Hegde, in the matter of Nutricare Holdings Limited v Nutricare Holdings Limited

Federal Court of Australia|2020-11-12|Before: Reeves J

Counsel for the Applicant: Mr A Collins

Solicitor for the Applicant: Macpherson Kelley

Counsel for the First Respondent: The First Respondent did not appear

Counsel for the Eighth Respondent: Mr BF Katekar SC with Mr D Habashy

Solicitor for the Eighth Respondent: Dentons

Counsel for the Third Respondent: The Third Respondent did not appear

ORDERS QUD 268 of 2020 IN THE MATTER OF NUTRICARE HOLDINGS LIMITED (ACN 613 504 724) BETWEEN: SHARATH HEGDE Applicant

AND: NUTRICARE HOLDINGS LIMITED (ACN 613 504 724) First Respondent

JAMES DUTTON Second Respondent

TRAVIS SMITHSON (and others named in the Schedule) Third Respondent

order made by: REEVES J DATE OF ORDER: 12 November 2020

The parties are to submit to my chambers, as soon as reasonably possible, a draft joint set of orders which reflects the relief to which each is entitled consistent with the contents of these reasons. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

INTRODUCTION 1 Mr Sharath Hegde commenced this proceeding seeking a number of declarations with respect to his directorship of the company Nutricare Holdings Limited, the first respondent. Because the issues raised created significant difficulties in the management of Nutricare Holdings, an urgent trial date was fixed in the proceeding. By the time of that trial, the only active respondent was Mark Casey Pty Ltd, the eighth respondent, which holds approximately 17.7% of the share capital of Nutricare Holdings. It is relevant to note that the fourth respondent, Mr Mark Casey, appears to be the controlling mind of Mark Casey Pty Ltd. For the avoidance of confusion, all references to "Mark Casey" in these reasons are references to the company. All but one of the other respondents, including Mr James Dutton, a remaining director of the company, filed notices submitting to the orders of the Court.

THE ISSUES 2 According to Mark Casey's written submissions, three issues fall to be determined in this proceeding. Since Mr Hegde did not contend otherwise, I will proceed on that basis. Those three issues are: (a) whether Mr Hegde's position as a director of Nutricare Holdings ceased in May 2020 either: (i) on 11 May 2020, when he sent an email to Nutricare Holdings' registered office (see at [8] below); or: (ii) on 29 May 2020, when his resignation as an employee of Nutricare Resources Pty Ltd, a subsidiary of Nutricare Holdings, took effect; (b) whether the Second Circulating Resolution (see at [12] below) was valid; and (c) whether the resolutions passed at the Extraordinary General Meeting on 12 October 2020 were valid (see at [15] below). 3 At the trial, Mark Casey indicated that it did not wish to pursue the issue described at [2(a)(i)] above. Accordingly, I will deal with the remaining issues in the order set out above.

THE FACTUAL CONTEXT 4 Stated briefly, the factual context to those three issues is as follows. 5 Nutricare Holdings was registered on 6 July 2016. Mr Dutton and Mr Hegde were two of its three original directors. The third, Mr Hamish MacDonald, resigned on 12 July 2016. 6 Nutricare Resources was registered on 10 April 2017. Mr Dutton was its sole director. Until his resignation in May 2020, Mr Hegde was employed as Nutricare Resources' Production Manager. 7 On 13 August 2019, Mr Travis Smithson joined the Nutricare Holdings board as a non-executive director. 8 On 11 May 2020, Mr Hegde sent an email to Mr Dutton, copied to Mr Smithson and another person. While the email stated that "I would like to inform you that I am resigning from my position as Production Manager for Nutricare [Resources] effective 11th May 2020", the attached letter of resignation stated "[m]y preference is to finish my employment on 29 May 2020". 9 On 19 May 2020, Mr Dutton signed a circulating resolution which provided that Mr Hegde "remain a Director of [Nutricare Holdings] in accordance with the provisions of Clause 8.14 of the Nutricare Holdings Ltd Constitution pertaining to the board of Directors determination" (the First Circulating Resolution). That Resolution was signed by Mr Hegde on 25 May 2020 and by Mr Smithson on 12 June 2020. 10 On 23 August 2020, Mr Smithson resigned as a director of Nutricare Holdings. 11 On 24 August 2020, Mr Hegde commenced the current proceeding. 12 Also on 24 August 2020, on the assumption that he was the sole remaining director of Nutricare Holdings, Mr Dutton signed a Circulating Resolution (the Second Circulating Resolution) relying on articles 11.9 and 8.6(a) of Nutricare Holdings' Constitution (the Constitution) which purported to appoint Mr Mark Casey, Mr Mike Tauschek, Mr Hammad Atassi and Ms Kimberlee Anne Boribon as directors of Nutricare Holdings. 13 On 18 September 2020, Mark Casey sent a notice pursuant to s 249F of the Corporations Act 2001 (Cth) (the Act) to the shareholders of Nutricare Holdings to convene an Extraordinary General Meeting of the company on 12 October 2020 (the 12 October EGM). The stated purpose of that meeting was to consider and, if thought fit, pass four resolutions to ratify or, alternatively, to make afresh the appointments of the four new directors mentioned above. 14 On 9 October 2020, Mr Hegde and Mark Casey each sent to the shareholders of Nutricare Holdings a statement regarding the business to be considered at the 12 October EGM. Some further background to some of the aforegoing events, at least from Mr Hegde's perspective, is set out in the passages from his explanatory statement which are reproduced at [34] below. 15 At the 12 October EGM, a majority of shareholders (with proxies, 95.8%) voted in favour of the four resolutions mentioned above.

