CATCHWORDS
CORPORATIONS - register of members - error or defect - person whose name has never been on register cannot be proved to be a member - whether name of member must be recorded exactly - enough to sufficiently approximate the correct name to identify the person - rectification available ex abundanti cautela - Corporations Law s 212.
CORPORATIONS - management and administration - appointment of representative - whether appointment to act at any general meeting of the company valid as an appointment for "specified" meetings - Corporations Law s 249(3).
CORPORATIONS - management and administration - meetings - failure of quorum a procedural irregularity - Corporations Law s 1322(2).
CORPORATIONS - management and administration - articles of association - quorum for general meeting - provision requiring the impossible - whether valid general meeting possible.
CORPORATIONS - management and administration - articles of association - alteration by special resolution - Corporations Law s 176 - no other means of altering articles of association provided for.
CORPORATIONS - dealings with issued shares - transfer of shares - transfer by operation of law - Companies (NSW) Code s 183(2).
CORPORATIONS - management and administration - appointment of representative - whether void - appointment may be cured as a procedural irregularity under Corporations Law s 1322(2) - whether the appointment of a representative a proceeding under this Law - both a general meeting of the company and the appointment of a representative a proceeding under this Law.
CORPORATIONS - management and administration - meetings - appointment of proxies - whether validly appointed - whether appointment under articles to vote at any ordinary or extraordinary general meeting of the company effective - appointment valid.
INTERPRETATION OF INSTRUMENTS - admissibility of extrinsic evidence in relation to instruments - where meaning of provision ambiguous or obscure - explanatory memorandum and second reading speech used - meaning of s 249(3) of the Corporations Law.
PRIVATE INTERNATIONAL LAW - general principles - laws relating to status - transfer of assets and assumption of liabilities under Yugoslavian law - our rules of private international law applied to recognise and give effect to the transfer.
Corporations Law s 176, s 184, s 212, s 247(3), s 249(3), s 250(3), s 253(4), s 1322(2)
Acts Interpretation Act 1901 (Cth) s 15AB
Companies (NSW) Code s 183(2), s 244(3), s 259
Standard Portland Cement Co. Pty Ltd v Good (1982) 47 ALR 107 (PC) at 112 applied
National Bank of Greece and Athens SA v Metliss [1958] AC 509 at 525 applied
Donrob Enterprises Pty Ltd v Queensland Petroleum Management Ltd (1988) 14 ACLR 307 applied
Maddocks v DJE Constructions Pty Ltd (1982) 148 CLR 104 at 117 applied
TCN Channel Nine Pty Ltd v Australian Mutual Providence Society (1982) 42 ALR 496 considered
Issac v Chapman (1915) 32 TLR 183 applied
Re Pembury Pty Ltd (1991) 4 ACSR 759 applied
Brain v Judo Federation of Australia (1994) 15 ACSR 708 applied
SIPAD HOLDING d.d.p.o. & Anor v NIKOLA POPOVIC & Ors
NG 3192 of 1995
Lehane J
1 November 1995
Sydney
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG3192 of 1995
GENERAL DIVISION )
IN THE MATTER OF
SIDEX AUSTRALIA PTY LIMITED
(RECEIVER AND MANAGER APPOINTED)
(A.C.N. 000 828 606)
BETWEEN:SIPAD HOLDING d.d.p.o.
First Applicant
PERO VLADIC
Second Applicant
AND: NIKOLA POPOVIC
First Respondent
DRAGAN KARAC
Second Respondent
MILAN JOVICIC
Third Respondent
JOSEPH JOHN GILLES
Fourth Respondent
AUSTRALIA FURNITURE PTY LIMITED
Fifth Respondent
SIDEX AUSTRALIA PTY LIMITED
(RECEIVER AND MANAGER APPOINTED)
Sixth Respondent
SIPAD EXPORT IMPORT d.d.p.o.
Seventh Respondent
CORAM: Lehane J
PLACE: Sydney
DATE: 1 November 1995
MINUTE OF ORDERS
THE COURT ORDERS THAT:
1. As against the second respondent the application be dismissed.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG3192 of 1995
GENERAL DIVISION )
IN THE MATTER OF
SIDEX AUSTRALIA PTY LIMITED
(RECEIVER AND MANAGER APPOINTED)
(A.C.N. 000 828 606)
BETWEEN:SIPAD HOLDING d.d.p.o.
First Applicant
PERO VLADIC
Second Applicant
AND: NIKOLA POPOVIC
First Respondent
DRAGAN KARAC
Second Respondent
MILAN JOVICIC
Third Respondent
JOSEPH JOHN GILLES
Fourth Respondent
AUSTRALIA FURNITURE PTY LIMITED
Fifth Respondent
SIDEX AUSTRALIA PTY LIMITED
(RECEIVER AND MANAGER APPOINTED)
Sixth Respondent
SIPAD EXPORT IMPORT d.d.p.o.
Seventh Respondent
CORAM: Lehane J
PLACE: Sydney
DATE: 1 November 1995
REASONS FOR JUDGMENT
Introduction: parties and claims
Sidex Australia Pty Limited, to which I shall refer as "Sidex Australia", was incorporated in New South Wales on 28 September 1970. It has an issued capital of 1,985,178 shares of $1 each. The principal question for determination in this case is, who is the person entitled to be registered as a member of Sidex Australia in respect of all but 1,927 of those shares?
