Wun v CellOS Software Ltd

BACKGROUND 6 Some context for this application can be found in a former related disputation: see CellOS Software Ltd v Wong (2017) 118 ACSR 501; [2017] FCA 95 ('CellOS Software v Wong'). The current shareholder activism and intervention has been the product of ongoing concerns regarding the financial viability of CellOS. Within such a climate, the Applicants contended that the Proposed EGM was necessary in order to consider the composition of the Board and its financial position. 7 The following facts were not contentious between the parties. 8 CellOS is an unlisted public company that develops software and conducts much of its business in Singapore. It has 2,072 shareholders, of which around 1,600 reside in Singapore. 9 By notice of meeting dated 20 March 2018 (the 'Notice of Meeting'), which was signed by 10 shareholders holding almost 7% of the issued shares (the 'Convening Shareholders'), the Convening Shareholders sought to convene the Proposed EGM of CellOS to be held on 26 April 2018, pursuant to s 249F of the Act. 10 The fact these Convening Shareholders had a right to call for a general meeting - effectively putting before that meeting their concerns regarding the financial position of CellOS and the composition of the Board - was not in dispute. 11 On 6 April 2018, the Board determined to postpone the Proposed EGM (the 'Postponement Decision') so that it could be held on the 29 June 2018, which was the same day as the annual general meeting (the 'Proposed AGM'). In determining this, the Board took seven matters into consideration and concluded that it was in the best interests of the company as a whole to postpone the Proposed EGM so as to coincide with the Proposed AGM. 12 Those seven matters, which are contained within the minutes of the board meeting on 6 April 2018, were as follows: (1) The apparent procedural irregularities in the Notice of Meeting and proxy form. In particular: (a) the risk that the Notice of Meeting and proxy form did not comply with the requirements of the Act; and (b) the failure of the Convening Shareholders to respond to inquiries about those proxy forms; and (c) the risk that the Cellos would incur unrecoverable costs even if it made a successful challenge to the Notice of Meeting and form. (2) The rights of shareholders to hold and conduct a general meeting, including its rights under the Act. (3) The Board's right to postpone a general meeting pursuant to the terms of the company constitution (the 'Constitution'). (4) Any prejudice to the shareholders of CellOS and, in particular, the Convening Shareholders, in the postponement of the Proposed EGM. (5) The status of previous litigation brought by the CellOS against Mr Jason Huber and others, which was to return to the Federal Court of Australia in May 2018 - with an estimated cost of completion of around AUD$150,000. (6) The evidence of relationships and links between the prospective future directors and parties to that litigation (including, in one case, a proposed director who was a witness in the proceeding). (7) The status of CellOS's audited financial accounts and timing of its next annual general meeting. 13 The stated background to this last consideration, as recorded in those minutes, was as follows: The Company has instructed its auditors, Deloitte Touche Tohmatsu (Deloitte), to prepare the Company's audited accounts for the 2016/17 financial year by no later than mid-June 2018. Deloitte has advised that i[t] expects to be able to comply with this timeframe. This would allow the company to circulate completed accounts before the end of the 2017/18 financial year. It was the Company's desire for the outcome of the litigation to be known prior to the audited accounts being completed (having regard to the pervasive nature of the litigation and the qualifications applied to recent audited accounts), but it is acknowledged that this is not achievable given the adjournment of the trial. 14 Between 11 and 12 April 2018, written notice of the postponement was communicated to shareholders, including by post for those shareholders for whom CellOS did not hold an email address. 15 In addition to seeking declaratory relief that the Postponement Decision was invalid, the Applicants sought declaratory relief that 29 June 2018 was not a reasonable time to hold the Proposed EGM by reason of s 249R of the Act, and that the Notice of Meeting was not invalid by operation of s 1322(4) of the Act. 16 By cross-claim filed on 16 April 2018, CellOS sought an interlocutory injunction restraining the Applicants from conducting (or purporting to conduct) a meeting the subject of the Notice of Meeting, and declaratory relief that the Postponement Decision was valid. 17 It is important to note that until 10 May 2018, CellOS did not seek final relief that the Notice of Meeting was invalid. This was an alternative order sought to a declaration that the Postponement Decision was valid and effective, and this alternative relief was not pressed at the hearing on 18 April 2018. 