Lancedale Holdings Pty. Ltd. & Anor. v. Heath Group Australasia Pty. Ltd. & Anor. [1999] NSWCA 460

COUNSEL : J.D. Heydon QC, I.E. Davidson & D.D. Knoll - Claimants D.F. Jackson QC, P.M. Biscoe QC & A. Lo Surdo - Opponents SOLICITORS : Hegarty & Elmtree, Sydney - Claimants Coudert Brothers, Sydney - Opponents CATCHWORDS : Contracts - Construction of contracts - Power of amendment - Whether permitted derogation from accrued rights.; Corporations - Prohibition of trading in own shares - Exception for scheme approved by general meeting - Scheme amended and amendment later approved by general meeting - Whether amendment effective prior to approval. ACTS CITED : Corporations Law ss.205, 206B, 206C, 206G, 206I DECISION : Appeal dismissed with costs.

Monday 13 December 1999 LANCEDALE HOLDINGS PTY. LIMITED & ANOR. V. HEATH GROUP AUSTRALASIA PTY. LIMITED & ANOR. JUDGMENT

1 MEAGHER, JA: I agree with Hodgson, CJ in Eq. and also Giles, JA. 2 GILES; JA: The cases amply establish that a power to amend a contract may be exercised so as to alter, even destroy, a right which has arisen under the contract: Pepe v City & Suburban Permanent Building Society (1893) 2 Ch 311; R v Brabrook (1893) 69 LT 718; Strohmenger v Borough of Finsbury Permanent Investment Building Society (1897) 2 Ch 469; Smith v Galloway (1898) 1 QB 71; Sixth West Kent Mutual Building Society v Hills (1899) 2 Ch 60 (rules of building societies); Allen v Gold Reefs of West Africa Limited (1900) 1 Ch 656; Peters' American Delicacy Co v Heath (1939) 61 CLR 457; Southern Foundries (1926) Ltd v Shirlaw (1940) AC 701 (articles of companies); Gra-ham Pty Ltd v Perpetual Trustees WA Ltd (1989) 1 WAR 65 (unit trust deed); Kearns v Hills (1990) 21 NSWLR 107 (trust deed); Lord Napier & Ettric v R F Kershaw Limited (1999) 1 WLR 756 (underwriters' trust deed). The existing contractual right, because containing within it the power of amendment, is liable to alteration or destruction. 3 I agree with Hodgson CJ in Eq that Rule 13.1(d) was part of the contract under which Lancedale's right arose and, for the reasons his Honour gives, empowered the amendment. I further agree that, for the reasons his Honour gives, the timing issue should be decided adversely to Lancedale. 4 I agree with the orders his Honour proposes. 5 HODGSON, CJ in Eq.: By their Amended Summons in these proceedings, the claimants Lancedale and Mrs. Langley claimed that Mrs. Langley was beneficially entitled to certain shares in the first opponent HGA, and they sought associated declarations and orders. In a judgment dated 23rd June 1999, Bryson, J. dismissed the proceedings. In circumstances where it was unclear whether an appeal from this judgment would involve a matter at issue, or question respecting any property, "amounting to or of the value of $100,000.00 or more" within s.101(2)(r) of the Supreme Court Act, the claimants sought leave to appeal from that judgment. At the outset of argument in this Court, the Court indicated that leave would be granted, and the matter proceeded as an appeal from the judgment of Bryson, J. OUTLINE OF FACTS 6 The facts in this matter are not in dispute. 7 In 1992, Mrs. Langley's husband Andrew Clive Langley commenced employment with HGA (then known as Heath Fielding Australia Pty. Limited) in a senior executive position. 8 On 16th November 1992, a general meeting of HGA approved draft Rules of what was called the Heath Fielding Executive Share Plan, and approved the lending by HGA of amounts to enable participants to pay for shares subscribed for by them under that Plan. The broad scheme of the Plan was that HGA would give an interest-free loan to executives with which the executives could purchase shares in HGA, on the basis that they could receive the benefit of any capital increase in the value of those shares, but on the other hand, if the shares did not increase in value or if they reduced in value, the loan would normally be fully repaid by HGA re-acquiring the shares after the employment of the executive ceased. 9 The Rules commenced with an interpretation clause, containing definitions of words such as "Committee", "Designated Executive", "Eligible Shares", "Fair Value", "Family Company", "Issue Price", "Plan", "Principal Sum", "Rules", "Sale Price", and "Termination Date". Rule 2 provided for the issue and financing of Plan Shares, Rule 3 for invitations to executives (which may with the approval of the Committee be transferred to a Family Company associated with the executive) to subscribe for shares, Rule 4 dealt with the Issue Price, and Rule 5 dealt with acceptances by executives of invitations to subscribe for shares. Rule 6 provided that, with certain exceptions, no executive may dispose of his shares during his employment with HGA, and no Family Company may dispose of its shares while its Designated Executive (the executive who controls it) is employed by the company. Rule 7 was in the following terms: 7.1. The Company shall for a period of 60 days ("the Buy-Out Period") from the Termination Date in respect of an Executive or Family Company (as the case may be) have the right (but not the obligation) to purchase or to arrange for another person to purchase all (but not only some) of the Plan Shares of that Executive or Family Company (as the case may be), in accordance with the following provisions.