THE RELEVANT CLAUSES OF THE CONSTITUTION 16 As is apparent from the factual context above, a number of provisions of the Constitution arise for consideration in this matter. The articles relating to the appointment of directors, to circulating resolutions and to the convening of a general meeting of the company include the following: (a) Directors: 8.1 Number of Directors Unless otherwise determined by the Company in general meeting, the number of Directors is to be not less than 3. 8.2 Retirement and election of Directors (a) A Director must not hold office without re-election: (i) past the third annual general meeting following the Director's appointment or last election; or (ii) for more than 3 years, whichever is the longer. (b) There must be an election of Directors at each annual general meeting of the Company. This can be satisfied by one or more of the following: (i) a person standing for election as a new Director having been nominated in accordance with article 8.5; (ii) any Director who was appointed under article 8.6 standing for election as a Director; (iii) any Director who is retiring at the end of the annual general meeting due to the tenure limitation in article 8.2(a), standing for re-election; or (iv) if no person or Director is standing for election or re-election in accordance with paragraphs (i), (ii) or (iii), any Director who wishes to retire and stand for re-election. Otherwise, the person who has been a Director the longest without re-election must retire and stand for re-election. If 2 or more Directors have been a Director the longest and an equal time without re-election, then in default of agreement, the Director to retire will be determined by ballot. (c) This article does not apply to one Managing Director who is exempt from retirement and re-election in accordance with article 10.1(d). 8.3 Office held until conclusion of meeting A retiring Director holds office until the conclusion of the meeting at which that Director retires but is eligible for re-election. 8.4 Director elected at general meeting The Company may, at a general meeting at which a Director retires or otherwise vacates office, by resolution fill the vacated office by electing a person to that office. 8.5 Eligibility for election as Director Except for: (a) a person who is eligible for election or re-election under article 8.2 or 8.6; (b) a person recommended for election by the Directors; (c) a person who is a Member, if they have lodged at the Registered Office, at least 35 business days before the general meeting, but no more than 90 business days before the meeting, a notice they have signed stating their desire to be a candidate for election at that meeting; or (d) a person who is not a Member, if a Member intending to nominate the person for election at a general meeting has lodged at the Registered Office, at least 35 business days before the general meeting, but no more than 90 business days before the meeting, a notice signed by the Member stating the Member's intention to nominate the person for election, and a notice signed by the person stating their consent to the nomination, a person is not eligible for election as a Director at a general meeting of the Company. 8.6 Casual vacancy or additional Director (a) The Directors may at any time appoint any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors. (b) A Director appointed under article 8.6(a) may retire at the next general meeting of the Company and is eligible for election at that meeting. (c) Subject to article 8.6(d) and unless the Director has already retired under article 8.6(b) and been elected, a Director appointed under article 8.6(a) holds office until the conclusion of the next annual general meeting of the Company but is eligible for election at that meeting. (d) Article 8.6(c) does not apply to one Managing Director nominated by the Directors under article 10.1(d). … 8.14 Vacation of office of Director In addition to the circumstances in which the office of a Director becomes vacant under the Corporations Act, the office of a Director becomes vacant (unless the board of Directors determines otherwise) if the Director: (a) is a Managing or Executive Director and ceases to be employed by the Company or a related body corporate; (b) becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental health; (c) becomes prohibited from being a Director by reason of any order made under the law; (d) becomes bankrupt or insolvent or makes any arrangement or composition with his or her creditors generally; (e) resigns from the office by notice in writing to the Company; (f) removed from office pursuant to this Constitution or the law; or (g) comes to the end of his or her term of appointment. … 11. 7 Continuing Directors may act The continuing Directors may act despite a vacancy in their number. If their number is reduced below the minimum fixed by article 8.1, the continuing Directors may, except in an emergency, act only for the purpose of filling vacancies to the extent necessary to bring their number up to that minimum or to convene a general meeting. … (b) Circulating resolutions: 11. 9 Circulating resolutions (a) The Directors may pass a resolution without a Directors' meeting being held if all of the Directors entitled to vote on the resolution (but excluding any Director on leave of absence approved by the Directors) have consented to the resolution in accordance with this article 11.9. The resolution is passed when the last participating Director consents to the resolution in accordance with this article 11.9. The resolution is not invalidated if it is consented to by a Director who is not entitled to vote. (b) A Director may consent to a resolution by signing a document that sets out the terms of the resolution and contains a statement to the effect that the Director is in favour of the resolution. (c) Alternatively, a Director may consent to a resolution by giving the Company a written notice (including by fax or other electronic means) addressed to and received by the Secretary or the Chair: (i) that signifies the Director's assent to the resolution; (ii) that sets out the terms of the resolution or identifies those terms; and (iii) if the Director has notified the Company in writing of a specified means by which his or her consent must be authenticated (including by providing particular personal information or an allocated code), that authenticates the Director's consent by those specified means. (d) Any document referred to in this article may be in the form of a fax or electronic notification. Separate copies of a document (including in electronic form) may be signed by the Directors if the wording of the resolution and statement is identical in each copy. (e) This article 11.9 applies to resolutions of Committees as if the references to Directors were references to Committee members. … (c) General meetings: 6.2 Convening a general meeting (a) The Directors may convene and arrange to hold a general meeting of the Company whenever they think fit and must do so if required to do so under the Corporations Act. (b) The Company may hold a meeting of Members at 2 or more venues using any technology that gives the Members as a whole a reasonable opportunity to participate. (c) Notice of a general meeting must be given in accordance with article 15, the Corporations Act and the Listing Rules. (d) In computing the period of notice under article 6.2(c), the day of the meeting is to be disregarded. (e) A Director is entitled to receive notice of and to attend all general meetings and all separate meetings of the holders of any class of shares in the capital of the Company and is entitled to speak at those meetings. … 6.4 Non-receipt of or defective notice (a) The non-receipt of notice of a general meeting or cancellation or postponement of a general meeting by, or the accidental omission to give notice of a general meeting or cancellation or postponement of a general meeting to, a person entitled to receive notice does not invalidate any resolution passed at the general meeting or at a postponed meeting or the cancellation or postponement of a meeting. (b) A person who attends a general meeting waives any objection the person may have to: (i) any failure to give notice, or the giving of a defective notice, of the meeting unless at the start of the meeting the person objects to the holding of the meeting; and (ii) the consideration of a particular matter which is not within the business referred to in the notice of meeting, unless the person objects to the consideration of the matter when first presented.

