The defendant and the two hundred persons who have joined with him in requisitioning a general meeting are unhappy about some aspects of the current administration of the plaintiff. It is unnecessary to go into the details of that unhappiness. They, accordingly, tendered a requisition for general meeting in accordance with the pro forma which is appendix A to these reasons.

The requisition was submitted to the company on 17 April 1998. The board on 28 April 1998 indicated that it would not convene the meeting to deal with objects 1 to 4 and later on the attempts to convene the meeting for the purpose of 5 miscarried. However, the plaintiff company today takes the position that as none of the items mentioned in the requisition were properly set out, the board could not be said to have failed to have convened the meeting under s 246(1) of the Corporations Law. Accordingly, there is no right in the requisitionists to convene a meeting under s 246. Indeed, at an interlocutory stage of these proceedings orders were made by consent that any meeting purportedly convened would be adjourned.

The current matter is complicated by a few factors. One is that on 1 July 1998 the amendments to the Corporations Law passed by Federal Parliament a couple of days earlier came into force. I refer in more detail to this problem in appendix B. With one or two exceptions this does not actually affect the present case because it is agreed that the vital date for considering the rights of the parties is 25 May 1998, which was the last day on which the directors could fulfil any duty under s 246(1).

Company law requires that decisions of a corporation be made by the proper organ of the corporation. Usually the constitution of the company vests the calling of meetings and matters of that nature in the board and the members have no right to be involved in that matter. The present constitution does not seem to say anything contrary to that general proposition. However, there has been a right in the members in England which comes from the Companies Clauses Act 1845 for a number of requisitionists to demand that a meeting be held to deal with the objects set out in the requisition. This power did not seem to come into New South Wales law until 1936 because of the wide form of s 248 of the Companies Act, 1899. If the board fails to comply with the requisition then the requisitionists can proceed to convene the meeting themselves. It is this right that is now included in s 246 of the Corporations Law.

There have been a series of cases dealing with the extent of the rights and duties under s 246 or its predecessor, but strangely the cases do not cover the field.

One of the first and the most significant case is Isle of Wight Railway Co v Tahourdin (1883) 25 Ch D 320. That case dealt with a requisition that there be a committee to inquire into the general management of the company with a view to the committee preparing a report whereby any directors who were adversely reported on by the committee might be removed.

At first instance Kay J held that there was no obligation on the directors to comply with the requisition because both of the matters referred to were ultra vires the general meeting and he granted an injunction to prevent the requisitionists convening a meeting themselves. On appeal this decision was reversed. The Court of Appeal approached the matter by saying that one needs to deal with the substance of what was put in the requisition, not the exact form, and that it was a very hard thing for a board to prevent a meeting being held of the members of a company to debate a matter of concern to the prescribed number of members who have requisitioned the meeting.

Mr Weepers, for the company, says that the way in which this sort of matter should be approached is that one should look at the substance of what the requisitionists indicate in their requisition and then apply the rule that the members of the board are entitled to decline to act on a requisition, the substance of which is to do something which is ultra vires. I may verbal him slightly, but I thought that he submitted that "ultra vires" meant not only that which was prohibited by the Corporations Law, but also matters which were so vague as to make the resolutions unworkable.

There have been a series of cases where the court has held that the requisition in question does not state an object which is intra vires and accordingly an injunction has been given against the requisitionists. The present case is different in that there are five objects specified in the requisition. The initial question arises as to how they should be dealt with if some are good and some are bad. It is now conceded that object 3 is not one which can be pressed. I believe, for the reasons that I will give shortly, that object 5, which carries object 1, also has not been validly specified. The question remains if 2 and possibly 4 are valid requisitions whether the board was obliged to call a meeting to deal with those only.

So far as research of counsel and my own research has disclosed there is no case which precisely covers this question. However, in Turner v Berner [1978] 1 NSWLR 66 the directors did receive a requisition containing more than one requisition and their attitude of disregarding the invalid parts and convening a meeting for what they considered were the valid parts appears to have the approval of Needham J. I think that is sufficient guidance for me to say that if parts of the requisition are valid and parts are not then the directors are obliged to convene a meeting for the valid parts.

