Supreme Court of WA|2001-11-26|Before: Mr P, Templeman J

Fast Scout Ltd v Bergel & Ors [2001] WASC 343 (26 November 2001)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : FAST SCOUT LTD -v- BERGEL & ORS [2001] WASC 343

Corporations - Interlocutory application for determination of validity of proxies - Relief sought under s 1322 of the Corporations Act 2001 (Cth) - Whether pre-completed forms are valid proxy forms - Whether Chairman's decision ruling the proxy forms invalid is reviewable

Declaration that resolution removing incumbent board of Bigshop and appointing Fast Scout nominees had been carried

Armstrong v Landmark Corporation Ltd [1967] 1 NSWR 13

Australian Hydrocarbons NL v Green (1985) 10 ACLR 72

Industrial Equity v New Redhead Estate [1969] 1 NSWR 565

North Sydney Brick and Tile Co Ltd v Darvall (1989) 17 NSWLR 327

Re Australian Koyo Ltd (1984) 8 ACLR 928

Scullion v Family Planning Association of Queensland (1985) 10 ACLR 249

1 TEMPLEMAN J: A general meeting of Bigshop.Com.Au Limited ("Bigshop") was held on 9 November 2001 for the purpose of considering resolutions for the removal of its directors and their replacement by representatives of Fast Scout Limited ("Fast Scout"). At that meeting, the Chairman announced that he had ruled invalid, proxy forms relating to 17,252,241 votes.

2 Although the Chairman then declined to give reasons for his decision, he disclosed later that he had ruled most of the relevant forms invalid because they had been pre-completed by Fast Scout. That is to say, the name of each shareholder, the name of the proxy and crosses marking votes in favour of the resolutions had been printed on the forms.

3 Had the votes been brought into account in the subsequent poll, the resolutions would have been carried. Because the proxy forms were ruled invalid, the resolutions failed.

4 The meeting was convened by Fast Scout as part of its campaign to take control of Bigshop. Following its defeat at the meeting, Fast Scout promptly commenced proceedings against Bigshop and its directors. They included Michael Richard Brereton, the Chairman of Bigshop who had chaired the meeting. Fast Scout sought declarations pursuant to s 1322 of the Corporations Act 2001 and the inherent jurisdiction of the Court that the relevant proxy votes had been disallowed improperly.

5 Fast Scout also sought a declaration pursuant to s 232 of the Corporations Act that Mr Brereton's conduct in declaring the pre-completed proxy forms invalid, and the actions of the directors in issuing certain convertible notes in Bigshop, constituted oppressive conduct. In addition, Fast Scout sought injunctions to restrain Bigshop and its directors from issuing shares or securities conferring a right to subscribe for shares in the company.

6 Following the commencement of proceedings there were several interlocutory applications. During the course of one such application on 12 November, Parker J made interlocutory orders and gave directions including the following:

"The application be listed urgently for trial for the determination of:

(a) the validity of the proxy votes cast;

(b) relief under s 1322 of the Corporations Act; and

(c) declarations as to the outcome of the meeting on 9 November 2001."

Those issues came on for trial before me on 20 and 21 November. I heard the matter on the basis that, subject to a threshold question of whether the Chairman's decision was reviewable at all, I would resolve the issues by reference to the provisions of the Corporations Act and Bigshop's Constitution relating to voting by proxy. That is to say, I would not deal with the question of oppression because it raised wider considerations.

7 Although the parties were anxious to have my decision as soon as possible, I took time to reflect on the competing submissions before announcing - as I did on 26 November - that, in my view, the pre-completed proxy forms relating to 16,833,836 votes were valid. (It was common ground at the trial that nothing turned on the validity of the forms relating to the balance of the 17,252,241 votes and that it was not necessary for me to consider that issue.)

8 I accordingly declared that the resolutions removing the incumbent directors of Bigshop and appointing the Fast Scout nominees had been carried. I gave my reasons in summary and said that I would publish full reasons in due course. I now set out those reasons, commencing with the findings of relevant facts.