THE RELEVANT LEGISLATIVE PROVISION 17 As well as the articles of the Constitution set out above, two sections of the Act are pertinent to the convening of a general meeting of a company. They are ss 249F and 249L as follows: 249F Calling of general meetings by members (1) Members with at least 5% of the votes that may be cast at a general meeting of the company may call, and arrange to hold, a general meeting. The members calling the meeting must pay the expenses of calling and holding the meeting. (2) The meeting must be called in the same way - so far as is possible - in which general meetings of the company may be called. (3) The percentage of votes that members have is to be worked out as at the midnight before the meeting is called. … 249L Contents of notice of meetings of members (1) A notice of a meeting of a company's members must: (a) set out the place, date and time for the meeting (and, if the meeting is to be held in 2 or more places, the technology that will be used to facilitate this); and (b) state the general nature of the meeting's business; and (c) if a special resolution is to be proposed at the meeting - set out an intention to propose the special resolution and state the resolution; and (d) if a member is entitled to appoint a proxy - contain a statement setting out the following information: (i) that the member has a right to appoint a proxy; (ii) whether or not the proxy needs to be a member of the company; (iii) that a member who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. Note: There may be other requirements for disclosure to members. (2) The notice of the AGM of a listed company must also: (a) inform members that the resolution referred to in subsection 250R(2) (resolution on remuneration report) will be put at the AGM; and (b) if at the previous AGM at least 25% of the votes cast on a resolution that the remuneration report be adopted were against adoption of the report (but the same was not the case at the AGM before that): (i) explain the circumstances in which subsection 250V(1) would apply; and (ii) inform members that the resolution described in subsection 250V(1) as the spill resolution will be put at the AGM if that subsection applies. Note: Subsection 250R(2) requires a resolution to adopt a remuneration report for a listed company to be put to the vote at the company's AGM. (3) The information included in the notice of meeting must be worded and presented in a clear, concise and effective manner.