The next question is what is meant by "stat[ing] the objects of the meeting" within the meaning of s 246(2) of the Corporations Law. It seems clear that where the object is not the passing of a special resolution, that fair liberty is allowed to the requisitionists in stating the substance of what they want the meeting to consider. That is in accordance with the general line of authority, which says that in convening meetings directors must give notices that comply with the verse in Habakkuk 2:2, which says that "who runs may read". All that has to be done is to indicate clearly what it is that is to be decided, not necessarily to provide the exact text of the motion.

However, other authority says that where what is being put to the meeting is that there be a special resolution or, indeed, any resolution, then it is necessary to put precisely the text of the resolution; see NRMA v Parker (1986) 6 NSWLR 517 at 521; Queensland Press Ltd v Academy Instruments No 3 Pty Ltd (1987) 11 ACLR 419, 422 and Windsor v National Mutual Life Association of Australasia Ltd [1992] FCA 123; (1992) 106 ALR 282, 292.

Object 2 to remove the auditor is a resolution and the exact text is not specified, but it seems to me that it is self-evident from the requisition that what is required is a resolution in exact form. The words "but without prejudice" to the end are odd, but I think that the argument of Mr Oakes SC, for the defendant, is correct when he says that they are merely surplusage. This is because, even if they were not there, the present auditor could be renominated by a person entitled to nominate an auditor.

Object 4 to appoint an auditor is said to be bad because it deals with an appointment for a year ending 30 June 1998 and this is contrary to the scheme in s 327(4) of the Corporations Law. I think that is technically correct, but once an auditor has been removed then the company has the right under s 327(5) of the Corporations Law to appoint an auditor, indeed may have a duty to do so. Accordingly, it appears to me, subject to the argument of Mr Weepers as to the true substance of object 2, that object 2 was a proper requisition.

Mr Weepers said that if one looks at the objects as a whole one can see that there is a scheme not in accordance with the Corporations Law to alter the tenure of the auditor. The scheme is that instead of the situation appertaining under s 327(4), which provides that an auditor may be appointed to hold office until lawfully terminated, there are now to be annual appointments of auditors with restrictions on who is to be eligible to be reappointed, and that object 2 is simply part of that scheme.

There is a lot of commercial sense in what Mr Weepers says. However, I consider that if directors who receive requisitions are permitted to make that sort of value judgment and if the approach submitted by the defendant to the construction of documents tendered by the requisitionists was correct, boards of directors would get into the same problems that Mr Weepers is seeking to avoid in his argument under object 5. It seems to me that one must take the objects stated on their face without looking at the political agenda or innuendo or consequence of how each object may interact with one other.

Accordingly, it seems to me that object 2 is a proper requisition for a meeting.

Object 3 is not pressed. Object 4 I think is technically bad, but the company will need to do something if a resolution to carry out object 2 is carried by the meeting. Object 1 has to be considered together with object 5.

The matter has been argued as an expedited matter and I have not had time to conduct as much research as I would have liked. It is also necessary for me to conclude these reasons within the next ten minutes.

It is very common when companies are adopting new Articles of Association to circulate a notice of meeting specifying that it will be proposed as a special resolution to amend the Articles of Association in accordance with the document that is either enclosed or identified in the notice of meeting. In ninety-nine cases out of one hundred the members will accept or reject the relevant document as a whole package. It is surprising that neither counsel nor myself have been able, in the time available to us, to find any case where the question as to what happens if part of the package is good and part of the package is bad is a live issue.

This question is intertwined with another question and that is how far it is competent for the meeting to deal with amendments to special resolutions. For instance, is it possible for a member at the meeting to move that the proposed amendment to article 42(3) be accepted only with the addition of certain words?

There is some authority to the effect that the only competence of the meeting is to pass the special resolution in the form in which it is submitted to the meeting; see Re Moorgate Mercantile Holdings Ltd [1980] 1 All ER 40; [1980] 1 WLR 227. That case was distinguished by the Court of Appeal in England in Re Willaire Systems plc [1987] BCLC 67 at 76.

However, Moorgate was actually followed after the decision in Willaire by Harman J in Re Swindon Town Football Co Ltd [1990] BCLC 467, though without reference to the Willaire case.

