152 There was a controversy which does not arise under the Corporations Act 2001 (Cth), s 181(1), as to whether or not s 232(2) of the Corporations Law (Cth) required a consciousness that what was being done was not in the interests of the company (Marchesi v Barnes [1970] VR 434) or, whether the provision was breached where a director exercised powers in a subjectively honest way but for a purpose which the court determined was an improper one (Australian Growth Resources Corp Pty Ltd v Van Reesema (1988) 13 ACLR 261). On my findings, the defendant asserted when confronted with the unsigned poll paper by Mr Hullah that he was acting in the best interests of the organisation. I am not bound to accept that assertion of the defendant and I reject it. I have found that the defendant deliberately omitted to sign the poll paper. He had the deliberate intent to disenfranchise the members who had appointed him proxy and required him to vote against resolution 6 and he was seeking, deliberately, to over-ride the intent of the members of NRMA which he knew to be against the passing of resolution 6 as a special resolution. He had the necessary consciousness that what he was doing was not in the interests of NRMA and his action was deliberate conduct in disregard of that knowledge sufficient to bring him within the Marchesi principle. I reject the submission that the conduct of the defendant was not within the scope of his office as a director of NRMA for the purpose of s 232(2).
149 In order for the respondent to prove a breach of s.232 in the proxy matter, it had to show that the alleged dishonesty of the appellant was in the exercise of his powers or the discharge of the duties of his office of director (s.232(2)) or that he made improper use of his position as a director to gain an advantage to himself or another, or to cause detriment to NRMA (s.232(6)). It was not alleged, nor in our opinion could it be, that he was an officer of NRMA in his capacity as chairman, as distinct from his capacity as director.
150 The primary judge was correct to say that a director does not cease to be a director because he or she chairs a meeting of members; and indeed the circumstance that a director is acting as chairman or in any other role does not necessarily mean that he or she is not at the same time exercising a director's powers or discharging a director's duties. But he or she might not be doing so: not everything a director does that affects his or her company is an exercise of a director's powers or a discharge of (or even governed by) a director's duties.
151 In particular, in our opinion the primary judge was wrong to make the general assertion that "The failure of any director appointed as proxy to vote in accordance with the instructions of the member appointing him or her is in breach of duty qua director".
152 A director who accepts appointment as a proxy will, as agent for the member who made the appointment, have the fiduciary duties of an agent towards the member as principal. If the member has directed the director as proxy to vote in a particular way, then generally those fiduciary duties will require the director as proxy to do so, although there may be some exceptions to this. In addition, the director is subject to statutory requirements, such as those of s.250A that we have considered, but only in his or her capacity as proxy, not as a director. Further, these duties and requirements are not duties owed to the company: the fiduciary duties are owed to the particular member who appointed the director as proxy, and the statutory requirements do not appear to give rise to any duty owed to any legal entity other than that member and/or the State.
153 Indeed, if the member directs the proxy/director to vote in a way that the director believes is not in the interests of the company, the director will generally, as the member's fiduciary, be obliged to vote in that way; and generally, this will not be in breach of the director's duties to the company. Even in voting their own shares, directors do not generally owe a duty to act in the interests of the company. In North-West Transportation Co. Ltd. v. Beatty (1887) 12 App.Cas. 589, the Privy Council found to be legitimate the narrow approval by shareholders of a contract between a director/shareholder and the company to buy a boat from him, in circumstances where most of the votes cast in favour of the resolution were those of the director/shareholder himself. The Court found that all shareholders, including a majority shareholder, are entitled to vote in the manner they wish, provided it is not unfair, improper, illegal, fraudulent or oppressive towards those shareholders opposing the resolution: see Ford, Principles of Corporations Law, 11th Ed. at 548. As there noted, that decision has not been departed from in Australia, although there may be circumstances in which a director/shareholder may come under a fiduciary duty to other shareholders (see Brunninghausen v. Glavanics (1999) 46 NSWLR 538), and there have been some statutory qualifications to the principle.
154 But the general principle is that directors voting their own shares can vote in their own interests, and are not bound by their duty as directors to act in the interests of the company as a whole. In our opinion, the position must be similar in relation to a director voting as proxy on the instructions of other shareholders, in the sense that the director can (and as a fiduciary should) vote as directed by those shareholders, and in doing so is not subject to a duty as director requiring that he or she vote in accordance with what he or she believes is in the best interests of the company. Thus, although there may be circumstances in which a director acting as proxy is discharging a director's duties, this is not necessarily the case.
155 In some circumstances, it may be obvious that what a director does is an exercise of a director's powers or a discharge of (or otherwise subject to) a director's duties; for example, where a director does something as part of the management of a company's commercial operations. However, for the reasons given in pars[152]-[154], in this case it was not obvious; and where this is so, in our opinion, if a remedy is claimed in reliance on an allegation that what a director did was an exercise of a director's powers or a discharge of (or otherwise subject to) a director's duties, then to avoid surprise the basis on which this is alleged must be made clear prior to the hearing. Generally this should be done in the Statement of Claim, by allegation of material facts said to make good the claim and/or by clear specification of its legal basis: see Supreme Court Rules Pt.15 rr.7, 13; Kirby v. Sanderson Motors Pty. Limited (2001) 54 NSWLR 135 at [19]-[21].