ISSUE (a)(ii) - WHETHER MR HEGDE RESIGNED AS A DIRECTOR WITH EFFECT FROM 29 MAY 2020

The issue and the contentions 18 The statement of this issue has been affected by Mark Casey's decision not to pursue its first part, namely the issue set out at [2(a)(i)] above. It was that issue that initially caused Mr Hegde to commence this proceeding. It would follow that he would be entitled to the relief he originally sought related to that issue. I will return to this matter at the conclusion of these reasons. 19 As already mentioned, at the trial of this proceeding, the focus of this issue turned instead to the second part, the issue at [2(a)(ii)], and more specifically to whether Mr Hegde resigned as a director on 29 May 2020 when his resignation as an employee of Nutricare Resources took effect. However, during submissions, this issue was further reduced to the interaction between the provisions of article 8.14 of the Constitution and the effect of the First Circulating Resolution. 20 Mr Hegde contended that the First Circulating Resolution was a valid resolution under article 11.9(a) of the Constitution and that, once it was signed by Mr Smithson on 12 June 2020, it evidenced "a meeting of minds" of the three directors of Nutricare Holdings such that he continued as a director of the company from that date. 21 Mark Casey contended that Mr Hegde's position as director had been "automatically vacated" on 29 May 2020 by virtue of his resignation as an employee of Nutricare Resources and the operation of article 8.14(a). It contended that result was not displaced by the passing of the First Circulating Resolution on 12 June 2020. It added that the directors had the power under article 11.7 to appoint a third director, but that is not what the First Circulating Resolution purported to do.

Consideration 22 The determination of this issue requires/rests on the construction of the Constitution, particularly article 8.14 thereof. The principles relating to that exercise were summarised by the Full Court in Owners - Units Plan No 3115 v Trustees of the Master Builders Fidelity Fund Scheme (2019) 273 FCR 598; [2019] FCAFC 227 (at [76]) that: … the modern approach to the construction of a company's constitution … recognises that constitutions "are instruments of company governance intended to endure and to be capable of operating with flexibility in changing circumstances": Re GIGA Investments Pty Ltd (in admin) (1995) 17 ACSR 472 at 476 per Branson J, (also reported as Re Ferguson (1995) 58 FCR 106 at 111), referred to with approval in Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd at first instance (2005) 223 ALR 560 at [77] per Finn J and on appeal (2006) 156 FCR 1 at [111] per Kenny J and [244] per Lander J. 23 Furthermore, in the latter Full Court judgment cited above, Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; [2006] FCAFC 144 (Lion Nathan), Weinberg J observed (citations omitted): "Most companies are formed to make a profit from carrying on a commercial venture. If alternative constructions of the provisions of a commercial company's constitution are possible, the construction which is most consonant with business efficacy should be preferred" (at [27]); "It is not in dispute that the memorandum and articles of a company (and therefore a corporate constitution as well) should be read together, and as a whole" (at [28]); and "There is ample authority for the proposition that the meaning to be given to a particular provision in the memorandum and articles of association can, and should, be influenced by the context in which that provision appears" (at [29]). Furthermore, also in Lion Nathan, Lander J observed (at [244]): "a company's constitution … should not be construed narrowly or pedantically … The constitution should be considered as an enduring and flexible document …" (citations omitted). 24 With these principles in mind, I turn to article 8.14 (see at [16(a)]). The first thing to be noted about that article is that it is subject to the exception stated in parenthesis "(unless the board of Directors determines otherwise)". Notwithstanding Mr Hegde's resignation as an employee of Nutricare Resources with effect from 29 May 2020, it was therefore clearly open to the directors to use that exception to determine that he would continue to serve as a director of the company. 25 Next, it is to be noted that the vacation of a director's office is by reference to the various events described in subclauses (a) to (g) of article 8.14, some of which may be of gradual onset and/or may be anticipated (for example (b) or (a) respectively); and some of which could be unexpected and/or sudden (for example (d)). Furthermore, the article uses the word "becomes" which comfortably accommodates the differences in timing and character of the events described in those seven subparagraphs. Finally, article 8.14 does not expressly provide for the "automatic" or immutable vacation of a director's office, as Mark Casey appears to contend. 26 In my view, these features, together with the flexibility and business efficacy considerations emphasised in the authorities mentioned above, suggest that article 8.14 must be construed to permit the exception mentioned above to be applied either prospectively, or retrospectively, as is necessary to meet the broad range of circumstances that may arise in the governance of the company. Conversely, they do not support the narrow or pedantic approach to its construction for which Mark Casey contends. 27 This broad and flexible construction of the exception in article 8.14 is also consistent with the flexibility that is demonstrated elsewhere in the Constitution with respect to the appointment of directors of the company. In particular, article 8.6(a) permits the directors "at any time" to appoint a person "either to fill a casual vacancy or as an addition to the existing Directors". Furthermore, as Mark Casey pointed out in its contentions, article 11.7 permits the directors to fill vacancies in their numbers "to the extent necessary to bring their number up to [the minimum fixed by article 8.1]". 28 It follows, in my view, that it was open to the directors of Nutricare Holdings to determine under the exception in article 8.14 that Mr Hegde should continue as a director even though the resolution to that effect was made after 29 May 2020. In this respect, it is to be noted that, while Mr Dutton and Mr Hegde signed that Resolution before 29 May 2020 (see at [9] above), article 11.9(a) of the Constitution provides that a circulating resolution of that kind "is passed when the last participating Director consents to the resolution", namely on 12 June 2020 when Mr Smithson signed the resolution.