7.2 The right referred to in Rule 7.1 must be exercised by notice in writing ("Exercise Notice") served on the Executive or the Designated Executive (as the case may be) before expiry of the Buy-Out Period.

7.3 Subject to the provisions of Rule 7.4 the purchase price for the Plan Shares shall be: (a) in respect of those Plan Shares which were Eligible Shares on the Termination Date the higher of the Fair Value and the Issue Price.

(b) in respect of those Plan Shares which were Ineligible Shares on the Termination Date, the Issue Price.

7.4 In the case of: (a) termination of the Executive or Designated Executive's services due to death, permanent disability, retirement (with the approval of the Committee) or retrenchment all of the relevant Plan Shares shall be deemed to be Eligible Shares;

(b) the law summary dismissal of the Executive or Designated Executive all of the relevant Plan Shares shall be deemed to be Ineligible Shares.

7.5 The holder of the relevant Plan Shares shall, in return for the price to be paid for the Plan Shares, tender to the Company - (a) the share scrip in relation to the Plan Shares; and

(b) a duly executed transfer form in respect of the Plan Shares;

failing which the company may cause the Plan Shares to be transferred to the Company (or other person referred to in Rule 7.1) and shall hold the price to be paid for those shares in trust for the former holder.

7.6 If the Company does not exercise its right under Rule 7.1 then, subject to the Articles of Association of the Company, the Executive or Family Company (as the case may be) may after expiry of the Buy-Out Period dispose of his or its Plan Shares to any third party. 10 Rules 13 and 16 were in the following terms: 13.1 The Plan shall be administered by the Committee which shall have power to: (a) determine appropriate procedures for administration of the Plan consistent with the Rules;

(b) resolve conclusively all questions of fact or interpretation arising in connection with the Plan or these Rules;

(c) delegate to any one or more persons for such period and on such conditions as they may determine the exercise of their powers or discretions under these Rules; and

(d) alter, modify, add to or repeat the Rules (even where such alteration, modification, addition or repeal might adversely affect existing rights or otherwise disadvantage an existing Plan participant).

13.2 The Committee shall endeavour to reach decisions by consensus. However, if a consensus cannot be achieved, decisions shall be made by majority vote.

16.1 Subject to the provisions of Rule 16.2, these Rules cease to apply to Plan Shares when those Plan Shares are validly transferred away from the holder in accordance with these Rules.

16.2 These Rules continue to apply if the transferee of the Plan Shares is also an Executive or a Family Company. 11 On about 11th January 1993, Mr. Langley received a letter from HGA inviting him to participate in the Plan, together with a copy of the Plan Rules and an application for shares to be issued at an issue price of $122,368.44 pursuant to the Plan. 12 The application form recorded that the applicant: 1. applies for 316,579 ordinary shares of 50 cents each ("the Plan Shares") in the capital of Heath Fielding Australia Pty. Ltd. ("the Company"), at an issue price of $310/802ths per Plan Share (amounting in aggregate to $122,368.44), payable in full on issue of the Plan Shares;

requests the Company to lend to the Executive the aggregate issue price of the Plan Shares to enable the Executive to finance the acquisition of the Plan Shares;