There is a secondary issue: it relates to the effectiveness, or otherwise, of certain resolutions which persons claiming to represent the members of Sidex Australia purported to adopt, some as special and others as ordinary resolutions, on 26 April 1995. A decision on that issue depends principally, but not entirely, on the answer to the main question; and on the decision on the secondary issue depend both the current form of the articles of association of Sidex Australia and the present composition of its board of directors.
Sipad Holding d.d.p.o. (to which I shall refer as "Sipad Holding"), the first applicant, is a body corporate established under the law of the Republic of Bosnia and Herzegovina. It claims that it is entitled to have the main question answered in its favour. That claim is supported by the second applicant, Pero Vladic, undisputedly a director of Sidex Australia. The first, second and third respondents oppose the claim of Sipad Holding to be a member of Sidex Australia. They assert (and the applicants deny) that they are directors of Sidex Australia. They do not claim to be entitled to any shares in Sidex Australia. The second respondent did not appear at the hearing. The first and third respondents were not legally represented at the hearing (the former solicitor for the first three respondents ceased to act for them and filed the appropriate notice on 28 September 1995); each of the three has, however, precisely the same interest as the others in relation to the questions which I have to decide and the first respondent, Mr Nicola Popovic, made certain submissions, to which I shall refer later, and cross examined witnesses called by Mr Douglas, QC, for the applicants.
The fourth and fifth respondents have no interest in the questions which I have to decide. They were joined as respondents for the purpose of certain interlocutory proceedings which in some cases have been disposed of and in others are, I gather, not intended to be pursued further. The fifth respondent was not represented before me; Mr Gray, who announced his appearance for the fourth respondent, sought, and I granted him, leave to be excused.
The sixth respondent is Sidex Australia. By an order made in these proceedings on 9 June 1995, Beaumont J appointed Michael Gregory Jones to be, until further order, receiver and manager of the assets and undertakings of Sidex Australia. I shall refer to Mr Jones as the "Receiver". There being nothing to the contrary in the order of Beaumont J, the Receiver has the powers described in section 420 of the Corporations Law. Mr Finch appeared on his instructions, in effect to submit (except as to costs) to whatever orders the Court might think fit to make.
Finally, the seventh respondent, Sipad Export Import d.d.p.o., to which I shall refer as "SEI". SEI is, on the evidence, a body corporate formed under the law of the Republic of Bosnia and Herzegovina. It was joined as a respondent, somewhat late in the proceedings, as a possible contender for membership in respect of the shares in Sidex Australia with which this case is concerned. It is, on the evidence, in a sense (though not, perhaps, in the sense to which Australian lawyers are accustomed) related to Sipad Holding. It appeared by solicitors and indicated that it did not oppose the orders sought by the applicants.
Before I
go further, there are three other matters to which I should refer. First, the first three respondents sought an
order vacating the hearing date. Mr
Popovic's submissions in support of that application made it clear that what
the first three respondents were in fact seeking was an indefinite adjournment,
until a time when, following a cessation of hostilities in the former Federal
Republic of Yugoslavia, communication with people there might be easier than, I
was told, it is at present. For reasons
which I gave at the time, I thought that the interests of justice required that
the hearing proceed, and I refused the application. Secondly, the form which the proceedings took
when the hearing commenced was thoroughly unsatisfactory, both as to parties
and as to relief sought. Following some
discussion at the commencement of the second day of the hearing, the applicants
filed, at the beginning of the third and last day, notices of motion seeking
amendments, which for reasons I then gave
I allowed, rather radically reconstituting the proceedings: radically, but in away which,
so far as seemed to be possible, permitted the Court conveniently to determine
what had emerged, several months ago, as the real issues. Thirdly, there is no respondent
to these proceedings who both has a direct interest in opposing the answer
sought by the applicants to the main question and seeks to do so. SEI might have a possible interest in doing
so, but consents to the orders which the applicants seek. The first three respondents oppose the relief
sought, but as I have said they do not have a direct interest in the answer to
the main question in the sense that none of them claims the shares for himself;
they are, all three, interested in the secondary question because each of them
claims to be a director of Sidex Australia, a claim which the applicants
deny. I think, however, that the
exercise of reconstituting the proceedings has been taken as far as it was
practically possible to take it in the circumstances.
I should mention also that there is on foot a cross-claim by Sidex Australia against the second applicant, Mr Vladic. The Receiver (within whose competence the matter at present falls) indicated through his counsel that he does not propose to pursue the cross-claim; the cross-claim will, however, have to be disposed of and I shall return to that matter at the end of these reasons.
Facts relevant to main question
The
register of members of Sidex Australia, a copy of which was tendered, states
that the holder of 1,983,251 shares in Sidex Australia is "Sour Sipad
Import Export" the address of which is stated as Sarajevo (there is added
in a different hand "15 Marsalia Tita") Yugoslavia. The applicants, however, assert, and the
first three respondents agree, that there is not, and never has been, a body of
that name. There is in evidence a
certificate of the Higher Court in Sarajevo which states, among other
things, that "there is no company registered in this Court of that name
(scil "Sour Sipad Import Export") and never has been". Plamenko Custovic, described as a State
Attorney for the Republic of Bosnia and Herzegovina and a lecturer in civil law
at Sarajevo University, called on behalf of the applicants, said in answer to a
question I asked him that there is no company, in existence under the law of
Bosnia and Herzegovina, which has that name.
How, then, did the register of members of Sidex Australia come to show, as the name of the holder of a majority of its shares, a name which does not correctly describe any actual person or body?