Conclusion 29 For these reasons, notwithstanding the fact that Mr Hegde resigned as an employee of Nutricare Resources with effect from 29 May 2020, the First Circulating Resolution was effective to continue his appointment as a director of the company from at least the time that resolution was passed on 12 June 2020. Since no relevant event occurred in the intervening period, it is not necessary, for present purposes, to determine whether that appointment applied during that period, that is, retroactively from 29 May 2020.

ISSUE (b) - WHETHER THE SECOND CIRCULATING RESOLUTION WAS VALID 30 This issue can be disposed of briefly. As a result of the conclusion I have reached in respect of issue (a)(ii) above, Mr Hegde was a director of Nutricare Holdings on 24 August 2020. That being so, article 11.9(a) of the Constitution required him to consent to the Second Circulating Resolution. Since it is not in dispute that he did not provide that consent, it necessarily follows that the Second Circulating Resolution was not duly passed and was not, therefore, valid to achieve the appointment of the four new directors.

ISSUE (c) - WHETHER THE RESOLUTIONS PASSED AT THE EXTRAORDINARY GENERAL MEETING ON 12 OCTOBER 2020 WERE VALID

Some further factual context 31 To dispose of this issue, it is necessary to add some further factual context to that set out above. First, the pertinent part of the notice for the 12 October EGM (see at [13] above) was as follows: NOTICE OF GENERAL MEETING Notice is hereby given that an extraordinary general meeting of Shareholders of Nutricare Holdings Ltd (Company) called by Mark Casey Pty Ltd (Convenor) pursuant to section 249F of the Corporations Act 2001 (Cth) will be held at 4/6 Riverside Quay SOUTHBANK VIC 3006 on 12 October 2020 at 10:00am (EST) with all shareholders required to attend on-line via the link: https://meet.google.com/omu-oyqe-ovv (Meeting). 32 Secondly, the four resolutions put forward, and passed, at that meeting were as follows: ____________________________________________________________________ 1 . Resolution 1 - Ratification and/or Appointment of Director - Mark Casey To consider and, if thought fit, to pass with or without amendment, as an ordinary resolution the following: "That, the appointment of Mr Mark Casey as a director of the Company pursuant to the circular resolution of directors dated 24 August 2020 be ratified and, in the alternative should the appointment of Mr Mark Casey pursuant to the circular resolution of directors dated 24 August 2020 be held invalid by a court of competent Jurisdiction, that Mr Mark Casey, having consented to act as a director of the Company, be appointed as a director of the Company effective immediately on the passing of this resolution." ____________________________________________________________________ 2. Resolution 2 - Ratification and/or Appointment of Director - Hammad Atassi To consider and, if thought fit, pass the following resolution as an ordinary resolution: "That the appointment of Mr Hammad Atassi as a director of the Company pursuant to the circular resolution of directors dated 24 August 2020 be ratified and, in the alternative should the appointment of Mr Hammad Atassi pursuant to the circular resolution of directors dated 24 August 2020 be held invalid by a court of competent jurisdiction, that Mr Hammad Atassi, having consented to act as a director of the Company, be appointed as a director of the Company effective immediately on the passing of this resolution." ____________________________________________________________________ 3. Resolution 3 - Ratification and/or Appointment of Director - Mike Tauschek To consider and, if thought fit, pass the following resolution as an ordinary resolution: "That the appointment of Mr Mike Tauschek as a director of the Company pursuant to the circular resolution of directors dated 24 August 2020 be ratified and, in the alternative should the appointment of Mr Mike Tauschek pursuant to the circular resolution of directors dated 24 August 2020 be held invalid by a court of competent jurisdiction, that Mr Mike Tauschek, having consented to act as a director of the Company, be appointed as a director of the Company effective immediately on the passing of this resolution." ____________________________________________________________________ 4. Resolution 4 - Ratification and/or Appointment of Director - Kimberlee Anne Boribon To consider and, if thought fit, pass the following resolution as an ordinary resolution: "That the appointment of Ms Kimberlee Anne Boribon as a director of the Company pursuant to the circular resolution of directors dated 24 August 2020 be ratified and, in the alternative should the appointment of Ms Kimberlee Anne Boribon pursuant to the circular resolution of directors dated 24 August 2020 be held invalid by a court of competent jurisdiction, that Ms Kimberlee Anne Boribon, having consented to act as a director of the Company, be appointed as a director of the Company effective immediately on the passing of this resolution." (Emphasis in original) 33 I interpose to record that the assumption contained in the first part of each of these resolutions is not maintainable for the reasons stated above. Accordingly, this issue is reduced to the validity of the second part of these four resolutions. 34 Thirdly, the explanatory statement that Mr Hegde circulated to shareholders prior to the 12 October EGM included the following passages concerning the business to be conducted at that meeting: … Issues with Current Board / Why we are Here It appears that Mike Tauschek, on behalf of Mark Casey Pty Ltd, appears to be suggesting that there is a deadlocked board. Due to this, there is a risk of a return to creditors. However, any deadlock in the board has been, for the reasons set out further, caused by the conduct of Dutton, and the proposed directors. Sharath [Hegde] seeks Nutricare return to business that is focussed on maximising shareholder value for all shareholders by appointing a majority independent board who will deliver on an achievable growth strategy. The proposed board is not independent, noting that Casey and Tauschek are officers of Mark Casey Pty Ltd. Prior to this dispute, the board had a strong strategy in place, that if executed would have delivered the strongest opportunity of maximising shareholders returns. However, the action by Dutton and Mark Casey Pty Ltd have compromised this by weakening its financial position and distracting from delivering its strategic objects and growth. For the benefit of all shareholders and for the purpose of achieving the strategic plan of listing Nutricare on the ASX, once the Court has determined the matters set out in this EM, Sharath [Hegde] seeks to appoint a majority independent board with the expertise and skill set to achieve the strategic growth goals of Nutricare for the most significant return to investors. Initial Issues With EGM There is initial concern that any resolution passed in respect of the