returns, duly signed, a form of Loan Agreement between the Company and the Executive, governing the terms of the loan to be provided by the Company to the Executive;

acknowledges that the Plan Shares will be issued pursuant to the Rules of the Heath Fielding Executive Share Plan ("the Plan Rules");

acknowledges that the Plan Shares will be registered in the name of Heath (Nominees) Ltd. and held in trust for the Executive;

acknowledges that he has read and understands the Plan Rules, and in particular understands that on his departure from the Company the Company will have the right, but will not be obliged , to buy-back his Plan Shares;

agrees to be bound by and to comply with the Plan Rules and the Memorandum and Articles of Association of the Company 13 It was originally completed by Mr. Langley, but it was subsequently amended so as to make it an application by Lancedale. 14 Soon afterwards, a loan agreement between HGA and Mr. Langley was apparently executed. This loan agreement was also, it appears, subsequently amended so that the borrower became Lancedale. Paragraph 3 of the loan agreement contained the following provision concerning repayment: 3.1 Subject to the provisions of clause 3.2, the Principal Sum is repayable by the Executive -

(a) in full, upon disposal by the Executive of all his Plan Shares;

(b) in part, upon disposal by the Executive of some only of his Plan Shares, the partial repayment to bear the same proportion to the Principal Sum as the number of Plan Shares disposed of bears to the total number of Plan Shares held by the Executive immediately prior to the disposal.

3.2 If the Sale Price of any Plan Shares is less than the Issue Price, the Executive's liability to repay the Principal Sum shall be reduced by the aggregate difference between the Issue Price and the Sale Price of those Plan Shares. 15 Thereafter, the second respondent Heath Nominees made a declaration of trust that 316,579 ordinary shares of 50 cents per share in the capital of HGA were held on trust for Lancedale; a contract of service agreement was executed between HGA as employer and Mr. Langley; and 316,579 ordinary shares in the capital of HGA were issued and registered in the name of Heath Nominees to be held by Heath Nominees as trustee for Lancedale. 16 On 7th August 1995, the employment of Mr. Langley with the first respondent ceased. Accordingly, the sixty day period during which HGA could require buy-out of Lancedale's shares under Rule 7.1 of the Plan expired on or about 6th October 1995. 17 However, nothing happened in relation to these shares until about February 1998. By this time, the shares had become Eligible Shares within the Plan Rules because by then they had been held by Lancedale for more than five years. 18 There was a meeting between representatives of the parties on 12th February 1998; and on 13th February 1998 the claimants' solicitors wrote to the respondents' solicitors advising that Lancedale "requires" Heath Nominees to deliver to it a properly executed transfer of the shares, together with the relevant share certificate. 19 On 19th February 1998, the respondents' solicitors wrote to claimants' solicitors offering to buy back Lancedale's beneficial interest in the shares for $122,368.44, this price to be satisfied by the extinguishment of the loan from HGA. The letter contended that this was the most favourable basis on which the shares could be re-purchased, namely on the basis of the Issue Price, because any other approach to the valuation of the shares would result in a zero value. 20 On 25th February 1998, a meeting was held of the Heath Fielding Executive Share Plan Committee, at which the following resolution was passed, altering the Plan Rules: 21 Pursuant to the power contained in Rule 13.1(d) of the Rules, the Rules of The Heath Fielding Executive Share Plan be modified as follows: (a) the definition of "Issue Price" in Rule 1 be amended by adding at the end the words "paid or to be paid by the Executive or his Family Company";

(b) the definition of "Fair Value" in Rule 1 be amended by deleting the meaning of the letter "c" in the formula and replacing it with the following:

"c = the whole number closest to 2/3 of the price earnings multiple as advised by the Auditor as appropriate for valuing a company of the industry type as the Company at the date of the giving of a notice under clause 7.2 or 7.6 PROVIDED THAT the whole number must not be more than 10";

(c) including in Rule 1 a new definition as follows:

""Auditor" means the current auditor of the Company";

(d) Amending Rule 7.1 of the Plan by deleting the words "for a period of 60 days" on the first line and replacing them with the words "at any time";

(e) the old Rule 7.6 be deleted and a new Rule 7.6 be inserted as follows:

