Pinnacle V R B Pty Ltd v Ronay Investments Pty Ltd [2000] VSC 330

11. On 15 June 2000 Amecoy, Mitpan, W.J. Holdings and A.L. Lyster requisitioned a general meeting of Pinnacle pursuant to s.249D of the Corporations Law. The section so far as is relevant reads:

"249D(1) [Members Request] The directors of a company must call and arrange to hold a general meeting on the request of: (a) members with at least five per cent of the votes that may be cast at the general meeting; or (b) at least 100 members who are entitled to vote at the general meeting. (5) [Time limit for calling and holding of meeting] The directors must call the meeting within 21 days after the request is given to the company. The meeting is to be held not later than 2 months after the request is given to the company".

15. The purpose of the meeting was to remove four of the existing directors from the board of Pinnacle, namely, Malcolm Jacques, Desmond Kennedy, Malcolm Logan and Richard Revelins and to elect two new directors, namely, Steven Horton and John Anderson.

18. By notice dated 27 June 2000 Ronay gave notice of a general meeting of members of Pinnacle to be held at 11 a.m. on 31 July 2000 at the Medina Grand Melbourne, 189 Queen Street, Melbourne, for the purposes of considering that J Anderson, S Horton, D Pethard and P Williams be elected as directors of the company. The meeting was called pursuant to the provisions of s.249F of the Corporations Law, the relevant sub-section of which reads:

"249F(1) [Members who may call a meeting at their own expense] Members with at least five per cent 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."

22. J Anderson and S Horton are the same persons as the John Anderson and Steven Horton referred to in the notice given by Amecoy, Mitpan, W.J. Holdings and A.L. Lyster on 15 June 2000.

25. The evidence in relation to the service of that notice of 27 June 2000 appears in the affidavit of Desmond Kennedy sworn 11 August 2000, the relevant paragraphs of which read:

"6. On Friday evening, 30 June 2000, I checked Jacques e-mail address" - I interpolate, Jacques is the present managing director of the plaintiff - "to ascertain whether he had received any messages and noticed that an e-mail had been sent to him at 3.18 p.m. that day from Allan and Margaret Dickinson who are shareholders of Pinnacle. The e-mail stated relevantly as follows: 'As shareholders in PCE shares, we were concerned to receive notice today from a company called RONAY INVESTMENTS PTY LTD regarding voting for directors at a meeting on 31 July 2000. As none of the names of those we have seen before and this Ronay group have only five per cent voting rights we would like to hear from you as to how you want us to vote and also what is the reason for material coming from Ronay investments. Looking to hear from you soon.' 7. The said e-mail was the first notice that I received of a meeting convened by the defendant herein ('Ronay') to be held on 31 July 2000 as: (a) no notice of any such meeting had been served on Pinnacle; and (b) I had not received any prior notice of any such meeting in my capacity as a director or shareholder of Pinnacle. 8. On Sunday, 2 July 2000 I met with David Pethard, who controls Ronay, and asked him why Ronay had convened a meeting of Pinnacle's members but had not served notice of that meeting on Pinnacle. Pethard smiled but did not address my question. 9. On Monday, 3 July 2000 at 12.32 p.m. Pethard attended Pinnacle's office at Level 6, 171 Latrobe Street, Melbourne and hand delivered a copy of Ronay's notice of meeting dated 27 June 2000, by which Ronay convened a general meeting of Pinnacle's members to be held on 31 July 2000."

29. By notice dated 6 July 2000 Pinnacle notified the members of Pinnacle that the meeting requisitioned by Amecoy, Mitpan, W.J. Holdings and A.L. Lyster would be held at 11 a.m. on 15 August 2000 at Level 6, 171 Latrobe Street, Melbourne.

32. It is a requirement of the Law that at least 28 days notice must be given of a meeting of a company's members.

35. As Ronay's notice of meeting was not served on Pinnacle until 3 July, it was not possible for Pinnacle to call the meeting requisitioned by Amecoy, Mitpan, W.J. Holdings and A.L. Lyster for the same day as that nominated by Ronay in its notice of meeting. It was necessary that it be called for a date later than 31 July.

38. On 19 July 2000 the Board of Directors of Pinnacle resolved to postpone the general meeting called by Ronay until 10 a.m. on 15 August 2000 at the offices of Phillips Fox, Level 47, 120 Collins Street, Melbourne. The meeting was postponed pursuant to the provisions of Article 12.5 of Pinnacle's Articles of Association, which reads:

"12.5 The directors will have power to postpone the holding of any general meeting provided that the postponed meeting will be held within twenty-one (21) days of the date for which it was originally called. Whenever any meeting is postponed for ten (10) days or more then not less than two (2) day's notice will be sent to the Members of every such postponed meeting in similar terms to the notice of the original meeting, but it will not be necessary to specify in such notice the nature of the business to be transacted at such postponed meeting."