9 Fast Scout is a substantial shareholder in Bigshop. On 12 September 2001, as a holder of 14.8 per cent of the 80 million issued shares in Bigshop, Fast Scout gave notice pursuant to s 249F of the Corporations Act and Article 13.6 of Bigshop's Constitution, of a general meeting of Bigshop to be held on 26 October 2001. The purpose of the meeting was to consider and, if thought fit, to pass the following ordinary resolutions:

1. Removal of Gary Irwin Bergel as a director and election of Farooq Khan as a director.

2. Removal of Charles James Morton as a director and election of Brett Murray McKeon as a director.

3. Removal of Michael Richard Brereton as a director and election of Victor Poh Hong Ho as a director.

4. Election of Brian Millwood Smith as a director.

5. Removal of directors appointed on or after the date of the notice (if any).

The notice was accompanied by various documents including a letter signed by Mr Khan as Fast Scout's executive chairman in which he set out his own experience and qualifications, and those of the other nominees, to become directors of Bigshop.

10 The documents included proxy forms bearing Bigshop's name and business number. The forms were addressed to the secretary of Bigshop.

11 On 4 October, Bigshop gave notice of a general meeting to be held on 2 November for the purpose of considering a proportionate takeover bid which had been made by Fast Scout in an endeavour to acquire 51 per cent of the shares in Bigshop which it did not own. Bigshop's notice was accompanied by proxy forms.

12 On 15 October, Fast Scout sent a circular letter to Bigshop shareholders urging them to vote in favour of the Fast Scout resolutions for the removal and replacement of the Bigshop directors at the general meeting on 26 October. Each letter was accompanied by a proxy form which had been partially completed. The name of the shareholder, the name of the proxy (Mr McKeon) and crosses in the "for" boxes had all been printed on each form. The shareholders were asked to return the forms to Fast Scout in a pre-paid envelope which had been included with the papers, or by facsimile.

13 Apart from the over-printing, the proxy form followed that used by Bigshop for its annual general meeting for the year 2000 and for the meeting of 2 November 2001.

14 On 17 October the Corporations and Securities Panel made an order postponing the general meeting due to be held on 26 October until after the takeover meeting which had been convened for 2 November. The circumstances in which the order was made are not relevant to this application.

15 On 23 October, Bigshop wrote to its members to inform them that the meeting to consider the changes in board composition would take place on 9 November. The letter referred to the unanimous recommendation of the Bigshop board that Fast Scout's takeover and board composition resolutions should be rejected; that the shareholders should not appoint Mr McKeon as proxy and that they should return completed proxy forms to Bigshop's company secretary.

16 Each letter was accompanied by proxy forms relating to the takeover meeting and the board composition meeting. The latter form was virtually identical in its layout and terms to that dispatched by Fast Scout on 15 October.

17 Fast Scout then countered by improving its proportional takeover offer. The revised offer was set out in a circular letter dated 26 October to Bigshop's shareholders. The letter informed the recipients that:

"If you have already submitted a proxy form to replace the board at the earlier meeting, your proxy will still count at the 9th November meeting. If however you have not yet submitted a proxy form to replace the board, it is not too late - we have included a proxy form to replace the board (the yellow proxy form), which you can sign and return to us as well."

18 The letter was accompanied by a document under the Fast Scout name and logo entitled "Instructions for Voting" and by green and yellow proxy forms. The shareholders were told:

"• To vote in favour of approving Fast Scout's Proportional Takeover offer, complete the GREEN proxy form.

• To vote in favour of replacing the current board of Bigshop, complete the YELLOW proxy form.

Return the completed proxy form(s) by fax, using the Fax header sheet enclosed, or the reply-paid envelope.

Remember, proxy forms must arrive at our office no later than 5.00 pm Tuesday 30 October for your votes to count."

19 The forms were identical in all material respects to those dispatched by Bigshop on 23 October, but again, they had been pre-completed by the over-printing of the name and address of each shareholder, the name and address of Mr McKeon as proxy and crosses in the "for" boxes.

20 The takeover meeting which had been convened for 2 November was adjourned to 5 November. Several of the Bigshop shareholders used the pre-completed proxy forms which had been supplied by Fast Scout. Mr Brereton, who chaired the meeting, accepted these forms. No question was raised as to their validity. Because Fast Scout was unable to vote at that meeting, the resolutions were defeated.