Moorgate does not seem, with respect, to be in accordance with Australian authority. One New South Wales authority which was distinguished in Moorgate is In re The Picturesque Atlas and Publishing Co Ltd [1892] NSWLawRp 16; (1892) 13 LR (NSW) (Eq) 44. Another authority which was not referred to is Daly v Gallagher [1925] St R Qd 1.

There are also some English authorities which are inconsistent with Moorgate, some were distinguished by Slade LJ in Moorgate and some were not referred to by his Lordship, which show more precisely the width of the meeting's power to deal with amendments. For instance, on one side of the line is In Re Teede and Bishop (Ltd) (1901) 17 TLR 282. There was a notice of meeting for the consideration of the voluntary winding up and reconstruction of a company but at the meeting the members purported to pass merely the winding up. Cozens-Hardy J held that that was not valid because a shareholder receiving the notice might not trouble to attend the meeting thinking that all that was being involved was a reconstruction.

On the other side of the line is Torbock v Westbury [1902] 2 Ch 871 where notice was given of a resolution that directors receive remuneration of forty percent of the profits of the company, the meeting amended this to twenty percent and Swinfen Eady, J held that it was duly passed. The reason for the difference is that an amendment cannot go beyond the matters to which the shareholders' attention has been drawn in the notice of meeting, but if the general substance of what is in the notice of meeting is not affected by the resolution as passed, or something lesser is proposed by way of amendment, then that is quite in order. I believe that it is appropriate to draw an analogy with parliamentary procedure. An order for leave to introduce is obtained when introducing a Bill. Amendments may be made to the Bill during Committee so long as they are within the order for leave, but not otherwise.

Horsley's Meetings Procedure Law and Practice 3rd ed Butterworths Sydney 1989 at p 489 says

"Amendments may be made to a special resolution of which notice has been given provided that they do not alter its nature, but if the amended resolution would not fall within the notice it would be invalid."

I think despite Moorgate's case that is a correct statement of the Australian law.

However, as Mr Weepers points out, these considerations are to some extent irrelevant. What the board must do when it is handed a requisition of this nature is to consider seriously whether the requisition falls so short of the requirements of the Corporations Law that it should deny the requisitionists their statutory right to have a meeting convened at the company's expense to consider the matter. The board will be so justified, it seems to me, when a package of matters which are put up to them contain a significant number of items which are ultra vires the meeting.

I do not think that the board would be justified in refusing to call a meeting if there were matters which could be cured by a simple procedural amendment at the meeting. For instance, if the only problem with a proposed amendment to article 47 was that it required a director to relinquish his right to participate in the board's proceedings, and that could be cured by making a provision that he not attend any meetings, then it would seem to me that the duty of the board would be to put the matter to the meeting so that it could consider it both in the form in which it was submitted and any amended form. Indeed, a member of the board might even move the required amendment to make sure that the company's meeting was kept on the right track.

Time does not permit me at the moment to deal with each of the objects. What I will do is add in appendix B to these reasons my view on each and every one of them.

In my view, on considering all the matters as a whole the resolution generally was so defective and the requirements made by the requisitionists sufficiently defective so as to justify the board in not convening the meeting to deal with object 5. There has, accordingly, been no failure to convene a meeting, and thus no right for the requisitionists to convene a meeting to deal with object 5. If necessary an injunction should go if there is no threat to do so.

This means that the board should have convened a meeting to deal with object 2. Mr Weepers asked that if I found that the requisitionists were entitled to something they did not get because the meeting was not convened I should pursuant to s 1322(4) of the Corporations Law extend the time for the board to comply with its obligations. However, the defendant is only prepared to agree to this if the requisitionists' meeting is held before the annual general meeting.

This point was made before it was known I would not order a meeting to consider object 5.

It seems to me that as there is no agreement and as the requisitionists may or may not choose to go ahead with a separate meeting to deal with object 2 and might prefer to put in a fresh requisition to deal with the amendment of the Articles of Association in some repackaged form, it is better not to extend the time and leave the requisitionists, if they wish, to exercise their statutory right in respect of object 2.