"7.6 If the Company has not after the Termination Date sought to exercise its rights under Rule 7.1 the Executive or Family Company which hold the Plan Shares otherwise the subject of Rule 7.1 may by notice in writing served on the Company before the expiry of the Buy-Out Period require the Company to offer to acquire all of the Executive's or Family Company's (as the case may be) Plan Shares on the terms of Rules 7.3, 7.4 and 7.5"; and

"If the Company does not comply with its obligations under Rule 7.6 and buyback the Executive or Family Company's Plan Shares within 90 days of receiving the notice referred to in Rule 7.6, then subject to the Articles of Association of the Company the Executive or Family Company (as the case may be) may dispose of his or its Plan Shares to any third party permitted by the Committee in its absolute discretion and subject to such terms and conditions as the Committee may see fit. The Committee shall not be required to give any reasons for withholding approval to a proposed sale of Plan Shares to any transferee". 22 On 25th March 1998, the respondents wrote to Mr. Langley, enclosing a notice of an extraordinary general meeting of HGA to be held on 17th April 1998. The purpose of the meeting was said to be 'the purpose of considering and, if thought fit, passing the following resolution: "That the following amendment of the Rules of the Health Fielding Executive Share Plan ("Plan"), which were passed by a resolution of the Plan Committee on 25 February 1998 pursuant to Rule 13.1(d) of the Plan Rules, are hereby approved'"; and the notice went on to set out the amendments which I have already specified. This notice was accompanied by an Explanatory Memorandum, giving reasons for the amendment of the Plan Rules and stating the effects of those amendments. 23 On 7th April 1998, Lancedale entered into a share sale agreement with Mrs. Langley by which it sold the 316,579 shares in HGA to Mrs. Langley for $100.00. 24 On 15th April 1998, the claimants' solicitors wrote to HGA asserting that the proposed amendments to the Plan were invalid, advising of the transfer from Lancedale to Mrs. Langley, and enclosing a cheque for $100.00 in repayment of the loan from Heath Nominees. 25 On 17th April 1998, at the general meeting of the shareholders of HGA, it was resolved that the amendments of the Plan Rules be approved. 26 On 19th May 1998, HGA gave a notice to Lancedale, pursuant to the amended Rule 7.1 of the Plan, to buy back the 316,579 shares. By letter dated 27th May 1998 from HGA to Mr. Langley and Lancedale, HGA advised that HGA exercised its powers under Rule 7.5 of the Plan and caused the shares to be transferred to HGA; and that this transfer was approved by the Board of HGA on 27th May 1998, and has been registered. The letter went on to advise that pursuant to s.206I(3) of the Corporations Law, the buy-back of the shares had been completed and the shares had been cancelled; and that the loan to Lancedale of $122,368.44 had been extinguished. 27 These proceedings were commenced on 23rd October 1998. ISSUES AND TRIAL JUDGE'S DECISION 28 The main issue argued before Bryson, J. was whether Rule 13.1(d) of the Plan Rules was effective to authorise the Committee to make the amendment to Rule 7.1 which it purportedly made on 25th February 1998, so as to give HGA the right to re-purchase Lancedale's shares, notwithstanding the previous expiry of the sixty day limit to the "Buy-Out Period" provided in the original Rule 7.1. 29 His Honour held that the words of Rule 13.1(d), particularly those in parenthesis, were sufficiently clear as to support the amendment of Rule 7.1, with retrospective effect so as to make Lancedale liable to be divested of its shares. The first eight grounds in the draft Notice of Appeal challenged this holding on various grounds. 30 It appears that it was also submitted to Bryson, J. that the amendment to Rule 7.1 took effect at the earliest on 17th April 1998, when it was approved by a general meeting of the shareholders of HGA; and that by then the shares had been sold to Mrs. Langley, as authorised by Rule 7.6, so that they could no longer be re-acquired even under the amended Rule 7.1. Bryson, J. held that the sale to Mrs. Langley was a genuine transaction, but he did not uphold the submission about the timing of the amendment. The ninth to eleventh grounds of appeal challenge this aspect of his decision. CONSTRUCTION OF RULE 13.1(d) 31 Mr. Heydon QC for the claimants first raised a question as to whether the Plan Rules were part of a contract between HGA and Lancedale. However, that matter was not pursued at length, and it seems clear that Lancedale's application for shares in accordance with the application form set out above, and entry into the loan agreement with HGA, was sufficient to make the Plan Rules, including Rule 13.1, part of a contract between Lancedale and HGA. 32 Mr. Heydon submitted that "the Rules", where those words appear in Rule 13.1(d), could have either of two meanings: firstly, the Rules as setting out a structure potentially available in the future for executives invited to join the Plan; and secondly, the first meaning and in addition the Rules as they operate contractually for executives and family companies who have already entered the Plan. Mr. Heydon submitted that the first meaning was the correct construction of the words. 