21 Bigshop's share register is maintained by Computershare Investor Services Pty Ltd ("Computershare") which has its head office in Melbourne and an office in Perth. Computershare's national registrar is Kenneth James Dyer who is located in Melbourne.

22 Mr Dyer is a very experienced share registrar. He has been involved in the operation of share registries for about 33 years. He is appointed regularly by major public companies to conduct shareholder meetings and polls. He was engaged by Bigshop to act as returning officer and to assist in the conduct of the meeting of 9 November.

23 On 7 November, Mr Dyer was informed by the manager of Computershare's Perth office that a number of pre-completed proxy forms had been received there in relation to the Bigshop meeting of 9 November. These were forms which shareholders had returned to Fast Scout.

24 Mr Dyer was also informed that a number of inconsistent proxy forms had been received from shareholders who had returned more than one form. Because all the forms had been delivered together to Computershare's offices, it was not clear which form represented the relevant shareholder's final intention.

25 Computershare's Perth office sent all the proxy forms to Mr Dyer who received them in Melbourne on the morning of 9 November, the day of the meeting.

26 Mr Dyer had previously informed Mr Morton, a director of Bigshop, that he had "concern" about the pre-completed proxy forms and the inconsistent forms. As I understood Mr Dyer's evidence, his concern in relation to the pre-completed forms arose from the fact that in his experience it was not normal practice for such forms to be used. Mr Dyer said he had never seen a pre-completed proxy form used in the eastern states, although he had heard about such forms being used in one or two instances in Western Australia.

27 Mr Dyer's concerns were relayed by Mr Morton to Mr Brereton who, on 8 November, sought advice from leading and junior counsel. Their opinion, given in a telephone conference, was that the pre-completed proxy forms were invalid.

28 On 9 November, at about 11.45 am, Mr Brereton met Mr Dyer. By then, Mr Brereton had received facsimile copies of all the pre-completed proxy forms which had been lodged by Fast Scout in Perth. Mr Brereton asked Mr Dyer to sort the proxies into "categories of concern". Mr Dyer did so. He produced a note in which he identified 16,833,836 votes arising from pre-completed proxy forms and 409,405 votes from shareholders who had returned inconsistent proxy forms. There were also 9,000 votes arising from proxy forms which had been altered in some way and which were therefore of doubtful validity.

29 At about that time, Mr Brereton received the written opinion of counsel by facsimile. Counsel were of the view that the pre-completed proxy forms did not comply with Listing Rule 14.2.1 of the Australian Stock Exchange because the forms did not enable the shareholder to vote either for or against the relevant resolutions.

30 Counsel were of the view also that Bigshop shareholders might have been misled into the belief that the pre-completed forms had been approved by Bigshop when that was not the case. Further, counsel were of the opinion that the Bigshop shareholders may have been confused "by the multiple number and varying type of proxy forms" which they had received in relation to the meeting of 9 November.

31 Counsel did not, however, express quite so dogmatically their earlier opinion that the proxies were invalid. They said that the matters referred to above "... raise serious irregularities (sic) as to the validity of the proxy forms".

32 Counsel said that in their view, the appropriate course for Mr Brereton to adopt, as Chairman of Bigshop, would be to consider the validity of the proxy forms and to make a determination pursuant to cl 12.16 of Bigshop's Constitution, which he should do in good faith.

"An objection may be raised to the qualification of a voter only at the general meeting or adjourned general meeting at which the vote objected to is given or tendered. Any such objection shall be referred to the Chairman of the general meeting, whose decision shall be final. A vote not disallowed pursuant to such an objection is valid for all purposes."

"On the basis of our present instructions, as outlined above, we are of the opinion that were an objection to be raised as to the qualification of a voter appointed by a (Fast Scout) proxy form to vote at today's meeting, then the Chairman would be entitled to disallow the right to vote of the person purporting to hold a proxy pursuant to a (Fast Scout) proxy form."

34 The meeting did not take the course envisaged by counsel. It is common ground that at or shortly after the commencement of the meeting, without any objection having been taken to the qualification of any voter, Mr Brereton, as Chairman, declared that he had ruled invalid, proxy forms relating to 17,252,241 votes. I am satisfied that although he relied on Mr Dyer to identify the relevant forms, it was Mr Brereton who made the decision.