The evidence establishes, and I do not believe that it is disputed, that there has for many years, in the former Federal Republic of Yugoslavia and more recently in the Republic of Bosnia and Herzegovina, been a substantial group of commercial enterprises trading under the name "Sipad". The business of the group included, and includes, the processing of timber and the manufacture and sale, including by export, of furniture. The business of Sidex Australia comprises largely the import and sale, in Australia, of furniture manufactured by the Sipad group.
Under a
law passed in 1976 by the former Federal Republic of Yugoslavia, the District
Commercial Court in Sarajevo registered certain documents in relation to a part
of the Sipad group. The consequence,
according to the evidence of Mr Custovic - and, again, I do not believe this
was challenged - was that that part of the group was given a "special
legal subjectivity" and power, among other things, to conclude
agreements and hold property. That part
of the group was thereafter properly known as "Sour Sipad", S, O, U
and R being the initial letters of words which can be represented in English by
some such phrase as "compound organisation of associated labour".
On 15 October 1985 an agreement for the sale of 17,343 ordinary shares in Sidex Australia was entered into between a vendor described as "Kozarsko Tekstilni Kombinat" of Viosko, Yugoslavia, and a purchaser described as Sour Sipad Import Export of Sarajevo, Yugoslavia. Although the purchaser is thus described in the schedule to the agreement, the agreement is expressed to be signed, sealed and delivered by "Sour Sipad"; the seal, an impression of which appears on the agreement, is stated to have been affixed in the presence of Seid Maglajlija. The evidence of Alija Celikovic was that Mr Maglajlija was in 1985 the Chairman of the Board of Sour Sipad and that he signed the agreement in the presence of Mr Celikovic. A transfer of the shares on completion of that agreement was signed on behalf of the vendor as transferor and, on behalf of a transferee described as "Sour Sipad Import Export", by Mr Maglajlija, described in the transfer as "Chairman of the Board of Sour Sipad - Sarajevo". Sidex Australia's register of members then records that, upon registration of the transfer, "Sour Sipad Import Export" became the holder of the shares transferred.
I think the evidence, the effect of which I have thus summarised, makes it clear that the party entering into the agreement to purchase the shares was the body which in 1985 was known as Sour Sipad and that, in the agreement, the transfer and the register of members the words "Import Export" were added by mistake. That again, I think, was not in dispute.
There are in evidence what purport to be minutes of a meeting of directors of Sidex Australia held on 12 September 1985 which appear to suggest that the intended purchaser was not Sour Sipad but the separate, though related, corporation SEI. As I have said, however, SEI does not claim to have been the purchaser and does not oppose the relief sought by the applicants; and, in any event, the rest of the evidence points in my view clearly to the conclusion that Sour Sipad was the actual purchaser.
The next
relevant series of events occurred during 1987.
The evidence of Mr Celikovic, who is described as the Vice President of
SEI, supported by the evidence of Dr Murat Backovic, who is described as the
President of Sipad Holding, is that on 20 January 1987 the Workers' Committee
of Sour Sipad approved the subscription of a further A$3,800,000 for shares in
Sidex Australia. There was then,
apparently, an application for permission to invest further funds made to the
Federal Secretariat for Foreign Trade of the Republic of Yugoslavia, resulting
in a decision (a copy of which was produced and identified by Mr Custovic)
authorising Sour Sipad to invest in Sidex Australia, "in the first
phase", the equivalent in Australian currency of US$1,395,000. Nothing further appears to have happened
until February 1988. Mr Celikovic's
evidence, again confirmed by that of Dr Backovic, is that in that month, in accordance with the permission of the
Secretariat for Foreign Trade, SEI paid on behalf of Sour Sipad the
subscription moneys for 1,965,908 further shares in Sidex Australia.
The application and allotment
journal of Sidex Australia records on 11 February 1988 an
application by "Sour Sipad Export Import" for, and an allotment to it
of, 1,965,908 shares. That allotment was
then recorded, under the same name, in the register of members.
Mr Popovic cross examined both Mr Celikovic and Dr Backovic at length. A large part of his cross examination of each of them comprised suggestions by Mr Popovic that the US$1,395,000 (the equivalent of the A$1,965,908) was provided in fact neither by Sour Sipad nor by SEI, but in an aggregation of smaller amounts each provided by a body described as a "member" of Sour Sipad from borrowings from an entity known as Sipad Bank. In support of that line of cross examination, Mr Popovic showed to each witness a number of documents. It cannot be said that there emerged from the cross examination a picture, clear in all details, of what actually occurred. Both witnesses, however, firmly denied the suggestion that the subscription moneys were paid by anyone other than Sour Sipad or SEI on its behalf, or that the intended subscriber was anyone other than Sour Sipad. Both suggested that if there was any funding by individual members of Sour Sipad, that was done as a matter of "internal organisation" and not on the footing that individual members of Sour Sipad would subscribe for shares in, or become members of, Sidex Australia.
The matters put to Mr Celikovic and Dr Backovic in cross examination were also put to me by Mr Popovic from the bar table and in paragraph 6 of a statement of Mr Popovic filed on 6 October 1995 and to which are attached copies of documents similar to those put to the witnesses in cross examination.
In my view the probabilities strongly favour the correctness of the evidence given by Mr Celikovic and Dr Backovic, and I accept their evidence. I find, accordingly, that the body which subscribed for the additional 1,965,908 shares in Sidex Australia was Sour Sipad and that - unsurprisingly - the same mistake was made in entering particulars of the subscription and allotment in the allotment journal and the register of members as had, not long previously, been made in relation to the smaller parcel of shares purchased by Sour Sipad.
