VALIDITY OF RESOLUTIONS OF THE BOARD MADE 17 FEBRUARY 2009
24 While the plaintiffs' primary claim concerning this issue is that the resolutions of the board of Aurium made 17 February 2009 are invalid because of a breach of s 195(1) of the Corporations Act 2001, it is useful to consider this claim firstly from the viewpoint of the general law and then by reference to the statutory disclosure and voting requirements falling on directors and the requirements of the constitution of the company in that regard.
25 It is well understood that a fiduciary is under an obligation not to promote his or her personal interest by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his or her personal interests and those of the persons whom he or she is bound to protect: Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41, Mason J at 103. Accordingly, a director owes a fiduciary duty to the company (and in some situations to a shareholder) to avoid the advancement of his or her personal interests over those of the company (and in some situations of a shareholder).
26 As a fiduciary the interest of a director in relation to a corporation may in some cases be measured in terms of a financial profit that a director might stand to earn. In other cases the question of profit may not be in issue, but a director may have a conflict of duties owed to different entities. It is for that reason that the authorities and texts usually draw a distinction between a "profit rule" and a "conflict of interest rule": see discussion in Austin RP, Ford HAJ and Ramsay IM, Company Directors, Principles of Law and Corporate Governance (LexisNexis Butterworths Australia, 2005) at para 8.20; Finn PD, Fiduciary Obligations (The Law Book Company Ltd, 1977) Ch 21, Ch 22.
27 Nonetheless, there is a tendency to conflate the two rules and for a complainant simply to assert that a fiduciary has a "conflict of interest" without specifying more.
28 The profit rule is perhaps clear enough. Finn calls this the "conflict of duty and interest": Finn (1977) Ch 21. A director as a fiduciary has an obligation not to allow a conflict between his or her duty to the company and his or her personal interests. Accordingly, a director should not use his or her position as director to derive an unauthorised benefit.
29 The conflict of interest rule, which Finn calls a "conflict of duty and duty" (Finn (1977) Ch 22), obliges a director to avoid a conflict of the duty owed to the company with a duty owed to some other person: see for example, Transvaal Lands Co v New Belgium (Transvaal) Lands & Development Co [1914] 2 Ch 488. This conflict rule has particular application in circumstances where a person is a director of two companies which have common dealings.
30 Thus, where a person finds themselves in the position that Mr Remta found himself in, in this case, as a director of each of two companies negotiating a transaction, a conflict of the duty the director owes to each company arises: see R v Byrnes (1995) 17 ACSR 551 at 562.
31 In recognition of his or her obligations when in a position of conflict, a fiduciary will necessarily take steps to avoid or remove the conflict, principally by making disclosure of a relevant interest to those to whom they owe the duty or by acting in a way that avoids the conflict.
32 In relation to a person who is a common director of two companies that have dealings, disclosure of the interest will often be enough to remove the conflict, although it is suggested that in some circumstances the common director may be obliged to avoid voting on the transaction or even taking part in negotiations in order to avoid the conflict: Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539; Finn (1977) para 583; Austin et al (2005) para 8.26.
33 No doubt each case depends on its particular facts. In this case, Mr Remta disclosed his interest to the board and did not vote on the resolution before the board on 17 February 2009. Each party to the negotiations understood and accepted the role Mr Remta played. No suggestion has been made that in this case Mr Remta should not have been involved in negotiations concerning the variation of the joint venture between Aurium and GPN. No doubt there were good commercial reasons, accepted on each side, for him to do so.
34 Against this general law background, the terms of a company's constitution and the requirements of the Corporations Act 2001 come into play.
35 So far as the constitution of the company is concerned, it may attenuate the fiduciary duty a director owes under the general law by making it less onerous.
36 Quite separately from the general law and corporate constitutional requirements, the Corporations Act 2001, by s 191(1), specifically provides that "a director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest", unless subs (2) applies, and s 195(1) requires the director not to vote and not to be present while the matter is being considered. In other words, the fiduciary duty must be met by positive action in these settings by force of statutory enactment. (However, these provisions do not apply to a proprietary company that has only one director: s 191(5), s 195(1A)(b)).