35 Mr Brereton was challenged immediately by Mr Khan who attended the meeting as the representative of Fast Scout. Mr Khan asked Mr Brereton to state the basis for his decision. Mr Brereton declined to do so. He said he had received Queens Counsel's advice that he was not obliged to disclose his reasons and that he would not do so.

36 Subject to one matter, it is not necessary for present purposes for findings to be made about the subsequent conduct of the meeting. It was unquestionably a heated meeting: and there are conflicting accounts about the exchanges which took place between Mr Brereton and those present. However, I find that if Mr Brereton had wished to give his reasons for rejecting the pre-completed proxy forms, he could have done so.

37 Ultimately, each of the resolutions was the subject of a poll. These were conducted by Mr Dyer and his assistants. The proxy votes which Mr Brereton had declared invalid were not taken into account in the polls. However, in each case, 10,073,471 of those votes were cast by corporate representatives present at the meeting. The difference between this number and the 17,252,241 votes declared invalid, was 6,760,365. These are the votes in issue in this application.

38 A member of a public company has a statutory right, which cannot be removed or varied by the company's constitution, to vote by proxy at meetings of the company. Section 249X of the Corporations Act provides:

"(1) A member of a company who is entitled to attend and cast a vote at a meeting of the company's members may appoint a person as the member's proxy to attend and vote for the member at the meeting.

(2) The appointment may specify the proportion or number of votes that the proxy may exercise.

(3) Each member may appoint a proxy. If the member is entitled to cast 2 or more votes at the meeting, they may appoint 2 proxies. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member's votes each proxy may exercise, each proxy may exercise half of the votes.

(4) Disregard any fractions of votes resulting from the application of subsection (2) or (3)."

The substance of these provisions is reproduced in cl 12.17 of Bigshop's Constitution under the heading "Appointment of Proxy":

"A Shareholder who is entitled to attend and cast a vote at a general meeting may appoint a person as the Shareholder's proxy to attend and vote for the Shareholder at the general meeting. The appointment may specify the proportion or number of votes that the proxy may exercise. Each Shareholder may appoint a proxy. A Shareholder who is entitled to cast 2 or more votes at the meeting may appoint 2 proxies. If the Shareholder appoints 2 proxies and the appointment does not specify the proportion or number of votes that the proxy may exercise, each proxy may exercise half the votes. Any fraction of votes resulting from the application of this clause 12.17 shall be disregarded."

(a) shall be in writing under the hand of the appointor or of his attorney, or, if the appointer (sic) is a body corporate, either under seal or under the hand of a duly authorised officer, or officers (as the case may be) or attorney;

(b) may specify the manner in which the proxy is to vote in respect of a particular resolution and, where an instrument of proxy so provides, the proxy is not entitled to vote on the resolution except as specified in the instrument;

(c) shall be deemed to confer authority to demand or join in demanding a poll;

(d) shall be in such form as the Directors determine and which complies with Section 250A of the Corporations Law;

(e) shall not be valid unless the original instrument and the power of attorney or other authority (if any) under which the instrument is signed (duly stamped where necessary) or a certified copy of that proxy, power or authority, is or are deposited at or sent by facsimile transmission to the Registered Office, or deposited at or sent by facsimile transmission to such other place as is specified for that purpose in the notice convening the general meeting, no later than 48 hours prior to the time of the commencement of the general meeting in the place that the general meeting is being convened ...

(f) shall comply with the Listing Rules.

The Company shall send out proxy forms which will enable Shareholders to vote for or against each resolution with notices covering general meetings of the Company."

39 One of the principal submissions made on behalf of Bigshop was that the pre-completed proxy forms did not comply with cl 12.17(d) because the directors of Bigshop had never agreed that such forms should be used.

40 I do not accept that submission for two reasons. First, the directors could obviously not determine how a proxy form should be completed. That being so, the directors' determination could extend only to the content and configuration of an uncompleted proxy form. In the present case, as I have noted above, Bigshop followed the Fast Scout form for the meeting of 9 November. The form was not, however, "determined" by the directors. Mr Brereton's evidence, which I accept, was that the form was "drawn together" by Mr Morton. But in all the circumstances, Bigshop can hardly complain that the proxies were not in a form its directors had determined.