That, however, is not sufficient to provide an answer to the main question: it is not a body called Sour Sipad which claims to be entitled to the shares, but a body called Sipad Holding d.d.p.o..
Mr Custovic gave evidence that in 1989 there was passed in the former Federal Republic of Yugoslavia an Act on Enterprises. The purpose of the legislation, according to Mr Custovic, was "adaptation to market commonly of western type with the aim that you understand us better too. It was obvious that according to the old law you couldn't do that." In any event, there is in evidence a copy, in English translation, of a decision of the Basic Court of Associated Labour Sarajevo of 15 January 1990 which, according to Mr Custovic, subjected Sour Sipad to the Act on Enterprises. What is not by any means clear from the English translation of the decision is whether the old entity Sour Sipad continued under the same name, albeit with some altered characteristics, or whether a new body was formed by the decision which succeeded to the assets and liabilities of the old body and to its name. That latter conclusion appears the more likely. That view of the matter is suggested also by the following exchange between Mr Douglas and Mr Custovic, through the intermediation of the interpreter:
Mr Douglas: Upon being brought under the Act on enterprises did Sour Sipad succeed to all the rights and liabilities of the old Sour Sipad?
The Interpreter: That's absolutely sure.
Mr Douglas: And did it succeed to the property of the old Sour Sipad?
The Witness:Of course.
The Interpreter: This was the case with other Sour's also. It was something that ...
Mr Douglas: Could you just repeat your answer please?
The Interpreter: This is out of suspicion. There is no doubt about it.
As that exchange makes clear, Mr Custovic's evidence was confidently to the effect that the "new" Sour Sipad succeeded to all the rights and property of the "old" Sour Sipad. There is no reason why I should doubt that evidence, which was undisputed. It follows that, if the "old" Sour Sipad was entitled to the shares transferred and allotted, the "new" Sour Sipad became entitled to them on 15 January 1990.
The next step is relatively easy. The evidence includes an English translation of a decision of the Basic Court of Associated Labour in Sarajevo entered on 5 July 1991, which brought about a "modification in organising SIPAD Composite Enterprise ... into HOLDING under full name: SIPAD HOLDING ...". Mr Custovic's evidence on the effect of this decision is clear:
Mr Douglas: If you turn to the next document in that bundle in front of you, you will see that there is a decision dated 5 July 1991 which is document 19 in the court bundle, you will see that that decision is described in English to enter in a court register with the registry court as follows and then it says "modification in organising Sipad composite enterprise for forestry wood industry and trade Sarajevo inter-holding under full name" and it then says "Sipad Holding", do you see that? Did that decision do anything more than change the name of the old Sour Sipad?
The Interpreter: It brought in not only a change of name but a change in organisation. But it didn't have any consequences on the property and liability because it's the same subject.
Mr Douglas: And the same entity under Yugoslavian law?
The Interpreter: Yes.
Mr Popovic put to Mr Celikovic and Dr Backovic a number of questions apparently designed to provoke admissions that, because not all the members of Sour Sipad had signed application documents in relation to Sipad Holding, Sipad Holding could not be said to be a true continuation of Sour Sipad. No such admissions were made, however, and I see no reason not to accept the clear evidence of Mr Custovic.
The final link in this part of the chain is a decree of a 11 April 1992 of the Republic of Bosnia and Herzegovina adopting certain laws of the former Federal Republic of Yugoslavia. The evidence of Mr Custovic as to the effect of that decree was as follows:
Mr Douglas: Was one of the laws which was applied by that decree the act on enterprises of the former Federal Republic of Yugoslavia?
The Interpreter: Yes.
Mr Douglas: In your opinion did the making of that decree have the effect that Sipad Holdings continued as an entity formed under the act on enterprises but under the law of Bosnia and Herzegovina?
The Interpreter: Yes, that is quite true.
Mr Douglas: In your opinion, did Sipad Holdings, formed under the law of Bosnia and Herzegovina, succeed to the rights and obligations and the property of Sipad Holdings formed under the former laws, under the laws of the former Federal Republic of Yugoslavia?
The Interpreter: It is the same Sipad Holding according to the earlier law and the law which was taken over.
That evidence was not disputed and I accept it.
There was no evidence of any other events or transactions relevant to the ownership of the shares with which this case is concerned. Accordingly, I hold that Sour Sipad became entitled to each of the two parcels of shares, on transfer and allotment respectively, and that Sipad Holding, the first applicant, is now entitled to them.
Conclusions on main issue
It is appropriate now to set out my conclusions on this aspect of the case in a little more detail:
1. I find that the purchaser, in 1986, of 17,343 shares in Sidex Australia and the subscriber, in 1988, for 1,965,908 shares in Sidex Australia was the body formed in the Federal Republic of Yugoslavia known as "Sour Sipad".
2. The addition of the words "Import Export" was simply a mistake, and the register of members might have been amended to correct it without any intervention by the Court. However, clearly there was an error or defect in an entry in the register and accordingly I see no reason why, on the application of Sour Sipad, the Court would not have been able to order rectification of the Register under s 259 of the Companies (NSW) Code. The case is, I think, analogous to one where a mistake in the expression of an instrument is read in the correct (i.e. intended) sense as a matter of construction but nevertheless rectification may be available ex abundanti cautela: Standard Portland Cement Co. Pty Ltd v Good (1982) 47 ALR 107 (PC) at 112.
