NRMA Insurance Group Ltd v Spragg

Supreme Court of NSW|2001-05-09|Before: Santow J

INTRODUCTION 1 This is an application under s1322(4) of the Corporations Law. It is to extend the time for holding a requisitioned meeting. This is to save the substantial cost of a separate meeting by having that meeting coincide with the Plaintiff's later annual general meeting, rather than precede it. A requisitioned meeting is otherwise held at the latest two months after the requisition. 2 The following summary of facts can be taken to be uncontroversial and as accepted as accurate by the Defendant. 3 The Plaintiff is a listed company with approximately 1.59 million members. 4 Article 10.3 of the Plaintiff's constitution provides that the directors must convene and arrange to hold a general meeting at the request of members under s249D of the Corporations Law. 5 Article 12.15 of the Plaintiff's constitution provides, among other things, that subject to the ASX Listing Rules, the Plaintiff may pay a former director a retirement benefit in recognition of past services in the amount determined by the directors, but not exceeding the amount permitted to be paid by the Corporations Law. Article 12.15 also provides that the Plaintiff may enter into a contract with a director providing for the payment of a retirement benefit. The ASX Listing Rules (rule 10.18) are not presently relevant. 6 Between 11 August 2000 and 1 March 2001 a committee of the board of the Plaintiff, and the board, gave consideration to the adoption of a retirement plan for non-executive directors in line with market practice of companies similar to the Plaintiff. 7 On 1 April 2001 Mr Whitlam, the chairman of the board of the Plaintiff, announced that he was stepping down as chairman and that he intended ultimately to resign as a director of the Plaintiff. 8 On 4 April 2001 at a board meeting of the Plaintiff the board resolved to adopt a policy with respect to retirement benefits for non-executive directors, subject to sign-offs from the Plaintiff's remuneration consultations and lawyers that the policy was in accordance with all applicable legislation and market practice. Mr Whitlam did not attend that meeting. The policy involved a formula dependent upon years of service as a director. The policy complied with the requirements of s200G of the Corporations Law. The Plaintiff subsequently received advices from its remuneration consultants and lawyers. 9 On 9 April 2001 Mr Whitlam resigned as a director. 10 On 10 April 2001 the board received a further update concerning the non-executive directors' retirement policy. Also on 10 April 2001 the Plaintiff announced to the ASX, among other things:

(b) that on 4 April 2001 the board had considered a retirement benefit plan for non-executive directors in line with market practice at similar companies, which had been the subject of consideration by a committee of the board since 11 August 2000, and approved it, subject to sign-off from expert advisers,

(c) that Mr Whitlam, who resigned from the board on 9 April 2001, would be entitled to participate in the plan, that the amount of Mr Whitlam's retirement benefit had not yet been determined, that the board would consider the amount at its May 2001 meeting and announce it to the market at that time, that it would be calculated in accordance with the plan and within the limits prescribed by the Corporations Law and that it would be certified by the Plaintiff's auditors. 11 On 23 April 2001 Mr Snodgrass, who was not a member of the Plaintiff, sent to Mr Ross, the new chairman of the board, a copy of a letter which Mr Snodgrass had sent to the Chairman of Australian Shareholders Association enclosing a form of requisition for a special general meeting of the Plaintiff. The letter to the Chairman of Australian Shareholders Association stated, among other things: "We would agree not to present the requisition to the company if the board gave the following undertaking: "That the NIGL board gives a written assurance to A.S.I.C. and shareholders that this motion will be put to members at the next general meeting and that no retirement benefits will be paid to retiring or sacked directors until after the motion is voted on by members at a general meeting"."

12 The form of requisition contained a request, pursuant to s249D of the Corporations Law, to the directors of the Plaintiff to call and arrange to hold a general meeting of members to consider the following resolution: "That the Constitution of NRMA Insurance Group Limited be amended by inserting a new Rule 12.15A in the following terms: 12.15A Notwithstanding any other rule in this Constitution, any payment or other benefit proposed to be made to any Director in connection with that person's retirement from the Board of the company (having regard to the interpretative provisions of Part 2D.2 Division 2 of the Corporations Law) shall not be made unless that payment has been approved by ordinary resolution of the company passed at a general meeting of members."