appointment of the proposed directors will be invalid in any event. This is because:- 1. There are strict eligibility requirements for a Non-Member to be elected as a director by a Member under clause 8.5 of the Constitution (noting that the individuals themselves are not Members, rather entities owned by them are); 2. For a Non-Member to be appointed as a director (which Casey, Atassi, Tauschek and Boribon are) a notice of intention to nominate signed by the Member and a notice accepting the nomination signed by the Non-Member must be served at the registered address of the office at least 35 business days before meeting, but no more than 90 business days before meeting; 3. The request for a general meeting which initially saw the proposed resolutions for all four directors in question was not sent until 28 August 2020, yet, the resolution was passed on 25 August 2020. Accordingly, such resolution as sought to ratify the appointment is clearly invalid; and 4. Additionally, the letters/notices sent by Deutsch Miller on behalf of Mark Casey Pty Ltd is not a notice of "intention to nominate" it is simply a request for general meeting and consent to act as director. They do not comply with clause 8.5 of the of the Constitution, such that Casey, Atassi, Tauschek and Boribon are currently not eligible to be appointed as director[s] of the Company. Given the above, it is likely that it will be declared that any resolution to appoint the directors will not be valid given the eligibility requirements have not been met. Concerns Regarding Independence of Board There has been a significant background, and course of conduct by Mr Dutton in particular, that has been the basis for all of the internal turmoil. It is important that the Members know of this conduct so that they are aware of how Nutricare is currently being run. Relevantly: 1. Sharath Hegde has been a director of Nutricare since 6 July 2016. He holds approximately 16% of the shareholding and was formerly employed as its production manager. After a dispute with Dutton due to Sharath [Hegde's] concern that Dutton was not acting in the best interest of shareholders, Sharath [Hegde] prepared a Notice of Resignation as a Director in anticipation that he may resign as a director. Despite this, Sharath [Hegde] was still considering, for various reasons, as to whether he should tender his resignation; 2. That resignation of director was provided to Sharath [Hegde's] accountants, FSA Partners. FSA Partners were instructed the Notice was not to be sent to ASIC without Sharath [Hegde's] instructions (given he was still considering whether to resign or not); 3. Article 8.1 of the Constitution of the Company mandates a minimum of three (3) directors unless otherwise determined. It is up to the directors to convene a general meeting on notice if there is not (clause 6.2). Article 8.14(e) provides that in addition to the provision of the Corporations Act 2001 (Cth), the office of a director becomes vacant if the director resigns from the office by notice in writing to the company; 4. On or about 14th May 2020, solely through the inadvertence of an employee of FSA Partners, the Notice was sent to ASIC. This has been confirmed by FSA Partners; 5. Upon FSA Partners realising the error, and despite attempts to withdraw the Notice by the lodgement of a notice of withdrawal, ASIC processed the documentation and removed Sharath [Hegde] [from] the register as a director; 6. There is no doubt that the sending of the Notice was in error and contrary to the instructions and the intent of Sharath [Hegde]. This has been confirmed by Mr Imran Tahir a partner of FSA Partners; 7. By a circulating resolution of directors on 18 May 2020, it was resolved by ordinary resolution that Sharath [Hegde] would "remain a director of the Company in accordance with the provisions of clause 8.14 of the Nutricare Holdings Ltd Constitution pertaining to the board of directors determination" ('the Resolution'). The resolution was signed by Dutton on 19th May 2020, Sharath [Hegde] on 25th May 2020 and Travis Smithson on 12 June 2020; 8. To correct the ASIC register, it was necessary that a current director execute a Form 106 Request to Withdraw a Lodged Document with ASIC. A request was prepared by FSA accountants ('the Request'); 9. Dutton, at that time, was the Company Secretary of Nutricare, such that the role of executing the Request and lodging same with ASIC was his role. However, Dutton refused to do so, instruction [sic - instructing] FSA Partners not to rectify the ASIC register, and informed all staff that Sharath [Hegde] was not a director of Nutricare (despite being to the contrary); 10. Nutricare, subsequently, sought advice from Mills Oakley, its legal advisors at the time, as to whether Sharath [Hegde] had been removed as a director. All directors were thus aware of the advice. In a careful analysis, the advice was that as a consequence of the Resolution, and the 'meeting of minds' of all directors Sharath [Hegde] had not been removed as a director and that the ASIC records should be updated in order to record same, and that no alternate directors should be appointed absent a resolution of the board (of which Sharath [Hegde] remained a member); 11. Dutton ignored the advice provided by Mills Oakley, purportedly relied upon alternate written advice which he refused to provide to the other board member at the time, Travis Smithson, and refused a proposal by Travis to seek independent and binding advice from a Queens [sic - Queen's] Counsel, with a non-biased brief, to settle the matter once and for all; 12. Given the rogue actions by Dutton, Travis Smithson resigned as a director of Nutricare; 13. Upon the resignation of Travis Smithson, the sole director, according to the ASIC register, was Dutton, who refused, until 7th October 2020, and by Order of the Court, refused to lodge the Request or otherwise cause it to be processed. Dutton, despite signing the Resolution, did not accepted [sic] the effectiveness of the Resolution. FSA Partners advises through its correspondence that Dutton instructed FSA Partners not to take further steps to progress the withdrawal request which had been lodged by FSA Partners; 14. Notwithstanding the advice, Dutton continued to act on his own accord against the advice and appointed the proposed directors; 15. Given the refusal of Dutton to cooperate and to act appropriately as a director, Sharath [Hegde] sought the appropriate declaration and an order rectifying the company's register so that Sharath [Hegde] is again correctly recorded as a director. … Summary It is clear that Mr Dutton does not have the interest of the shareholders in mind, and is simply acting in his own best interest as he sees fit. Additionally, the proposed directors are not independent and will simply act in their own best interests as well. This has been seen by clear disregard of Court Orders and the constitution by them to put forward their own best interests. (Emphasis and errors in original)

