Hua Cheng Properties Pty Ltd v Hua Cheng International Holdings Group Pty Ltd

EX TEMPORE Judgment 1Before the court is a motion that the proceedings be dismissed as not having been commenced with the authority of the plaintiff. 2The proceedings to which that reference is made is a proceeding to extend a caveat consequent upon the service of a lapsing notice and an order that the defendant be required to seek the leave of the court before applying to the Registrar-General for a notice under s 74J(1) of the Real Property Act 1900 in relation to the caveat. 3The respective parties to the motions are Hua Cheng Property Pty Ltd and Hua Cheng International Holdings Group Pty Ltd. It was Hua Cheng Property which lodged the caveat, the subject of the proceedings. 4What is in issue is the question whether a valid meeting of the board of directors of Hua Cheng Property authorised commencement of the proceedings. 5A meeting was convened for Monday 17 September 2012. One of the directors is Lawrence Xu. He was not given notice until an email was sent to him at 6.15pm on Friday September 14th which informed him that a meeting was to take place on Monday morning at 10.30am using a telephone conference facility. The reason for that is that two directors of the company are residents of China. Mr Xu also received notice of the meeting at 10am on Monday morning. He was so informed by Charles Peng, General Manager of Hua Cheng International Holdings. He chose not to attend because he had another commitment. 6The question arises whether the notice was sufficient. It has been held that a notice that does not give a reasonable time does not allow the directors sufficient time to attend the meeting. 7It seems to me that in the circumstances of this case where the meetings of the directors were likely to be by telephone conference because of the residence of the respective parties, that such meetings might be called on at short notice. In my view, in the circumstances of this case the giving of the notice that I have described was reasonable. 8If I am wrong on that point the Corporations Act 2001 (Cth), s 1322(2) provides that a proceeding under the Act is not invalidated because of any procedural irregularity unless the court is of the opinion that the irregularity has caused or may cause substantial injustice that can not be remedied by any order of the court and by order declares the proceeding to be invalid. 9A procedural irregularity is defined in s 1322 (1)(b)(ii) to include a defect, irregularity or deficiency of notice or time. The effect of that provision has been referred to in authorities such as Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd [2001] NSWCA 427. At [63], the Court of Appeal said that the section was raised as a sub-issue by Santow J at first instance but not dealt with by him presumably reflecting the practice to which Bowen CJ in Eq referred in Re Compaction Systems Ltd [1976] 2 NSWLR 477 of applying for an order under s 1322(4) rather than relying on the contingent validation afforded by s 1322(2). 10The effect of the provision is to conditionally validate the irregularity leaving it to the other party to seek to establish substantial injustice. No such substantial injustice was pointed to in this case. 11The meeting by telephone in September 2012 was attended by Kenneth Stout. Some question arises as to whether Mr Stout was a director, albeit that the ASIC records show that he was. It was he who signed the minute as chairperson. But it seems to me that the document is admissible, not necessarily as a minute of the meeting, but as evidence of what happened at it, and the attendees included the two lady directors from China who became directors of the company in accordance with an order that I made in proceedings that I heard in April 2010: Lu v Hua Cheng International Holdings Pty Ltd [2010] NSWSC 228. I ordered that the ladies who were the second and third defendants in those earlier proceedings, upon signing consents to act, be appointed as directors of the fourth defendant, being Hua Cheng Property Pty Ltd. They are recorded in the document as having agreed to lodge a caveat recognising the equitable holding of Hua Cheng Property, as set out in the this Court's order of 9 April 2010. The two directors are recorded as having voted in favour of that action. 12The point was made that the resolution did not authorise the commencement of proceedings to extend the caveat and reference was made to Riley's Solicitors Manual that because a lawyer has implied authority to do all such things incidental to the object of the retainer and to recover costs in relation thereto, the scope of that authority is determined by asking whether, given the object of the representation, it could reasonably be said that the lawyer had authority to engage in the conduct in question without prior consultation and consent of the client. A lawyer who acts outside his or her implied authority is liable to the client for breach of the retainer. 13However, at [3105.10] it is said that "[t]he existence of a retainer does not, aside from express terms to this effect, of itself confer any authority on the lawyer to institute legal proceedings on the client's behalf". 14The procedure, with respect to the lodgement of caveats, used to be that once the caveat was lodged it remained on the title unless and until the property owner obtained an order for its removal. That procedure was changed by statute to the present procedure of the application to the Registrar-General for the issue of a lapsing notice with 21 days notice that it would lapse unless some action was taken. 15The suggestion is that the resolution passed by a majority of the directors of Hua Cheng Property carried with it an implied right to protect the caveat that had been specifically agreed to be lodged and at this interlocutory level I propose to act on that basis. 16With those short reasons I am of the view that the meeting that took place by telephone facility in September 2012 was valid. 17If I be wrong on that issue, a meeting took place last night which contains the following quote: "Chairlady Lu stated for the avoidance of doubt the purpose of this Director meeting was to ratify earlier decision as taken by the majority of the Directors acts undertaken on behalf of the Company that have been disputed by one of the directors of the Company in order to resolve that dispute, without admission that such acts were or were not approved by the directors in accordance with the Company's constitution, Corporation Act 2001 (Cth) or at general law. The Objections of Lawrence Xu as contained in letter from Chris Lee Lawyer was noted but rejected because of the need for the company to be protected". 18On 27 November 2012 Chris Lee Lawyers wrote to the lady directors of Hua Cheng Property requesting that the question of the extension of the caveat be referred to a referee. In the earlier proceedings to which I have referred I made the following order, at [100]: "Orders that the Fourth Defendant appoint a person agreed by the Plaintiffs and the Second and Third Defendants to act as referee in respect of any disputes in relation to the course to be taken by the Fourth Defendant in the development of the Hurstville land and that the decision of that person be binding on the parties. In the event agreement is not reached within 14 days of the date of these orders, the Fourth Defendant will appoint a person selected by the Chairman of the Institute of Arbitrators and Mediators". 19In support of the meeting last night senior counsel for the plaintiff submitted that the ratification of the resolution to lodge a caveat did not fall within the request for reference to the referee because the order was limited to disputes with respect to the development of the land and the question whether a caveat should be protected or not was not such a dispute. 20To the contrary, it was said that it was an interference with negotiations being conducted with financiers and prospective joint venturers and reference was made to an email which was sent to Charles Peng stating that a client who was involved in negotiations with respect to the development of the land required the caveat to be removed and required confirmation from Hua Cheng Property, satisfactory to the client, that it approves the proposed arrangements with the client. 21While the caveat may have some effect with respect to the development of the land in the future it does not seem to me that the correspondence to which I have referred establishes that the dispute with respect to the extension of the caveat is one with respect to the development of the land. 22The point was made that if the extension of the caveat fell within the scope of the order that I have set out above, the directors lacked jurisdiction to ratify the earlier resolution at the meeting that was held last night. 23For the reasons I have given I do not accept, for the purpose of an interlocutory application, that that is so. 24The notice of motion is dismissed. 25I order the applicant to pay the respondent's costs of the motion.