41 Secondly, and more fundamentally, I do not think it open to the directors to fetter the statutory right of a shareholder to appoint a proxy by an instrument which complies with s 250A(1) of the Corporations Act. That section provides:

"An appointment of a proxy is valid if it is signed by the member of the company making the appointment and contains the following information:

(a) the member's name and address;

(b) the company's name;

(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.

42 Counsel for Bigshop submitted that compliance with s 250A(1) is not the only criterion by which the validity of an instrument appointing a proxy is to be judged: that the section should not be taken to remove the protection afforded to shareholders by a company's constitution. Counsel pointed to s 250A(2) and (6). The former provision permits a company, by its constitution, to accept an appointment as valid even though it contains only some of the information required by s 250A(1): the latter provision removes any necessity for an appointment to be witnessed.

43 In my view, these provisions run counter to counsel's submission. They demonstrate a legislative intent to make a shareholder's right to appoint a proxy, one which is exercisable with the minimum of formality.

44 It is common ground that the only relevant Listing Rule referred to in cl 12.17(f) is rule 14.2 which, so far as relevant, provides:

"A notice of meeting must include a proxy form which must satisfy the following rules.

14.2.1 The proxy form must provide for the security holder to vote for or against each resolution.

14.2.2 The proxy form must provide for the security holder to appoint proxies of the holder's choice, but may specify who is to be appointed as proxy if the security holder does not choose a person to act as the security holder's proxy."

This rule is reproduced substantially in the final paragraph of cl 12.17.

45 In the present case, Bigshop did send out proxy forms which complied with Listing Rule 14.2. However, counsel for Bigshop submitted that on its true construction, cl 12.17(f) has the effect that only a blank proxy form contemplated by Listing Rule 14.2 may be used to appoint a proxy. Counsel relied on the vices of pre-completed proxy forms, to which I shall refer below, to support this construction.

46 I do not accept the submission. In my view, it takes no account of the fact that Listing Rule 14.2 and the final paragraph of cl 12.17 of Bigshop's Constitution, apply only to the forms which are sent out to shareholders. But those forms are not instruments appointing proxies: and the provisions have nothing to say about the instruments by which proxies are appointed. In my view, all that is required for such an instrument to be valid is that it shall comply with s 250A of the Corporations Act. All the forms relating to the 16,833,836 votes did comply.

47 That being so, it is not necessary to express any view about the broader issue - as counsel for Bigshop described it - whether a pre-completed proxy form should be treated as invalid because of the potential to affect the shareholder's voting intention.

48 Counsel's submission was that the provisions of Bigshop's Constitution, the Corporations Act and the Listing Rules relating to the appointment of proxies, are designed to protect shareholders from those who would seek to impose influence on them: and even to protect shareholders from themselves. Counsel submitted that the regime relating to proxy voting is designed to protect "the unintelligent, the uneducated, the illiterate, the people who are too busy, the distracted, the first-time shareholder who is unfamiliar with how voting by proxy works ...".

49 Counsel submitted that where a shareholder votes on what may be described as a blank proxy form, the inference should be drawn that the vote represents the exercise by the shareholder of his or her independent judgment. That inference could not be drawn, counsel submitted, when the shareholder has merely signed a pre-completed proxy form. That is because the inference would be equally open that the shareholder fell within the class of unintelligent, uneducated, etc who had been denied the protection which only a blank proxy form could provide and had signed the form without thinking or exercising any independent judgment.

50 I can see force in the argument that pre-completed proxy forms are undesirable. However, in my view, even if the argument was overwhelming, it could not influence the outcome of this application. If, as I believe to be the case, s 250A of the Corporations Act permits the use of pre-completed forms, the merits or otherwise of that practice are irrelevant.

51 The question whether pre-completed proxy forms are valid has not, it seems, received any judicial consideration. However, the matter was considered recently by the Market Surveillance Panel of New Zealand in a decision relating to Cue Energy Resources Ltd.