A question arises as to the validity of the proxy to be used at the meeting. A sample proxy appears as appendix C. However, I will reserve consideration of that question and include my reasons in appendix D to these reasons.

I stand the matter over to 11am on Friday 31 July 1998 for short minutes.

Exhibit CJM 7 to Mr McGrath's affidavit sets out the details of the amendments proposed to the Articles of Association by the requisitionists. The document consists of 20 pages and takes the form of setting out the existing article, striking through the words proposed to be deleted and inserting new words in bold italics. The plaintiff takes objection to the following articles only 14(1), 21(h), 28(3), 40(8), 42(3), 42a(3), 47(4)(a), 47(6) and 52(1). I will deal with each of these in turn except instances where two or more can be dealt with together.

The present article 14 provides that the annual general meeting shall be held before the conclusion of September in each year at such time and place as may be prescribed by the board. The proposed amendment is that the annual general meeting shall be held before the end of October with the time prescribed by a resolution of a monthly members' meeting or, in default of such a resolution, by the board. There are ancillary provisions.

Mr Weepers says that this article is so vague as to be unworkable. Mr Oakes SC on the other hand, says that the mere reason that there are vagaries in the article is no reason why it should not be put to the meeting. However, he does agree that it would be advisable to have any decision of a monthly members' meeting confirmed at a board meeting. He puts that the article could be amended on the floor of the meeting.

I agree that if the resolution proposed as a special resolution were a series of small packages of amendments appropriately worded, an amendment to deal with even important matters of detail could be considered. This does not alter the nature of the resolution being proposed.

The question if the resolution resulted in an article which was unworkable that resolution should still go to the meeting is one which requires more thought.

A basic principle of corporation law is that generally speaking the members have the right to consult about any matter which affects their corporation. This principle would tend to support the proposition of Mr Oakes SC. However, the cases show that courts will injunct requisitionists from convening meetings where the proposed resolution is beyond the competence of the general meeting. Thus, directors are excused from convening a meeting to deal with a question which is one for the directors and not one for the general meeting, see NRMA v Parker supra at page 521. By parity of reasoning, one would think that if the article proposed is so vague as to be completely meaningless using the strict test applied to commercial documents in cases such as Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429, the resolution would be in the same plight. However, where there is merely some vagueness about the resolution it would seem to me that it would be the duty of the directors to put the matter to the meeting.

I would add the rider that where a series of amendments to the articles are of borderline validity, then the total effect of the requisition may be such as to entitle the directors to disregard that requisition.

In my view, had article 14(1) stood alone, the problems with it could be cured on the floor of the meeting.

Proposed articles 21(h) and 52(1) belong together. These require an auditor to be reappointed at each annual general meeting.

Mr Weepers says that under the Corporations Law auditors hold office until death or removal or resignation. Accordingly, articles requiring an annual appointment run contrary to the Corporations Law, s 327(4).

Mr Oakes SC says that one must read s 327(4) in the light of the general rule of construction set out in s 109ZB(8) of the Corporations Law, that is, that a power to make an appointment to an office includes a power to appoint a person to act in the office until the expiration of 12 months after the office or place was created or became vacant.

In my view s 109ZB(8) only applies to acting appointments and not to permanent appointments. The section does not at all affect the provision of s 327(4) which altered the law so far as auditors were concerned. Traditionally, auditors were appointed on an annual contract; see HG Palmer (Consolidated) Ltd v MacBride Hinton & Co (1967) 87 WN (Pt 1) (NSW) 83, 86. There was a deliberate policy, it seems to me, in enacting

s 327 to alter this and an article reverting to the old system runs contrary to the Corporations Law and is not one which can be passed by the meeting. Thus the directors need not convene a meeting to consider this matter.

Article 28(3) deals with the form of proxy. It is a new provision and reads as follows:

"(3) A proxy in favour of "Chairman of the Meeting" (other than one which identifies the Chairman by name), acts only as an instruction to vote in accordance with the specific written instructions of the appointor as set down in the instrument of proxy and must not be construed so as to authorise the Chairman to vote on behalf of the appointor on any matter not specified in the instrument (including procedural motions) unless otherwise stated."