33 Mr. Heydon submitted that, on this construction, meaning could still be given to the words in parenthesis: for example, Rule 2.2 provided that the number of Plan Shares should not at any time exceed 24% of the issued ordinary shares for the time being in the capital of HGA, and an alteration of that provision could adversely affect existing rights or otherwise disadvantage an existing Plan participant without directly affecting the contractual terms operating between HGA and existing Plan participants. 34 Next, Mr. Heydon relied on three principles of construction. First, that a construction would be preferred which would avoid a retrospective deprivation of an accrued right. Second, that a construction would be preferred which would avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust: see Australian Broadcasting Commission v. Australasian Performing Rights Association Ltd. (1973) 129 CLR 99 at 109-110. And third, in cases of bad drafting, the Court should be less willing to be driven by semantic niceties to attribute to the parties an improbable or unbusiness-like intention: see Mitsui v. Attorney-General of Hong Kong (1986) 33 BLR 7 at 14. On that matter, Mr. Heydon pointed to the distinction drawn in Rule 13.1 between "the Plan" and "the Rules", when in truth, having regard to the definitions of those words, they really were the same thing. 35 Mr. Heydon then advanced four particular arguments in support of his preferred construction. 36 First, he pointed out that Rule 13.1(d) applied only to the Rules, although the legal relationship between Lancedale and HGA depended also on the Deed of Loan and the Deed of Trust. There was no power to amend the latter two instruments, and this pointed against a power to amend the Rules, which were just one part of the overall contractual relationship. 37 Secondly, Mr. Heydon submitted that sub-paragraphs (a), (b) and (c) of Rule 13.1 were narrow and, in general, apt only to apply to future participants. The procedures for administration of the Plan mainly concerned procedures by which executives or their family companies become participants. Questions of fact or interpretation cannot extend to questions of law concerning the application of the Rules to existing participants, because the power to determine questions of law conclusively cannot be given in this way: see Harbottle Brown v. Halstead (1968) 3 NSWR 493 at 497. Again, the Committee's power or discretions under the Rules mainly related to things other than contractual matters relating to existing participants. 38 Thirdly, by October 1995, the only right which Lancedale continued to have was the right to deal freely with the shares. If Rule 13.1(d) permitted the amendment made in this case so as to affect Lancedale's rights, HGA's obligation to recognise that sole remaining right was one the performance of which was entirely within the discretion of HGA (the Committee plainly being a creature of HGA): see Placer Development Limited v. The Commonwealth (1969) 121 CLR 353 at 361; Biotechnology Australia Pty. Limited v. Pace (1988) 15 NSWLR 130 at 151. Where a wider construction would lead to invalidity on the basis that the purported contract was illusory, the Court should prefer the narrower construction. 39 Fourthly, Mr. Heydon submitted that the wider construction would produce strange results. Rule 11 of the Plan provided for a restraint of trade binding the executive for a period of twelve months following termination of his employment with HGA. On the wide construction, that Rule could be amended so as to increase the period of restraint, either just before or even after the period of twelve months had expired. 40 That point linked with Mr. Heydon's next submission, namely that, even if one adopted the wider construction, some limitation had to be put upon the width of the provision. It could not be interpreted so as to permit an amendment to the Rules which introduced an entirely new contractual obligation on existing participants. In paragraph 60 of his judgment, Bryson, J. noted that there were limits arising from limits of the concepts of an alteration, a modification and an addition. His Honour went on to say that "a purported alteration which introduced a new obligation of an entirely different kind, or a transforming obligation in an existing obligation, might be found to be beyond the concept of an alteration and beyond the powers in Rule 13.1(d)". Mr. Heydon submitted that this alteration, destroying an existing right, was properly characterised as a transforming alteration in an existing obligation. Such an exercise would be "beyond the reasonable contemplation of the parties": see Lord Napier & Ettric v. R.F. Kershaw Limited (1999) 1 WLR 756. 41 Mr. Jackson QC for the respondents first pointed out that, under Rule 16.1, the Plan operated until the shares were transferred, this plainly referring to a legal, not mere beneficial, assignment. 42 He further submitted that the Plan Rules, including the power to amend in Rule 13.1(d), were always part of the contract between Lancedale and HGA. The broad words of Rule 13.1(d) should not be read down by reference to paragraphs (a), (b) and (c) of Rule 13.1. Mr. Jackson referred us to the cases of Bailey v. NSW Medical Defence Union (1995) 184 CLR 399; Gra-ham Australia Pty. Limited v.Perpetual Trustees Western Australia Limited (1989) 1 WAR 65; and Kearns v. Hill (1990) 21 NSWLR 105 at 109. 