37 Section 191 is the successor of a provision which was enacted to overcome constitutional clauses which gave such wide dispensation to the directors as to be unacceptable in the interests of members and creditors: Austin et al (2005) at para 8.29. The operation of s 191(1) is not subject to any contrary provision in the constitution. Rather, under s 193, s 191 has effect in addition to and not in derogation of any provision in the company's constitution restricting a director from having a material personal interest in the matter and related concerns.
38 Section 191(1) provides:
191 Material personal interest - director's duty to disclose
Director's duty to notify other directors of material personal interest when conflict arises
(1) A director of a company who has a material personal interest in a matter that relates to the affairs of the company must give the other directors notice of the interest unless subsection (2) says otherwise.
(1A) For an offence based on subsection (1), strict liability applies to the circumstance, that the director of a company has a material personal interest in a matter that relates to the affairs of the company.
Note:For strict liability, see section 6.1 of the Criminal Code.
39 Section 191(2) provides that notice is not required in certain circumstances. In particular under s 191(2)(a)(iii), a director does not need to give notice of an interest under s 191(1) if:
(iii) [the interest] relates to a contract the company is proposing to enter into that is subject to approval by the members and will not impose any obligation on the company if it is not approved by the members
40 Section 191(4) deals with the effect of contravention by a director of s 191 and provides that:
(4) A contravention of this section by a director does not affect the validity of any act, transaction, agreement, instrument, resolution or other thing.
41 Consequently, a contravention of the s191(1) duty to notify other directors of a relevant interest does not affect the validity of any resolution.
42 However, it is important to note that s 193 provides that s 191 and s 192 (which entitles a director to give other directors standing notice about an interest) have effect in addition to, and not in derogation of:
(a) any general law rule about conflicts of interest; and
(b) any provision in a company's constitution (if any) that restricts a director from:
(i) having a material personal interest in a matter; or
(ii) holding an office or possessing property;
involving duties or interests that conflict with their duties or interests as a director.
43 In other words, even though s 191(4) has the effect that contravention of the s 191(1) duty to notify other directors of a relevant interest does not affect the validity of a resolution of the board, for example, that is not to say that the conduct giving rise to such contravention might not contravene any general rule of law regarding conflicts of interest or requirements in the company's constitution concerning conflicts of directors.
44 Section 195(1) and s 195(1B) of the Corporations Act 2001 impose restrictions on voting on directors of public companies, in the following terms:
195 Restrictions on voting - directors of public companies only
Restrictions on voting and being present
(1) A director of a public company who has a material personal interest in a matter that is being considered at a directors' meeting must not:
(a) be present while the matter is being considered at the meeting; or
(b) vote on the matter.
…
(1B) An offence based on subsection (1) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code.
45 However s 195(1A) provides that s 195(1) does not apply if:
(a) subsection (2) or (3) allows the director to be present; or
(b) the interest does not need to be disclosed under section 191.
46 Section 195(2) allows a director to be present and to vote if directors who do not have a material personal interest have passed a resolution in effect allowing those things to happen.
47 Section 195(3) enables a director to be present and vote with the approval of the Australian Securities and Investment Commission (ASIC).
48 Section 195(5) deals with the effect of contravention by a director in the following terms:
(5) A contravention by a director of:
(a) this section; or
(b) a condition attached to a declaration or order made by ASIC under section 196;
does not affect the validity of any resolution.
49 Again, as in the case of s 191(5) concerning the notification of a material personal interest in a matter, the failure of a director to absent himself or herself from a meeting having declared such an interest does not affect the validity of any resolution made.
50 In this case it appears that none of the relevant directors Mr Remta, Mr Quinn and Mr Benson had given a formal written standing notice about their interests. A standing notice under s 192 does not need to be in writing. However, under s 192(2) to qualify as a standing notice, the notice must:
(a) give details of the nature and extent the interests; and
(b) be given:
(i) at a directors' meeting (either orally or in writing); or
(ii) to the other directors individually in writing.
The evidence does not support the view that a written or oral standing notice of interests in such terms was given. However, that the three directors declared interests at the meeting on 17 February 2009, and succinctly explained the reasons for doing so, is undoubted and seems to have been well understood by the other directors.