Mr Weepers says that this restricts the statutory rights to appoint a proxy. At this point I have to be careful because the law that will be in effect when the meeting would be held is, as events have turned out, different to what it was at the time of the requisition. However I will deal with both situations as best I can.

Before 1 July 1998, the right to a proxy was set out in s 250 of the Corporations Law. That section, so far as public companies such as the plaintiff are concerned, provided that there was a statutory right to appoint a proxy to attend and vote instead of a member which proxy was to have the same right as the member to speak at the meeting and to vote on a poll.

Section 249X, which replaced s 250, came into effect on 1 July 1998 and gives a statutory right to appoint a proxy in the same terms as the superseded section. Section 249Y then sets out the right of a proxy in similar terms to the old s 250 and ss 250A to 250C further deal with proxies. Section 250A provides that a person may give a standing proxy.

There is no right at common law to appoint a proxy: Harben v Phillips (1883) 23 Ch D 14, 35; Woodford v Smith [1970] 1 WLR 806, 811. I should note, however, that the appointment of proxies has been going on for at least 150 years; see eg Monmouthshire Canal Navigation Co v Kendall (1821) 4 B & Ald 453; 106 ER 1003 (where counsel said the word "proxy" was just an abbeviation for "procuracy" (ER 1005). Indeed, in England, from at least 1815, stamp duty was specifically imposed on appointments of a proxy.

Thus, any right to appoint a proxy must be found in the constitution of the company or in the Corporations Law. Under s 250(2), a proxy had the same rights to vote on a poll as the member. However, under s 249Y(1)(b), the proxy's right is expanded in that he or she can vote otherwise than on a poll (unless the company's constitution otherwise provides), but it also provides that a proxy has a right "to vote (but only to the extent allowed by the appointment)". This suggests that it is possible for a proxy to limit the ambit of the proxy's authority by the specific terms of the appointment. Indeed, it has always been possible in the proxy itself, but not otherwise, to limit the proxy's authority in a way which will need to be noticed by those conducting the meeting: R v Kelk [1840] EngR 253; (1840) 12 Ad & E 559; 113 ER 924.

I should remark that this sort of appointment would make it very very difficult for company secretaries and those chairing meetings because they would need to take great care to see that not only were the proxies in order, but to note specifically the limitations of each proxy holder.

It may be that as at today's date such an article would be valid. However I must look at the matter as at 25 May 1998 under s 250.

It must always be remembered that a proxy is just an agent to vote for the member. As such an agent, the proxy has fiduciary duties. In Rice & Hutchins Inc v Triplex Shoe Co 147 A 317, 322, (1929) (Del), Wolcott, Ch said in the Delaware Supreme Court, "A person acting as proxy for another is but the latter's agent and owes to the latter the duty of acting in strict accord with those requirements of a fiduciary relationship which inhere in the conception of agency. If directors who are the agents of the stockholders are invested with a fiduciary character which inhibits them from passing judgment where their own peculiarly personal interests are involved as was held in the Lofland case (Lofland v Cahall 118 A 1 (1992) (Del)), I am unable to see why on principle the same sort of inhibition is not imposed on those who act as proxies for a stockholder."

Thus a proxy holder as agent cannot bind his or her principal by an act done from an interest adverse to that of the stockholder; see Ballantine on Corporations revised edition (Callaghan & Co Chicago 1946) p 413. The decision in the Rice & Hutchins case was affirmed by the Delaware Supreme Court and reported as Triplex Shoe Co v Rice & Hutchins Inc 152 A 342 (1930); 72 Am LR 934.

Although there is a statutory right under s 250 to appoint a proxy, I can see no attempt by the legislature to limit the ordinary rights of a person to limit the rights of the proxy or indeed to dispense with fiduciary obligations. It may be as I have said that there are problems in that proposition for those who need to police the proxy system at a large meeting and there may be some problems in relying on fiduciary duties where ostensibly the proxy has authority but is voting in his or her own interest in breach of the fiduciary obligation. However neither of those matters affect the principle. I cannot see why the constitution of a company cannot provide specifically for limitations on the appointment of particular proxies if the company thinks it desirable.