43 In my opinion, the decision of Bryson, J. on this matter was correct, for the reasons he gave. However, I will address specifically the principal submissions of Mr. Heydon. 44 I accept the principles of construction referred to by Mr. Heydon, although I do not accept that Rule 13 should be considered as badly drafted. There is, in my opinion, some distinction between the Plan, which continues to be the Plan irrespective of amendments to the Rules, and the Rules, which are subject to amendment. In any event, I agree with Meagher, JA in Kearns at p.109F that the fact that a document contains infelicities is not a sufficient reason to do other than construe it according to its natural meaning. 45 It is true that the power in Rule 13.1(d) is a power to amend only the Plan Rules, and does not authorise any amendment of the Deed of Loan or Deed of Trust. And, as I have mentioned, Lancedale became subject to the Rules by entering into a single transaction which included entry into the Deed of Loan and Deed of Trust. However, that circumstance does not mean that Lancedale's contract cannot be amended by amendments to the Rules, at least so long as these amendments are not inconsistent with terms of the Deed of Loan and Deed of Trust; and it is not a strong indication that amendments under Rule 13.1(d) should not affect contractual terms applying to existing participants. 46 I do not accept that paragraphs (a), (b) and (c) of Rule 13.1 give powers which do not affect the rights of existing participants; but even if they did, I do not believe that this would affect the construction of Rule 13.1(d). 47 In my opinion, there is no question of the contract being illusory. The fact that the terms of a contract purport to give one party a choice whether or not to perform some aspect of the contract makes the contract illusory only if that term is in substance the only consideration given by the party. Otherwise, the inclusion of such a term is a matter which goes to such things as intention to contract, certainty of terms, and construction. In this case, even accepting that a stage was reached where, on the wide construction, Rule 13.1(d) would allow HGA to deprive Lancedale of its only outstanding right, this would not make the contract illusory. In my opinion, the reference to the alleged illusory nature of the contract does not add anything to the other arguments. 48 I accept that the circumstance that, on its wide construction, Rule 13.1(d) could be exercised to take away existing rights and perhaps to produce strange results would be a factor supporting a narrow construction. However, it is clear that the power has to be exercised bona fide for the purpose for which it is given, and I accept Bryson, J's view that some limitation is provided by the concepts of alteration, modification, and addition. Construed in that way, I do not think that this circumstance, either on its own or coupled with Mr. Heydon's other submissions, is enough to overcome the very clear words in Rule 13.1(d), especially those in parenthesis. 49 On the particular example of the restraint of trade clause, I would comment that any restraint of trade is prima facie void, and while that prima facie position may well be overcome where there is a reasonable restraint agreed to at the time of entering into a contract, it seems very unlikely that an additional restraint imposed by exercise of a power such as this to amend rules could possibly be other than void. 50 As held by Bryson, J., the power in Rule 13.1(d) must be exercised in good faith and for the purposes for which it was conferred; but, again as pointed out by Bryson, J., this has limited practical effect in view of the apparent width of the purposes for which the power exists. I agree with Bryson, J. that there is no occasion to consider whether the amendment falls within the reasonable contemplation of the parties. Furthermore, in my opinion the amendments made in this case cannot be considered as being outside the concepts of alteration, modification or addition. 51 For those reasons, on this aspect of the case, I consider that Rule 13.1(d), and particularly the words in parenthesis, are so clear that the power does extend to altering the contractual rights of existing participants; and they are sufficiently wide to authorise the particular amendments which were made in this case. QUESTIONS OF TIMING 52 The argument on this matter requires reference to s.205 of the Corporations Law, at the relevant time, and some associated provisions. 53 Section 205(1)(a) and (9)(b) are in the following terms: 205(1) Except as otherwise expressly provided by this Law, a company shall not: (a) whether directly or indirectly, give any financial assistance for the purpose of, or in connection with: (i) the acquisition by any person, whether before, or at the same time as, the giving of financial assistance, of: (A) shares or units of shares in the company; or (B) shares or units of shares in a holding company of the company; or (ii) the proposed acquisition by any person of: (A) shares or units of shares in the company; or (B) shares or units of shares in a holding company of the company; ...