18 It is in this context that the following matters arose for consideration in this proceeding: (1) Whether the Board impermissibly cancelled the Proposed EGM when it had no power to do so. (2) Whether the power in cl 14.1(d) of the Constitution was invalid insofar as it purported to provide the Board with a right to postpone a meeting convened under s 249F of the Act (on the basis that such a power would be an unlawful interference with the statutory right granted by s 249F). (3) Whether, assuming cl 14.1(d) did provide the Board with a valid power to postpone an EGM, the Board's exercise of that power was invalid on the basis that: (i) it would frustrate a proper purpose of the meeting called under s 249F; or (ii) the power has been exercised for an improper purpose, without proper justification or arbitrarily. (4) Whether the Board sought to postpone the Proposed EGM to a date that was not "reasonable" within the meaning of s 249R of the Act and thus deemed invalid. (5) Whether the Notice of Meeting was prima facie invalid because the process for proxy voting was contrary to s 250B of the Act, and if so, whether the Court should make a declaration under s 1322(4) that the Notice of Meeting was not invalid. 19 The Applicants' position was as follows: (1) The Board had impermissibly purported to cancel the Proposed EGM in the absence of it having any power to do so. (2) Any power in cl 14.1(d) of the Constitution to postpone a meeting convened under s 249F constituted an unlawful interference with the statutory right granted by s 249F and was therefore was invalid. (3) The Board's purported exercise of the power in cl 14.1(d) of the Constitution (assuming such a power existed) was invalid on the basis that it would frustrate a proper purpose of the meeting called under s 249F, and the power had been exercised for an improper purpose, without proper justification or arbitrarily. (4) The issue raised by CellOS as to the validity of the Notice of Meeting (because of the process for proxy voting) was misconceived. There is no requirement in the Act that proxy forms must be received directly by the company from the shareholder and not through Link Market Services Ltd ('Link') (an share registry management services provider acting as an intermediary), and the Notice of Meeting does not contain any directions or statements that are inconsistent with the relevant provisions of the Act or the Constitution. Further and in any case, to the extent that the contemplated proxy process is inconsistent with s 250B of the Act, the Court should make an order under s 1322(4)(a) declaring that the Notice of Meeting is not invalid by reason of this. 20 CellOS disputed each of these contentions.

THE CORPORATIONS ACT AND COMPANY CONSTITUTION 21 Section 249F of the Act states with respect to the calling of general meetings by members: Calling of general meetings by members (1) Members with at least 5% 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. (2) The meeting must be called in the same way - so far as is possible - in which general meetings of the company may be called. (3) The percentage of votes that members have is to be worked out as at the midnight before the meeting is called. 22 Section 249R of the Act requires that: A meeting of a company's members must be held at a reasonable time and place. 23 Under cl 14.1(d) of the Constitution, the Board is granted the power to postpone a general meeting or change the place at which it is to be held: by giving appropriate notice to all persons to whom the notice of the original meeting was given, not later than 72 hours prior to the time of the meeting. The notice must specify the new place, date and time of the meeting. 24 Section 250B of the Act relevantly states: Proxy documents Documents to be received by company before meeting (1) For an appointment of a proxy for a meeting of a company's members to be effective, the following documents must be received by the company at least 48 hours before the meeting: (a) the proxy's appointment; (b) if the appointment is signed, or otherwise authenticated in a manner prescribed by regulations made for the purposes of subsection 250A(1), by the appointor's attorney - the authority under which the appointment was signed or authenticated or a certified copy of the authority. … Receipt of documents (3) A company receives a document referred to in subsection (1): (a) when the document is received at any of the following: (i) the company's registered office; (ii) a fax number at the company's registered office; (iii) a place, fax number or electronic address specified for the purpose in the notice of meeting; and (b) if the notice of meeting specifies other electronic means by which a member may give the document - when the document given by those means is received by the company as prescribed by the regulations. Constitution or notice of meeting may provide for different notification period (5) The company's constitution (if any) or the notice of meeting may reduce the period of 48 hours referred to in subsection (1) or (2). 25 Clause 14.18 of the Constitution relevantly provides: Lodgement of proxies (a) An instrument appointing a proxy is not treated as valid unless: (i) the instrument; and (ii) the power of attorney or other authority (if any) under which the instrument is signed; or (iii) a copy of that power or authority certified in a manner acceptable to the Directors, are lodged not less than 48 hours (or any shorter period as the Directors may permit) before the time for holding the meeting at the place specified for that purpose in the notice of the meeting or, if none, at the registered office of the Company. … (c) For the purposes of this clause 14: … (ii) Members can appoint a proxy and attorney or a corporate representative using electronic means to deliver the document (or a copy of the document) effecting the appointment and, in the absence of any manifest irregularity, the Company may act on that appointment. 26 Clause 1.4 of the Constitution provides that the Act prevails to the extent of any inconsistency.