51 The plaintiffs say that, on the facts of this case, none of the exemptions to the operation of s 195(1) of the Act apply and that, by reason of the failure of Mr Remta, Mr Quinn and Mr Benson to then absent themselves from the board meeting on 17 February 2009, the resolutions then purportedly passed by the board are invalid, thus affecting the power of the members in general meeting to deal with the agenda items set out in the Notice of Meeting.
52 The plaintiffs note that in Mott v Mount Edon Gold Mines (Australia) Ltd (1994) 12 ACSR 658, Owen J expressed the view in obiter dictum that a breach of the former s 232A(1) (the precedessor to s 195 of the Corporations Act 2001) of the former Corporations Law (Law) was a "procedural irregularity" to which s 1322 of that Law applied, such that breach did not spell invalidity. The plaintiffs submit that the better view is that a contravention of s 195(1) of the Corporations Act 2001 will not amount to a procedural irregularity if the requirement is deliberately ignored or the directors have tried to do something which the Corporations Act 2001 does not authorise. This submission appears to ignore s 195(5) of the Corporations Act 2001, to which I will return.
53 As to what transpired at the meeting of the board of directors of 17 February 2009, some of the relevant factual events have been set out above in the introduction. I have already mentioned that I consider the minutes of that meeting as entered into the minute book of the company to be substantially accurate. The meeting was a relatively informal one, in that it appears that at the meeting directors talked amongst themselves and then came together as appropriate to deal with agenda items.
54 Mr Anderson, the Company Secretary, explained that he is in fact the company secretary of ten listed companies. The boards of some of these companies proceed to deal with business in meetings in an informal way, like Aurium's did here, while others act with more formality. He explained that sometimes formal resolutions are not put but it is plain nonetheless, from the course of discussion, that the board resolved to adopt particular resolutions. He ordinarily, in such cases, takes direction from the chairman of the board or a director who had the carriage of a particular matter to confirm the resolutions made by the board. He did that in this case by taking the direction of the chairman of the board, Mr Remta, following the meeting.
55 Some attack was made by counsel for the plaintiffs on the evidence of Mr Remta concerning what happened at the directors' meeting. It was suggested that there were some inconsistencies suggested by earlier drafts of the minutes of the board meeting and the evidence of Mr Remta as to the order in which things happened. In my view, having regard to Mr Remta's evidence, Mr Saunders' evidence, Mr Anderson's evidence, the documentary record including the draft minutes and the final minutes as entered in the company's minute book, and the evidence of the other directors (apart from Mr Percy who did not attend to give evidence), the sequence of the events was substantially as follows.
56 The joint venture variation agenda item was introduced. Mr Remta briefly outlined the nature of the agenda proposal, which involved a variation of the existing joint venture between the company and GPN. Mr Remta took the running on this agenda item as, since his appointment as chairman and director of the company in September 2008, it had been clear to him (and the other directors and it seems GPN too) that the joint venture currently in place between the company and GPN was not serving the company (or GPN) well. Following this outline, Mr Remta indicated an interest in the matter as he was not only chairman of directors of the company but also chairman of directors of GPN. At that point, each of Mr Quinn and Mr Benson, by reason of direct and/or indirect interests in or in entities that hold shares in GPN, also declared an interest. The meeting then proceeded to consider the agenda item through a discussion between the remaining directors, namely Mr Saunders, who effectively acted as the chair of the meeting, and Mr Percy. They then in substance adopted the resolutions outlined above.
57 In so finding, I have paid particular regard to the evidence of Mr Saunders, who had no apparent interest in the agenda item before the board. He confirmed the sequence of events outlined above. He explained that he and Mr Percy discussed the agenda item before adopting the resolutions. He positively stated that the directors who had declared interests did not participate in those proceedings. He also indicated that having regard to the nature of those interests he did not personally believe that Mr Quinn and Mr Benson needed to declare any interests because the nature of the interests they disclosed were as shareholders in GPN and a variation of the joint venture could only affect them in the same way as it would affect any other shareholder in GPN.
58 I should add that it seems that both Mr Benson and Mr Quinn disclosed their respective interests in terms in which they had ritually done at other, earlier board meetings.
59 So far as the interest declared by Mr Remta is concerned, he declared an interest on the basis that since September 2008 he had been a director and chairman of the board of each of the company and GNP and therefore might be considered in a position of conflict. He otherwise held no shares directly or indirectly in either company and in that sense apparently did not stand to gain financially. On the face of it, the conflict rule rather than the profit rule seemed to govern his disclosure.
