102 If the second meeting is not an adjournment of the initial meeting, no entitlement in a single director (direct or indirect) to adjourn a meeting would be required, or conferred, by sub-clause 13.1(a). The ordinary provisions applicable to convening a meeting by a director or a shareholder, including the requirements for fixing a date and the necessary notice, would apply.
103 Toll relies on the reference to "the adjourned meeting" in sub-clause 13.1(b). Sub-clauses 13.1(a) and (b) must be read together in order to establish the preconditions of service of a notice. The reference in sub-clause 13.1(b) to "the adjourned meeting" can only refer to a second meeting first referred to in sub-clause 13.1(a). In my view, in contrast to sub-clause 13.1(a), which effectively defines or gives content to the second meeting, sub-clause 13.1(b) merely assumes, rather than contradicts or adds to, that content. Rather, it "labels" the second meeting. If, on analysis, the second meeting provided for in sub-clause 13.1(a) is not an adjourned meeting, a reference to it as such in sub-clause 13.1(b) will be ineffective to alter its character.
104 In my opinion, the second meeting referred to by different terms in sub-clauses 13.1(a) and 13.1(b) is, in character, not an adjournment of the initial meeting, but a "subsequent" meeting, in accordance with the terms of sub-clause 13.1(a), which assumes that a new meeting will be convened in accordance with all co-existing relevant provisions of the Shareholders' Agreement and the Constitution.
105 While that conclusion means that the subsequent meeting could be convened with different periods of notice depending on whether it were a board meeting or a shareholders' meeting, the different convening periods would not operate to abridge the minimum one month interval between the initial and subsequent meetings. Further, even if, as Toll contends, the second meeting were, on a proper construction, an adjournment of the initial meeting (which could logically only be made at the initial meeting) in my opinion, the minimum one month time period would still commence to run, by the express words of sub-clause 13.1(a), from "the meeting at which the Relevant Resolution was initially considered".
106 Toll's construction requires that the plain meaning of the term "meeting at which the Relevant Resolution was initially considered" be disregarded and that for the purposes of sub-clause 13.1(a), it be interpreted to mean a meeting at which the resolution was both considered and not agreed upon (whether for the first time or not) and at which the requirement for the adjournment was first made. (On Toll's construction there is, of course, only one board meeting although, by adjournment, it is held on different occasions.)
107 The reference to the "initial consideration" of the relevant resolution must, on Toll's interpretation, bear an artificial meaning, because, irrespective of the number of previous meetings at which the resolution has already been considered (and not agreed upon), the resolution must be taken, for the purposes of sub-clause 13.1(a), not to be initially considered until the consideration and failure to agree first coincide with the making of the requirement that the matter be adjourned.
108 Toll bases that interpretation on the ground that it is necessary in order to ensure a minimum period of one month's notice that the resolution is to be reconsidered or put again at a subsequent meeting, thus providing a possible basis for a notice under sub-clause 13.1(b). That notice enlivens the deadlock-breaking mechanism, which may ultimately result in the sale of the business. Toll says that such a drastic mechanism necessarily requires at least one month's notice that it may be invoked.
109 Toll also argues that it would be absurd if a resolution could be lost and an indefinite time could then elapse, after which the "subsequent meeting" could be convened with only three days' notice (or fifteen days' notice in the case of a shareholders' meeting). Such an outcome is possible on the plaintiffs' construction, because no maximum length is prescribed for the interval between the two meetings. If Toll's construction be adopted, although a lengthy time could elapse between the two meetings, the parties would be on notice throughout the intervening period that a subsequent meeting within terms of sub-clause 13.1(b) was scheduled.
110 On the plaintiffs' construction, a "subsequent meeting" of the board within terms of sub-clause 13.1(b) could be convened with only three days' notice. Although there would be an interval of at least one month between the meeting at which the resolution was put and lost and the subsequent meeting, the parties would not necessarily have a minimum of one month's notice that a subsequent meeting for the purposes of a sub-clause 13.1(b) notice was to occur.
111 Further, the plaintiffs' construction admits the possibility that a party could rely on a resolution, which failed to pass at a meeting some time ago, in order to convene, on three days' notice (or fifteen days' notice in the case of a shareholders' meeting), a board meeting which could form the basis for a sub-clause 13.1(b) notice.