Mr Weepers cited Scullion v Family Planning Association of Queensland (1985) 10 ACLR 249 to support his submissions. However, it is clear from that decision that one can regulate the right to appoint a proxy in articles so long as the regulations do not extend to frustrating the statutory right to appoint a proxy. I do not consider that there is frustration in the instant case.

Accordingly, I would have held that, standing alone, the proposed amendment in article 28(3) is in order.

Article 40(8) provides for an electoral officer to be involved in elections, such officer to be elected at the annual general meeting of each year (new article 37(b)) and that such electoral officer, if he or she forms the opinion that there has been a serious breach of the articles such that a candidate for election as director has gathered an unfair advantage, " may, at her or his absolute discretion, disqualify the candidate or candidates so advantaged and reassign any votes in favour of that candidate or those candidates to the voters' next preferences."

Mr Weepers says that it is not possible to confer on a nominated person the power to disqualify candidates from an election.

Mr Oakes SC says that really the new article does nothing more than introduce a new formula for dealing with a problem that is currently dealt with by fiduciary duties. If there is such unfair conduct at an election for a board of directors then the court will declare the election null and void.

There are many occasions where a company may by its constitution or otherwise legitimately confer power on a third party, at least with the consent of that third party. As presumably the electoral officer would consent to appointment, I can assume consent in the instant case to the duties that would be imposed on the electoral officer by article 40(8).

The method of election of a board of directors is a matter for the constitution of each corporation. As is pointed out in the 6th ed of Gower's Principles of Modern Company Law (Sweet & Maxwell London 1997)

p 180, there is nothing to prevent a company by its constitution providing that a third person shall appoint all its directors. Indeed, in the case of a company where a government has a controlling interest, such a provision is common. The appointment of directors is merely a matter for the constitution of each company and is not a matter that is dealt with by the Corporations Law. I can see no difficulty in principle with a company adopting a provision in its constitution which enables a third party to disqualify candidates. If that party misused his or her power, then there would be fiduciary obligations which could be policed.

There is quite a long line of American authority dealing with this type of article and the cases favour them. This type of article was upheld and the rights defined as long ago as Commonwealth v Woelper 8 Am Dec 628 (1819) (Penn). In that case, there was included in the constitution of a corporation formed to service a Lutheran Church congregation a provision for inspectors to police election of churchwardens. Taylor, CJ said at page 631, "The inspectors do more than receive and count the votes. But it is said the inspectors are judges, and may decide the election as they please, by the admission or rejection of votes. Their office is ministerial rather than judicial. The charter declares who may vote and the inspectors are bound by it. To be sure, they must in some cases exercise their judgment when a question arises on the construction of the charter. But so must every ministerial officer, when a question arises on the extent of his powers. If an inspector refuses a vote, the injured person is not without remedy."

In Umatilla Water Users' Association v Irvin 108 P 1016 (1910) (Ore), a corporation's constitution appointed the president as inspector of elections. The court held that the inspector's decision could only be challenged in the court, not reversed by the meeting.

In Young v Jebbett 211 NYS 61 (1925) three judges of election were chosen to superintend the voting for directors of the Frontier Mortgage Corporation. At page 66, Crouch, J giving the judgment of the New York Supreme Court, Appellate Division, Fourth Department affirmed that such "judges" were ministerial officers, though vested with discretion to bend the strict rules in the interests of securing a full and fair election. See also In re Canal Construction Co 182 A 545 (1936 ) (Del); Atterbury v Consolidated Coppermines Corp 20 A (2d) 743, 748 (1941) (Del) and Re Giant Portland Cement Co 21 A (2d) 697, 702 (1941)(Del) as other instances of review by courts of inspectors' decisions.

There does not appear to have been any case where the legality of the practice of appointing such an inspector has been challenged. Indeed in Securities and Exchange Commission v Transamerica Corp 163 F (2d) 511 (1947), where Biggs, J giving the decision of the Circuit Courts of Appeals, Third Circuit, said at page 517, "Stockholders are entitled to employ watchment to eye the guardians of their enterprise, the directors."