3. I find that the "new" Sour Sipad which emerged as a result of the Act on Enterprises and the decision, of 15 January 1990, of the Basic Court of Associated Labour Sarajevo was not the same entity as the "old" Sour Sipad. I think, however, that the conclusion to be drawn from the evidence of Mr Custovic is that the succession that occurred of the "new" to the "old" occurred under a law which is to be characterised as a law relating to status in the same sense as that which the House of Lords considered in National Bankof Greece and Athens SA v Metliss [1958] AC 509. The result is that thisCourt, applying our rules of private international law, will recognise and give effect to the transfer of assets and assumption of liabilities for which the Yugoslavian law provides. "If a corporation exists for no other purpose than to assume the assets, liabilities and powers of another company, what sense is there in our recognising its existence if we do not also recognise the purposes of its existence and give effect to them accordingly." (National Bank of Greece and Athens SA v Metliss, supra at 525). If what happened is to be regarded as including a transfer of shares in Sidex Australia, it was, I think, one to which s 183(2) of the Companies (NSW) Code applied: that is, the lack of a proper instrument of transfer did not prejudice the power of Sidex Australia to register the "new" Sour Sipad as a shareholder, that body being a person to whom the right to shares in Sidex Australia had devolved by operation of law. I think, therefore, that the right to correct the register and the possibility of an order for rectification continued unaffected.
4.4. It is clear, I think, from the evidence of Mr Custovic, and nothing in the documents before me suggests to the contrary, that although the changes effected by the decision of the Basic Court of Associated Labour in Sarajevo of 5 July 1991 went beyond a mere change of name, Sipad Holding d.d.p.o. is to be regarded as the same legal entity as the "new" Sour Sipad; and I accept also that the same entity continues under that new name under the decree of the Republic of Bosnia and Herzegovina adopting the Federal law of the Republic of Yugoslavia. I think that the register may be corrected to reflect that change and I think also that rectification remains available, though now under the Corporations Law, s 212.
For those reasons, I think that the applicants are entitled to the order for rectification which they seek. They seek also a declaration that the entity described as Sour Sipad Import Export in the register of members of Sidex Australia is the first applicant. Given my conclusions as to the succession of the "new" Sour Sipad to the "old" Sour Sipad, I think it is more appropriate (anticipating a discussion, later in these reasons, of the meaning of "member") to make a declaration that the first applicant is a member of the sixth respondent and is the holder of the shares in question.
Secondary question: validity of resolutions: facts
A consideration of the secondary question requires some additional findings of fact. Because there is no dispute as to the facts (as opposed to the conclusions to be drawn from them) and because, for the most part, they are on the evidence clear I can state them in summary form.
1. The
register of members of Sidex Australia records, as the name of the holder of
all the 1,927 issued shares of Sidex Australia other than those with which the
earlier part of this judgment was concerned, "Kozarski Kombinat". This
also, apparently, is an incorrect name.
Until 28 December 1989, the
correct name of the body intended to be described appears to have been
Kozarski Tekstilni Kombinat Viosko. That
is, of course, the name under which it entered
into the agreement, to which I have already referred, to sell 17,343shares in Sidex Australia to
Sour Sipad. The evidence of Mr Custovic
is thaton 28 December 1989 this body
was, like Sour Sipad, brought under the Act
on Enterprises: a
copy of a translation of the decision of the Basic Court of Associated Labour
Sarajevo is in evidence. From that
decision it appears that the correct name of the body which succeeded to the old
Kozarski Tekstilni Kombinat Viosko is "KTK Viosko". There is, however, I think no reason to doubt
- and there is no dispute - that the body then known as Kozarski Tekstilni
Kombinat Viosko was in 1986 the holder of the shares which it then sold to Sour
Sipad. Similarly there is no reason to
doubt, and no dispute, that the successor of that body is entitled to 1,927
shares in Sidex Australia: that is, all those shares in that company which are
not registered under the name "Sour Sipad Import Export".
2. The first two respondents, Messrs Popovic and Karac, were appointed directors of Sidex Australia on 1 July 1989; on 23 November 1990 the third respondent, Mr Jovicic, was appointed as a director of Sidex Australia, as were Dr Backovic, Morris Papo, Mustafa Haznadarevic, Sakib Hadzik and the second applicant, Pero Vladic.
3. On 19 August 1994 Sipad Holding certified under its seal that it had, by resolution of its board of directors, appointed the second applicant to act as its authorised representative to:
(a) sign on behalf of Sipad Holding any resolution under Article 51 of the articles of association of Sidex Australia;
(b) sign on behalf of Sipad Holding any consent to short notice for any general meeting of Sidex Australia; and
(c) act as corporate representative of Sipad Holding at any general meeting of Sidex Australia.
The effectiveness of the resolution referred to in the certificate depends, of course, on the validity of the claim of Sipad Holding to be a member of Sidex Australia, and I shall return to that issue.
4. On 23 August 1994 Kozarski Tekstilni Kombinat, by a certificate under its seal (the name on which, it may be noted, is "KTK Viosko") certified that its board of directors had under s 249(3) of the Corporations Law appointed Mr Nehru Dzambegovic as its authorised representative, with authorities similar to those purportedly conferred by Sipad Holding on Mr Vladic.
5. On 21 April 1995 Mr Vladic gave notice of an extraordinary general meeting of Sidex Australia to be held at a place specified in the notice at 7.00 am on Wednesday, 26 April 1995. Under Article 41 of the articles of association of Sidex Australia Mr Vladic was, as a director, entitled to give that notice. The purpose of the meeting was to consider some proposed special and ordinary resolutions. The proposed special resolutions were for the amendment of the articles of association, mostly in relation to matters concerning the conduct of general meetings and meetings of the directors. Included among them also, however, was a proposal for the insertion in the articles of association of a new Article 5, as follows:
5. The Company may by resolution, including (without limiting any other provision of these Articles) a resolution in writing under Article 51, remove any Director forthwith and may also by resolution appoint another person in that Director's stead.