52 Counsel for Fast Scout informed me that the Market Surveillance Panel is the New Zealand equivalent of our Corporations and Securities Panel, being constituted under the Takeovers Act 1993 of New Zealand. A division of the Panel was required to consider the decision of the Chairman of Cue Energy Resources Ltd to disallow pre-completed proxy forms at a general meeting of the company.

53 The Panel considered an argument "... that the proxy forms did not allow the appointor to direct the proxy as to the manner in which the votes were to be cast". The Panel did not accept the argument. They said:

"All shareholders had a blank form of proxy provided by Cue which they could have used. They could if they so wished have changed the pre-completed proxy forms before returning them. The Panel can see no difference between signing and returning a proxy form in which the direction as to voting has already been completed, and first completing and then signing and returning a proxy form."

54 The Panel noted earlier in their decision that the question relating to the use of pre-completed proxy forms is currently the subject of litigation in the High Court of New Zealand.

55 The decision of the Market Surveillance Panel is not authority for the proposition that pre-completed proxy forms must always be acceptable. The Panel's decision is, however, stamped with the authority of Sir Ian McKay as its Chairman.

56 The use of pre-completed proxy forms was considered in Capital Energy NL v Stirling Resources NL (1996) 20 ACSR 704. There, Sheppard J held that a company which sent out pre-completed proxy forms together with blank forms did not contravene the equivalent of the present Listing Rule 14.2.

57 Sheppard J decided the question as a preliminary issue pursuant to O 29 r 2 of the Federal Court Rules, in advance of the meeting at which the proxy forms were to be used. His Honour pointed out that he had been asked to determine the matter "as a dry question on the face of the various documents". That being so, no question arose as to the validity of pre-completed proxy forms. The decision does not therefore, assist in the resolution of the present dispute.

58 Counsel for Fast Scout submitted that even if the pre-completed proxy forms were invalid, they could be saved by orders made pursuant to s 1322(4)(a) of the Corporations Act. This provision enables the Court to make an order declaring that:

" ... any act, matter or thing purporting to have been done ... in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation."

By s 1322(6)(a) the Court must not make such an order unless it is satisfied that

"(i) the act, matter or thing ... 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 ... that no substantial injustice has been or is likely to be caused to any person.

The relevant "act, matter or thing" for present purposes is the dispatch by Fast Scout of the pre-completed proxy forms. However, if such forms were invalid, as a matter of law, I do not think it could be said that their use was "essentially of a procedural nature". It would be a matter of fundamental importance. Furthermore, the acceptance of pre-completed proxy forms which were invalid as a matter of law, would be likely to cause substantial injustice to the directors of Bigshop who were thereby removed from office.

59 In these circumstances, I am not persuaded that, if I was wrong in my conclusion that the pre-completed proxy forms were valid, it would be appropriate to make an order pursuant to s 1322 of the Corporations Act.

60 Counsel for Bigshop submitted that the Chairman's decision to rule the proxies invalid was taken pursuant to cl 12.16 of the Constitution and was therefore final. Alternatively, counsel submitted, the Chairman had a general jurisdiction to rule on the validity of appointments of proxies and it is in the public interest that his decisions should be final.

61 I have set out cl 12.16 above. However, it will be convenient to repeat the relevant part:

"An objection may be raised to the qualification of a voter only at the general meeting ... at which the vote objected to is given or tendered. Any such objection shall be referred to the Chairman of the general meeting, whose decision shall be final. A vote not disallowed pursuant to such an objection is valid for all purposes."

(My emphasis)

62 In my view, that provision has no application in the present case. No objection was raised as to the qualification of a voter: nor was any objection raised at the meeting. Mr Brereton had determined in advance that he would declare the pre-completed proxy forms invalid.

63 The limited effect of provisions equivalent to cl 12.16 has been settled for over 100 years. In Wall v Exchange Investment Corporation Ltd [1926] Ch 143, the English Court of Appeal (at 143) considered an article of that company's constitution which provided:

"No objection shall be made to the validity of any vote excepting at the meeting at which such vote shall be tendered, or at the meeting (if any) to which such meeting shall be adjourned in the regular course of business, and every vote, whether given in person or by proxy, not disallowed at any one of such meetings, shall be deemed valid for all purposes whatsoever."