DID THE BOARD CANCEL OR POSTPONE THE PROPOSED EGM? 27 There was no dispute that the Board had no power to 'cancel' the meeting called by the Convening Shareholders under s 249F. The initial question was whether the Board of CellOS did in fact cancel, as distinct from postpone, the Proposed EGM. 28 The Applicants contended that while styled as a "postponement", properly construed, the notice of the Postponement Decision from the Board effectively sought to cancel the Proposed EGM and notify members that a new meeting was to be called and held in its place. 29 The notice of the Postponement Decision contained the following statement: Given the above, you should take no action in relation to the EGM materials which have been sent to you and the general meeting will not be held on 26 April 2018. CellOS will provide shareholders with a notice of meeting and proxy form in due course in relation to the general meeting on 29 June 2018. The resolutions contained in the EGM Materials will be included in this notice of meeting. 30 A number of observations were made by the Applicants about the notice of the Postponement Decision itself. Prior to issuing the notice, the Board resolved that the resolutions contained in the EGM materials would be considered by members of CellOS at the company's "next general meeting". The "next general meeting" was not a meeting called and arranged to be held by the Convening Shareholders. The notice directed members to "take no action in relation to the EGM materials which have been sent to you". Such a direction was said to be inconsistent with a mere postponement of the Proposed EGM, pursuant to which shareholders should properly be able to continue to take action, such as completing proxies. Then the notice stated that CellOS would provide members with a (new) notice of meeting in due course. If the meeting was merely being postponed, it was contended that no new notice of meeting was required as the notice would have already specified the new place, date and time of the meeting. The notice also stated that CellOS would provide members with new proxy forms in due course. If there was not a new meeting, it was contented that there would be no need to provide new proxy forms. Finally, it was observed by the Applicants that there was the extensive nature of the purported postponement, being 65 days and the fact that the new meeting would be held at a different location. 31 The Applicants submitted that taken in combination, the matters referred to above evidenced that the Board was in effect purporting to cancel the Proposed EGM, effectively putting an end to the Proposed EGM which had been called by the Convening Shareholders. 32 There is some merit in each of these observations relating to the notice of the Postponement Decision. However, in the end, it is a matter of characterisation of what the Board was intending to achieve by its resolution as contained in the relevant minutes of the Board. In my view, the terms of resolution leave no doubt that the Board was resolving to postpone the meeting, irrespective of some of the terms of the notice of the Postponement Decision. The Constitution required the Board to specify a new place, date and time of the meeting - which the notice did. The Board could indicate that it would put the proposed resolutions of the shareholders at a general meeting if heard before the Proposed EGM, which does not mean the Proposed EGM was cancelled. The notice itself may have some defects, it being implemented by management; however, this does not impact upon the clear terms of the resolution as a postponement (not a cancellation) of the Proposed EGM. 33 In my view, the Board in its resolution did postpone the Proposed EGM, and did not seek to cancel, nor did it cancel, the Proposed EGM.

