The Parties
Portman Iron Ore Limited (Portman) was a shareholder in Golden West Resources Limited (Golden West), an ASX – listed company.
The Meeting
On 20 June 2008 Portman served a notice on Golden West under s249D of the Corporations Act 2001 (Cth) (Act) requisitioning a general meeting and proposing motions for the removal of two current directors and the appointment of two new directors.Portman owned 19.2% of the voting shares in Golden West.
On 21 July 2008 Golden West called a meeting of its shareholders to be held on 29 August 2008. The Notice of Meeting set out the motions requested by Portman (along with other motions) and included a proxy form.
The Proxies
On 13 August Portman wrote to Golden West’s shareholders identifying its recommended votes for the proposed motions, reasons for the recommended votes and attaching a pre-completed proxy form. Portman requested that the proxy forms be returned to its office at a time to enable it to deliver the proxy forms to the registered office of Golden West by the deadline for lodgement. The proxy forms were lodged with Golden West before the deadline.
The Dispute
On 28 August 2008 at 4.30pm (i.e after the deadline for proxy lodgement) the Chairman of the meeting called and informed Portman’s solicitor that he had provisionally decided each of the Portman proxy forms were invalid. The parties exchanged further phone calls and emails on the subject but could not reach agreement.
Portman sought urgent court orders that Golden West not act on any resolution to be put at the general meeting or alternatively that Golden West be restrained from holding the meeting. The Federal Court issued interim orders to preserve the status quo and then decided the matter several days later.
Should Golden West have been prevented from acting on resolutions passed?
The Court found that even if the Portman proxy forms were treated as valid and included in the vote, the Portman motions would not have prevailed. Therefore the Court did not order that the company not act on resolutions passed at the meeting.
Did delivery of proxies to Portman invalidate them?
Section 250B(1) of the Act provides:
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:
- the proxy's appointment
- evidence of authority where signed under power of attorney
The court relied on the decision in Bisan Ltd [2002] VSC 430 which found that the right to appoint and vote by proxy under s249X of the Act is a significant statutory entitlement and any provision in a public company’s constitution inconsistent with the requirements of the Act would be ineffective. In Bisan it was held that a company may reduce the minimum period for receipt of a proxy but that the constitution cannot modify the requirement for receipt by the company.
Portman argued (and the Court agreed) that there is no express requirement in the legislation that proxies are returned only and directly to the company however McKerracher J maintained the position in Bisan that the
legislation's insistence on receipt by the company appears to contemplate a receipt by an entity managed and controlled by persons subject to onerous fiduciary duties in relation to the proxies…
McKerracher J endorsed the practical reasoning articulated in Bisan that the receipt of proxy forms by an intermediary third party creates exposure to the possibility of filtering or other inappropriate handling. Also, some shareholders had apparently filled out 2 proxy forms – one from Golden West and one from Portman.
Could the Chairman’s ruling be reviewed?
Although the Court supported the Chairman’s ruling on the Portman proxies, it considered the general issue of whether a Chairman’s ruling could be reviewed. McKerracher J reflected on numerous cases finding that the position of a chairman is one of an arbitrator entrusted with the power to decide whether a vote should be allowed or disallowed.
A chairman has jurisdiction to rule on the validity of proxies however a chairman’s decision is open to review by the court if an error of law is made. A chairman’s decision will not be taken as invalid unless the chairman failed to take into account all the relevant factors, took into account irrelevant factors or reached a conclusion that a reasonable chairman in that position would not have.
Impact for Companies and their Members
Where a party invites proxies from members and then delivers them to the address specified in the notice of meeting, the proxies may be declared invalid. While the judgment does not cover every possible circumstance, company members seeking to influence the outcome of a meeting risk undermining themselves if they ignore the “formalities” in the notice of meeting.
A chairman holds the authority to make decisions at a meeting which affect the outcome of the meeting, however these decisions are subject to court review where an error of law has been made.
Note for clarification
Although not an issue in this case, it is lawful for the company itself to specify an address other than its own office for delivery of proxies, such as a share registry.
Lis Boyce, Partner & Berna Rizk, Lawyer