64 The Court of Appeal followed the decision of North J in Wall v London and Northern Assets Corporation [1899] 1 Ch 550 where the article in question was in similar terms. In that case, North J held that in the absence of fraud, a resolution for voluntary winding up of the company could not be impeached on the ground that the votes had been received improperly. North J said (at p 552):

"The article in question is not of very general application; it does not go to the extent of making the chairman's decision final as to a resolution being passed. If he had made a mistake in counting, for instance, the article would not apply. All the rule says is that any objections to votes are to be taken at the meetings, 'and every vote not disallowed at any one of such meetings shall be deemed valid for all purposes whatsoever.' ..."

65 In the 1926 case, the Chairman of a company meeting had refused to disallow a vote by a proxy to whom objection had been taken at the meeting. Pollock MR held that the Chairman was acting, in effect, as if he was an arbitrator chosen by the parties concerned, whose decision was to bind those parties on the question whether votes were to be treated as valid or not. His Lordship went on to say that the Chairman had been entrusted with powers which required him to decide whether or not the vote should be disallowed. Warrington LJ was of the same opinion. Sargant LJ also agreed. He added (p 148):

"It may well be that in the case where a vote has been disallowed, the shareholder whose right has been impeached to that extent should have a right to apply to the Courts. Here, all that is done is to take away from a shareholder a right of appeal against the decision disallowing an objection by him against the votes of some other shareholder, and it seems to me quite reasonable that such a question should be allowed to be decided summarily and finally by the chairman, although there should not be the same summary and final effect given to a decision against the right of a shareholder to vote."

66 It is to be noted that in both of the Wall cases, the Courts emphasised that there was no misconduct on the part of either Chairman which would have invalidated his decision. In the present case, it is alleged in the substantive proceedings that Mr Brereton acted improperly in disallowing the pre-completed proxy forms. However, that issue is outside the scope of the present proceedings and I have assumed that Mr Brereton acted properly in making his decision.

67 I accept that a Chairman has jurisdiction to rule generally on the validity of appointments of proxies (although Mr Brereton did not purport to exercise that jurisdiction on 9 November). But whether making a ruling under cl 12.16 or generally, a Chairman's decision will be amenable to review by the Court if he makes an error of law. This proposition is well settled. It is convenient to refer to Link Agricultural Pty Ltd v Shanahan, McCallum & Pivot Ltd [1998] VSCA 3; [1999] 1 VR 466. There, at 511, Kenny JA, with whom Batt JA and Buchanan J agreed, accepted the submission that the powers exercisable by the Chairman of a general meeting of a company were not unfettered and that "(b)roadly speaking, these powers could not be exercised so as unlawfully to deprive members of their votes".

68 Kenny JA reviewed a number of authorities which support that proposition, including Byng v London Life Association Ltd [1990] 1 Ch 170. There the Court of Appeal held that in exercising powers as Chairman of a meeting of the members of a public corporation, a Chairman would err in law if he did not take a decision reasonably, with a view to facilitating the purpose for which the powers had been conferred. At p 189, Browne-Wilkinson V-C said:

"The chairman's decision will not be declared invalid unless on the facts which he knew or ought to have known he failed to take into account all the relevant factors, took into account irrelevant factors or reached a conclusion which no reasonable chairman, properly directing himself as to his duties, could have reached ..."

69 In the present case, although the Chairman gave no reasons at the time for his decision to disallow the votes cast by the pre-completed proxy forms, he gave reasons subsequently, pursuant to the order of Parker J. The reasons were that the pre-completed proxy forms:

(a) were not in a form determined by the directors;

(d) were misleading in wrongly promoting each of the resolutions as having the endorsement of the directors of Bigshop; and

70 I have dealt expressly with reasons (a) and (b). But in my view, it is a complete answer to all those reasons that the pre-completed proxy forms complied with s 250A(1) of the Corporations Act. Further, in relation to (d), I do not accept that the forms were misleading. They cannot be viewed in isolation, but as part of the campaign pursued by both Bigshop and Fast Scout to win the votes of the Bigshop shareholders.