156 The Statement of Claim in this case identified the relevant duties merely as duties as a director under and in terms of s.232, and duties as a director and chairman/proxy holder under s.250A; and it pleaded that the appellant's failure to vote in accordance with the instructions of the proxy givers was in breach of those provisions, in particular (in relation to s.232) in failing to act honestly in the exercise of his powers or discharge of the duties of his officer, and in making improper use of his position as director to gain an advantage to himself. It did not in any way specify why the appellant owed duties in relation to the proxies, not merely to the proxy givers, but also to the company; or otherwise suggest why his duties in respect of the proxies were duties owed as a director.
157 In relation to the allegation of breach of s.232(6), the pleading was adequate to support a claim that the appellant had used his position as a director to acquire proxies, and then failed to vote those proxies so as to gain a personal advantage; and that therefore he was in breach of s.232(6). However, to complete a finding of breach of s.232(6), it would be necessary to make the finding that this action was done "to gain, directly or indirectly, an advantage for himself". We have already indicated our view that, on the evidence in this case, a finding could not be made on the Briginshaw standard that the appellant's purpose in failing to sign was to gain a personal advantage, as opposed to advancing what he, along with the other directors, supported as being in the interests of the company. In our opinion, a finding of breach of s.232(6) was not open on the evidence; and so it would not be appropriate to order a new trial on this issue.
158 As regards s.232(2), the primary judge found that, because the appellant became chairman and proxy through his office as director, he was as a director subject to the duties he had as chairman and proxy, including the obligation to vote as directed. It appears from the Statement of Claim, the submissions to the primary judge, and the judgment, that this was the only positive basis advanced for the finding that the relevant conduct of the appellant was in exercise of his powers or discharge of his duties as a director.
159 In our opinion, the finding of breach of s.232(2) is unsupportable on that basis. Certainly, the appellant was not, when he was dealing with the poll paper and omitting to sign it, exercising his powers as a director: the question then was whether he was discharging his duties as a director. In our opinion, the mere circumstance that there was a causal connection between the appellant's position as a director and his appointment as proxy is not of itself sufficient to make his dealing with the poll paper a discharge of the duties of his office as director. Unless there was some further element involved, his duty in relation to the voting of proxy votes was to the proxy givers, not to the company; and it was not a director's duty.
160 At the beginning of the second day of the hearing of the appeal, the Court raised with Counsel the possibility that the appellant had a duty as a director to the company to make an appropriate contribution to the proper running of the Annual General Meeting, and in particular to the carrying out of voting procedures, and a duty not to subvert those procedures; and that a deliberate attempt to subvert those procedures would be a breach of that duty as a director. Viewed in that way, while the appellant certainly had a duty as a fiduciary to the proxy givers to act in accordance with their directions, he may also possibly have had a duty to the company, in so far as he was a director having some control over the voting procedures, not to subvert those procedures. If so, both duties would have required him to vote as directed.
161 It could also possibly be argued that, in a large company like NRMA, one of the roles of a director is to serve the company by being available to represent, at general meetings, members who are unable to attend. When a director does so, particularly where the company has held out to members that the director will act as their proxy, it could be argued that the director then has the dual roles of agent for the particular members and director serving the company. In those cases where a member gives no direction how to vote, it may be the case that the director must cast the vote bona fide in the interests of the company, so that there would be no difficulty in seeing this as an exercise of director's duties. Where the member does give a direction how to vote, the director's duty as agent for the member would generally require that this direction be followed, even if the director does not think it in the interests of the company; but it could possibly be argued that this does not mean that the casting of the vote is not a discharge of director's duties, because the director has a duty to serve the company by acting faithfully as proxy (so that the company fulfils what it has held out to members), which displaces any duty as director to consider how the vote itself would affect the interests of the company.
162 We express no view as to whether either of the possibilities raised in pars.[160] and [161] is correct: there has not been sufficient argument to enable us to do so.
163 In response to the Court's suggestion referred to in par.[160], it was submitted for the respondent that this approach was within the case as pleaded and contested, and the respondent made no application to amend or even to put on a Notice of Contention. On the other hand, it was submitted for the appellant that it was not, and that an amendment would be required, had not been sought, and would not be granted: the approach suggested would raise novel questions which would require considerable research, and could also raise factual issues that have not been addressed.
164 In our opinion, a finding of breach of s.232(2) was not open on the way the case was put by the respondent. This was a charge of serious misconduct, and as such had to be formulated with precision. Neither of the two possibilities we have raised was canvassed in the case, either in the pleadings or during the twelve-day hearing before the primary judge. Even now, they have not been advanced by the respondent, either in a Notice of Contention or in any other appropriate way. In relation to them, natural justice has not been afforded to the appellant. It would not in those circumstances be right for this Court to consider and rule upon some new basis which it has itself formulated, such as these two possibilities.
165 In those circumstances, our conclusion must be that, even if the appellant had been found to have deliberately failed to sign the poll paper, this could not, on the way the case was pleaded and conducted, have been found to be a breach of s.232(2). Accordingly, we do not think it would be appropriate to order a new trial on this issue.