Contentions 35 In his written submissions, Mr Hegde raised two challenges to the validity of the 12 October EGM. The first related to the time stated in the notice of that meeting. He contended that the meeting was not "at least on [his] version" convened at the time stated in the notice, namely "10am EST". 36 In response, Mark Casey submitted that any reasonable person reading the notice would understand that 10.00 am referred to the time at the place where the meeting was to be held. In support of this contention, it relied on the fact that Nutricare Holdings' principal place of business is located in Victoria and it claimed that any confusion about the time of the meeting was likely to have occurred on Mr Hegde's part by not appreciating that daylight saving time had commenced in Victoria on 4 October 2020. 37 This aspect of Mr Hegde's challenge to the validity of the 12 October EGM can be disposed of briefly. In short, and without repeating them, I agree with Mark Casey's contentions above. 38 Mr Hegde's second challenge to the validity of the meeting was similar to that developed in his explanatory statement above, namely that none of the proposed directors had been properly nominated in accordance with article 8.5 of the Constitution. 39 In response to this challenge, Mark Casey made the following contentions: … there was no irregularity based on a lack of strict compliance with [article] 8.5 of the Constitution … because: (a) [article] 8.5(b) allows the election of a person as a director at a general meeting if the person has been recommended for election by the directors; (b) at the time of the circulating resolution dated 24 August 2020, Mr Dutton was the sole director of Nutricare [Holdings]; and (c) the Second Circulating Resolution amounted in substance to a recommendation by the sole director at the time for the election of the Four Appointees as directors of Nutricare [Holdings], within the meaning of [article] 8.5(b). 40 For the reasons set out above in respect of issue (b), I do not accept these contentions. 41 However, Mark Casey provided two further responses to this challenge. First, it contended that the failure to provide 35 business days' notice of the nomination of the proposed new directors under article 8.5(d) should be treated as an irregularity under s 1322(1)(b) and regularised under s 1322(2) of the Act. In this respect, it relied upon Tayeh v Commonwealth of Australia, in the matter of 1st Fleet Pty Limited [2020] FCA 1323 at [26] per Jagot J; Australian Hydrocarbons NL v Green (1985) 10 ACLR 72 at 81 per Hodgson J; and Mosaic Oil NL (No 2), Re (2010) 80 ACSR 281; [2010] FCA 1186 per Jacobson J. Alternatively, it relied on, what it contended was, the reserve power of the company in a general meeting to appoint directors where there was a deadlock in the board of directors, relying upon Barron v Potter [1914] 1 Ch 895 (Barron); Foster v Foster [1916] 1 Ch 532; Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666 at 682-683 per Samuels JA. 42 In his supplementary submissions in reply to the latter contention above, Mr Hegde contended that there was not any "true 'deadlock' between the directors in performing their duties", but rather the concern related to the present litigation in this Court. He added that any deadlock was "an artifice caused by Dutton"; that "the purported 'deadlock' was the legitimate challenge to Dutton's conduct"; and that, prior to the 12 October EGM, the "shareholders were not told of the alleged conduct of Dutton or that none of those sought to be appointed as directors did not qualified [sic] as non-members".