SECTION 249F AND POWER OF POSTPONEMENT 34 In respect of the issue of the Board's power to postpone the Proposed EGM, the parties referred to the interlocutory decision of Beach J in Pinnacle VRB Ltd v Ronay Investments Pty Ltd (2000) 35 ACSR 240; [2000] VSC 330 ('Pinnacle VRB'). In Pinnacle VRB, his Honour held that the power given to directors under the constitution to postpone the members' meeting was procedural in nature and did not affect the right of members to call a meeting under s 249F, nor did it modify that right. His Honour concluded (at [40]-[41]): [40] 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 [Corporations] Law, does not in any way affect the right of members to call such a meeting, nor does it modify that right. [41] 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. 35 Accordingly, Beach J held that the board of directors' postponement was valid. 36 The decision of Beach J has been the subject of commentaries by Neil Pathak and Hugh Lauritsen in 'A Shareholder's Right to Call General Meetings - A Sharp Sword for the Disgruntled Shareholder or Just a Blunt Instrument?' (2005) 23 Company & Securities Law Journal 283, and by Michael Shand QC in 'The Postponement by the Directors of Meetings Convened by a Member under s 249F of the Corporations Law' (2001) 19 Company and Securities Law Journal 160. 37 Both commentaries considered that arguably the construction adopted by Beach J, and the subsequent decisions to which I will come, undermine the independence of the statutory right conferred on shareholders under s 249F, and the correctness of the decision of Beach J is not beyond doubt. Both views have been useful in my consideration of the construction and application of s 249F, as have the submissions of the parties. However, as apparent from the orders of the Court, I have followed these decisions after considering the matter myself. 38 It is useful to briefly outline these decisions. Justice Emmett in Central Exchange Ltd v Rivkin Financial Services Ltd (2004) 213 ALR 771; [2004] FCA 1546 followed the decision in Pinnacle VRB and effectively held that the directors' power in a company constitution to postpone a meeting does not abrogate from the right conferred by s 249F. The main contention before Emmett J was that, given the meeting convened under s 249F was of a different category to all other general meetings, none of the provisions in the company constitution regulating the conduct of general meetings applied. Instead, it was contended, that all the rules regulating the conduct of such meetings were to be found in the general law. His Honour rejected this submission and held that there was no reason why the provisions in the company constitution regarding, for example, the timing and content of notices should not apply to meetings called under s 249F. His Honour was not directly presented with the argument that only the provision for postponement derogated from the right conferred by s 249F (and not all of the procedural provisions of the company constitution). 39 Nevertheless, relevant to another issue before me, Emmett J did state at [33] that: … the circumstances in which it will be proper for the board to postpone or change the place for a meeting called pursuant to s 249F, or to cancel such a meeting, will be limited and such powers must, of necessity, be exercised extremely sparingly so as not to frustrate the right conferred by s 249F. If the directors change the place, as well as the time, they must have some justification for doing so. The Directors cannot arbitrarily postpone or change the place for the meeting. 40 In Colbern Nominees Pty Ltd v Prime Minerals Ltd (2009) 74 ACSR 236; [2009] WASC 289 ('Colbern Nominees'), Le Miere J noted that Michael Shand QC's article doubted the correctness of the decision by Beach J in Pinnacle VRB. Although Le Miere J was referred by the parties to both the Pinnacle VRB and Central Exchange decisions, his Honour was not asked to decide (and did not decide) whether the postponement provision in the constitution applied to a meeting convened by members under s 249F. 41 In Carpathian Resources Ltd v Highmoor Business Corporation [2010] FCA 1294 ('Carpathian') at [33]-[36], Barker J adopted the approach taken by Emmett J in Central Exchange (while also referring to the decision in Pinnacle VRB) and said that the powers created by the constitution of a company may continue to operate in relation to a meeting called under s 249F of the Act. Again, his Honour was not called upon to give consideration to the argument that can be put forward in favour of the proposition that the power to postpone derogates from the members' statutory right to call and arrange to hold a meeting under s 249F. 42 In the interlocutory decision of Mishme Enterprises Pty Ltd v Nticed Pty Ltd [2013] VSC 187 at [12] ('Mishme'), Ferguson J (as her Honour then was) similarly followed Central Exchange and held that "there is no doubt that the directors have power under … the constitution to postpone a general meeting under s 249F". In Mishme, it appears that no contention had been made by the convening members that the power of postponement derogated from the members' statutory right under s 249F and therefore this issue was not directly considered by the Court. 43 In these circumstances, I have considered the issue afresh, although respecting the decisions made in previous cases by experienced commercial judges. An examination of s 249F of the Act, and the right it confers upon shareholders to "call, and arrange to hold, a general meeting" becomes necessary to determine whether s 249F prevents a postponement by the Board pursuant to a company's constitution. 