42. At the same time the Board resolved to transfer the meeting called by Amecoy, Mitpan, W.J. Holdings and A.L. Lyster to the same venue but still at 11 a.m.

45. That same day Pinnacle forwarded to the Australian Stock Exchange an announcement of the postponement of the meeting called by Ronay and the change of venue of the meeting called by Amecoy, Mitpan, W.J. Holdings and A.L. Lyster. The reason Pinnacle gave for the change of date and venue in the announcement was:

"In an attempt to simplify the Pinnacle V.R.B. Ltd shareholders' responses to the two extraordinary meetings called by minority shareholders, the Board of Directors has announced the postponement for one of the meetings and change of venue of the other. The outcome of these alterations is to ensure shareholders may attend both meetings on the same day, at the same venue, one meeting after the other."

52. On 27 July 2000 Pinnacle caused a notice to be sent to all shareholders informing them of the postponement and change of venue and on 29 July 2000 caused an advertisement to be published in the Age newspaper, the Australian newspaper and the Australian Financial Review notifying shareholders of the announcement.

55. On 28 July 2000 a company called Asset Backed Holdings Ltd (Asset) which holds 6.25 per cent of the ordinary shares in Pinnacle, forwarded a letter to Pinnacle informing it that it intended to proceed with the meeting convened by Ronay on 31 July 2000.

58. On 31 July 2000 Pinnacle's Chairman of Directors and its solicitor attended at the Medina Grand Melbourne at 11 a.m.

61. Representatives of Ronay, Amecoy and Asset were present together with a number of other individuals. In total some 35 to 40 of Pinnacle's 2,033 shareholders were present or represented. It is said that those present held approximately 30 per cent of the voting share capital of Pinnacle.

64. The Chairman of Pinnacle announced to the persons present that the meeting called by Ronay had been postponed to 15 August by the Board of Pinnacle acting in accordance with Pinnacle's Articles of Association and that the meeting being held that day was not a meeting of the members of Pinnacle.

67. Nevertheless persons present that morning proceeded to propose and second the resolutions which had been put forward by Ronay. Perhaps not unexpectedly the persons present voted in favour of the resolutions.

70. At the conclusion of the proceedings one Huston, who had acted as chairman of the purported meeting, announced that those persons who had been appointed additional directors to the Board of Pinnacle should proceed to Pinnacle's offices to take up their functions as directors of Pinnacle.

73. On 1 August 2000 Pinnacle filed an originating motion in the court naming Ronay as defendant and by which it seeks the following relief:

"A. A declaration that the meeting of members of the plaintiff convened by the defendant by its notice dated 27 June 2000 pursuant to s.249F of the Corporations Law has been postponed until 15 August 2000. B. A declaration that the purported meeting of certain members of the plaintiff held on 31 July 2000 at 11 a.m. at the Medina Grand Melbourne, 189 Queen Street, Melbourne, Victoria was not a general meeting of members of the plaintiff. C. A declaration that the resolutions purportedly passed by those present at the said purported meeting are not and none of them is a resolution of a general meeting of the members of the plaintiff."

77. On 4 August 2000 Pinnacle filed a writ in the court naming as defendants David Dexter Pethard, John Anderson, Steven Horton and Peter Williams and by which it seeks injunctive relief restraining those persons from holding themselves out as directors of Pinnacle, or purporting to act as if they were, pending the hearing and determination of the plaintiff's originating motion filed in the court on 1 August.

80. Both proceedings came before me in the Practice Court on 4 August 2000. Upon counsel for Pinnacle and three directors of the company named Kennedy, Wantrup and Jacques giving the usual undertaking as to damages on behalf of Pinnacle and themselves, and upon counsel for Pethard, Anderson Horton and Williams giving an undertaking that until 4.15 p.m. on 14 August or further order, those persons would not hold themselves out or represent that they are directors of Pinnacle or purport to act in any way as directors of Pinnacle the further hearing of Pinnacle's application was adjourned to today.

83. The issues raised by the two proceedings can be summarised as follows:

(1) Do the provisions of s.249F of the Corporations Law permit a postponement of a s.249F meeting by the Board of Directors of a company acting under its articles?

(2) If yes to (1), do the provisions of Article 12.5 of Pinnacle's Articles of Association permit the directors of Pinnacle to postpone a general meeting of the shareholders of Pinnacle called pursuant to s.249F of the Law?

(3) If the answer to question (2) is yes, did the directors of Pinnacle resolve to postpone the meeting called by Ronay?

(4) If the answer to question (3) is yes, did the directors of Pinnacle comply with the provisions of Article 12.5 in postponing the meeting?

(5) If the directors of Pinnacle did resolve to postpone the meeting and did comply with the provisions of Article 12.5, did they do so for a proper purpose?

91. There is a dispute between the parties concerning whether the directors of Pinnacle resolved to postpone the meeting of 31 July to 15 August at the directors' meeting on 19 July, and as to whether Pinnacle gave the required notice to its shareholders in accordance with the provisions of Article 12.5.