In Australia, it has not been the practice to have returning officers in company elections. However, the same result is obtained by having scrutineers and by empowering the chairman of the meeting to make declarations of elections which are sometimes said to be conclusive. Illustrations are Ryan v South Sydney Junior Rugby League Club Ltd (1974) 3 ACLR 486, where the role of scrutineers was considered and Industrial Equity Ltd v New Redhead Estate & Coal Ltd [1969] 1 NSWR 565 and ANZ Nominees Ltd v Allied Resources Corp Ltd (1984) 2 ACLC 783 as to the powers of chairmen.

I consider it to be clear from the authorities that people such as the official sought to be empowered by proposed article 40(8) may be appointed and may make determinations which affect rights. Within certain limits, these powers cannot be challenged, outside those limits, the court may intervene. What those limits are have purposely never been definitively stated, nor could they be.

I was concerned during the argument of this case that whilst there was an implied contract between the members who were parties to the constitution, there would be no contractual rights between the electoral officer and the members. I consider this point is still valid, but on consideration, do not really see how it affects the validity of this particular article. Accordingly, I would have allowed this particular article to go forward to the meeting if it were in a package of its own.

It is agreed on both sides that article 42(3) is not a proper article. I need not consider it save to note that its presence goes to invalidate the whole package of amendments.

The next matter is the validity of proposed new article 42a(3). This provides that a director who fails to declare a material interest may be dealt with under the disciplinary provisions of the articles, and, subject to the Corporations Law, may be removed from his office as director.

Mr Weepers says that the reference to the removal of the director from office is ambiguous because the clause fails to state the procedure. It is not clear whether that procedure is what is contained in article 42(2)(b) or the Corporations Law or some other procedure. Mr Weepers also says the fact that the right of removal is expressed to be subject to the Corporations Law does not necessarily import the statutory procedure for removal and he refers to the decision of Ipp, J in Browne v Panga Pty Ltd (1995) 17 ACSR 75, 86.

Mr Oakes SC does not argue strongly for this article but says that it was just one of those articles which could easily be crossed out leaving the rest of the package in place and its presence was no reason for the directors not to call a meeting.

I take the view that this article was probably so vague as to be one that should not have been put to the meeting.

I now turn to address the validity of article 47(4)(a). In essence this new article provides that a director may appoint an alternate for up to four consecutive meetings if he has been granted leave of absence, but otherwise where a director expects to be absent for a period exceeding four months he must either resign his office or relinquish his right to participate in the board's proceedings for the whole of that period. Mr Weepers says that the requirement to relinquish the right to attend board meetings, whatever that might mean, is inconsistent with the duties of a director to monitor, guide and manage the affairs of the company and refers to Daniels v Anderson (1995) 37 NSWLR 438.

I am not too sure whether that comment really goes to the core of the matter. If a director is outside Australia or otherwise unable to attend board meetings for a significant period of time, then his mere absence may breach his duty to monitor, guide and manage. However, I agree that the concept of relinquishing a right to participate or compelling a director to resign goes beyond what Articles of Association can require. The article could require that the office be declared vacant if certain things happened, but it is difficult to see how it can go further than this. If there was only the alternative that the director resign, then it may be a mandatory injunction could be secured by the company to force a resignation, but having the two alternatives of resignation and relinquishment would seem to make this almost impossible.

Mr Oakes SC does not seek to support the article in its present form, but says it is one which could be amended on the floor of the meeting. I think it possibly could be amended by referring to an office becoming vacant on the happening of an event, but I also consider that the directors when proffered an article of this nature were under no duty to redraft it and, in conjunction with other infelicities of drafting, were entitled not to call the meeting.

The next attack is on article 47(6) which provides for a circular resolution signed by the majority unless directors representing not less than one-third give notice in writing to the secretary that they object to the resolution. Mr Weepers says that this is quite unworkable because there is no time by which the dissenting directors must give notice. Thus one could have the situation where on 1 August there are seven directors and four sign a resolution, but it is not circulated to the remaining directors for a week and then three days later two directors object. In the meantime, no-one knows the status of the resolution. Again Mr Oakes SC says that this could be amended on the floor of the meeting to insert a date. I think that is probably right, but the same conclusion must be reached as was reached with article 47(4)(a).