112 Toll contends that, given the very serious possible consequences of the deadlock-breaking mechanism, the parties to the Shareholders' Agreement could not have intended that consequence but rather, because sub-clause 13.1 establishes a process which provides a number of opportunities for such a dispute to be resolved by discussion between the directors or shareholders, they must have intended a regime whereby a sub-clause 13.1(b) notice could not be served unless the other party had at least one month's notice that it may be served.
113 The construction of a contractual provision should not be dictated by the aim of excluding its possible abuse for ulterior purposes, for which remedies may be available elsewhere.
114 I am not persuaded that the parties must have intended, under sub-clause 13.1(a), to exclude the possibility that a resolution which was dealt with at a meeting some time ago would be reconsidered at a meeting convened in accordance with the usual convening provisions of the Shareholders' Agreement.
115 The usual minimum three business days' notice for Board Meetings under the Shareholders' Agreement applies to the most serious matters, expressly including the disposal of all or a substantial part of the company's business. In contrast to the express stipulation for a minimum period of one month between the two meetings contemplated by sub-clause 13.1(a), no maximum period is specified for the interval.
116 The notice that a subsequent meeting was required would not be notice of a certainty but of a possibility, as the shareholders might agree upon the resolution at the subsequent meeting, or if they did not, neither party might serve a sub-clause 13.1(b) notice.
117 Further, the deadlock-breaking mechanism does not impose an immediate forced sale but rather, prescribes a period of at least six weeks for discussion and bona fide attempts to resolve the deadlock.
118 In a company with the management and decision-making structure of Pacific National (where any decision of the board requires the unanimous agreement of two equally empowered parties and there is no casting vote) the potential for paralysis and its attendant deleterious consequences, is significant. In such circumstances, the prolongation of the prerequisite preliminary process for the commencement of the deadlock-breaking mechanism may be commercially undesirable.
119 I am therefore not persuaded that (if, contrary to the view expressed above, the second meeting is properly an adjourned meeting) a radical departure is necessary from the ordinary meaning of the words "from the meeting at which the Relevant Resolution was initially considered" in order to avoid a result which the parties could not have intended. The minimum one month period would, in the present case, in my view, commence to run on 1 September 2005.
Whether matter or relevant resolution to be adjourned
120 Sub-clause 13.1(a) states that a director may require that "the matter", rather than the meeting, be adjourned. That phraseology entails a degree of ambiguity. It is not preceded by any reference to a "matter". Rather, at its commencement, clause 13.1(a) refers to a "Relevant Resolution" which is considered at a meeting and on which there is inability to agree. The subsequent reference to the "matter be adjourned" can only relate back to the Relevant Resolution which has been considered and not agreed upon.
121 Toll contends that the Relevant Resolution, rather "the matter" must be adjourned. Putting the same argument in a slightly different way, it contends that "the matter" does not exist independently of the Relevant Resolution and that the two concepts wholly coincide.
122 Toll also relies on the reference in sub-clause 13.1(b) to remaining unable to agree on the Relevant Resolution, in order to argue that only if the Relevant Resolution in the identical form considered at the initial meeting is not agreed upon at the second meeting will the conditions for service of a sub-clause 13.1(b) notice be satisfied. Therefore, even minor amendments to the Relevant Resolution, in the absence of agreement, would be impermissible for the purposes of sub-clause 13.1(b). As such, Toll contends that failure to agree on the amended Relevant Resolution attached to Mr Corrigan's letter dated 14 September 2005 convening the board meeting on 4 October 2005, cannot form the basis of a sub-clause 13.1(b) notice.
123 The plaintiffs argue that the phrase "the matter be adjourned" refers to the matter the subject of the Relevant Resolution. As such, they contend that it is wider than a form of words and is unaffected by the introduction of minor amendments. In contrast to a meeting, which would determine when closed, or a resolution, which would determine when put and lost, "the matter" would have a continued existence, so that its adjournment is not an incongruous concept.
124 "Adjourn" usually connotes the putting off, deferral or suspension of a process which has not terminated. Although it does not aptly describe a resolution which has been put to the vote and not passed, Toll contended that in the special context of sub-clause 13.1(a) there would be sufficient life in a lost resolution for its adjournment, as the sub-clause otherwise did not make sense. I am not persuaded that a resolution once put to the vote and lost could be other than exhausted.
125 Further, I do not consider that the rational operation of sub-clauses 13.1(a) and (b) necessitates such a strained interpretation.
