FEDERAL COURT OF AUSTRALIA

Wilmar Sugar Australia Limited v Queensland Sugar Limited, in the matter of Queensland Sugar Limited (No 2) [2016] FCA 180

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to r 9.12 of the Federal Court Rules 2011, leave be granted to Bundaberg Sugar Limited, Isis Central Sugar Mill Company Limited and Mackay Sugar Limited (the BIM mills) to intervene in this proceeding for the purpose of adducing evidence and making submissions on the appropriate form of the further final relief to be granted, such intervention to be on the basis that the BIM mills bear their own costs.

2.    Pursuant to s 233(1)(b) of the Corporations Act 2001 (Cth) (the Act), the defendant’s Constitution be modified by repealing the amendments proposed in item 1 of the notice of general meeting of members of the defendant dated 13 November 2015 and passed on 8 December 2015 (the 2015 amendments) and restoring the defendant’s Constitution in the form it took immediately before the 2015 amendments were made.

3.    For the purposes of s 233(3)(a) of the Act, the defendant have the power under s 136 of the Act to make changes to its Constitution, other than by re-inserting Article 31 thereof in the form in which it has been found by the Court to be oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiff, as declared on 1 February 2016, notwithstanding Order 2 hereof.

4.    The interlocutory application filed by the defendant on 7 December 2015 be dismissed with costs, such costs to be taxed if not agreed.

5.    The defendant pay the plaintiff’s costs of the proceeding, such costs to be taxed if not agreed.

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

REASONS FOR JUDGMENT

YATES J:

1    On 1 February 2016, I made a declaration to the effect that a resolution amending Article 31 of the defendant’s Constitution was oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiff, as a member of the defendant, within the meaning of s 232(e) of the Corporations Act 2001 (Cth) (the Act): Wilmar Sugar Australia Limited v Queensland Sugar Limited, in the matter of Queensland Sugar Limited [2016] FCA 20 (my earlier reasons).

2    At that time, I expressed my satisfaction (at [129]) that it is appropriate that the Constitution be modified pursuant to s 233(1)(b) of the Act, so as to remove the oppression and unfairness that has been caused.

3    The resolution to amend Article 31 of the Constitution was proposed and passed on 8 December 2015, in the following terms:

To consider and, if thought fit, to pass a special resolution to amend the Constitution of the Company as detailed by the marked up changes set out in the document in Annexure A to this Notice of Meeting, with the date to be inserted in the definition of ‘Original Continuing Mill Owner Members’ in clause 1 being the date on which the members passed this resolution.

4    Annexure A to the notice of meeting not only proposed amendments to Article 31, but also amendments to a number of other articles, some related to Article 31 and others unrelated to Article 31 (the 2015 amendments).

5    For example, substantial amendments were proposed to Article 30, dealing with the appointment of Grower Directors. Also, amendments to Articles 29A(b) and 29A(c) were proposed, dealing with Independent Director vacancies. This proposal was to provide that the Board Selection Committee could fill a vacancy for an Independent Director by selecting an appropriate applicant from those who had been shortlisted for the position under Article 29A(a) by the vote of a simple majority of members of the committee rather than by consensus. An amendment was proposed to Article 35(d) so as to enable directors providing extra services, in addition to the normal duties expected of a director, to be remunerated having regard to the value of the services provided. Various other amendments were proposed, including those ancillary to or consequential upon what might be said to be the more substantial amendments.

6    The effect of proposing and passing a single resolution on 8 December 2015 was that a number of substantial amendments were made to the Constitution, not just to Article 31. Thus, while the act causing the oppression and unfairness which I have found was the passing of the resolution, it was only Article 31 that gave effect to that oppression and unfairness.

7    At [129] of my earlier reasons, I said:

… The plaintiff’s concern has been with respect to Article 31, although the amendments to Article 31 and the other amendments comprising the 2015 amendments were passed by a single resolution. One course open might be to order that Article 31 should be removed and replaced by Article 31 in its form before the 2015 amendments. However, it is not clear to me what effect that might have for other amendments which have been made. I am prepared to hear the parties further on the form of relief that should be granted in this regard. Hopefully they will be able to agree on the appropriate form of the order.

8    As events transpired, the parties were able to agree on the appropriate form of the order, subject to one matter which I will discuss below. In essence, the parties agreed on an order that would provide for some of the changes made to the Constitution on 8 December 2015 to remain, or remain in an altered form, and for some changes to be reversed—principally, the changes to Article 31.

9    However, on 9 February 2016, Bundaberg Sugar Limited (Bundaberg), Isis Central Sugar Mill Company Limited (Isis) and Mackay Sugar Limited (Mackay) (referred to collectively in my earlier reasons, and here, as the BIM mills), who are Mill Owner Members of the defendant, filed an interlocutory application seeking leave to intervene in the proceeding, pursuant to r 9.12 of the Federal Court Rules 2011 (the Rules). Rule 9.12 of the Rules provides:

(1)    A person may apply to the Court for leave to intervene in a proceeding with such rights, privileges and liabilities (including liabilities for costs) as may be determined by the Court.

