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."