60 While something of an attack was launched against Mr Remta in cross examination concerning any shareholding that he might have had indirectly through his son, I am satisfied on the basis of the evidence led that Mr Remta does not have any such interest. Indeed, counsel for the plaintiffs having cross examined Mr Remta in that regard did not positively submit that the Court should find otherwise.
61 The evidence concerning Mr Benson's interests is as follows:
· Mr Benson is a director and shareholder of Millcrest Pty Ltd which is the holder of 87,848,943 shares in GPN, which represents 7.57% of the issued capital of GPN.
· Some of the shares owned by Millcrest Pty Ltd in GPN are held in its own name and others are held for Millcrest for a nominee account in the name of Fortis Clearing Nominees Pty Ltd (Fortis).
· Mr Benson owns one B class share and two ordinary shares in Millcrest Pty Ltd while 3,300 ordinary shares and one A class share are held by his father, Dr Colin Benson.
· Mr Benson and his wife jointly own 9,656,594 ordinary shares in GPN over which he has direct control. This represents 0.83% of the issued capital of GPN.
· Mr Benson and his wife are also trustees of the Benson Family Trust (which is a discretionary trust) and in that capacity are registered as the owner of 200,000 shares in GPN.
· Fortis is also registered as the holder of 10,000 shares in Aurium which it holds as the nominee for Millcrest.
· Mr Benson is also the registered owner of 1,014,000 shares in GPN as trustee for his three daughters respectively.
· Mr Benson is a director of Stock Market Research Pty Ltd which owns 1,165,000 shares in GPN. He owns approximately 25% of the issued capital of Stock Market Research Pty Ltd.
62 The evidence concerning Mr Quinn's interests is as follows:
· Mr Quinn owns one share in Jamora Nominees Pty Ltd. Jamora owns 48,730,280 shares in GPN. This represents 4.20% of the issued capital of GPN.
· Jamora owns 5,750,000 shares in Aurium, being 6.78% of the issued capital of the company.
63 For the purposes of s 191(1) and s 195(1) of the Corporations Act 2001 the respective duty to notify and the restrictions on voting are imposed by reference to the test whether or not a director has a "material personal interest in a matter that relates to the affairs of the company". This expression is not defined in the Corporations Act 2001. Nor are any of the component expressions, such as "material" and "interest". However, as noted above, there is a considerable body of law dealing with the question of conflict of interest of fiduciaries under the general law in equity.
64 In McGellin v Mount King Mining NL (1998) 144 FLR 288, Murray J in the Supreme Court of Western Australia was required to consider the meaning of the expression "material personal interest" as it appeared in s 232A of the former Corporations Law, which was in similar terms to s 195(1) of Corporations Act 2001. At 304, Murray J observed:
In the end it seems to me that a material interest for the purpose of art 15.15 and a material personal interest for the purpose of s 232A would bear much the same character. 'Material' in this context, I think, means that the interest involves a relationship of some real substance to the matter under consideration or the contract or arrangement which is proposed. In that way the nature of the interest should be seen to have a capacity to influence the vote of the particular director upon the decision to be made, bearing in mind that both the article and the section are concerned with that aspect of a director's fiduciary duties which relates to the resolution of conflict of interest which must, of itself, be of a real or substantial kind. The interest with which both the article and the section are concerned should be of a kind as to give rise to a conflict of that character. If that test is met, it seems to me not to matter that the nature of the interest may be described as direct or indirect, or vested in interest or contingent. It is the substance of the interest, its nature and capacity to have an impact upon the ability of the director to discharge his or her fiduciary duty which will be important.
65 Article 15.15 of that company's constitution provided as follows:
No Director shall be disqualified by his office from contracting with the Company whether as vendor purchaser or otherwise, nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided or prejudiced on that account, nor shall any Director be liable to account to the Company for any profit arising from any such contract or agreement by reason only of such Director holding that office or of the fiduciary relationship thereby established, but it is declared that the nature of his interest must be disclosed by him at a Director's meeting as soon as practicable after the relevant facts have come to his knowledge and such Director shall not vote on any resolution relating to a contract or arrangement through which that Director has directly or indirectly a material interest.