13 The form of requisition also contained a request, purportedly pursuant to s249P of the Corporations Law, that the Plaintiff give members an explanatory statement in favour of the proposed resolution, the terms of which the signatories authorised Mr Talbot, a member of the Plaintiff and former director of NRMA Insurance Limited (a subsidiary of the Plaintiff), to formulate and provide to the Plaintiff. 14 Between 26 April 2001 and 1 May 2001 there was correspondence between the Plaintiff and Mr Snodgrass, which ended with the Plaintiff indicating that the matters raised by Mr Snodgrass had been placed on the agenda for the board meeting on 3 May 2001, and that until the directors had met and discussed the issues there could be no board decision in relation to Mr Snodgrass' proposal. 15 On the afternoon of 2 May 2001 the Plaintiff received copies of requisitions signed by approximately 237 persons. At least 100 of the signatories were members of the Plaintiff, thereby satisfying the requirements of s249D(1)(b) of the Corporations Law. The Defendant was one of the signatories. Mr Snodgrass and Mr Talbot were not signatories. 16 The requisitions were in the form described in paragraphs 10 and 11 above. 17 On 3 May 2001 the board of the Plaintiff met and discussed, among other things, the requisitions and the costs that would be incurred in convening a special general meeting of members of the Plaintiff separately from the annual general meeting scheduled to be held on 2 November 2001. The board passed a number of resolutions that day including the following: "(a) To defer considering the application of its policy on retirement benefits for non-executive directors to any directors until shareholders had had an opportunity to vote on the proposed amendment to the company's constitution at the earlier of the company's scheduled annual general meeting in November or an extraordinary general meeting called in response to the requisition. (b) That no payment would be made to, nor benefit conferred on, any retired non-executive director by the company in connection with retirement from office until the time referred to in (a) above. (c) To authorise Mr Ross and Ms Keating to approach Mr Snodgrass, as a representative of the requisitionists, or another representative of the requisitionists, seeking that person's cooperation in obtaining withdrawal of the requisition by the other requisitionists or alternatively support in applying to the Court for orders permitting the company to defer convening a general meeting to consider the proposed amendment to a time no later than the date of the company's scheduled annual general meeting. (d) To provide logistical support to Mr Snodgrass, or another representative of the requisitionists, in seeking the withdrawal of the requisition and to pay the fees of the requisitionists on any application to the Court where they support the orders sought by the company. (e) To authorise an application being made to the Court to seek orders extending the period in which the company is obliged to convene a general meeting to consider the proposed amendment to a time no later than the date of the company's annual general meeting. (f) That authority be given to provide an undertaking to the effect of (b) either to one or more of the requisitionists in seeking their support, or to the Court in seeking formal orders, for deferral of any required general meeting."

18 Also on 3 May 2001 the Plaintiff issued a news release in which, among other things, it:

(a) announced that it had deferred implementing its retirement benefit policy in respect of Mr Whitlam, until after the members have had an opportunity to vote on the proposed amendment to the constitution,

(b) referred to the receipt of the requisitions and the proposed amendment,

(c) referred to the board's view that it was in the company's best interest to avoid the expense of around $1.5 million of holding a special general meeting,

(d) sought members support to defer considering the proposed amendment until the annual general meeting in November 2001. 19 On 7 May 2001 representatives of the Plaintiff met with the Defendant and Mr Snodgrass concerning, among other things, the proceedings which the Plaintiff proposed to commence. 20 The Manager, Corporate Projects for the Plaintiff, with responsibility for managing and administering the co-ordination and holding of general meetings of members of the Plaintiff, has expressed the opinion, based upon his experience and the preparatory work undertaken in connection with the requisitioned meeting, that approximate savings in the order of $1,392,500 would potentially be available if the requisitioned meeting were held immediately before or after the scheduled annual general meeting on 2 November 2001 rather than on some other earlier date. The detailed components of the potential savings were identified; and the bases for the calculations were articulated.

