Ariadne Australia Ltd, Re [1990] QSC 318 [1991] 2 Qd R 377

IN THE SUPREME COURT OF QUEENSLAND No. of 1990 Before Mr. Justice Cooper BETWEEN: IN THE MATTER of the Companies (Queensland) Code - and - IN THE MATTER of ARIADNE AUSTRALIA LIMITED VOTRAINT NO. 255 LIMITED WILLIAMS BARRETT CAPP, SIR RONALD ALFRED BRIERLEY, GARY HILTON WEISS, DONALD BRUCE CONWAY, and MURRAY RAYMOND BOYTE JUDGMENT - COOPER J. Applicant Respondents Delivered the 24th day of September, 1990. CATCHWORDS: Counsel: Solicitors: I. Gzell Q.C. with P. Dutney for applicant Fryberg Q.C. with A. Morris for respondents Clarke & Kann for applicant Michael Standish for respondents Hearing date: 21 September, 1990. -- 1 of 9 -- IN THE SUPREME COURT OF QUEENSLAND BETWEEN: No. of 1990 IN THE MATTER of the Companies (Queensland) Code - and - IN THE MATTER of ARIADNE AUSTRALIA LIMITED VOTRAINT NO. 255 LIMITED WILLIAMS BARRETT CAPP, SIR RONALD ALFRED BRIERLEY, GARY HILTON WEISS, DONALD BRUCE CONWAY, and MURRAY RAYMOND BOYTE JUDGMENT - COOPER J. Applicant Respondents Delivered the 24th day of September, 1990. This is an application under s. 574(1) of the Companies {Queensland) Code ("the Code") for an injunction to restrain the respondents, the directors of Ariadne Australia Limited ("Ariadne"), from convening a general meeting of the company on 23 October, 1990. The applicant is Votraint No. 255 Limited, a shareholder in Ariadne. On 28 August, 1990 the applicant, pursuant to s. 241 of the Code, requisitioned a general meeting of Ariadne for the purpose of considering resolutions seeking the removal of certaip directors of Ariadne and their replacement with nominees of the applicant. On 18 September, 1990 I refused an application on the -- 2 of 9 -- 2 part of the directors of Ariadne to extend the time for convening such a meeting. On 18 September, 1990, after my refusal of the application, the directors of Ariadne discussed the matter and determined to convene a meeting on 23 October, 1990 to consider the proposed resolutions. In consequence, instructions were given to Mr. Standish, the respondents' solicitor, on the evening of 18 September to prepare notice of meeting and a form of proxy. On 19 September, 1990 an announcement was made by Ariadne to the Australian Stock Exchange (Brisbane) Limited that a meeting would be called on 23 October, 1990 and the Exchange was advised of the purpose of the meeting. The announcement appeared in the financial press on 20 September, 1990. On 19 September, 1990 the applicant, having become aware of the notice to the Stock Exchange, wrote two letters to the respondents and Ariadne on that date. One letter, an "open letter", asserted a right in the applicant to convene a meeting pursuant to s. 241 (3) of the Code and advised that the applicant would seek an injunction to restrain the directors from continuing to convene the announced meeting. The second letter was "without prejudice". In the second letter the applicant offered to allow the meeting to proceed provided certain undertakings were given. The undertakings, inter alia, required that only limited and identified material would be distributed to shareholders and that the applicant would have rights of editing or supplementing material to be dispatched. Neither Ariadne nor the directors responded to the letters df 19 September, 1990. -- 3 of 9 -- 3 The application for an injunction was brought on Friday afternoon 21 September, 1990. The respondents did not object to the short notice nor the applicant's seeking final relief notwithstanding the form of order sought in the notice of motion. Section 574(1) of the Code provides:- " [ Power to make injunction] Where a person has engaged, is engaging or is proposing to engage in any conduct that constituted, constitutes or would constitute a contravention of this Act, the Court may, on the application of - (a) the Commission; or (b) any person whose interests have been, are or would be affected by the conduct, grant an injunction restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing." The applicant contends that the respondents have committed one breach of the Code, namely, that they failed within 21 days to forthwith convene a meeting (s. 241(1)). The applicant also contends that the respondents are engaging in conduct which would constitute contraventions of the Code. The applicant contends that in the circumstances which have occurred there is an implied prohibition in s. 241 of the Code against the respondents convening a meeting to consider the applicant's proposed resolutions. Further, it is contended that by calling a meeting, when the applicant has indicated it intends to exercise the power given to the applicant under s. 241(3) of the Code, or alternatively from failing to give an undertaking in the terms sought, which would give to the applicant control of, or a part in the material to be distributed, the directors are not acting honestly in breach of s. 229 ( 1) of the Code or are making -- 4 of 9 -- 4 improper use of their position as directors in breach of s. 229(4) of the Code. The respondents conte~d that they are not in breach of s. 241(1) of the Code in that the meeting will be called within two months of the date of requisition. Further, the respondents deny that any conduct on their part would constitute a breach of the Code as alleged or at all, and, that there is no evidence which would support a finding of a breach or threatened breach of the Code. Section 241 (1) of the Code provides that the directors upon receiving a requisition from an appropriately qualified requisitioner shall "forthwith convene a general meeting of the company to be held as soon as practicable but, in any case, not later than two months after the date of the deposit of the requisition". In my opinion to convene a meeting within the meaning of s. 241 (1) of the- Code requires that the requisite notice of meeting be given. Although there is no direct provision in the Code as to how directors convene a meeting, assistance is gained from a consideration of s. 242(2) and s. 248(8) of the Code and Article 41 of Ariadne's Articles of Association. It follows in my view that the respondents ~ere required bys. 241(1) of the Code to resolve upon a date and give the requisite notice of meeting at the first reasonable opportunity after, and