126 In my opinion, the different term "matter" in the context of sub-clause 13.1(a) is not a synonym for the Relevant Resolution, but is of wider reach. That conclusion is based not only on the use of a different and potentially wider word, but also on the total context of clause 13.1 in which it appears. Sub-clause 13.1(a) commences by a reference to a resolution considered at a meeting and not agreed upon. It does not state that the resolution must be put to the vote and not passed. The sub-clause is not expressly focussed on the voting process per se. While counsel for both parties took a contrary view, and it is unnecessary to decide the point, I am not persuaded that a failure to agree upon the relevant resolution must in every case necessarily be evidenced by the putting of a resolution which is not passed. Such an approach may be unduly technical, given the relative generality of the language used.
127 The view that sub-clause 13.1 is essentially concerned with deadlock on a matter underlying, and not necessarily coincident with, the resolution of which it is the subject, is reinforced by the statement in Schedule 1 Part A of the Shareholders' Agreement that "A notice under clause 13.1(b) will operate to notify the other Shareholder that unless the matter the subject of the Relevant Resolution has been agreed upon at the expiration of 14 days from the giving of that notice ("the Notice Period") the provisions of paragraph 2 may be invoked".
128 Although the adjournment of "the matter" not agreed upon does not pose as many conceptual problems as a resolution voted upon and not passed, if the requirement that "the matter be adjourned" is made after the conclusion of the initial meeting, as Toll contends, it would lack the temporal sequence characteristic of an adjournment, because, by that stage, consideration of it would already have been interrupted. The requirement at that stage would be, more accurately, for reconsideration of the matter.
129 If the term "adjourned" bears its strict technical meaning, there are problems with its application to either "the matter" or a resolution, although they are magnified in relation to the latter.
130 The term "adjourned" must, however, be applied to one or the other (whether or not the initial meeting must also be adjourned) and it is not contended that sub-clause 13.1(a) covers only the case of disagreement over a resolution not put to the vote.
131 Strict conformity with the technical requirements of adjournment in the context of sub-clauses 13.1(a) and (b) is not consistently possible on either the plaintiffs' or Toll's construction. As relevant authority establishes, "technical interpretations and undue emphasis on niceties of language" should be eschewed. Applying a "common sense non-technical" approach "in the light of the commercial purpose of the setting", I consider that "adjourn" is not used accurately or consistently in the relevant sub-clauses, but rather imprecisely and colloquially, to indicate both the reconsideration of a matter and a later meeting.
132 In my opinion, "the matter" referred to in sub-clause 13.1(a) is the substantive underlying subject matter of the Relevant Resolution on which there has been a failure to agree.
133 Sub-clause 13.1 is aimed at breaking a deadlock and it would seem an unduly technical approach to construe it as obstructing measures which, during the preliminary phase, might avert deadlock, such as minor amendments to the Relevant Resolution, which leave its substantive subject-matter unchanged. As observed above, although a resolution is required, the relatively wide language of sub-clause 13.1 suggests that it is not narrowly focussed on voting on resolutions per se, but on the failure to agree on underlying subject-matter.
134 In the present case, the amendments to the Relevant Resolution clarify the independent status of the solicitors, counsel and accountants proposed to be appointed, in apparent concession to objections raised by the other Shareholder, and in my opinion do not otherwise alter its substance.
135 Sub-clause 13.1(b) refers to remaining unable to agree on the Relevant Resolution, which supports Toll's submission that a resolution identical to that considered at the initial meeting must be considered at the later meeting. The reference to "the matter" which is to be adjourned is, however, interposed between the reference to the Relevant Resolution in sub-clause 13.1(a) and the reference to the Relevant Resolution in sub-clause 13.1(b). As discussed above, the term "Relevant Resolution" is given no content in sub-clause 13.1(b) and can be understood only by reference to sub-clause 13.1(a) which expressly states that "the matter", not the Relevant Resolution, is to be adjourned.
Conclusion
136 It follows that, in my opinion, the letter of Christopher Corrigan dated 14 September 2005 together with the accompanying Agenda and Notice of Meeting constituted a requirement within the meaning of sub-clause 13.1(a) of the Shareholders' Agreement that the matters the subject of the Relevant Resolution considered at the meeting of the board of Pacific National Pty Ltd on 1 September 2005 be adjourned, and that the board meeting convened for 4 October 2005 is "the adjourned meeting" within the meaning of sub-clause 13.1(b) of the Shareholders' Agreement.
137 Accordingly, in my opinion, the plaintiffs are entitled to the relief sought in the originating motion.