of B, but is entitled at all times to ignore B's interests, act entirely on his own behalf and advance his own interests, a true relationship of agency is not created. I think this is the effect of the decision of the Privy Council in Coachcraft Ltd v SVP Fruit Co Ltd (1980) 28 ALR 319." 65 Cousins , Coachcraft and NT Power Generation are not authority for the proposition that a proxy may never validly be made irrevocable, as Mr Studdy suggests. As Romer LJ points out in Cousins , when a shareholder who has a given a proxy for a meeting attends that meeting himself "he is not revoking the proxy … but doing an act which does away with the necessity of the proxy ever being exercised at all" . So, if the proxy is a "standing proxy", i.e. it is not confined to a specified meeting or is made irrevocable because it is contained in an irrevocable Power of Attorney, it will be ineffective when the shareholder chooses to attend a particular meeting in person but it will not be revoked by the shareholder's attendance at that meeting and will remain effective at any subsequent meeting which the shareholder chooses not to attend. 66 The point made by Romer LJ in Cousins is that a person's act is not rendered invalid and of no legal effect merely because he has contracted with a third party that the third party shall have authority to perform that act as the person's agent. The principal may be liable to the agent for breach of contract if the principal carries out the act himself, but the act of the principal is still, in law, valid and effective. The point is illustrated in James v Nesbitt (1954) 28 ALJR 482. 67 In that case the appellant gave a bill of sale and an irrevocable power of attorney to a finance company to secure an advance. The appellant later surrendered a lease of certain business premises. Surrender of the lease was within the power of the finance company to do pursuant to the irrevocable power of attorney. The finance company argued that it alone had power to surrender the lease and because it had not done so the surrender was invalid. The High Court unanimously rejected the submission. 68 At p.484 the Court referred to the provisions of s.161 of the Conveyancing Act 1919 (NSW) (the predecessor of the present s.15 and s.16 of the Powers of Attorney Act 2003 (NSW), which relevantly provided that where a power of attorney is given for valuable consideration and the power is expressed to be irrevocable, then in favour of a purchaser the power shall not be revoked and any act done at any time by the donee of the power in pursuance shall be as valid as if done by the donor. The High Court said: "The contention is that these provisions operate to make it impossible for the donor of the power … to do any of the acts covered by the power. With this construction of s.161 we find it impossible to agree. Section 161 gives an irrevocable authority to the donee of the power to do certain acts. It does not in itself strip the donor of his legal capacity, whatever it may be, by virtue of ownership or otherwise to do the same acts. If there is any inconsistency between the manner in which the donee of the power acts and the manner in which the donor of the power acts in reference to something which is covered by the power, then s.161 will operate, according to the circumstances of the case, in favour of a purchaser." 69 As I have said, these principles of the common law, which are in essence the rudimentary principles of the law of agency, have been given statutory form in CA Pt 2G.2 Div 6. 70 In my opinion, CA 249Y(3) confers on a shareholder a statutory right to attend any meeting of shareholders of the company and, by doing so, to suspend whatever rights that shareholder may have conferred on a proxy holder to attend and vote at that meeting. The subsection permits that statutory right to be regulated or even taken away by provision in the company's constitution, but not otherwise. 71 As I shall explain later, there is no provision in TCGH's constitution taking away the statutory right conferred on Cordiant by s.249Y(3). It follows that if Cordiant validly appointed Mr Pagano as its representative to attend the Meeting and vote in respect of all of its shares, Mr Pagano's presence at the Meeting suspended the right of TCGH's nominees to exercise any voting rights at the Meeting in respect of the Attorney Shares.
Cordiant's appointment of a representative under s.250D
72 CA s.250D provides: " Body corporate representative
(1) A body corporate may appoint an individual as a representative to exercise all or any of the powers the body corporate may exercise:
(b) at meetings of creditors or debenture holders; or
(c) relating to resolutions to be passed without meetings; or
(d) in the capacity of a member's proxy appointed under subsection 249X(1).
(2) The appointment may set out restrictions on the representative's powers. If the appointment is to be by reference to a position held, the appointment must identify the position.
(3) A body corporate may appoint more than 1 representative but only 1 representative may exercise the body's powers at any one time.
(4) Unless otherwise specified in the appointment, the representative may exercise, on the body corporate's behalf, all of the powers that the body could exercise at a meeting or in voting on a resolution." 73 Clause 48 of TCGH's constitution provides: " Representatives of corporations
48.1 Any Member that is a corporation may appoint an individual as its representative as provided by the Corporations Act. If a Member corporation does so:
(a) its representative may exercise at the relevant general meeting all the powers which the Member corporation could exercise if it were a natural person; and
(b) when its representative is present at a meeting, the Member corporation is considered to be personally present at the meeting.
48.2 The chairperson of a general meeting may permit a person claiming to be a Representative to exercise his or her powers even if he or she has not produced a certificate evidencing his or her appointment, or may allow the Representative to vote on the condition that he or she subsequently establishes to the satisfaction of the chairperson of the general meeting his or her status as a Representative within a period prescribed by the chairperson of the general meeting.