44 As has been said many times, it is both permissible and necessary to examine context at the same time as considering the text of legislation. Understanding the text in its statutory, historical or legal context may suggest a meaning that a mere textual analysis does not. A summary of the proper approach was conveniently stated in Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2017] FCAFC 159 (Middleton, Beach and Moshinsky JJ) at [377]-[378] as follows: 377 We have reached this conclusion through an orthodox application of the principles of statutory construction. These principles of statutory construction require a consideration of the statutory text, context and purpose: see Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]-[71]; Commissioner of Taxation (Cth) v Consolidated Media Holdings Ltd ('Consolidated Media Holdings') (2012) 250 CLR 503 at [39]; Thiess v Collector of Customs ('Thiess') (2014) 250 CLR 664 at [22]-[23]; Military Rehabilitation and Compensation Commission v May (2016) 257 CLR 468 at [10]; North Australian Aboriginal Justice Agency Ltd v Northern Territory (2015) 256 CLR 569 at [11]. Statutory construction must begin and end with the statutory text: Thiess at [22] (quoting Consolidated Media Holdings at [39]). But as Gageler J observed in SZTAL v Minister for Immigration and Border Protection ('SZTAL') [2017] HCA 34 at [37]: But the statutory text from beginning to end is construed in context, and an understanding of context has utility "if, and in so far as, it assists in fixing the meaning of the statutory text". 378 Similarly, Kiefel CJ and Nettle and Gordon JJ observed in SZTAL at [14]: The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if it's ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected. (Footnotes omitted) 45 This approach was also recently adopted in Australian Competition and Consumer Commission v Yazaki Corporation (2018) 357 ALR 55; [2018] FCAFC 73 (Allsop CJ, Middleton and Robertson JJ). 46 Focussing on the text, it was submitted by the Applicants that the language contained in s 249F referring to a right to call and arrange to hold a meeting is a continuing right, one which subsists all the way up to, the very least, the commencement of the meeting. It covers all of the continuing things that need to be done to make sure that the meeting can effectively take place. 47 The important issue is the extent of the statutory right enshrined in s 249F. The wording of s 249F suggests only that the shareholders have a right to call and to arrange to hold a meeting. The concept of arranging will involve those things needed for the holding of the meeting (at the relevant shareholders' expense (s 249F(1)). 48 Section 249F(2) provides that the meeting is to be called in the same way as far as possible in which meetings of the company may be called. Once the meeting is held, in the normal course it would be conducted by the chair of the existing board, according to the normal procedures applicable to a general meeting of shareholders. The provisions of the constitution of the company or the general law dealing with such matters as adjournments, quorum, voting and proxies will apply to the meeting. 49 There is no doubt that the timing of a meeting can be of significance and importance to members. There is also no doubt that the legislature, in introducing s 249F (and ss 249D and 249E) enhanced members' rights, and was a significant departure from previous legislative provisions dealing with the convening of meetings. In this sense, the provisions are to be read in a way beneficial to the conferring of rights on members. 50 However, s 249F does not extend to conferring the right to otherwise hold or conduct the meeting. In other words, s 249F gives members a right to call a meeting and facilitate its holding, that is to say, a right to initiate a process that is subject in all other respects to the constitution of the company and the Act. Section 249F refers to the calling of a meeting, not the holding a meeting. The inclusion of the words "arrange to hold" reflects a preliminary course of conduct in preparation for a future event, namely the holding and conducting the meeting itself. 51 The statutory language contemplates some form of postponement, it being accepted that once the meeting commences it is subject to being adjourned or and may be subject to being postponed. Section 249F can be contrasted to the language of holding or conducting the meeting as opposed to 'call and arrange to hold'. Section 1319 (in giving power to the Court with respect to meetings ordered by the Court) refers to giving directions with respect to "the convening, holding or conduct of the meeting" where the Court under s 249G orders a meeting of the company's members be called. 52 Even without control of the meeting, the right to initiate and arrange to hold a meeting is an important and useful right in itself. This right upon being exercised will enable the members the opportunity to call upon all eligible members to vote on a particular issue at the time and place nominated by them, but subject to a lawful postponement of that meeting. 53 Apart from the text of s 259F, the Applicants referred to the broader statutory context to support the argument that the Board cannot postpone a meeting called under s 249F. It was observed that s 249F can be contrasted with s 249D, where members have the power to requisition a general meeting but can only do so on the basis that the company retains power over the arrangements for the holding of the meeting (s 249E). Section 249D is also constrained by certain statutory time limits in which the company must hold the meeting. Section 249F contains no such time limits, although the Convening Shareholders are subject to the requirement under s 249R that the meeting is to be held at a reasonable time and place. 