Federal Court of Australia

Keybridge Capital Limited v WAM Active Limited [2023] FCAFC 194

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant file a written submission about costs within 7 days of this order, and the respondent reply within 14 days of this order.

3.    The question of costs be determined on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    For reasons which we will explain, this is an appeal against carefully considered reasons of a judge of this Court, in respect of which the appellant could not identify any appellable error. The appeal must fail for reasons that can be explained in short order.

2    The principal issue on this appeal is whether the directors of the respondent, WAM Active Limited (WAM), effectively exercised their power to change the venue of a general meeting called by the appellant, Keybridge Capital Limited (Keybridge), pursuant to s 249F of the Corporations Act 2001 (Cth) (Corporations Act).

3    There was no dispute about the objective facts.

4    As the primary judge explained, WAM is a public company listed on the Australian Securities Exchange (ASX). Keybridge held 7.2% of the voting shares in WAM.

5    On 7 February 2022, Keybridge issued an ASX announcement stating its intention to make a conditional off-market takeover bid for WAM.

6    The same day, WAM wrote to Keybridge and issued an ASX announcement stating that it “[did] not consider that the Proposed Bid is genuine”.

7    On 14 February 2022, Keybridge’s solicitors sent a notice titled “Notice of Meeting & Explanatory Statement” calling a meeting of the company under s 249F of the Corporations Act to each member of WAM. The notice said that a general meeting of WAM would be held at 10.00 am on 17 March 2022 at Level 7, 370 St Kilda Road, Melbourne (in-person meeting). It set out proposed resolutions for the appointment of six individuals as directors of WAM, which we will call the Keybridge resolutions. The notice also enclosed proxy forms to be returned before 10.00am on 15 March 2022 by mail or hand delivery to either Keybridge’s registered office in Melbourne, or WAM’s registered office in Sydney.

8    As at 14 February 2022, COVID-19 related restrictions remained in force in Victoria.

9    On 15 February 2022, WAM’s board (which comprised four directors) had a discussion by teleconference and decided to change the venue of the in-person meeting to an online venue, at the same time and date, essentially because of COVID-19 safety concerns.

10    On 16 February 2022, WAM released an ASX announcement entitled “IGNORE defective Keybridge documents sent to you DIRECTORS DO NOT SUPPORT Keybridge’s resolutions”. The notice stated that the venue of the meeting was being changed to a wholly online meeting to be held at 10.00 am on 17 March 2022, “[i]n order to minimise health risks created by the COVID-19 pandemic and to ensure compliance with public health orders” and because “shareholders … will be able to participate in the General Meeting through an online platform [which] … enables participants to listen to [it] live, vote on the relevant resolutions in real time and ask questions online”.

11    The notice enclosed an alternative proxy form, set out the Keybridge resolutions, provided attendance and voting instructions, asked members to ignore Keybridge’s “defective” notice, and instead vote at the online meeting online or through the “valid proxy forms”. The notice continued:

[WAM’s] Board does not support any of the resolutions being proposed by Keybridge and each of them will be voting all shares under their control AGAINST all resolutions at the Meeting.

We ask you to IGNORE the defective Keybridge Notice. Please refer to the Official Notice and Official Proxy Form for information regarding the Meeting and how to ensure your vote is counted.

Do not complete the defective documentation provided by Keybridge. Voting on defective documentation provided by Keybridge will invalidate your vote. Vote using the proxy forms provided by WAM … or via the online voting facility to ensure your vote is counted.

12    On 15 March 2022, WAM released an ASX announcement titled “Meeting update: Over 50.1% of all WAM … shareholders have voted to SUPPORT the current Board of Directors and AGAINST the Keybridge resolutions”. It said that proxy forms lodged before 10.00 am that day indicated that over 50.1% of WAM’s members voted against the Keybridge resolutions.

13    In the events that occurred, both meetings – the in-person meeting in Melbourne and the online meeting – took place, in circumstances explained by the primary judge (J at [19]-[26]).

14    The results of the polls conducted at the online meeting were announced in, and the report was attached to, an ASX announcement released by WAM at 1.31 pm on 17 March 2022. The ASX announcement was titled “WAM Active shareholders vote overwhelmingly with the Board and AGAINST all Keybridge resolutions”.

15    The notice also addressed the in-person meeting, describing it as “illegitimate”, and said that, having been notified by Keybridge on 15 March 2022 that it would still proceed to try and hold the meeting in Melbourne:

Accordingly, and to avoid future arguments and protect shareholders, a WAM Active Director, Joint Company Secretary and our share registry, Boardroom, attended the old meeting venue in Melbourne. WAM Active is pleased to note that Keybridge’s inappropriate actions to try and hold its own purported meeting had no impact on the outcome. The Chairman of that purported meeting is also pleased to declare that none of the resolutions were passed.

16    On 8 April 2022, Keybridge announced the withdrawal of its bid.

17    Before the primary judge, the appellant sought to impugn the decision made by WAM’s board to change the venue of the meeting.

18    It alleged that the power to change the venue of the meeting was invalidly exercised because the change was made for an improper purpose, citing Central Exchange Ltd v Rivkin Financial Services Ltd [2004] FCA 1546; (2004) 213 ALR 771 at 779 [33] (Emmett J) for the undoubted proposition that if directors change the place, as well as the time of a meeting called pursuant to s 249F of the Corporations Act, they must have some justification for doing so.