48.3 The appointment of a Representative may set out restrictions on the Representative's powers." 74 By an appointment dated 16 October 2004 signed by Cordiant's sole director, Cordiant appointed Mr Pagano pursuant to s.250D "as its representative to exercise all of its powers" at the Meeting. 75 I am unable to accept Mr Bathurst's submission that these clear words should be "read down" to mean that Mr Pagano was appointed to exercise all of Cordiant's powers in respect of the shares which are not subject to the Power of Attorney. The appointment is not so limited and it is clear from the correspondence between the parties' solicitors prior to the Meeting that, in fact, Cordiant had no intention to limit the extent of Mr Pagano's appointment. Cordiant may have breached the Shareholders Agreement in appointing Mr Pagano as its representative and as its proxy to exercise all of its powers as a shareholder at the Meeting, but the question is whether such a breach of contract invalidates the appointments for the purposes of the Meeting and of the Corporations Act . 76 The appointment under s.250D of a person as a representative of a company to attend a meeting of shareholders, creditors or debenture holders is fundamentally different in its legal character and consequences from an appointment under CA s.249X of a proxy to attend and vote on the company's behalf at a shareholders meeting. Such a proxy is essentially the agent of the company at the meeting whereas the representative is not the company's agent at all; rather, the representative is the embodiment of the company itself for all purposes at the meeting: see per Ipp J in Atkins v St Barbara Mines Ltd (1997) 138 FLR 425 , at 432; Hillman v Crystal Bowl Amusements Ltd [1973] 1 WLR 162, at 165; Cousins v International Brick Company Limited (supra). Clause 48.1(b) of TCGH's constitution expressly recognises this principle. 77 CA s.250D(1) confers statutory rights which are not subject to any qualification. Those rights may not be taken away by contract between a shareholder and a third party. In exercising its statutory rights under s.250D a corporate shareholder may commit a breach of covenant with a third party and that third party will have its remedies for that breach. However, the act of the shareholder in making the appointment under s.250D and the act of its representative at the meeting will still have effect for the purposes of the meeting. 78 The same reasoning applies to Cordiant's appointment of Mr Pagano as its proxy to vote in respect of all of its shares at the Meeting. The right of a shareholder to appoint a proxy is an unqualified statutory right conferred by CA s.249X(1). The right may not be taken away by a contract between a shareholder and a third party. The shareholder may commit a breach of covenant in exercising its statutory right under s.249X(1) but its breach of covenant does not deprive the appointment of the proxy of validity for the purposes of the Corporations Act or any meeting of the company's members. 79 In summary, therefore, I am of the view that whether or not Cordiant committed a breach of the Shareholders Agreement in appointing Mr Pagano as its proxy and as its representative in respect of all of its shares at the Meeting, the appointments were valid and effective for the purposes of the Meeting. By virtue of s.250A(7), Mr Pagano's appointment as proxy, being a valid appointment, revoked the proxy contained in the Power of Attorney in respect of the Attorney Shares, so far as that proxy could be exercised at the Meeting, as both appointments could not be validly exercised at the same time. Similarly, by virtue of s.249Y(3) the authority of TCGH's nominees under the Power of Attorney was suspended so long as Mr Pagano, as Cordiant's representative, was present at the Meeting. However, Mr Pagano's appointment as proxy and representative did not bring to an end the provisions of clause 16.9 of the Shareholders Agreement or the effectiveness generally of the Power of Attorney.
80 TCGH's constitution relevantly provides: "34.4 If there is a dispute at a general meeting about a question of procedure, the chairperson may determine the question. … 36.6 A decision of a general meeting may not be impeached or invalidated on the ground that a person voting at the meeting was not entitled to do so. … 37.3 The chairperson may determine any dispute about the admission or rejection of a vote.
37.4 The chairperson's determination, if made in good faith, will be final and conclusive. … 41.1 An objection to the qualification of a voter may only be raised at the meeting or adjourned general meeting at which the voter tendered its vote.
41.2 An objection must be referred to the chairperson of the meeting, whose decision made in good faith is final.
41.3 A vote which the chairperson does not disallow under an objection is valid for all purposes." 81 Mr Bathurst QC submits that:
As I have mentioned, there is no dispute between the parties that the chairman's ruling was made on the basis of legal advice and in good faith. 82 I am unable to accept Mr Bathurst's submission. As I have held earlier, s.249Y(3) creates a statutory right in a shareholder to be present and to vote at a shareholders meeting even if he or she has previously appointed a proxy to attend that meeting; the subsection permits that statutory right to be modified only if the company's constitution provides "for the effect that a member's presence has on the authority of a proxy appointed to attend and vote for the member" . 83 I do not think that one can find in the terms of clauses 37.3 and 37.4 of TCGH's constitution the kind of provision which is required by s.249Y(3) in order to take away the statutory right conferred by that section. Those clauses are in general terms and relate to a chairperson's authority to make decisions at a shareholders meeting. In my view, the words in s.249Y(3) - i.e. "provide for the effect that a member's presence has on the authority of a proxy appointed to attend and vote for the member" and "if the constitution does not deal with this" - require the constitution itself to state expressly what is to happen to a proxy's authority if the member himself attends the meeting. In the absence of such express provision, s.249Y(3) provides for what is to happen, namely, the proxy's authority to do anything at the meeting is suspended. To hold otherwise would leave the exercise of an important statutory right to ad hoc, unpredictable and unchallengeable decisions of the chairperson. It seems to me that the object of s.249Y(3) is to provide certainty: that object would be frustrated by the construction which Mr Bathurst urges. 84 As TCGH's constitution contains no express provision, as is required by s.249Y(3), it follows that Cordiant's presence at the Meeting by its personal representative, Mr Pagano, suspended the authority of TCGH's nominees to exercise any voting rights under the Power of Attorney. The chairman's ruling to the contrary, even though given in good faith, cannot deprive Cordiant of the statutory right conferred upon it by s.249Y(3): see the discussion at paras [94]-[96] infra and the cases there cited.