54 I should also mention that the Applicants referred to the Explanatory Memorandum to the Company Law Review Bill 1997 (Cth). It was therein stated that s 249F gives members an independent power to call members meetings, with more specifically paragraph 10.22 stating that a "company will no longer be able to displace its members' right to call a general meeting themselves by adopting a contrary provision to the constitution". I do not need to return to this Explanatory Memorandum: it provides no further guidance in determining the issue of construction, that issue being to determine exactly what is encompassed by the members' right which cannot be displaced by the constitution. 55 It is important to recall that, in general, the right to postpone or adjourn a meeting properly convened vests in the meeting itself. In some instances, the chair may have the power to adjourn the meeting. However, it has been well recognised that directors have the power to postpone a meeting of the company properly called or convened if the constitution authorises them to do so: see eg Colbern Nominees and Smith v Paringa Mines Ltd [1906] 2 Ch 193. 56 Where the company constitution has given the directors a power to postpone, one would expect any abrogation or modification of this power would be expressly introduced by the legislature. The legislature has not taken away expressly the power given to directors under the constitution to postpone a meeting of the company. Of course, the directors in so exercising a power conferred on them by the company constitution must act for a proper purpose and in good faith in exercising their power of the postponement. 57 The fact that the legislature has permitted the members to call a meeting under s 249F and not avail themselves of s 249D, and for a proper purpose (s 249Q) and at a reasonable time and place (s 249R) does not indicate one way or the other the co-existence of the power to postpone by the Board, or the ambit of the scope of s 249F. As with the calling of all meetings, the obligation of proper purpose and reasonableness of time and place is a relevant consideration in the minds of those calling the meeting. Section 249D is an option for members to use, depending on their objectives and whether they are prepared to pay for the meeting. Section 249D does not give control to the shareholders over the initial timing and location of the meeting, but directors must call and hold the meeting within a prescribed time. Even with a power of postponement given to the board, s 249F allows shareholders to send out a notice of meeting, arrange the venue and time, and bring the issue which is sought to be agitated to a head. As I have indicated, this in itself is an important and useful option given to shareholders. 58 In my view, the Board of CellOS had the power to postpone the Proposed EGM.

PURPOSE OF POSTPONEMENT 59 In my view, the power conferred on the Board by cl 14.1 of the Constitution was properly exercised in accordance with law. The Board's grounds for exercising this power were set out in the minute resolving to postpone the shareholders' meeting. When understood in the context of the circumstances surrounding the exercise of the power, the decision of the Board was justified. There is no basis on the evidence before the Court to conclude that the power was exercised in bad faith, on an ulterior motive or based on any error of law. If relevant to the exercise of directors' duties, I am also of the view that the decision reached by the directors of the Board took into all the relevant considerations and was reasonable. The directors of the Board were not cross-examined, and the basis of their resolution to postpone was set out in the minutes of their meeting. Accepting the minutes as reflecting a true record (which I do), they indicate purposes of wanting to wait for audited accounts and wanting to deal with every issue at the Proposed AGM (on 29 June 2018). There were also issues concerned the validity of the Proposed EGM and proxies. The Board wanted to deal with all of these issues properly at what it regarded as an appropriate time. 60 Little guidance can be given on this issue by the previous cases referred to in these reasons. The factual circumstances of, and purpose for, the exercise of the postponement power in each of the previous cases referred to above were different to the present case. 61 For instance, in Colbern Nominees, the convening members did not contend that the postponement power had been exercised for an invalid purpose, so as to infringe the limits of the exercise of such a power (as identified in Pinnacle VRB and Central Exchange). The convening members advanced more limited arguments, including that the meeting was being convened to a date (15 November 2009) that was not a reasonable time within the meaning of s 249R. The argument was essentially that it was not a reasonable time because it was being convened to the day before the company's AGM was to take place, and that it was inconvenient for two meetings to occur in such short succession. As Le Miere J noted, "the application [was] confined to the case that the day before the AGM, 16 November 2009, is not a reasonable time at which to hold the meeting" (at [38]). 