The proposed ordinary resolutions were for the removal, with effect forthwith, from office as directors of Sidex Australia of Messrs Papo, Popovic, Karac and Jovicic; for the appointment of Edina Berberovic as a director; for the replacement of Mr Popovic by Mr Vladic as secretary of the Company; and for a change of registered office.
6. On 13 April 1995 Sipad Holding purported to appoint Edina Berberovic as its proxy to vote in respect of one of its shares in Sidex Australia, and Mr Vladic as its proxy to vote in respect of its other shares in Sidex Australia, at any general meeting (including without limitation an annual general meeting or extraordinary general meeting) of Sidex Australia, or adjournment thereof.
7. On 24 April 1995 Mr Vladic on behalf of Sipad Holding and Mr Dzambegovic on behalf of Kozarski Tekstilni Kombinat signed a form of consent to short notice in respect of the meeting convened by Mr Vladic's notice. The operative paragraph of the form of consent was:
We agree that:
(a) the meeting is deemed to be duly convened notwithstanding that it is convened by notice shorter than is otherwise required by the Corporations Law or the Company's articles of association; and
(b) each resolution to be proposed as a special resolution may be proposed and passed at the meeting as a special resolution notwithstanding that less than 21 days notice of the meeting has been given.
8. The meeting was held. Present were Pero Vladic, Nehru Dzambegovic and Edina Berberovic. Mr Vladic was appointed Chairman. The documents appointing representatives and proxies were tabled and the meeting purported to pass unanimously the proposed resolutions, special and ordinary.
9. On the same day Messrs Vladic and Dzambegovic signed, as representing Sipad Holding and Kozarski Tekstilni Kombinat respectively, a form headed "Resolution pursuant to Article 51 of the Articles of Association". That document purported to adopt the resolutions, both special and ordinary, to the extent that they might not have been validly passed at the meeting.
10. Article 51 of the articles of association of Sidex Australia provides:
51. A resolution in writing signed by all the members for the time being entitled to receive notice of and to attend and vote at general meetings (or being corporations by their duly authorised representatives) shall be as valid and effectual as if it had been passed at a meeting of members duly called and constituted.
Before going further, I must deal with some resolutions which were purportedly passed at a general meeting of Sidex Australia on 16 March 1993. Among the resolutions purportedly passed at the meeting were some special resolutions to amend the articles of association, in many respects very similar to those before the meeting of 26 April 1995, and an ordinary resolution by which the meeting purported to dismiss Mr Popovic from office as a director. A notice of the special resolutions was lodged with the Australian Securities Commission; a notice of Mr Popovic's removal as a director was not. While counsel for the applicants did not concede that the resolution which in 1993 purportedly removed Mr Popovic from office was ineffective, he clearly was not inclined to rely on it very heavily. He does, of course, contend that if Mr Popovic remained in office after the 1993 meeting he was effectively removed as a director by the resolutions of 26 April 1995.
The question of the effectiveness or otherwise of the 1993 resolutions was not seriously pursued at the hearing and I am in no position to express a concluded view on it. The possible invalidity of the resolutions may, however, have one other consequence. One of the amendments of the articles which those resolutions purported to make was one which replaced Article 44 (dealing with the quorum for a general meeting) with a new article to the effect that two members present in person or by proxy should be a quorum for a general meeting. The article thus intended to be replaced provided as follows:
Three members, at least two of whom shall represent Sour
Sipad Export Import, present in person or by proxy shall be a quorum for a
general
meeting and no business shall be transacted at any general meeting unless the
requisite quorum is present.
It was presumably for fear that that article was still in effect that Sipad Holding adopted the otherwise strange expedient of appointing two proxies in addition to one representative. However, literally the article demands the impossible: two proxies representing one member are not two members representing that member (Donrob Enterprises Pty Ltd v Queensland Petroleum Management Ltd (1988) 14 ACLR 307). Either the article required something which, in a company having two members, was impossible or "member" is to be read in an unusual, and not particularly sensible, sense. In any case, I am not by any means convinced that a company which lawfully has two members cannot effectively have a general meeting though both members are present because its articles contain a provision requiring the impossible, viz the presence of a greater number of members than two. These matters, however, were not argued and I need not pursue them because, as will appear, the Corporations Law provides a remedy for any technical deficiency of this kind, if such a deficiency there is.
There is another preliminary matter. I confess that I am quite unable to see how a signed resolution under Article 51 could effectively alter the Articles of Association. The Corporations Law provides (s 176) that a company may by special resolution alter or add to its articles. No other means of doing so is provided. Section 253 of the Law tells us what a special resolution is: it is a resolution passed by a specified majority at a general meeting. A document signed under Article 51 is not a resolution passed at a meeting. Whether the articles of association were effectively altered on 26 April 1995 depends, therefore, on the effectiveness of the extraordinary general meeting of Sidex Australia purportedly held on that day.