85 CA s.1322 relevantly provides: "(1) In this section, unless the contrary intention appears:
(a) a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and
(b) a reference to a procedural irregularity includes a reference to:
(i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme; and
(ii) a defect, irregularity or deficiency of notice or time.
(2) A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.
(4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:
(a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation; … and may make such consequential or ancillary orders as the Court thinks fit.
(6) The Court must not make an order under this section unless it is satisfied:
(a) in the case of an order referred to in paragraph (4)(a):
(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; and
(c) in every case - that no substantial injustice has been or is likely to be caused to any person."
the votes exercised by TCGH's nominees in respect of the Attorney Shares were held valid by the chairman in accordance with the provisions of clause 37.4 of TCGH's constitution and Cordiant is contractually bound to accept the chairman's decision as final and binding;
to the extent that Cordiant seeks to challenge the validity of the Special Resolution by virtue of its alleged right to vote in respect of the Attorney Shares it is seeking to take advantage of its breach of clause 16.9 of the Shareholders Agreement, which it ought not to be allowed to do;
the passing of the Special Resolution is, in fact, in the best interests of TCGH. 86 The last point may be disposed of at once. I do not think that s.1322(2) permits the Court to take into account, in determining whether a procedural irregularity has caused or may cause substantial injustice, what are said to be the best interests of the company in any commercial sense. Such a consideration would call for the exercise of business judgment. The Court should not enter into the province of the directors and the shareholders in this regard. For the purposes of s.1322(2), an enquiry as to "substantial injustice", in the context of a shareholders meeting is concerned with whether a shareholder's rights to attend and vote have been materially affected, not with whether the result of the meeting would be in the best commercial interests of the company. 87 There is no doubt that the passing of a special resolution at a shareholders meeting is a "proceeding" under the Corporations Act for the purposes of s.1322: see R v Mariquita & New Granada Mining Co (1858) 28 LJQB 67, at 69; Scullion v Family Planning Association of Queensland (1985) 10 ACLR 249, at 253-254; Talbot v NRMA Holdings Ltd (1996) 21 ACSR 577, at 580. However, it is often difficult to draw the line between procedural irregularity and substantial irregularity for the purposes of the section. I think it is fair to say that in some cases irregularity has been regarded as procedural rather than substantial primarily according to the degree of injustice or inconvenience caused rather than according to the nature of the irregularity: see the observations of Gillard J in Re Freehouse Pty Ltd; Jordan v Avram (1997) 26 ACSR 662, at 678-9. 88 The cases concerning s.1322 are numerous and it is sufficient to take only a sample in order to illustrate the difficulties which arise in determining what is a "procedural irregularity". 89 In Scullion (supra) the company's Articles made no provision for voting by proxy. The company sent a notice of general meeting to members enclosing a proxy form which required that executed proxies be returned to the company by a certain time. At the meeting, the chairman rejected proxies which had been received too late. 90 Ryan J held that a precursor of the present CA s.249X(1) conferred on a shareholder entitled to attend and vote at a meeting a right to vote which could be regulated by the Articles but not extinguished. In the absence of any procedure in the Articles of the company regulating the appointment of proxies, it was impermissible to require proxies to be lodged before the meeting and to reject proxies which were lodged at the meeting itself. 91 At p.253-254 his Honour said: "I do not consider that the direction in the notice was a procedural irregularity. Any restriction on the right of members to appoint a proxy to attend and vote at a meeting is a matter which affects an important substantial right of members. Accordingly in my judgment the effect of imposing such a restriction or misleading members to suppose that such a restriction existed is that proceedings at the meeting will be void unless the court is satisfied that the unauthorized action did not affect those proceedings." 92 In Integrated Medical Technologies Ltd v Macel Nominees Pty Ltd (1988) 13 ACLR 110, Bryson J had to consider whether failure to comply with the statutory requirement for the content of a valid proxy form was a "procedural irregularity". His Honour dissented from the view expressed by Ryan J in Scullion that denying a shareholder the right to vote by proxy was a substantive, not a procedural, irregularity. At p.119, his Honour said: "Ryan J treated a demonstration that an erroneous matter affected an important substantial right of members as establishing that the matter was not a procedural irregularity. With respect, I do not regard this as a correct approach; a procedural irregularity is no less an irregularity and no less procedural if it affects an important substantial right of members, and it is in the nature of procedure and of irregularities to do so, as well as to have effects on other rights, including rights which are not important and rights which are not substantial." 93 With the greatest respect, if this view is correct it is very difficult to see how any miscarriage of proceedings at a shareholders meeting would not be "procedural", no matter how substantial the rights involved and no matter what the consequences were. Yet s.1322(2) does not validate a proceeding affected by "any irregularity" - the irregularity must be a "procedural irregularity" so that the subsection itself recognises that not all irregularities are of the same character: there are "procedural irregularities" and "substantive irregularities". 