62 In Carpathian, the board resolved to postpone the meeting of the company from 23 November 2010 to 16 December 2010, so that the meeting could be held on the same day as the company's AGM. The primary purpose of postponing the meeting was that ex parte orders had been obtained in proceedings in the Eastern Caribbean Supreme Court that restrained 47% of the company's shareholders from voting at the meeting. An application to discharge the injunction imposing this restraint was to be heard on 26 November 2010. The postponement was therefore justified on the basis that a meeting occurring on 23 November 2010 risked disenfranchising a very substantial proportion of shareholders who were legitimately entitled to vote. In this context, Barker J considered that it was not improper for the board to postpone the meeting (at [46]). 63 In Mishme, the board postponed a meeting in circumstances where there was a significant question as to whether the company's share register was accurate such that a meeting could not effectively proceed. In particular, there was an issue as to whether the defendant (as a shareholder) held sufficient shares so as to be entitled to convene the meeting under s 249F (at [19]). As such, it could not be accepted that postponement of the meeting meant that the defendant was being deprived of its existing rights as a shareholder, because there was a significant question as to whether a share register existed and whether the defendant had such rights (at [21]). Further, there was no argument that postponement of the meeting would have any negative effect (at [21]). 64 During the course of oral submissions, the Applicants raised a number of matters which attacked the purpose of the Board in making its resolution to postpone. As already mentioned, I was asked to make my decision on the basis of the minutes of the Board meeting, in the context of the circumstances pertaining to CellOS at the time. No suggestion was made that the minutes were inaccurate and could not be relied upon in their terms. 65 The Applicants wanted me to conclude primarily that the Board was postponing the Proposed EGM for the substantive purpose of trying to control when a vote takes place as to the composition of the board for the purpose of ensuring that the board does not alter an existing business decision of CellOS involving the completion of existing litigation. In their written submissions, the Applicants contended: The exercise of the postponement power in this way is at odds with the strict limits contemplated for the use of a postponement power in cases such as Pinnacle VRB and Central Exchange, and is invalid on the basis that: (1) the postponement of the meeting would frustrate a proper purpose of a meeting called under s 249F, being the purpose of having the shareholders of CellOS consider the composition of the board in circumstances where the company is about to incur significant litigation costs and where the company is currently in breach of its obligations under the Act (at the least, in respect of its obligation to file financial accounts); (2) the power has not been used "extremely sparingly", with a proper justification, or in a manner that is not improper or arbitrary, as those concepts are to be understood based on Emmet J's decision in Central Exchange; (3) the power is not being used in a purely "procedural" way, to ensure that the meeting takes place at a time and place convenient to the majority of members, as required by Pinnacle VRB. 66 I should interpolate that the issue of timing, and the application of s 249R, relates to the issue of whether the power to postpone was exercised for a proper purpose, that is to say - whether or not the Postponement Decision was consistent with s 249R of the Act, requiring the meeting to be held at a reasonable time and place. 67 The requirements of s 249R apply to both annual general meetings and other general meetings of members. The section imposes an obligation on directors when deciding the time and place of the annual general meeting to have regard to the convenience of members in being able to attend the meeting. There is a common law principle that directors have a fiduciary duty to convene meetings of members at a time and place suitable for members to attend: Smith v Sadler (1997) 25 ACSR 672. It has been held that s 249R does not create any new substantive law: Howard v Mechtler (1999) 30 ACSR 434 at 442; [1999] NSWSC 232. In that case, Austin J held that the time and place of 6pm on 30 December was not inherently an unreasonable time to hold a meeting. 68 The Applicants contended that, in all of the circumstances of the present case, 29 June 2018 was not a reasonable time to hold the meeting convened under s 249F, and the Postponement Decision was therefore invalid as it is inconsistent with the requirements of s 249R of the Act. To support this view, the Applicants believed it to be necessary that in order to appropriately deal with this question of reasonableness, it be essential to take into account broad considerations. The Applicants stressed that the incumbent Board purported to postpone the Proposed EGM from 26 April 2018 for a period of 65 days to 29 June 2018, and changed the place of the meeting from the CBD to Abbotsford. 69 The question of whether a meeting is being held at a reasonable time and place must be considered in this statutory context. There is nothing in the statutory context which would prevent the question of reasonableness to take into account broad considerations, which are not limited to a purely procedural consideration of whether the time, date and place of the meeting is "convenient" (in the sense of allowing shareholders a reasonable opportunity to attend). 70 On the basis of my earlier reasoning that the Postponement Decision was made on the grounds stated in the minutes of the Board and was properly reached, extending the time to coincide with the Proposed AGM on 29 June 2018 was not inappropriate. The Postponement Decision was made for a proper purpose and whilst the postponement was lengthy, it was justified in the circumstances confronting the Board.