19    At the hearing before the primary judge, WAM called three witnesses, Mr Jesse Hamilton, its joint Company Secretary; Mr Simon Poidevin, a non-executive Director of WAM; and Mr David Parkinson, a representative of Boardroom Pty Ltd, a company engaged by WAM to provide meeting services.

20    Mr Hamilton and Mr Poidevin gave evidence that WAM’s board determined to change the venue to a wholly-online meeting to facilitate shareholder participation and in light of COVID-19 related health concerns. Both of them were cross-examined.

21    Having carefully considered that evidence, the primary judge accepted it, holding that “the board of WAM Active determined to change the venue of the meeting to an online meeting, to allow as many shareholders as possible to attend, participate in and vote at the [online] meeting and so as to protect the health and safety of shareholders and staff”, and not for any “improper purpose” (J at [45]).

22    Because the primary judge had the benefit of seeing and assessing the credit of WAM’s principal witnesses, in order to succeed, the appellant needed to show that her Honour’s finding that their evidence was to be accepted was glaringly improbable or contrary to compelling inferences. See, for example, Warren v Combes (1979) 142 CLR 531 at 552 (Gibbs ACJ, Jacobs and Murphy JJ); Fox v Percy (2003) 214 CLR 118 at 128 [29] (Gleeson CJ, Gummow and Kirby JJ); Robinson Helicopter Co Inc v McDermott (2016) 90 ALJR 679 at 686-87 [43] (French CJ, Bell, Keane, Nettle and Gordon JJ). Counsel for Keybridge accepted as much in the course of oral argument.

23    The appellant submitted, as it submitted below, that the decision to change the meeting from an in-person meeting to an online meeting “was motivated by the improper purpose of the directors, seeking to ensure their sole control of the board”.

24    The first and most obvious difficulty with that submission is that it was never explained how the Keybridge resolutions would have enjoyed any better prospect of being passed at a meeting held in-person, rather than an online meeting. As the primary judge said (J at [47]):

The change of venue in no way undermined the statutory right of a shareholder in Keybridge’s position to call a general meeting. Exactly the same resolutions were put to the Online Meeting as had been proposed by Keybridge. Moreover, the participation of shareholders was facilitated by the provision of virtual technology.

25    Keybridge also submitted below and on appeal that the fact that the directors did not instead call a “hybrid” meeting was also evidence that the directors acted for an improper purpose. But, again, as the primary judge found, there is no basis on which to derive ill-intent from the directors’ failure to change to a hybrid meeting, because there was nothing to suggest that the Keybridge resolutions would have enjoyed any better prospects at a hybrid, rather than a wholly virtual, meeting (J at [46]).

26    Keybridge further submitted below and on appeal that WAM’s admittedly intemperate 16 February 2022 notice “revealed” the alleged improper purpose. But as the primary judge found:

The … language of the 16 February WAM [notice] does not warrant a conclusion that the board acted for improper purposes in changing the venue. Evidence was given that the notice was reviewed by [WAM’s] lawyers and issued in its form, having been reviewed by [WAM’s] lawyers. Whether that advice was well-founded is not to the point.

(See too J at [63].)

27    The primary judge also dealt at some length with Keybridge’s submission that the defects alleged by WAM in its 16 February 2022 notice to be contained in Keybridge’s notice, were misplaced (J at [50]-[62]). The primary judge found that although some of the defects alleged by WAM in its notice were “questionable”, her Honour was not satisfied that the language revealed that the directors changed the venue of the meeting for an improper purpose (J at [63]).

28    On appeal, Keybridge sought to place considerable emphasis on the reasons of Kirby P in Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 9 NSWLR 464 at 474F-475C, 484-485 and 487 (Glass JA agreeing). That case was not referred to below. That was a case about “the limits which the law places upon company directors in the expenditure of the funds of a company in a way favourable to the re-election of certain directors and unfavourable to competing candidates” (at 466A). It is thus of no assistance here.

29    Counsel for Keybridge also took us to various parts of his cross-examination of Mr Hamilton and Mr Poidevin below, but nothing he relied on suggested that the primary judge’s finding that the stated purpose of moving the meeting was the actual purpose, was improbable.

30    In our view, the primary judge’s finding that the stated purpose of moving the meeting was the actual purpose was, on the contrary, plainly open on the evidence, not only because it was never explained how the Keybridge resolutions would have enjoyed any better prospect of being passed at a meeting held in-person or at a hybrid meeting, but also because, as the primary judge found:

(a)    WAM’s 16 February 2022 notice cited as reasons for the change of venue COVID concerns and the desire for all shareholders to be able to participate in the meeting before any complaint was made about improper purpose (J at [8]);

(b)    Keybridge’s own notice of meeting said “[a]s a result of the potential health risks and the Governments [sic] recommendations in response to the COVID-19 pandemic, the Company encourages all shareholders to lodge a directed proxy form prior to the meeting rather than planning on attending the meeting in person” (J at [43]);

(c)    temporary amendments to the Corporations Act remained in force allowing for wholly virtual meetings of members, in recognition of the ongoing impact of the pandemic on the gathering of people for the purposes of such meetings (J at [33] and [46]); and

(d)    COVID-19 related restrictions on movement and gathering in Victoria, which changed “relatively frequently”, were still in force (J at [42]).

31    It was common ground that if the challenge to the primary judge’s reasons on the alleged improper purpose failed, as it does, the other grounds set out in the notice of appeal concerning the in-person meeting, do not arise.

32    For the foregoing reasons, in our view, the appeal must be dismissed. We will direct that the appellant file and serve a written submission about costs within 7 days, and that the respondent respond 7 days after that.

Associate:    

Dated:    12 December 2023