94 The view expressed by Bryson J may be contrasted with the decision of Street J (as his Honour then was) in Industrial Equity Ltd v New Redhead Estate & Coal Co Ltd [1969] 1 NSWR 565 . There, the chairman rejected proxies lodged prior to a shareholders meeting on the ground that the shareholders giving them were not properly the shareholders of the company. The rejection of the proxies was held by the court to be unauthorised. However, the company relied on an article in the company's constitution which provided that the chairman's ruling was final and conclusive. Street J held that the chairman's ruling was not inviolate. At p.570 his Honour held that the right of a shareholder to vote by proxy conferred by the precursor of the present s.249X(1) was a statutory right and that the chairman's ruling rejecting the proxies was "no mere regulatory control over the exercise of the express statutory right … It was a repudiation of that right" . His Honour held that, as a consequence, the meeting had miscarried. 95 Street J held that the admission of the wrongly rejected proxies would have made no difference at all to the result of the election of two of the three directors standing for election at the meeting, but would have produced a different result in the election of the third director. His Honour therefore refused, in the exercise of discretion, to make a declaration that the election of the two directors was invalid as a result of the miscarriage of the meeting, but he made a declaration that the election of the third director was invalid and ordered the company to convene a fresh meeting to elect a third director. 96 The holding in Industrial Equity that a shareholder's statutory right to attend and vote at a meeting cannot be taken away by a chairman's erroneous ruling was approved and followed by O'Bryan J in ANZ Nominees Ltd v Allied Resources Corporation Ltd (1984) 2 ACLC 783, at 789 and by Ryan J in Scullion at 253. Scullion , Industrial Equity and ANZ Nominees were approved by the Victorian Court of Appeal in Link Agricultural Pty Ltd v Shanahan, McCallum & Pivot Ltd (1998) 28 ACSR 498, at 511. 97 The decisions in Industrial Equity and Scullion provide a useful guide to how problems arising out of irregularities at meetings may be resolved as a matter of fairness and practicality. A wrongful denial of a shareholder's statutory right to vote at a meeting is a denial of a substantive right and is not a "procedural irregularity" within the scope of s.1322(2) at all. Nevertheless, a pragmatic means of avoiding injustice or undue inconvenience is available by recourse either to the principles upon which the remedy of a declaratory order is given under the general law or by recourse to a validating order under CA s.1322(4)(a). By virtue of CA s.1322(6)(a)(ii), (iii) and (c), the Court can make a validating order under s.1322(4)(a) where the irregularity is substantive rather than procedural if the Court is satisfied either that the parties concerned acted honestly or that it is just and equitable that the order be made. In either case, however, the Court must also be satisfied that no substantial injustice has been, or is likely to be, caused to any person. 98 The principles and discretionary considerations which govern the grant of a declaration of validity under the general law are very close to, if not identical with, the considerations which the Court must take into account under CA s.1322(6)(a)(ii), (iii) and (c). As is illustrated by Industrial Equity and the cases which have followed it, of central importance is that if the result of the Meeting would have been different but for the irregularity, a validating order would be refused both under the general law and under s.1322(2) or (4)(a), because substantial injustice would result. 99 Notwithstanding the remedy provided by the general law and by CA s.1322(4)(a), some of the decisions in this area seem to try to find the means of a pragmatic solution solely within s.1322(2) by stretching the boundaries of "procedural irregularity". 100 In Talbot v NRMA Holdings (supra), the applicant sought a declaration that the passing of a resolution was invalid because the chairman had admitted proxies in favour of the resolution which had not been lodged within the time required by the company's articles. The respondent cross claimed for a declaration that the resolution was validated by s.1322(2). Burchett J held that the proxies had been correctly admitted to vote, so that the resolution was valid. However, his Honour went on to deal with the claim for validation under s.1322(2). At p.579 his Honour said: "Plainly, what occurred was of a procedural nature; it concerned the procedures of the company in respect of proxies. Plainly also no substantial injustice was caused or could be caused, since it is accepted that the result of the vote was not affected."
His Honour therefore held that by reason of s.1322(2) the resolution was not invalidated. 101 With respect, it seems to me that the decisions in Industrial Equity , ANZ Nominees , Scullion and Link Agricultural suggest that if acceptance of the proxies had been unauthorised, there would have been an irregularity of a substantive character, not of a procedural character: votes would have been counted at a shareholders meeting which were not entitled to be counted at all and the value of the votes validly admitted would have been diluted accordingly. However, because the result of the meeting in Talbot would not have been affected whether the proxies were rejected or accepted, it would have been open to the Court to produce a practical and just outcome, without recourse to s.1322(2), by refusing in the exercise of discretion to make a declaration of invalidity as sought by the applicant and by making a declaration of validity as sought by the respondent either under the general law or under CA s.1322(4)(a) and (6)(a)(ii) or (iii) and (c). 102 What, then, is a substantive irregularity as distinct from a procedural irregularity? In my view, the cases concerning the distinction between a substantive law or rule and a procedural law or rule provide some guidance. In John Pheiffer Pty Ltd v Rogerson (2000) 203 CLR 503, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ said at p.543-544: "… matters that affect the existence, extent or enforceability of the rights or duties of the parties to an action are matters that, on their face, appear to be concerned with issues of substance, not with issues of procedure. Or to adopt the formulation put forward by Mason CJ in McKain 'rules which are directed to governing or regulating the mode or conduct of court proceedings' are procedural and all other provisions or rules are to be classified as substantive." 103 In the light of this observation and of the decisions in Industrial Equity , ANZ Nominees , Scullion and Link Agricultural , I think that the following general proposition may be formulated for the purposes of the application of CA s.1322:
Would substantial injustice be caused by validation?