71 Mr Brereton had written to the shareholders only three days before Fast Scout made its improved offer. An Information Notice which accompanied that letter explained Bigshop's position and its voting recommendations in considerable detail. In those circumstances I do not think it can be said that any shareholder could have thought Bigshop was soliciting votes in favour of the resolutions.

72 In short, I consider that the Chairman's decision to rule the pre-completed proxy forms invalid, was wrong in law and was therefore amenable to review by the Court.

A further issue: The Chairman's refusal to give reasons for his decision

73 Counsel for Fast Scout submitted that because the Chairman declined to give reasons at the meeting for holding the pre-completed proxies invalid, it is not now open to Bigshop to maintain their invalidity. On the view I take of the application, this submission does not require to be considered. However, in case I am wrong, I shall summarise my conclusions in respect to it.

74 Counsel relied on the decision in ANZ Nominees Ltd v Allied Resources Corporation Ltd (1984) 2 ACLC 783. In that case, the Chairman of a company meeting failed to raise at the meeting the fact that there had been non-compliance with an article, with the result that the appointment of a proxy was invalid. O'Bryan J held that in those circumstances the inference could be drawn - given that members of the company and its directors were present at the meeting - that the directors had waived compliance with the formalities. In reaching that decision, his Honour followed Re Oxted Motor Company Ltd [1921] 3 KB 32. That is, however, a somewhat different case. There, the only two shareholders of the company, who were also its directors, met and passed a resolution that the company should be wound up. Later, one of the shareholders contended that the resolution was invalid because no notice of the resolution had been given. Lush J held that it was competent for the shareholders of the company, acting together, to waive the formalities required by the relevant statutory provision as to notice of intention to propose an extraordinary resolution.

75 ANZ Nominees Ltd (supra) was followed by Blanchard J in Maori Development Corporation Ltd v Power Beat International Ltd [1995] 2 NZLR 568. There, no objection was taken at a company meeting attended by a proxy, to the authority of that person to vote on behalf of the shareholder as he did. However, it emerged later that the proxy's vote had been disallowed. The decision to disallow the vote could have been taken only by the Chairman of the meeting who gave no notice that he intended to take that course.

" ... if no objection is taken to the representation and no enquiry made as to the status of the representative prior to the declaration by the chairman of the result of the poll, the representative must be taken to have validly cast the vote of the corporate shareholder. The company cannot later rely upon a ground of invalidity not then specified by the chairman; ANZ Nominees Ltd v Allied Resources Corporation Ltd at p 788."

77 Although the decisions in ANZ Nominees Ltd and Maori Development Corporation Ltd were that instruments appointing proxies could not be impeached on grounds not specified at the relevant meeting, the underlying principle is that the failure of the person or persons having authority to raise an irregularity must be taken as a waiver.

78 In the present case, if the pre-completed proxies were irregular, I do not think it could be said that the Chairman waived the irregularity. In my view, there is a difference between the failure to raise an invalidating point on the one hand: and on the other, to rule on the point without giving reasons. In the first case there may be a waiver: in the second, there would not.

79 If reasons are given subsequently, the question may arise whether those were the reasons in fact relied upon at the material time. However, that is not an issue which has been raised in the present application.

80 In my view, therefore, Bigshop is not barred from maintaining the invalidity of the pre-completed proxy forms by reason of the failure of the Chairman to give reasons for his decision at the meeting of 9 November.

81 As I have noted above, it has been necessary to consider only the validity of the pre-completed proxy forms relating to 16,833,836 shares. That is because it was agreed between counsel that whether or not the issues arising from inconsistent or amended forms were all resolved in favour of Bigshop or Fast Scout, the result would be the same.

82 Given my finding that the pre-completed proxy forms were valid, the result is that the resolutions removing the Bigshop directors and replacing them with Fast Scout nominees should have been passed at the meeting of 9 November. Fast Scout is therefore entitled to a declaration to that effect.

Fast Scout Ltd v Bergel & Ors [2001] WASC 343

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (133 paragraphs)

Fast Scout Ltd v Bergel & Ors [2001] WASC 343 (26 November 2001)

A further issue: The Chairman's refusal to give reasons for his decision

Parties

Cases Cited (1)