94. It is clear that such matters can only be resolved following a full hearing of the proceedings which will, of course, involve the calling of viva voce evidence.

97. The practical problem which faces the court then is that the two general meetings are scheduled to be heard tomorrow, and the court simply does not have the time to resolve the practical disputes between the parties before those meetings take place.

100. In that situation I suggested to counsel for the parties that the court might well take the view that it is in the interests of the shareholders of Pinnacle to adjourn the meetings to a suitable date to enable a trial of all issues between the parties to be heard and the issues determined.

103. If authority is required for the court's power to do so, see Paringa Mining and Exploration Co. PLC v. North Flinders Mines Ltd & Ors (1988) 14 A.C.L.R. 587, particularly per King, C.J. at p.591. However, counsel for the parties resisted that invitation, arguing instead that I should determine the first two questions posed leaving the other issues to be resolved, if necessary, following the meetings tomorrow.

106. I say "if necessary" because depending on the outcome of tomorrow's meetings it may never become necessary to resolve the disputes.

109. It was with a degree of reluctance that I acceded to counsel's request. It will be appreciated, therefore, that these reasons have been prepared in haste and without me having had a proper opportunity to give the issues the consideration they warrant.

112. I should perhaps add that I have only agreed to do so because of the state of confusion which must surely now exist in the minds of the large majority of Pinnacle's shareholders.

115. Why Messrs Anderson, Horton, Pethard and Williams, but in particular Messrs Anderson and Horton, should create a situation where the members of Pinnacle are to face two general meetings of the company tomorrow to consider the same subject matter, namely, the composition of the board of Pinnacle, was never satisfactorily explained to me. It does cause one to have some reservations concerning their motives.

118. Nevertheless, that is the reality of the situation and it must be faced up to.

121. Expressed in broad terms, it is said by counsel for Ronay that the right of a member of a company under s.249F to call a general meeting of the company is an independent statutory right to be exercised free of interference from the board of the company, and that the Articles of Association of that company cannot displace or modify that right.

124. Counsel for Pinnacle, on the other hand, contended that the right given to a member by s.249F is the right to call a meeting of the company and nothing more; that once the meeting is called the articles and other provisions of the LAW apply in all respects regardless of who called the meeting.

127. As there is nothing in the Corporations LAW concerning the postponement of a meeting called under s.249F, one then looks to the articles of the company to see if such a provision exists in them. If it does, then it may be exercised in the manner provided. Further, there is nothing in article 12.5 which limits its operation to meetings convened by the board, the article is expressed to apply to, I emphasize, any general meeting.

130. The conclusion I have arrived at in the matter is that the power given to directors of a company to postpone a meeting for a period of not more than 21 days, albeit one called pursuant to s.249F of the LAW, does not in any way affect the right of members to call such a meeting, nor does it modify that right.

133. In my opinion article 12.5 could be said to be procedural in nature in that it simply gives the directors of a company the power to ensure that a general meeting of a company called by minority shareholders, as is clearly the situation in the present case, is held at a time and place convenient to the majority of the members of the company. Indeed, s.249R specifically provides that a meeting of a company's members must be held at a reasonable time and place. Of course, the power to postpone must be exercised bona fide, and for the benefit of the members not the benefit of the directors.

136. There is nothing on the face of the material before me which satisfies me that the directors of Pinnacle have acted in any way which could be described as inappropriate.

139. They were faced with the situation that as matters stood before they postponed the s.249F meeting, the members of Pinnacle were being required to give consideration to two separate general meetings, some 14 days apart, to consider the same subject matter. I would have thought that common sense, if nothing else, dictated that the meetings be held on the same day at the same location. Regrettably, sometimes common sense plays little part in resolving such disputes.

142. My answer to the first question posed, therefore, is yes, so long as the decision of the directors to postpone the meeting is bona fide and made in the interests of the members of the company as a whole.

148. In the circumstances I direct that the further hearing of the application in proceeding No. 6296 of 2000 be adjourned to a date to be fixed subsequent to the meeting on 15 August 2000.

151. The costs of the application in that proceeding are reserved.

154. In proceeding No. 6333 of 2000, counsel for the defendants has indicated that if those were to be my findings he would give an undertaking on behalf of the defendants in that proceeding that pending their election as directors of Pinnacle at one or other of the general meetings to be held tomorrow, they would not hold themselves out or represent that they are directors of Pinnacle or purport to act in any way as directors of Pinnacle.

157. Mr Rodbard-Bean, would you be good enough to give that undertaking, please.

163. HIS HONOUR: That undertaking having now been given I adjourn the further hearing of the application for injunctive relief to a date to be fixed after 15 August 2000.

166. Again in that proceeding I reserve the costs of the application today.

169. In each case I will refer the proceeding to the judge in charge of the Corporations List.