110 In case I am wrong in my conclusion that the chairman's ruling produced substantive, not procedural, irregularity, I should consider whether validation under CA s.1322(2) has caused, or may cause substantial injustice. 111 It has been held that if a different result may have been produced at a shareholders meeting had a procedural irregularity not occurred, substantial injustice has been shown for the purposes of s.1322(2): Mamouney v Soliman (1992) 9 ACSR 63, at 71; Talbot , at 579-580; Scullion , at 255; Link Agricultural , at 487 and Sutherland (as liq of Sydney Appliances Pty Ltd (in liq)) v Robert Bosch (Aust) Pty Ltd & Ors (2000) 33 ACSR 680, at 689. 112 If Cordiant had been permitted to vote at the Meeting in respect of all of its shares, there is no doubt that the Special Resolution would have been defeated. The Special Resolution was, clearly, an important one, involving TCGH in the expenditure of many millions of dollars. It follows that Cordiant has demonstrated that substantial injustice has been caused by the chairman's ruling at the Meeting, for the purposes of s.1322(2). 113 However, Mr Bathurst submits that the question whether injustice has occurred or would occur must be determined not just by looking at whether the result of the meeting would be different but in light of the fact that Cordiant's attendance at the meeting to vote in respect of all of its shares in TCGH was a breach of its obligations under the Shareholders Agreement. It would not be unjust, Mr Bathurst submits, to hold Cordiant to a result of the Meeting in which it contracted to acquiesce. 114 It is to this submission that I now turn.
115 TCGH says that Cordiant's appointment of Mr Pagano to attend and vote at the Meeting in respect of all of Cordiant's shares was a breach of Cordiant's obligations under clause 16.9 of the Shareholders Agreement and that Cordiant should not now be heard to cry "injustice" for the purposes of s.1322 when it is seeking to take advantage of its own wrongdoing. 116 I will deal first with the question whether Cordiant has committed a breach of contract. 117 Mr Studdy submits that:
Whether Cordiant can "take advantage of its own wrong"
123 The principle which Mr Bathurst relies upon as the foundation for his submission that no injustice was caused by the result of the Meeting is an ancient maxim of the common law - that no party can take advantage of its own wrongdoing. 124 In my opinion, the maxim has no application in the present case. Although the maxim has a certain aura of universality about it, it is often invoked without a proper appreciation of the narrow confines within which it properly operates. 125 Lord Bramwell made clear the correct application of the maxim in Hooper v Lane (1859) 6 HL Cas 443 ((1859) 10 ER 1368). At [461] (1375), his Lordship said: "… that rule only applies to the extent of undoing the advantage gained [by the wrongdoer] , where that can be done, and not to the extent of taking away a right previously possessed."
His Lordship gave several examples and continued at [461] (1375): "… [the maxim] means that no one shall gain a right by his own wrong; and not that if he has a right, he shall lose it, or the power of exercising it, by a wrong done in connection with it …" [Emphasis added.] 126 Lord Bramwell's exposition of the maxim has frequently been applied. For example, in Re London Celluloid Co (1888) 39 Ch D 190, a liquidator sought to recover the balance of the unpaid issue price of certain shares of a company in liquidation. A section of the Companies Act imposed upon a shareholder the liability to pay the whole of the unpaid amount of the issue price of shares unless there was a contract to the contrary effect which was registered in accordance with the Act. The shareholders alleged that there was a contract to the contrary effect but, in breach of that contract, the company in liquidation had failed to register it in accordance with the Act. The shareholders therefore argued that the liquidator of the company could not sue for the unpaid issue price of the shares because the liquidator would thereby be taking advantage of the company's wrongdoing in failing to register the contract. The argument was unanimously rejected by the Court of Appeal. 127 At p.206, Bowen LJ said: "The maxim that no man can take advantage of his own wrong must be carefully considered, and expressed in more precise terms, before it can be safely applied. It means that a man cannot enforce against another a right arising from his own breach of contract or breach of duty . The observations of Baron Bramwell in Hooper v Lane on this subject are very instructive.
To return to the maxim that a man cannot take advantage of his own wrong, we can see the point where it ceases to be applicable. Construing the maxim as I have said, the first question is, has the right to demand payment in cash been acquired through the breach of contract in question? Was it through non-registration of the contract that the liability to pay in cash arose? In my opinion it was not: the liability arose from taking the shares, although such liability might have been avoided in the one way pointed out by the section." [Emphasis added.]