Consideration 43 A company has an inherent power to appoint directors unless that power is "surrendered", that is expressly and exclusively delegated, to the board of directors (Barron at 902 per Warrington J and Worcester Corsetry Ltd v Witting [1936] 1 Ch 640 (Worcester) at 650 per Lawrence LJ). Whether or not that power has been so delegated depends on the construction of the articles of association (that is, the company's constitution) (Worcester at 647 per Lord Hanworth MR and at 648 per Lawrence LJ). 44 As mentioned earlier, article 8.6 of the Constitution (see at [16(a)] above) gives the directors the power to fill a casual vacancy, or to appoint additional directors. In Worcester, Lord Hanworth MR considered that a similar provision to this article conferred only a "temporary power" on the board (at 648, see also Lawrence LJ at 650 and Slesser LJ at 654). It follows that Nutricare Holdings had an inherent power to appoint directors at the 12 October EGM. 45 Moreover, even if the power to appoint additional directors in ordinary circumstances is exclusively delegated to the board, where that board is in deadlock, the company has a reserve power to appoint additional directors to resolve that deadlock (Barron at 903 per Warrington J). I consider such a deadlock exists in the board of Nutricare Holdings. So much is clear from the history of this litigation briefly outlined above and from the terms of Mr Hegde's explanatory statement (see at [34] above). It matters not who is responsible for that state of affairs, the fact is it exists. I therefor reject Mr Hegde's contentions to the contrary. 46 It follows that, even if Nutricare Holdings did not have the inherent power referred to above, it had a reserve power to undertake the appointment of directors at the 12 October EGM. 47 Finally, it is necessary to address the questions whether there is any limit to the number of directors who could be appointed under the inherent, or reserve, power described above, or any requirement that the appointees hold particular qualifications. 48 As to the former question, article 8.1 of the Constitution provides: Unless otherwise determined by the Company in general meeting, the number of Directors is to be not less than 3. 49 In Wood v Inglis (2008) 68 ACSR 420; [2008] NSWSC 1147, Barrett J considered a provision in a company's constitution similar to this article and concluded (at [72]) that: "An article in this form allows not only the creation of a new position but also installation of a person in that position" (citing Worcester and Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1). 50 The Company could therefore validly appoint four new directors at the 12 October EGM. 51 As to the latter question, since an appointment under article 8.6 is temporary, that is, it only continues until the next annual general meeting of the company, and since there is no requirement in that article that an appointee has to hold particular qualifications, for example that he or she is independent, or is a member of the company, I do not consider there is any such requirement. It follows that the four new directors appointed at the 12 October EGM did not need to possess any particular qualifications.

Conclusion 52 For these reasons, I consider the resolutions passed at the 12 October EGM were valid. That is to say, I consider the four new directors were validly appointed at that meeting.

OVERALL CONCLUSIONS 53 To sum up, for the reasons set out above, I have concluded that: (a) Mr Hegde continued as a director of Nutricare Holdings from at least 12 June 2020. (b) The Second Circulating Resolution of 24 August 2020 was not valid. (c) The resolutions passed at the 12 October 2020 Extraordinary General Meeting were valid. 54 These conclusions mean that both Mr Hegde and Mark Casey are entitled to relief in this proceeding. In addition, as foreshadowed at [18] above, Mr Hegde will be entitled to the relief he sought in his initial originating application. I therefore direct the parties to submit to my chambers, as soon as reasonably possible, a draft joint set of orders which reflects the relief to which each is entitled consistent with the contents of these reasons. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Reeves.

SCHEDULE OF PARTIES QUD 268 of 2020 Respondents Fourth Respondent: MARK JAMES CASEY Fifth Respondent: MIKE TAUSCHEK Sixth Respondent: HAMMAD ATASSI Seventh Respondent: KIMBERLEE ANNE BORIBON Eighth Respondent: MARK CASEY PTY LTD (ACN 117 178 480)

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