66 Murray J ultimately found that the director had a personal interest of a material kind. In so finding, His Honour, at 305, did in fact have regard to whether that interest was enjoyed directly or indirectly and whether it was too remote or contingent. The director was held to have a material personal interest because the matter under discussion at the board meeting involved the company issuing shares to him to reimburse him for contributions he had made towards meeting the cost of mining exploration work undertaken by the company.
67 The important point to note here is that an assessment of the materiality of a personal interest is not made in some generalised way, but in relation to "the matter that relates to the affairs of the company", or as Murray J put it at 304, "to the matter under consideration or the contract or arrangement which is proposed".
68 As an exercise in textual interpretation of the statutory expression, the word material would appear to be important, as Murray J suggests, and appears to convey the idea that the interest must be of some substance or value, rather than merely a slight interest; that is, an interest of small value can be taken without further inquiry, and does not cross the materiality threshold: see also Austin et al (2005) para 8.30. This view is also entirely consistent with the general law as explained by Mason J in Hospital Products 156 CLR 41 at 103, to the effect that restitutionary remedies are not available for a breach of the conflict rule when the interest of the fiduciary is "remote or insubstantial". See also Finn (1977), para 472; Austin et al (2005), para 8.23.
69 The concept of a material personal interest also rather suggests that, on the face of it, the section does not apply to a conflict of duty and duty, where the director has a conflict of duties but the interest at stake is an interest of someone else, such as a beneficiary of a trust of which the director is trustee, or a company of which the director is also a director. While equity may assist to prevent this conflict, it may not be because a "personal" interest is being preferred. However, in both of those situations additional facts no doubt can lead to the conclusion that the director has a personal interest - for example, where the trust operates to support the director's family and therefore reduces his or her obligation to provide support from other funds; or where a director's position as a director of another company involves substantial executive remuneration for performance‑related remuneration: Austin et al (2005) at para 8.30.
70 Austin et al (2005) at para 8.30 also suggest that the words "personal interest" suggest that where the proposal under consideration would promote the company's interests rather than the director's personal interest, s 191 is not attracted, and refer to Kriewaldt v Independent Direction Ltd (1995) 14 ACLC 73. However, in some such circumstances, a matter under discussion might both promote the company's best interests and advance a personal interest of the director, as a matter of fact.
71 In this case, Mr Benson plainly has an "interest in a matter that relates to the affairs of the company". This is because (a) he holds some shares in GPN directly and on the face of it, has an indirect interest in some other GPN shares as well as Aurium shares and (b) the proposed variation of the joint venture between Aurium and GPN is "a matter that relates to the affairs of the company", namely Aurium.
72 Given that the shares he directly owns (with his wife) represent 0.03% of the issued capital of GPN, that holding, which may be considered a "personal interest" cannot be considered an interest in the matter which has a realistic capacity or propensity to influence the director's decision in the administration of the company's affairs. In short, it is insubstantial and cannot be considered a "material" personal interest.
73 As to the 7.57% holding of Millcrest in the issued capital of GPN, Millcrest is controlled by the father of Mr Benson. There is no suggestion on the evidence that Dr Colin Benson acts at the say‑so of his son. I do not consider it can be said that this holding is a "personal" interest enjoyed by Mr Benson. To the extent Mr Benson has an indirect interest in GPN through Millcrest I consider it to be insubstantial.
74 I also consider the indirect interest in Aurium to be in the same category.
75 As to the shares held by Mr Benson as trustee for his three daughters, and the shares held by Stock Market Research Pty Ltd, the company in which Mr Benson has a 25% holding of the issued capital, I consider these also are too insubstantial (and also too remote in the case of Stock Market Research Pty Ltd), to be considered "material".
76 There is also a question whether the shares held by Mr Benson as trustee for the three daughters, can constitute a material "personal" interest. However, given that the inference is that the children are minors, and Mr Benson has a general responsibility, if not at law then by reason of love and affection, to provide for them, any advantage they might receive might also be considered a personal interest in the hands of Mr Benson. Nonetheless I consider the relevant interest is so small that it cannot be considered material.