See also Ruthol Pty Ltd v Mills [2003] 11 BPR 20,793, at 20,813-20,815. 128 In the present case, it is true that in appointing Mr Pagano as its representative under CA s.250D(1) to attend the Meeting and thereby bringing about the suspension of the proxy rights provided by the Power of Attorney in accordance with CA s.249Y(3), Cordiant breached its obligations to TCGH under the Shareholders Agreement. Even so, its breach of contract did not give rise to Cordiant's right to attend the Meeting by its representative to the exclusion of any proxy. That right to attend and vote in person was a pre-existing right conferred on Cordiant by a combination of CA s.249X, s.249Y(1) and s.250D(1): the statutory right did not cease to exist merely because Cordiant contracted not to exercise it for the duration of the Power of Attorney. In the words of Lord Bramwell in Hooper v Lane , the power of exercising that statutory right is not lost to Cordiant by a wrong done by Cordiant in connection with that right, namely, committing a breach of a contractual provision not to exercise it. 129 In that circumstance, the maxim upon which Mr Bathurst relies has no application in the present case. I cannot take into account Cordiant's breach of contract in determining whether substantial injustice has occurred, or may occur, for the purposes of CA s.1322(2). 130 This conclusion may appear to produce an unjust result as between Cordiant and TCGH: Cordiant has breached its contract not to vote in respect of the Attorney Shares yet its vote in respect of those Shares is given effect in law. However, I think it is important in this context to bear in mind the distinction between rights and relationships as between a company and its shareholders on the one hand and rights and relationships as between shareholders themselves or as between shareholders and third parties, on the other. 131 Contractual rights as between shareholders or as between shareholders and third parties, while they may ultimately affect what happens in a company's affairs, should not intrude into the administration of the company's affairs as governed by the Corporations Act and by the company's constitution. For example, it would produce an impossible situation if a company with a large membership had to ascertain at every general meeting whether every shareholder was subject to contractual or other obligations to third parties which regulated whether the shareholder was entitled to attend and vote, or was required to vote in any particular way. In determining the voting rights of shareholders, a company should be required to have regard to nothing more than the Corporations Act and its constitution. 132 In the present case, the circumstance which strikes one as producing injustice is that Cordiant has bound itself to restrict its voting rights in TCGH in a contract to which TCGH is itself a party. But the Shareholders Agreement is not TCGH's constitution: it is fortuitous that TCGH itself has the benefit of covenants more often found in agreements between shareholders or between shareholders and third parties. That circumstance should not blur the distinction between statutory rights and contractual rights upon which CA Pt 2G.2 Div 6 is founded. 133 The law, however, does not leave TCGH without an effective and practical remedy, as will shortly appear.
Should the Special Resolution be declared valid under CA s1322(4)(a)?
134 TCGH seeks by its Cross Claim a declaration under s.1322(4)(a) that the Special Resolution be declared valid. The power of the Court to make a declaration of validity under s.1322(4)(a) does not depend upon a finding that there has been a procedural irregularity: s.1322(6)(a)(ii) and (iii) make it clear that a validating order may be made under s.1322(4)(a) even if the irregularity was not procedural, provided that the other conditions specified are met. 135 I conclude that such a declaration should not be made for the reasons which I have given in paragraphs 94 to 101 above, which may be summarised thus:
136 TCGH seeks a declaration that notwithstanding that the Special Resolution may be held to be invalid, in so far as financial assistance was given by TCGH in reliance upon the Special Resolution, any contravention of the Corporations Act does not affect the validity of the financial assistance. 137 TCGH relies upon the following provisions of the Corporations Act : " 260A. Financial assistance by a company for acquiring shares in the company or a holding company
(1) A company may financially assist a person to acquire shares (or units of shares) in the company or a holding company of the company only if:
(a) giving the assistance does not materially prejudice:
(i) the interests of the company or its shareholders; or (ii) the company's ability to pay its creditors; or
(b) the assistance is approved by shareholders under section 260B (that section also requires advance notice to ASIC); or
Shareholder approval for financial assistance by a company must be given by: (a) a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by the person acquiring the shares (or units of shares) or by their associates; or
260D. Consequences of failing to comply with section 260A
(1) If a company provides financial assistance in contravention of section 260A:
(a) the contravention does not affect the validity of the financial assistance or of any contract or transaction connected with it; and
(b) the company is not guilty of an offence." 138 TCGH's submission assumes that in providing financial assistance it has contravened s.260A(1) because:
May Cordiant direct how the Attorney Shares can be voted?
