Holmes v Keyes [2010] NSWSC 1474 | Case summary

1 On 15 December 2010, I made an order under s 411(4)(b) of the Corporations Act 2001 (Cth) approving a scheme of arrangement between The MAC Services Group Ltd ("MSL") and its members. I indicated on that occasion that I would publish brief reasons on one matter that arose upon the hearing. These are those reasons. 2 The particular matter concerns steps taken to receive and count members' votes cast upon the resolution for the approval of the scheme and the question whether the statutory requirements in that respect were satisfied. 3 In order for a compromise or arrangement to become binding under s 411(4), it is necessary, in a case of the present kind, that "a resolution in favour of the compromise or arrangement is … passed by a majority in number of the members … present and voting (either in person or by proxy); and … passed by 75% of the votes cast on the resolution". This is the effect of s 411(4)(a)(ii). In addition, the resolution must be so passed "at a meeting convened in accordance with an order of the Court under subsection (1)". This is the effect of the opening words of s 411(4)(a). 4 In the present case, the order under s 411(1) required that the meeting of members be held on 13 December 2010. At that meeting, members' votes were taken upon a poll. The question to which these reasons relate concerns the connection between the passing of the resolution by means of those votes and the meeting convened in accordance with the court's s 411(1) order - the connection denoted by the word "at". 5 Having regard to rule 3.3(2) of the Supreme Court (Corporations) Rules 1999, a meeting of this kind is to be held and conducted in accordance with the provisions of Part 2G.2 of the Corporations Act that apply to the members of a company and the provisions of the company's constitution that apply to meetings of members and are not inconsistent with Part 2G.2. 6 Part 2G.2 of the Corporations Act (which, in any event, applies of its own force to a meeting of this kind: Re NRMA Insurance Ltd [2000] NSWSC 408; (2000) 156 FLR 412, Appendix B, para (4)) provides that a poll may be demanded on any resolution at a meeting of a company's members (s 250K(1)) and specifies by whom and when a demand may be made (s 250L(1) and 250L(3)). These provisions are not "replaceable rules" and apply regardless of the content of the company's constitution. When it comes to the taking of the poll, however, the only relevant provision within Part 2G.2 is the "replaceable rule" in s 250M. For reasons stated in Re The MAC Services Group Ltd [2010] NSWSC 1316 at [33] and [34], this "replaceable rule" does not apply to MSL. 7 It follows that rule 3.3(2) causes the provisions of MSL's constitution regarding the conduct of a poll to be relevant. Article 13.14 of the constitution provides: "If a poll is duly demanded (and the demand not withdrawn) it must be taken in such manner and at such time (either at once or after an interval or adjournment or otherwise) as the chair of the meeting directs. The result of the poll is the resolution of the meeting at which the poll was demanded." 8 I turn now to the evidence. While members and proxyholders were assembled at the meeting of 13 December 2010, the following relevant events occurred: 1. The chairman demanded a poll on the proposed resolution to approve the scheme. 2. The chairman gave directions for the conduct of the poll, including as to the manner of completing and depositing blue voting cards distributed to persons who wished to vote on the poll. 3. After asking whether anyone needed more time to complete and deposit a voting card, the chairman said: "Thank you. I believe all voting cards have now been lodged and I declare the poll closed." 4. The chairman then said: "As the resolution is to be decided on a poll, the result of the vote will be announced to the ASX as soon as possible following the conclusion of the meeting. Ladies and gentlemen, that now concludes the business of the scheme meeting and I therefore formally declare the meeting closed. I would like to thank you for your attendance." 9 The chairman had earlier directed that Ms Vrzina of Computershare should act as returning officer, deal with the collection of completed voting cards and the counting of votes and report the result to him. It may be inferred that all completed voting cards were, at the chairman's direction, in the possession of Computershare personnel so as to be under Ms Vrzina's control when the last of the words set out above were spoken. 10 Following the speaking of the last word quoted aboves, the persons who had attended the meeting dispersed. This happened at about 10.20am. Ms Vrzina then began the processes of examination of cards and counting. 11 About three and a half hours later, at approximately 1.50pm, the chairman received Ms Vrzina's written report. It was addressed to him and stated the numbers of members voting (in person and by proxy) for and against the resolution and the numbers of votes cast by them. The report disclosed that some 94.93 of members voting voted in favour, while some 99.96 of the votes cast were votes in favour. 12 The chairman then immediately caused to be lodged with Australian Securities Exchange ("ASX") a copy of Ms Vrzina's report, together with a covering announcement that "requisite majorities of MSL shareholders voted in favour of the scheme of arrangement". That announcement was widely disseminated on 13 December 2010 through ASX's system of publication of announcements by listed companies. 13 I mention these matters - and, in particular, the sequence of events on 13 December 2010 - because of the statutory requirement that the approving resolution of members be "passed" by the relevant majorities "at" the meeting convened in accordance with the s 411(1) order. 14 There are two possible bases for a conclusion that this requirement was met and that, "at" the meeting convened and held on 12 December 2010 in accordance with the court's order, the resolution was "passed" by the majorities stated in Ms Vrzina's report.