not later than 21 days after, receipt of the requisition. In the instant case the respondents failed to discharge the obligation cast upon them bys. 241(1). -- 5 of 9 -- 5 The consequence of such a failure empowered the applicant to "in the same manner and as nearly as possible as that in which meetings are to be convened by directors, convene a meeting" (s. 241 (3)(a)). The applicant's contention is that upon default of the respondents, the applicant had the sole "right" to convene a meeting to the exclusion of the respondents who were impliedly prohibited by the section from calling a meeting. The purported existence of such a right vested in the applicant is the foundation for the assertion by it of threatened breaches of the Code in the proposed calling of the meeting by the respondents. The contention was that there would be two meetings called at great expense which would be against the interests of Ariadne, its shareholders and creditors. This follows because it is contended that having acquired the right to call the meeting, and the ancillary rights to settle the form of notice of meeting, the proxy form and the material to be sent to shareholders, the applicant is absolutely entitled to exercise these rights and intends to do so notwithstanding the steps put in train by the respondents to call the meeting on 23 October, 1990. I am further asked to infer that because the applicants have acquired these ancillary rights of determining the nature and extent of the material to be sent to the shareholders, the failure by the respondents to give the undertaking in the terms sought evidences an intention to improperly use the position of the board to act in their own interests. The power given bys. 241(3) of the Code is not a personal right of the applicant. The position was clearly stated by -- 6 of 9 -- 6 Harvey C.J. in Equity in Adams v. Adhesives Pty. Ltd. (1932) 32 S.R. (N.S.W.) 398 at 401 ::... "If the directors do not do so, a power is given to the requisitionists themselves to summon a meeting, but that is a power which is given to them to exercise as ministers or officers of the company for the purpose and subject to the same supervision by the Court as the powers given to the directors to summon meetings. It is not a personal proprietary right of shareholders, but a ministerial right passed on to them quasi officials of the company, to act in convening a meeting in place of the directors. The same principle must apply as to the time and the place for which the meeting should be called as applies to the directors themselves." Al though the observation of Harvey C. J. in Eq. concerned the power given under an article of association, there is in principle no difference when one is considering the power given under s. 341 (3) of the Code (see also Humes Ltd. v. Unity A.P.A. Ltd. (1987) 5 A.C.L.C. 15 at 19). Such a power must be used reasonably in the interests of the company, the shareholders and in certain circumstances the creditors of the company. The essential feature of s. 241(3) is to cloak the requisitionists with the power to act in place of the directors where the directors are refusing to call a meeting of shareholders which they are obliged to call. The power given is to provide the mechanism by which a meeting which could and would not otherwise be convened, is, in fact, convened. I do not construes. 241 as prohibiting the respondents from discharging, albeit belatedly the duty cast upon them by s. 241 (1), and a duty which is ongoing in terms of Article 40 of the Articles of Association. The respondents, in any event, have an independent power under Article 40 to convene a general -- 7 of 9 -- 7 meeting of shareholders to consider such resolutions as the directors consider ought to be placed before a general meeting. The applicant's contention that it is the only entity entitled to convene a meeting of members to consider . the subject-matter of its proposed resolutions, is, in my view, incorrect. If the respondents had, after the refusal of the application to extend time on 18 September, 1990, resolved to call the meeting on 23 October, 1990, and dispatched notice of meeting on that day, the applicant could have absolutely no ground of complaint. The respondents on 18 September, 1990 put in train steps which they ought to have taken earlier. The date of 23 October, 1990 is within the two months provided in s . 2 41 ( 1 ) and as a date has not been complained of by the applicant in correspondence or before me. The complaint of the applicant now, is that the respondents are doing that which the applicant thought it would be doing if the extension of time to convene the meeting was refused, as it was, on 18 September, 1990. I do not accept that to call the meeting as contemplated is not to act honestly in the interests of Ariadne or its members or creditors. Nor do I accept that the evidence discloses that the respondents are acting improperly in using their positions in their own interests. The respondents by their announcement to the Australian Stock Exchange and their instructions to Mr. Standish have evinced an intention to discharge their duty as directors and this has informally been communicated to shareholders through the Stock Exchange and the financial press. The position may have been otherwise if the respondents had -- 8 of 9 -- 8 failed to act and allowed the applicant to call a meeting and then sought to convene a second competing meeting. However that is not this case. The only meeting presently announced to shareholders is the meeting to be convened on 23 October, 1990. The applicants have failed to satisfy me that I have the power, or if I have the power consequent upon the failure of the respondents to call by notice of meeting a general meeting within 21 days of its requisition, that I ought to restrain the respondents from calling the meeting on 23 October, 1990. There are no circumstances that persuade me that the respondents, now proceeding to call the meeting the applicant requisitioned, ought to be restrained from calling that meeting in favour of the applicant "in the place of the directors" (Adams (supra) at 402) calling the same meeting. I dismiss the application and order the applicant to pay the respondents' costs of and incidental to the application to be taxed. -- 9 of 9 --