RESOLUTION OF APPLICATION 21 I have had the benefit of submissions on behalf of the Plaintiff from Mr Wood of Counsel. The only matter requiring any detailed consideration pertains to s1322(4) and (6) of the Corporations Law. It is whether the extension orders that I have now made satisfy the statutory requirement "that no substantial injustice has been or is likely to be caused to any person"; see s1322(6)(c). 22 The matter which gives rise to that question is whether Mr Whitlam could be said to be a person suffering substantial injustice in that sense. Mr Whitlam is presently overseas. Correspondence with his solicitors have indicated that he is presently uncontactable with the consequence that he has not been in a position to attend or make submissions in relation to the orders made; see PX1. 23 For that reason, though otherwise satisfied on the material before me to make the orders, I deferred those orders contained in paragraph 2 from coming into effect for a short period, namely to the expiry of 14 May 2001. The period is short because the Plaintiff will be incurring ongoing costs in preparation for the requisitioned meeting at an earlier point of time to the annual general meeting. This is until such time as there is certainty that my orders will take effect extending the requisitioned meeting so it coincides with the annual general meeting. 24 Though the time be short, Mr Whitlam's legal advisers are thereby given the opportunity to put any additional matters to the Court if they choose to do so, on Monday 14 May 2001 when I hear the Corporations List. 25 On the material presently before me and applying the reasoning of Ormiston J in Sali v SPC Limited (1991) 9 ACLC 1,511 at 1,519 to 1,525, to the similarly worded resolution before me as was before Ormiston J, I would conclude that Mr Whitlam has not at this point any contractual entitlement to be paid a retirement benefit under the policy adopted by that resolution. That conclusion is necessarily one which has not had an effective contradictor to test it. It can be taken that both the Plaintiff and the Defendant would not have an interest in arguing to the contrary. I thus leave open the possibility that that matter may be revisited. My conclusion should be treated as any conclusion in a quasi interlocutory proceeding of this nature. I am conscious that it will however have final consequence in terms of orders under s1322. 26 Were the position otherwise, that is to say were Mr Whitlam to have a contractual entitlement, it is conceivable that an argument might be put that the effect of the orders in the context of the undertaking given would have the practical effect of deferring any payment pursuant to that contractual entitlement. If that argument were put it would be necessary to look more closely at the notion of "substantial injustice" as it operates in the present context. 27 In that regard I should note that the cases have determined that "injustice" within s1322(b)(c) requires "the Court to consider real, and not merely insubstantial or theoretical prejudice" (Elderslie Finance Corp Ltd v Australian Securities Commission (1993) 11 ACLC 787 at 790); and that a degree of prejudice to a person or persons may be outweighed by the "overwhelming weight of justice" (Re Compaction Systems Pty Ltd (1976) 2 ACLR 135 at 150). Moreover, as I said in Super John Pty Ltd v Futuris Rural Pty Ltd (1999) 32 ACSR 398 at 402 (paragraph 14): "detriment per se is not the same as substantial injustice; that must depend on whether the remedial order in giving rise to that detriment is unjust in the sense of causing such prejudice overall as to be unfair or inequitable, taking into account the interests of all of those directly affected by such dispensation".

28 I would otherwise adopt what is said in paragraphs 13 to 15 of the Plaintiff's submissions quoted below. I find nothing in the decision in Windeyer J in NRMA Insurance Ltd v Carroll (1999) 32 ASCR 655 as operating as an impediment to the present application. "13. In the present case, it is in the interests of the Plaintiff and all of its members to save the expense of a meeting of members prior to the date of the scheduled annual general meeting on 2 November 2001, which savings are estimated to be in the order of $1.3925 million (paragraphs 5 and 6 of Mr Watson's affidavit). With a membership of approximately 1.59 million (paragraph 3 of Mr Watson's affidavit) the costs of convening a meeting to be held prior to 2 July 2001 pursuant to the requisition are bound to be substantially in excess of the costs of holding a meeting sequentially with the annual general meeting scheduled for 2 November 2001. 14. There is no injustice to the requisitionists or to any other members who may propose to vote in favour of the amendment to the constitution. Their position: (a) is protected by the resolution of the board of the plaintiff made on 3 May 2001 to defer considering the application of its policy on retirement benefits for non-executive directors to any directors until members have had an opportunity to vote on the proposed amendment to the constitution (paragraph 9 of Ms Morstyn's affidavit), (b) is further protected by the resolution of the board made on 3 May 2001 that no payment would be made to, nor benefit conferred on, any retired non-executive director by the company in connection with retirement from office until the members had voted on the proposed amendment (paragraph 9 of Ms Morstyn's affidavit), (c) is further protected by the undertaking proffered by the Plaintiff to the Court as a condition of the orders (see prayer 1(i) of and the Schedule to the Originating Process).

It follows from the submissions in paragraphs 6 and 7 above, that there is no substantial injustice which is likely to be caused to Mr Whitlam by the making of the orders sought. He has no vested or accrued rights. The deferral of consideration of the application of the policy on retirement benefits to him means that payment of a benefit to him is dependent upon a number of contingencies: (a) first, the fate of the proposed amendment to the constitution,

(b) secondly, depending upon the outcome to (a), the exercise of majority voting power at a meeting of members in favour of payment (under the proposed regulation 12.15A) or the exercise of the discretion vested in the directors (under regulation 12.15)."

OVERALL CONCLUSION 29 Orders should be made extending the requisitioned meeting time to coincide with the Plaintiff's annual general meeting, but deferred from operation till after 14 May 2001. This is so Mr Whitlam has an opportunity to put any matters in opposition if he desires. Otherwise the orders made are uncontroversial.

Last Modified: 05/11/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

CITATION : NRMA Insurance Group Ltd v Spragg [2001] NSWSC 381 revised - 10/05/2001 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2507/01 HEARING DATE(S) : 08/05/01, 09/05/01 JUDGMENT DATE : 9 May 2001

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