A photostat of the form that Mr Gadd is sending out to members on behalf of the requisitionists is Appendix C. It will be noted that there are pre-printed ticks against motions 3 and 4.

Article 28 of the Articles of Association in its present form provides that instruments of proxy must be in the form determined by the board but the form must enable the member to specify the manner in which the proxy must vote in respect of a particular transaction (article 28(1)(a)) and leave a blank for the member to fill in the name of the person primarily appointed as proxy (article 28(1)(b)). The article sets out a form to be used pending contrary determination by the board.

Mr Weepers submits that the form proposed by Mr Gadd does not comply with the prescribed form in that the notes have been largely omitted and the section where the member indicates whether he or she is in favour of or against the resolutions has been inserted. He further says the form does not comply with article 28(1)(a) in that it does not enable the member to specify the manner in which the proxy must vote on resolutions 3 and 4 because of the pre-printed tick. Furthermore, it does not comply with article 28(1)(b) in that there is no blank for the member to fill in the name of the person primarily appointed as proxy as Mr Gadd's name has been pre-printed. Finally, given the fact that the proxy forms were pre-printed before the lodgment of the resolution, they do not state the proposed resolutions to which the proxy form relates.

Mr Oakes, SC puts that the prime purpose of s 250 of the Corporations Law is to facilitate people being represented at a meeting by a proxy and that a benevolent construction of proxies must be put in place or else the intention of the proxy giver and the intention of the legislature would be frustrated. He refers to Dominion Mining NL v Hill [1971-73] CLC 40-021 where LW Street J said at pp 27,219-20 in the context of a meeting proposed to be called by requisitionists, "The immediate authority conferred by the proxy is to vote at meetings. It was sought in terms which would enable the proxy giver to `be represented at the extraordinary general meeting to be announced.' In my view it is legitimate to construe these words with benevolence, as conferring upon Mr Hill, if necessary, authority to represent the proxy giver in and about the convening of the meeting, if such a course should become necessary as a prerequisite to enabling the proxy giver's proxy to be used by Mr Hill at the meeting contemplated in the circular. To hold otherwise would be to frustrate what can readily be seen to be the intention of the givers of these proxies." See also Clifton v Mount Morgan Ltd [1940] NSWStRp 5; (1940) 40 SR (NSW) 31, 52.

I respectfully agree that that is the right way to approach this matter. However, it does seem to me that, bearing in mind that subject to the legislation it is the articles which confer the rights on a proxy, one must pay fairly close regard to the articles when determining whether a proxy form is valid.

Despite the benevolent construction that must be given to proxies it must also be remembered that although the appearance of the proxy system is to enhance democratic rights, in actual fact it operates in the reverse way. This is because proxy votes are often more significant than the votes of people in person so that arguments at a meeting are no longer considered and weighed because the voting control of the members is to a large degree managed by those in control of the corporation exercising their power to send out forms of proxy soliciting shareholders' signatures in favour of the existing management; see eg Ballantine on Corporations p 412.

Although paras (a) and (b) of article 28(1) on their true grammatical construction only deal with the matters which are mandatory in any form the board prescribes, the total form of the article shows that the constitution requires a proxy form to have a blank for the person to be primarily appointed the proxy. Appendix C fails in this regard.

I am less sure about the pre-printed ticks in favour of motions 3 and 4. On the one hand it would be open for the proxy holder merely to cross out the whole of the section containing the boxes and leave the proxy to vote as he thought fit. It would also be possible to white-out the pre-printed ticks, draw in a box under word "against" in respect of motions 3 and 4 and place a tick in those. On the other hand, the dynamics of company meetings and proxies strongly militate against anyone doing either of these things. After considerable thought I believe that the word "enable" in article 28(1)(a) should be read as synonymous with "facilitate" so that a form which makes it harder for a shareholder to indicate his or her choice is not one which enables the shareholder to specify that choice. Accordingly, in my view, a form with pre-printed ticks against certain resolutions is not one which carries out the right to appoint a proxy set out in the company's constitution.

Accordingly, in my view the proxy form set out in Appendix C is not a valid form of proxy.