77 Taken cumulatively, I do not consider that the shares held by Mr Benson (and his wife) (0.83% of the issued capital of GPN), the shares held by Mr Benson for his three daughters (considerably smaller percentage again), the 25% interest Mr Benson holds in a company that holds about the same percentage of shares in GPN as the children hold in GPN, the indirect interest in GPN shares through Millcrest/Fotis, or the small indirect interest in Aurium shares suggest that Mr Benson holds a material personal interest in the matter of the consideration by Aurium of the variation of the existing joint venture agreement between the company and GPN.
78 Further, it is necessary to consider the nature of the interest "in the matter that relates to the affairs of the company" in order to determine whether Mr Benson's interest, such as it is, is a material personal interest in that matter. That matter is the variation of an existing joint venture agreement between the company and GPN. This is not a case, such as that dealt with by Murray J in McGellin 144 FLR 288, where the director had a very personal interest in the issuance of the shares under consideration, but rather involves a quite indirect benefit, if it be a benefit at all, under the joint venture agreement.
79 The joint venture agreement, as varied, no doubt would be of benefit to the two companies. The essence of the proposed variation is outlined in the Explanatory Memorandum at para 7 above. GPN provides more ground for exploration (to Aurium's advantage), the parties agree that a wider range of minerals (all but manganese) are to be explored for (arguably also of advantage to Aurium), Aurium contributes a further $550,000 to the joint venture (part of the consideration flowing to GPN), and in further consideration thereof the former 50/50 interest of the companies alters to 70/30 in favour of GPN. Aurium also issues 35,000,000 (more than 15% of the total) shares in Aurium to GPN as part of the consideration for the variation. As noted in parenthesis, benefits flow in both directions, but none is to the advantage of any individual shareholders, including Mr Benson and Mr Quinn.
80 While the joint venture variation no doubt has some value in prospect to Aurium and GPN, the value of that agreement to Mr Benson is that, together with all shareholders of GPN and Aurium, eventually, depending on the outcome of the joint venture exploration of mining tenements, he (or the relevant shareholding entities) might see a flow of dividends or increase share value. Under the existing joint venture, the company and GPN undertake exploration for certain minerals (gold and uranium). Under the varied joint venture, all minerals (with the exception of manganese) can be explored for. Depending on the outcome of exploration, each of the joint venturers might materially benefit. If they do, all shareholders of each of the companies might expect material benefits to follow, possibly in terms of dividends or more likely through mining agreements and increased share market value. But such material financial benefits are, to say the least, utterly speculative at this point both for the two companies and certainly for the individual shareholders.
81 All in all, in these circumstances, taking into account the nature of the matter that relates to the affairs of the company (the proposed variation of the existing joint venture) and the relatively limited extent of Mr Benson's interests in GPN and Aurium, I consider it unrealistic to suggest that Mr Benson has that degree of control that his interest (in either GPN or Aurium) can be considered a "material" personal interest in the matter that relates to the affairs of the company.
82 Therefore, in my view, it matters not whether Mr Benson at the board meeting on 17 February 2009, declared that he had an interest - which he seems to have done out of an abundance of caution in a ritual way - as there was no need for him to do so.
83 It follows, in my view, that Mr Benson was not required under s 195(1) of the Corporations Act 2001 not to be present while the joint venture matter was being considered at the director's meeting.
84 In any event, by virtue of s 191(2)(a)(iii), s 191(1) does not apply to an interest that relates to a contract the company is proposing to enter into that is subject to approval by the members and will not impose any obligation on the company if it is not approved by the members. The heads of agreement leading to the variation are expressly conditional on the issue of shares by the company to GPN as consideration for the variation, being approved by the shareholders of the company by 15 April 2009 or such later date as agreed on by the parties. Accordingly, either the variation agreement, or that part of it which constitutes a contract to issue the shares, was required to be approved by the shareholders. Accordingly, s 191(1) did not apply to the consideration by the directors of that matter.
85 So far as the indirect interest of Mr Benson in Aurium, the company itself, is concerned it also appears to me that that was not an interest which required notification under s 191(1), by reason s 191(2)(a)(i). That is because the relevant interest is one that arises because the director is a member of the company (Aurium) and is held in common with other members of the company. The shareholding in question is of ordinary shares, not a special class of shares. It seems to me in these circumstances, this particular exemption applies to the Aurium interest.