Clearly, what was done at the meeting was validly and effectively done only if the two bodies represented at the meeting were the members of Sidex Australia. Section 184 of the Corporations Law provides that a person who agrees to become a member of a company and whose name is entered in a company's register of members becomes a member of the company. In deciding whether Sipad Holding was at relevant times a member of Sidex Australia I do not think it is particularly helpful to refer to the proposition, undoubtedly correct as it is, that the register of members is prima facie evidence only of the matters inserted in it. It is, no doubt, true that if in the register there appears, as the name of a member, the name of a person who has not consented to become a member the lack of agreement may be proved so as to establish that the person concerned is, indeed, not a member. However, the converse - that a person who has agreed to become a member but whose name has not been entered in the register may nevertheless be proved to be a member - plainly is not true: see Maddocks v DJE Constructions Pty Ltd (1982) 148 CLR 104 at 117. I think Sour Sipad must, on both occasions when it acquired shares in Sidex Australia, be taken to have agreed to become a member and I think the burden of that agreement must be taken to have passed to the "new" Sour Sipad, including that body under its present name.
Has, then, the name of Sipad Holding been entered in the register of members of Sidex Australia? In my view the answer to that question is clearly "yes". Although I know of no authority directly in point, and I was referred to none, I cannot believe that I am required to hold that a person's name must be entered in the register with absolute completeness and correctness, and without any superfluous additions, in order that it may be said that that person is one "whose name is entered in the company's register of members". It is enough, I think, if the entry sufficiently approximates the correct name to identify the person concerned: particularly where, as in this case, the mistake resulted from the way in which the putative member described itself (or allowed itself to be described). And a person does not cease to be a member, of course, upon a change of name: the change does not mean that the person's name was not entered in the register. I conclude, therefore, that Sipad Holding was on 26 April 1995, and at relevant earlier times, a member. By parity of reasoning I conclude that, at those times, Kozarski Tekstilni Kombinat Viosko (or KTK Viosko) was also a member.
The substance of the matter, therefore, is that both members of Sidex Australia were represented at the meeting on 26 April. The meeting had been called, as the articles permitted, by a director. The notice given was less than that required, in the absence of effective consent to short notice, by the Corporations Law and by the articles, but consent to the short notice had been given in the way contemplated by s 247(3) and s 253(4) of the Corporations Law. Apart from the possible question as to a quorum, however, there is one possible impediment in the path towards a conclusion that the proceedings of the meeting were valid and effective.
Each of the two members, in its certificate of appointment of representative, certified that it had appointed its representative to "act as its corporate representative at any General Meeting of the Company". If s 244(3) of the Companies (NSW) Code were still in force, that would not give rise to a difficulty. That section provided that a body corporate might "authorise such person as it thinks fit to act as its representative either at a particular meeting or at all meetings of the company". Section 249(3) of the Corporations Law provides, however, that a body corporate may "authorise a specified person to act as the body's representative at specified meetings that the body would, if it were a natural person, be entitled to attend as a member ... of a company." The applicants submitted that, because s 249(4) provides that an authority thus given is effective "until it is revoked", I should conclude that "any General Meeting" should be read, in the certificates of appointment, as meaning any general meeting of Sidex Australia to be held between the date of the certificate and the date on which the authority should be revoked and that meetings complying with that specification should be considered "specified meetings" for the purposes of s 249(3). Counsel referred also to the statement in the explanatory memorandum to the Corporations Law that clause 249 "is based on CA s 244".
Section 15AB of the Acts Interpretation Act 1901 (Cth) provides that if the meaning of a provision of an Act is ambiguous or obscure consideration may be given, in interpreting that provision, to extraneous material. The extraneous material which may be used for that purpose includes any explanatory memorandum relating to the relevant Bill and the second reading speech of the responsible Minister in relation to the Bill (s 15AB(2)(e), (f)). Both the explanatory memorandum relating to the Corporations Bill and the second reading speech delivered by the then Attorney-General on 25 May 1988 make it clear that, except on matters specifically indicated, it was not intended by the Bill to effect substantial changes to the existing company law but that some changes had been made for the purpose of simplifying or clarifying certain provisions. If, with that background, one turns to the changes made to the previous s 244(3), it is easy enough to see that what might have seemed inappropriate about the drafting of that section was that it seemed to contemplate that a body corporate might appoint a person to represent it at one particular meeting, or at all meetings, but not at a number of meetings greater than one but less than all. It is difficult to see why the ability to appoint a representative at all meetings would have seemed inappropriate, because the section explicitly contemplated revocation of an appointment as, of course, does s 249(3) of the Corporations Law. I would therefore be inclined, if it were necessary, to accept the submission made on behalf of the applicants and to hold that s 249(3) permits a corporate member of a company to appoint a person to represent it at any or all future meetings of the company, however generally described. The difficulty with that construction is, of course, the use of the word "specified" which in many contexts suggests a requirement of greater particularity: see, for example, TCN Channel Nine Pty Ltd v Australian Mutual Providence Society (1982) 42 ALR 496. I have indicated my tentative view, but for reasons which will appear it is unnecessary (if tempting) for me to form a concluded view and as I have not heard full argument on the subject I do not think I should do so.
Article 53 of the articles of association of Sidex Australia provides that votes may be given (at a general meeting) either personally or by proxy "or in the case of a company by a representative duly authorised". The article also provides that "... a corporation being a member of the Company may appoint as its proxy or representative any officer of such corporation." The applicant did not submit that that article conferred on a corporate member of Sidex Australia a power, independent of s 249 of the Corporations Law, to appoint a person to represent it at general meetings of Sidex Australia. They did, however, submit that if I held that the appointments of representatives (because they did not relate to specified meetings) were not authorised by s 249(3) I should nonetheless declare the resolutions to have been effective on the footing that s 1322(2) of the Law applied or, failing that, that I should make an order in relation to the meeting of 26 April under s 1322(4) that the resolutions were not invalid by reason of any "contravention" constituted by the form of the appointments.