15 Under the first approach, one assumes that the correct characterization of events is that there was no meeting in existence after 10.20am. On that basis, examination and counting by Ms Vrzina, the preparation of her report, the receipt of the report by the chairman and the subsequent lodgment he caused to be made with ASX all occurred after (and therefore not "at") the meeting. But, so the argument runs, none of those subsequent actions formed part of the passing of the resolution. At the point at which the chairman satisfied himself that all voting cards had been deposited and declared the poll closed, the resolution had, as a matter of fact, received the measure of support subsequently disclosed by Ms Vrzina's report and announced to ASX. Examination of completed cards, counting and the later steps merely caused to be revealed and communicated the already existing fact that votes cast before the chairman declared the meeting closed (and therefore obviously "at" the meeting) satisfied the criteria for the passing of the resolution. On this view of matters, the resolution was "passed" immediately the process of collecting voting cards was complete and it was no longer open to persons at the meeting to deposit such cards. 16 For reasons to be mentioned presently, this approach must be rejected. 17 I turn therefore to the second possibility. According to the alternative characterisation of events, the resolution was not "passed" until, at the earliest, the chairman received Ms Vrzina's report which was then immediately transmitted to ASX for dissemination. If that is the correct approach, it is necessary to find that the relevant step in that later sequence of events was taken "at" the meeting, despite the fact that the persons who made up the meeting had separated and gone their respective ways more than three and a half hours earlier. 18 A poll duly demanded need not be taken at the meeting at which the demand is made. Where, as here, the power and duty of making arrangements for the poll rest with the chairman, there may be a direction by the chairman that the poll take place at some future time. In that event, the position at common law is as stated by Cotton LJ in R v The Wimbledon Local Board (1882) 8 QBD 459 at 465: "A poll is not a new meeting, but it is a mode of ascertaining the sense of the meeting which is continued for that purpose." 19 In Shaw v Tati Concessions Ltd [1913] 1 Ch 292, Swinfen Eady J said at 297 that "the true legal position" in such circumstances is that "the original meeting continues for the purpose of taking the poll until the poll is closed"; while in Spiller v Mayo (Rhodesia) Development Co (1908) Ltd [1926] WN 78, Russell J, after noting that "the taking of a poll . . . was in law a mere continuation of the meeting at which the poll was directed to be taken", continued: "For the particular purpose in question [related to a rule about lodgment of proxies before the meeting] therefore the meeting must be taken to have begun on December 15 and to have come to an end at the declaration of the poll, a week later." 20 Inconsistencies between these statements were noted by Jenkins LJ in Holmes v Keyes [1959] 1 Ch 199. The end of what is, in effect, an elongation of the meeting at which the poll is demanded and directed was described by Swinfen Eady J as the point at which "the poll is closed" and by Russell J as "the declaration of the poll", while Cotton LJ referred to continuation of the meeting until the sense of the meeting has been ascertained. 21 Holmes v Keyes (above) concerned election of directors at a general meeting. The facts were similar to those in this case. Votes were cast upon a poll while members remained together at the meeting at which the poll was demanded and directed, but counting of votes was not completed until the next day. It was necessary to decide on which day the successful candidates had been elected. Jenkins LJ said at 216: "In my judgment, the ascertainment of the result should be considered as part of the poll, and, consequently, there can be no appointment of a director by a general meeting until the result of the poll is ascertained. It is only then that the appointment can become in any sense effective. In effect the meeting should be treated as continuing until the result of the voting on the poll is ascertained. Unless the appointment begins when the result of the poll is ascertained and on no earlier date, it would be impossible for the company to know who its directors were. That produces a result that is really quite impossible." 22 It is for the reasons made plain by this passage that the possibility outlined at paragraph [15] must be rejected. Rather, it should be accepted that the process of a poll, of its nature, may extend beyond the time at which the persons making up the meeting at which it is demanded and directed cease to be together and, if the poll has been directed in such a way that the result can only crystallise after that time, the meeting is to be regarded as continuing until the result does crystallise. In using the word "crystallise", I deliberately avoid the choice between ascertainment of the result and formal declaration of the result (see, as to this distinction in the case of election of officers, R v Coaks (1854) 3 El & Bl 249; 118 ER 1133; Lynch v McGrane (1965) 7 FLR 188). Ascertainment will always precede declaration but the important factor is, to my mind, completion of the process, as directed, so that the result is manifested in a way appropriate to the circumstances. Romer LJ, in his concurring judgment in Holmes v Keyes, said (at 217) that the tenure of the directors elected did not begin "until the result of the poll has been made known", this being the form of words also preferred by Holland J in Ryan v South Sydney Junior Rugby League Club Ltd (1974) 3 ACLR 486 at 490. 23 As I have noted, the chairman said at about 10.20am, "I therefore formally declare the meeting closed", adding that "the result of the poll" would be announced to ASX "as soon as possible following the conclusion of the meeting." The chairman did not adopt the alternative course of seeking the meeting's concurrence in an adjournment to, say, the company's office at 2.00pm for the purpose of receiving Ms Vrzina's report and declaring the poll, at the same time informing those present that they should not feel obliged to attend at the later time as the brief remainder of proceedings would be a mere formality and the result would be publicised through an announcement to ASX. 24 The words spoken by the chairman at about 10.20am nevertheless made it clear that steps to arrive at "the result of the poll" were to be taken after "the conclusion of the meeting" and that there would be no such "result" while those who had attended remained together. The declaration that the meeting was "closed" and the reference to the emergence of the result after its "conclusion" indicated to the persons concerned no more than that the remaining steps to achieve "the result of the poll" would be taken without their presence and participation, neither of which was required. It is quite consistent with this for the meeting to be regarded as having continued in the way indicated by the cases to which I have referred. 25 As noted at paragraph [7] above, the constitution of MSL provides that the "result" of a poll is the "resolution of the meeting at which the poll was demanded". This, coupled with the words spoken by the chairman and the principle that, if a poll, once demanded and directed, has not reached its ordained conclusion when those present at the meeting disperse, the meeting continues to that conclusion despite their departure, means that the meeting of 13 December 2010 convened in accordance with the court's order continued until the result of the poll was manifested shortly after 1.50pm on that day. 26 The resolution in respect of which the poll was taken was accordingly passed "at" the meeting convened in accordance with the s 411(1) order. **********

Holmes v Keyes

At a glance

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Judgment (14 paragraphs)

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