Proxy and validity of the notice of meeting 71 The remaining issue was whether the Notice of Meeting was prima facie invalid because the process for proxy voting was contrary to s 250B of the Act, and if so, whether the Court should make a declaration under ss 1322(4) of the Act that the Notice of Meeting was not invalid. I can deal with these issues briefly. 72 Three contentious issues arose regarding the Notice of Meeting and the accompanying proxy form. Although there was interplay and interconnectivity between these three issues, I will address them separately as dictated by the submissions of the parties. 73 First, I will address the temporal concern raised. The Notice of Meeting had the practical effect of extending the prescribed period in which a shareholder can lodge a proxy form from 48 hours to a much longer period, contrary to s 250B(1) of the Act. The time so prescribed was directly inconsistent with the Act. 74 Otherwise, as I considered in CellOS Software v Wong at [20], s 250B(1) of the Act sets out no further requirement for a valid proxy than receipt by the company and a prescribed period between receipt by the company and the proposed meeting. There is nothing in the legislation to indicate that an intermediary cannot be employed to facilitate the mandated delivery to the company, and if receipt by the company occurs within the permitted period, s 250B(1) is relevantly complied with. 75 Secondly, I should indicate that I see no problem with the employment of Link as contemplated by me in CellOS Software v Wong at [22], and as contemplated and explained by Barker J in Carpathian at [71] provided that lodgement is clearly made by reference to the company and not Link. 76 Thirdly, there was an issue relating to the absence of an electronic option for return of the proxy form. The Notice of Meeting gave shareholders no option to return the proxy form by facsimile or by email to Computershare or to CellOS. However, cl 14.18(c) of the Constitution is an express provision validating the lodgement of proxy forms received by electronic means at places for lodgement of proxy forms. 77 Over all, there is confusion in the Notice of Meeting which, in my view, could lead the shareholders to be misinformed of the requirements relating to proxies, and in particular the failure to refer to the electronic means contemplated by the Constitution as an avenue of lodgement. 78 Therefore, the Notice of Meeting on the above basis had defects, which in the normal course would lead to invalidity. As at 18 April 2018, when I made the first orders, I was not prepared to make an order under sub-s 1322(4) of the Act that the Notice of Meeting was not invalid. I was also not going to make an order declaring that the Notice of Meeting was invalid. That order was not sought at that time other than in the alternative. As the Proposed EGM was not going to be held until June 2018, there is sufficient time for the Applicants, if so advised, to seek to regularise the notice and proxies and to make separate application under ss 1322(4). Once the proxy forms and notice were corrected, the Court would then be in a position to consider the requirements of sub-s 1322(6) of the Act. 79 As events turned out, the Applicants did not seek to regularise the notice and proxy forms. Application was then made by CellOS on 10 May 2018 to have the Notice of Meeting declared invalid. On the basis of my reasons above, and in the absence of any specific relief being sought under sub-s 1322(4), I made the order declaring the Notice of Meeting invalid. I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.