146 Cordiant seeks an order that TCGH convene another general meeting of members for the purpose of voting upon the Special Resolution. TCGH seeks an order restraining Cordiant from lodging any further proxy or appointing any representative to vote in respect of the Attorney Shares at any other general meeting of the company. 147 In opposition to any such injunction, Mr Studdy relies upon his submissions that Cordiant has not committed any breach of the Shareholders Agreement and would not commit any further breach by exercising its rights under s.249Y(3) at any further meeting of TCGH held during the currency of the Power of Attorney. For the reasons which I have given above, I am unable to accept those submissions. 148 I conclude from the correspondence which has passed between the parties' solicitors and from the position which Cordiant has taken in these proceedings that Cordiant would, unless restrained, seek to exercise its rights under s.249Y(3) at any further shareholders meeting of TCGH at which the Special Resolution is proposed or any resolution is put for ratification of anything done in pursuance of the Special Resolution. 149 Clauses 16.9(b) and (c) of the Shareholders Agreement are, in effect, an agreement between Cordiant and TCGH that, in the events which have happened, the votes attaching to the Attorney Shares may be exercised by TCGH's nominees. Because the Agreement provides that the means for so voting is an irrevocable Power of Attorney, I think it follows that, contrary to Mr Studdy's submissions, TCGH's nominees are not bound to exercise their rights under the Power of Attorney in accordance with Cordiant's directions. This is so for a number of reasons. 150 First, it is clear from the provisions of clause 16.9(a) and (b) that upon a Change of Control in Cordiant, as defined, Cordiant is no longer to have the right to appoint a director to the board of TCGH and is no longer to have the right to block the passing of a special resolution: the formula for the calculation of the number of Attorney Shares makes the latter intention plain. It would defeat the plain purpose of clause 16.9 entirely to construe the Power of Attorney as obliging TCGH's nominees under the Power of Attorney to act in accordance with Cordiant's directions. 151 Second, clauses 4 and 5 of the Power of Attorney make it plain that although the attorneys act in the name of Cordiant, they are not bound by the normal duty of an agent to act in the principal's interest. 152 Third - and of decisive importance - an irrevocable power of attorney, by its very nature, is very different from a revocable power of attorney whereunder the donee is constituted the agent of the donor and has fiduciary duties of loyalty to the donor: see e.g. Midland Bank Limited v Reckitt [1933] AC 1, at 14; Saad v Doumeny Holdings Pty Ltd [2005] NSWSC 893, at para [24]. A power of attorney, to be irrevocable at common law, must be coupled with an interest so that it is given for the better securing of that interest as against the donor. Statute has long recognised the irrevocable power of attorney as a special creature which, although constituting the donee as the donor's agent, does not fasten upon the donee the usual fiduciary obligations of an agent: see e.g. Powers of Attorney Act 2003 (NSW) s.15 and s.16 and its precursors. 153 Indeed, it has been suggested that an irrevocable power of attorney confers on the donee the right to act independently of the donor so that the donee need not consult, or confer with, the donor and, indeed, may ignore any direction given by the donor: P.W. Young Annotated Conveyancing and Real Property Legislation (NSW) 3rd Ed. Butterworths, para 33410.5. The principal authority cited for this proposition is Tingley v Müller [1917] 2 Ch 144. 154 In that case, Mr Müller gave an irrevocable power of attorney to his solicitor. Subsequently, and while the power of attorney was current, Mr Müller returned to Germany and became an enemy alien. The solicitor sold land belonging to Mr Müller pursuant to the power of attorney. The purchaser sought a declaration that the contract was unenforceable because it involved trading with an enemy alien. The argument failed. 155 At p.156, Lord Cozens-Hardy MR held that the power of attorney was complete and irrevocable before Mr Müller became an enemy alien so that no further "intercourse" between the solicitor and Mr Müller was required in order that the solicitor might validly enter into the contract in the name of Mr Müller. His Lordship held that the solicitor "could not be interfered with in reference to the sale" by Mr Müller and that the solicitor's position was "practically the same as if Müller had conveyed the property to [the solicitor] upon trust for sale" . 156 At p.165, Warrington LJ said: "Again, a recognized mode of dealing with land is through an attorney acting under a power of attorney. If such a power is made irrevocable, as is the case with that of May 20, 1915, then, in favour of a purchaser, not only can it not be revoked in the ordinary sense, but any act done by the donee within the limits of the authority conferred by the power will be as valid as if anything done by the donor of the power without the concurrence of the donee had not been done: Conveyancing Act, 1882, s.9. The attorney under such a power is not like an ordinary agent. As between him and a purchaser he is, so long as he does not exceed his authority, absolutely independent of the principal. He has no occasion to consult or confer with him, and he need pay no attention to any directions he may give. The attorney in fact, when dealing with a purchaser, is exclusively clothed with all the capacities of the principal in reference to the subject-matter."
The section of the Conveyancing Act to which his Lordship referred is mirrored in the present s.16(1) Powers of Attorney Act , which provides: " Effect of irrevocable powers of attorney
(1) The power conferred by an irrevocable power of attorney is not revoked or otherwise terminated by, and remains effective despite, the occurrence of any of the following:
(a) anything done by the principal without the concurrence of the attorney,
(d) the principal becoming a person who is a temporary patient, a continued treatment patient or a forensic patient within the meaning of the Mental Health Act 1990 , or a protected person within the meaning of the Protected Estates Act 1983,
(d1) the principal becoming a person who is a protected missing person within the meaning of the Protected Estates Act 1983,
(f) if the principal is a corporation, the dissolution of the corporation." 157 Tingley v Müller was considered by Nicholas CJ in Eq in Perpetual Trustee Co Ltd v Aroney (1944) 44 SR(NSW) 313. There, an irrevocable power of attorney contained a clause, similar to clause 6 in the Power of Attorney given by Cordiant, whereby the principal ratified all acts done and to be done under the power of attorney. At p.318, Nicholas CJ in Eq held that such a clause made the attorney independent of his principal. His Honour observed that doubts had been expressed as to whether Tingley v Müller was good law, but his Honour was of the view that the decision had not been overruled and that the decision, reinforced by the ratification clause in the power of attorney, resulted in the attorney in the case before him being independent of the principal. 158 In my opinion, it should now be accepted that, subject to any contractual provision to the contrary, as between donor and donee an irrevocable power of attorney confers on the donee the right to act within the terms of the authority conferred independently of, and even contrary to, the directions of the donor. As between the donee and a third party, the acts of the donee within the terms of the authority conferred are valid and binding by virtue of s.16(1)(a) Powers of Attorney Act regardless of whether the donee has disregarded the directions of the donor. 159 In the present case, there is no requirement in the Power of Attorney that TCGH's nominees shall comply with Cordiant's directions. It follows that the nominees of TCGH are not obliged to exercise the votes attaching to the Attorney Shares at the direction of Cordiant.