(9) Nothing in subsection (1) prohibits: ... (b) the giving by a company of financial assistance for the purpose of, or in connection with, the acquisition or proposed acquisition of fully-paid shares or units of fully-paid shares in the company or in a holding company of the company to be held by or for the benefit of participating employees in relation to the company, where:

(i) if the company has an approving holding company or approving holding companies - the company, and that holding company or those holding companies, have each, at a general meeting; or (ii) otherwise - the company has, at a general meeting;

approved a scheme for providing money for such acquisitions and the financial assistance is given in accordance with the scheme. 54 Section 205(1)(b) precludes a company acquiring shares in itself, although this is qualified by s.205(1A) to the effect that it is not contravened by "a buy-back" authorised by s.206B. Section 206B states that a company may buy back its own shares if it follows certain procedures. Under s.206C(1) and (4), the relevant procedures in this case would require lodgment of a notice with the ASC that it intended to carry out the buy-back at least fourteen days before it entered into the buy-back agreement: see s.206C and s.206G. The company would then have to cancel the shares: s.206I. 55 Mr. Heydon submitted that s.205(9)(b) was an exception to a fundamental principle of company law, made on the condition of approval of the "scheme" by a general meeting. This provision disclosed an intention that such a scheme should not be amended without the approval of a general meeting. If it were alleged that the transaction between Lancedale and Mrs. Langley was ineffectual to prevent the shares being re-acquired, because the shares remained registered in the name of the trustee, and because the Plan still applied by reason of Rule 16.1, it should be observed that on 13th January 1998, the claimants' solicitors requested from the trustee a transfer of shares and share certificate. That should have been complied with, and the respondents cannot now take advantage of that non-compliance. 56 Mr. Jackson submitted that s.205(9)(b) did not disclose an intention that such schemes be incapable of amendment except with the approval of a general meeting. Rule 13.1(d) did not require that a general meeting approve any amendment, nor did the terms of the Committee resolution require it. 57 I accept Mr. Jackson's submission that Rule 13.1(d) does not require amendments to be approved by a general meeting of HGA, and that the resolution actually passed by the Committee did not purport to be in any way conditional upon subsequent approval by a general meeting of HGA. None of the documentation associated with that resolution and the subsequent general meeting indicate any intention that the resolution not take effect until approval by the general meeting. 58 In my opinion, there may be a question whether or not, after the Committee resolution, the Plan as amended was still a scheme approved by the company at a general meeting within s.205(9)(b). However, if it was not, that would not in my opinion invalidate the amendment as such; but rather, it would mean that any financial assistance for the purchase of shares subsequently provided under the amended scheme would not, until approval of the amendment by the general meeting, be protected by s.205(9)(b), and would involve a breach of s.205(1)(a). That problem was overcome by the approval of the amendment by the general meeting, so that after that approval, financial assistance could be given for the purchase of shares under the amended scheme. 59 In those circumstances, the Buy-Out Period was on 25th February 1998 effectively extended to "any time", and the right of disposal given by Rule 7.6 was taken away. Accordingly, the transaction between Lancedale and Mrs. Langley on 7th April 1998 did not prevent HGA subsequently exercising its right under Rule 7.1. 60 There were no submissions suggesting any other problem arising from the provisions of the Corporations Law. For the reasons I have given, in my opinion the submissions on the timing issue made by the claimants should be rejected. CONCLUSION 61 For these reasons, in my opinion leave to appeal should be given, and the appeal should be dismissed with costs.

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