86 In my view, like observations may be made in respect of the interests disclosed by Mr Quinn to his fellow directors at the board meeting on 17 February 2009.
87 Mr Quinn's relationship with GPN is quantatively different to that of Mr Benson in that Mr Quinn has a demonstrated indirect interest in GPN through Jamora which holds 4.2% of the issued capital. Jamora also holds 6.78% of the issued capital of Aurium.
88 In each case, the relevant interests in GPN are relatively small. If one were to use the Corporations Act 2001 provision as a guide, Mr Quinn is not a substantial shareholder in GPN. A "substantial holding" is defined by s 9 of the Corporations Act 2001 in the following terms:
substantial holding: A person has a substantial holding in a body corporate, or listed registered managed investment scheme, if:
(a) the total votes attached to voting shares in the body, or voting interests in the scheme, in which they or their associates:
(i) have relevant interests; and
(ii) would have a relevant interest but for subsection 609(6) (market traded options) or 609(7) (conditional agreements);
is 5% or more of the total number of votes attached to voting shares in the body, or interests in the scheme; or
(b) the person has made a takeover bid for voting shares in the body, or voting interests in the scheme, and the bid period has started and not yet ended.
Note: For relevant interest, see section 608.
For present purposes, the relevant definition is that at (a), namely whether the total votes attaching to voting shares in the body is 5% or more of the total number of the shares attaching to voting shares in the body.
89 In my view, having regard to the size of the shareholding of Jamora in GPN (less than a substantial holding), taking into account the fact that Jamora also holds 6.78% of the issued capital in the company, and taking into account also the nature of the matter which relates to the affairs of the company, I am not satisfied that Mr Quinn has a material personal interest in that matter such that he was obliged to disclose his interest in that matter pursuant to s 191(1).
90 It follows that Mr Quinn was not obliged under s 195(1) of the Corporations Act 2001 not to be present at the meeting of directors which considered that matter.
91 In any event, as in the case of Mr Benson, I also consider that by reason of s 191(2)(a)(iii) Mr Quinn did not need to give notice of his interest under s 191(1).
92 It also seems to me that so far as Mr Quinn's interest in Aurium is concerned, as in the case of Mr Benson, the exemption in s 191(2)(a)(i) applies, which means that interest is not one in respect of which notification must be given to other directors under s 191(1).
93 As to the interest disclosed by Mr Remta, by reason of him being the common chairman of each of the company and GPN, while he may have had an interest - because of a potential conflict - it is difficult to see what "personal" interest he held at material times. He is not shown to be a person with any shareholding in either GPN or Aurium. I have rejected the suggestion that he may have had such an interest by reason of his son's holding. It is not shown, for example, that his son is a dependent minor or otherwise dependent on Mr Remta or that Mr Remta has any legal or other obligation to provide for his son, such that any general interest he might have in the relevant matter could be considered a material personal interest. In those circumstances, I consider that Mr Remta did not have a "personal" material interest in a matter that relates to the affairs of the company, for the purpose of s 191(1), at the directors meeting on 17 February 2009.
94 While it might be said that to the extent that Mr Remta as chairman of GPN and Aurium receives remuneration or other benefits, he has an interest in the matter that might be considered personal, there is a paucity of evidence before the Court to establish whether or what the nature of the chairman's remuneration or other benefits or incentives are in the case of Mr Remta. While it might be thought, under general principles, that Mr Remta, by reason of his common chairmanship of the two companies has a realistic capacity or propensity to influence the director's decision in the administration of the company's affairs, the evidence fails to establish that his interest is a "personal" interest for the purposes of s 191(1).
95 Of course, this would not mean that Mr Remta does not have a duty to avoid any conflict of interest under the general law, as explained above.
96 In any event, regardless of whether or not s 191(1) or s 195(1) may have been breached by a director, as noted earlier, a contravention of either section does not affect the validity of any resolution.
97 In the result, I find that the resolutions which I have found were passed by the board on 17 February 2009, as entered in the company's minutes book, concerning the variation to the joint venture agreement, are not invalid.
98 For these reasons, the case of the plaintiffs, to the extent it relies upon breach of s 195(1) of the Corporations Act 2001, fails.