Should Cordiant be restrained from breaching the Shareholders Agreement?
160 It is clear that another general meeting of TCGH will be necessary to deal with the consequences of this judgment. As I have said, there is a real basis for apprehending that Cordiant will, unless restrained, attempt to invoke again at such a meeting its statutory rights under CA s.249X(1), s.249Y(3) and s.250D(1). For the reasons which I have given, such action on the part of Cordiant would constitute a breach of clause 16.9 of the Shareholders Agreement. Ought the Court to grant an injunction restraining Cordiant's anticipated breach of contract? 161 Mr Studdy's opposition to the injunction sought by TCGH is founded on the submission that Cordiant, by invoking its statutory rights under s.249Y(3) and s.250D has not committed, and would not in the future commit, any breach of clause 16.9 under the Shareholders Agreement. As I have said, I am unable to accept those submissions. Mr Studdy does not say that the Court has no jurisdiction to grant an injunction in a case such as the present nor does he say that the balance of convenience lies against the grant of an injunction. He does not submit that damages are an adequate remedy. 162 The provisions of clause 16.9 amount to an agreement as to how the votes of a shareholder will be exercised in a certain eventuality. Agreements as to how votes attaching to shares will be exercised are not uncommon and there is no obstacle in principle in enforcing them by the remedies of specific performance and injunction. 163 For example, in Puddephatt v Leith [1916] 1 Ch 200, shares were transferred into the name of a mortgagee so that the mortgagee had the right to vote in respect of the shares. However, the mortgagor and the mortgagee had agreed that the mortgagee would vote in respect of the shares at the direction of the mortgagor. The court granted not only a prohibitive injunction restraining the mortgagee from voting contrary to the mortgagor's directions, but also a mandatory injunction requiring the mortgagee to vote in future at the mortgagor's directions so long as the mortgagor had an equity of redemption. 164 Again, an injunction may be granted restraining the donor of an irrevocable power of attorney from doing anything which would deprive the donee of the intended benefit. In Knight v Bulkeley (1859) 5 Jur NS 817, the defendant assigned to the plaintiff a pension receivable for war wounds to secure the payment of an annuity by the plaintiff to the defendant. The defendant executed a power of attorney enabling the plaintiff to collect the pension from the War Office. The defendant subsequently revoked the power of attorney by going to the War Office and collecting the pension payments himself. 165 Sir John Stuart VC granted a mandatory injunction requiring the defendant to execute another power of attorney enabling the plaintiff to receive the pension and also granted a perpetual injunction restraining the defendant from revoking that power of attorney or "doing any act whereby the plaintiff's right to receive the pension might be prevented or intercepted" (at p.818). 166 In the present case, the covenants in clause 16.9 of the Shareholders Agreement are still binding on Cordiant and the Power of Attorney is still valid and effective although the authority conferred by it was suspended during Mr Pagano's attendance at the Meeting. I do not think that this is a case in which TCGH should be left to a remedy in damages if Cordiant commits further breaches of clause 16.9 in respect of further general meetings of TCGH. 167 I see no reason for refusing to grant an injunction restraining Cordiant from lodging a proxy or making an appointment under CA s.250D in respect of the Attorney Shares during the Appointment Period, as that term is defined in the Shareholders Agreement, except in the circumstances permitted by clause 16.9(d).
168 It will be convenient to summarise my conclusions as follows:
169 There will be declarations and orders in accordance with these reasons for judgment. 170 I will stand the proceedings over for a short time to enable the parties to bring in Short Minutes of Order. 171 Cordiant succeeded on its major point that the Special Resolution was invalid. TCGH succeeded on its major point that Cordiant's invocation of its statutory rights was a breach of contract and could be restrained in the future. However, it ought to have been apparent that even if it was ultimately held that the Special Resolution was invalid and would not be validated, the financial assistance provided by TCGH pursuant to the resolution was validated by s.260D(1) so that the ultimate practical utility of these proceedings is questionable. 172 In those circumstances, my present tentative view is that each party should pay its own costs of the proceedings. However, when the Short Minutes are brought in, I will hear any argument as to costs. - oOo -
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Cordiant Communications (Australia) Pty Ltd
The Communications Group Holdings Pty Ltd
(1997) 138 FLR 425
(1980) 28 ALR 319
(2000) 201 CLR 520
(1997) 189 CLR 215
(1954) 28 ALJR 482
(1986) 7 NSWLR 644
(2002) 54 NSWLR 433
(2000) 23 WAR 482
(1940) 64 CLR 153
(2000) 203 CLR 503
(1979) 144 CLR 596