I am by no means convinced that what was done, assuming it to be unauthorised by s 249, amounted to a "contravention of a provision of this Law". What was done may have been unauthorised by the Law and therefore ineffective but it was not, I think, in any usual sense of the word a "contravention". Thus, at least without the benefit of further argument, I would not be inclined to make an order under s 1322(4).
Section 1322(2) operates in relation to a "proceeding under this Law" in circumstances where there has been a "procedural irregularity". Sub-s (1) gives content to those terms. It is clear that a general meeting of a company is to be regarded as a proceeding under the Law, and I think the appointment of a representative under s 249 must be regarded as a proceeding under the Law also. However, if it is to be assumed that, but for s 1322, a general appointment of someone to represent a corporation at general meetings of the company is ineffective, I am not convinced that it is ineffective or invalid because of a procedural irregularity. Shortly, perhaps with excessive crudity and without reference to authority (I know of none that particularly assists) the problem is not that parties have attempted to do something which the Law permits but failed to do it effectively because of a procedural failure or omission; it is that they have tried to do something which the Law does not authorise.
Fortunately, I think these also are matters about which I do not have to come to a concluded view. Whatever the effect of the attempted appointments of representatives, one matter that does seem to be quite clear is that Sipad Holding was represented at the meeting on 26 April by properly appointed proxies. I suggested to counsel during the course of the hearing that there might be a difficulty, under the articles of association of Sidex Australia, in appointing proxies for meetings generally (which is what Sipad Holding did) rather than for a particular meeting. I am satisfied, however, that my doubt was unwarranted. In Issac v Chapman (1915) 32 TLR 183 Petersen J held, in relation to articles (of Marks and Spencer (Limited)) which were similar in significant respects to those of Sidex Australia and do not appear to have differed in ways that matter, that an appointment of a proxy to vote "at any ordinary or extraordinary general meeting of the Company" was valid: indeed, his Lordship thought the point so obvious that he did not find it necessary to call on counsel for the plaintiffs. No other deficiency was suggested in the way in which the proxies were appointed, and I can see none: the requirements of s 250(3) of the Corporations Law were satisfied as were, I believe, the provisions of the articles of association. The evidence is, particularly, that the notice of the appointment of the proxies was given before the latest time permitted under the articles.
The result, I think, is this. The meeting was validly called. Consent to short notice of the meeting was given by persons authorised by each member to give that consent on its behalf. There were present proxies for the holder of very nearly all the issued shares in Sidex Australia. A person was present who had been appointed - perhaps invalidly - to represent the other member. Thus, technically, there may not have been a quorum. It is possible also that there was no quorum by reason of the doubt, to which I have referred earlier, about the precise form the articles then took. It is clear, I think, that the absence of a quorum is to be regarded as a procedural irregularity for the purposes of s 1322(2) (Re Pembury Pty Ltd (1991) 4 ACSR 759; Brain v Judo Federation of Australia (1994) 15 ACSR 708).
The only remaining question, then, is whether the Court is of the opinion that the irregularity, if there was one, has caused or may cause substantial injustice. In the circumstances, I am unable to see that the irregularity caused any injustice. The action that the members took at the meeting was action which they were entitled to take. If they failed effectively to take it, it was only because one of them - the holder of relatively a very small parcel of shares in Sidex Australia - acted on what may have been an incorrect view of s 249 of the Law. Accordingly, I think what was done at the meeting on 26 April was validly done.
Because the second respondent, Mr Karac, was not present at the hearing and had no notice of the amendments, no orders can be made against him on the amended application and I think it follows that, as against him, the application must be dismissed. Subject to that, I think that the orders I should make are as follows:
1. Declare that the first applicant is a member of the sixth respondent and is the holder of 1,983,251 shares in the sixth respondent.
2. Order pursuant to s 212 of the Corporations Law that the register of members of the sixth respondent be rectified by amending the name "Sour Sipad Import Export" to "Sipad Holding d.d.p.o."
3. Declare that the resolutions passed at a general meeting of the members of the sixth respondent held on 26 April 1995 are valid and effective.
I am, of course, willing to hear argument on the precise form of those orders.
There are other matters which remain to be disposed of. One is the cross-claim; another is the discharge of the Receiver. There may be others which I have overlooked. It may be that the parties will be able to agree as to the disposition of these matters, so that they can be dealt with by consent orders. Otherwise the matter will have to be listed for further hearing.
There is also the question of costs. I have already made an order for costs in relation to the further amendments made to the Application on 12 October 1995. A separate matter arising between the fourth and sixth respondents awaits final disposition on 3 November. That leaves to be dealt with the remaining costs of these proceedings, including reserved costs. During the hearing I indicated a tentative view that, in the unusual circumstances of this case, the usual consequences of the applicants' success on the main issues might not necessarily be appropriate. I gathered that no one took serious issue with what I said. However, I invite the parties to make submissions to me on the appropriate order for costs. If necessary, the matter can be listed before me shortly for that purpose.
I certify that this and the preceding 30 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.
Associate:
Dated:
Heard: 10 - 13 October 1995
Place: Sydney
Decision: 1 November 1995
Appearances: Mr F M Douglas QC and Mr J E Sexton of counsel instructed by Mallesons Stephen Jaques appeared for the applicant.
The first and third respondents appeared in person.
Mr V R Gray of counsel instructed by R F Giles Payne & Co appeared for the fourth respondent.
Mr S G Finch of counsel instructed by Phillips Fox appeared for the sixth respondent.