(2)    The Court may have regard to:

(a)    whether the intervener’s contribution will be useful and different from the contribution of the parties to the proceeding; and

(b)    whether the intervention might unreasonably interfere with the ability of the parties to conduct the proceeding as the parties wish; and

(c)    any other matter that the Court considers relevant.

(3)    When giving leave, the Court may specify the form of assistance to be given by the intervener and the manner of participation of the intervener, including:

(a)    the matters that the intervener may raise; and

(b)    whether the intervener’s submissions are to be oral, in writing, or both.

Note 1:    The Court may give leave subject to conditions—see rule 1.33.

Note 2:        The Court may appoint an amicus curiae.

10    The purpose of this intervention was to advance submissions opposing the order to which the parties had agreed. In essence, the BIM mills say that the Constitution should be restored to its pre-2015 amendments form, rather than removing only some of the amendments made by the single resolution passed on 8 December 2015 and making other consequential amendments.

11    The plaintiff opposes the intervention by the BIM mills. The defendant does not oppose the intervention but, contrary to the position of the BIM mills, advances the order it has agreed with the plaintiff.

12    On 24 February 2016, I heard the BIM mills’ interlocutory application for leave to intervene concurrently with the further hearing of the proceeding to determine the appropriate form of the further final relief to be granted.

13    The questions to be determined are:

    whether leave should be granted to the BIM mills to intervene, for the purpose stated; and

    what form should the further orders take?

14    There is an additional aspect to the second question. The defendant seeks an order under s 233(3)(a) of the Act. Section 233(3) of the Act provides:

If an order made under this section repeals or modifies a company's constitution, or requires the company to adopt a constitution, the company does not have the power under section 136 to change or repeal the constitution if that change or repeal would be inconsistent with the provisions of the order, unless:

(a)    the order states that the company does have the power to make such a change or repeal; or

(b)    the company first obtains the leave of the Court.

15    The plaintiff opposes the making of such an order. If granted leave to intervene, the BIM mills support the making of such an order.

Should leave to intervene be granted?

16    The determination of the question of whether leave to intervene should be granted to the BIM mills is closely connected with the merits of the submissions they seek to advance in respect of the proper form of the further final relief. The question of whether, in terms of r 9.12(2)(a) of the Rules, their contribution will be useful and different from the contribution of the parties, can only be sensibly evaluated by considering the substance of those submissions. For the reasons given in later paragraphs of these reasons, I am satisfied that the BIM mills’ contribution will be useful and different. Also, I am satisfied, in terms of r 9.12(2)(b) of the Rules that their intervention would not cause an unreasonable interference with the ability of the parties to conduct the proceeding as they wish.

17    In Roadshow Films Pty Ltd v iiNet Limited [No 1] (2011) 248 CLR 37; [2011] HCA 54 at [2]-[3], the High Court said:

2.    In determining whether to allow a non-party intervention the following considerations, reflected in the observations of Brennan CJ in Levy v Victoria [(1997) 189 CLR 579 at 600-605], are relevant. A non-party whose interests would be directly affected by a decision in the proceeding, that is one who would be bound by the decision, is entitled to intervene to protect the interest likely to be affected. A non-party whose legal interest, for example, in other pending litigation is likely to be affected substantially by the outcome of the proceedings in this Court will satisfy a precondition for leave to intervene. Intervention will not ordinarily be supported by an indirect or contingent affection of legal interests following from the extra-curial operation of the principles enunciated in the decision of the Court or their effect upon future litigation.

3.    Where a person having the necessary legal interest can show that the parties to the particular proceedings may not present fully the submissions on a particular issue, being submissions which the Court should have to assist it to reach a correct determination, the Court may exercise its jurisdiction by granting leave to intervene, albeit subject to such limitations and conditions as to costs as between all parties as it sees fit to impose.

18    I am satisfied that the BIM mills are non-parties whose interests would be directly affected by the relief proposed by the parties, following the findings and conclusions expressed in my earlier reasons and the declaration that has been made.

19    The plaintiff’s opposition is based substantially on the fact that it says the BIM mills’ submissions on relief should be rejected. I deal with this below. The plaintiff also advances two additional matters. First, it says that the BIM mills have delayed seeking to intervene, when they could have intervened or sought to be joined as parties to the proceeding at a much earlier stage. Secondly, the plaintiff submits that the final relief that is now sought would not have been necessary had the BIM mills been prepared to stay their hand and agree to an adjournment of the meeting at which the 2015 amendments were proposed and passed pending the determination of the plaintiff’s claim. The plaintiff’s claim having already been commenced, the matter could have proceeded to determination on a quia timet basis.

20    As to the first matter, I do not think that any criticism can be levelled at the BIM mills for seeking leave to intervene now and not at an earlier time. It is perfectly true that the BIM mills were aware of the proceeding and had been given copies of the originating process and statement of claim. While the BIM mills made a forensic decision not to seek leave to intervene or to be joined as parties at an earlier time, they reasoned, not unreasonably in my view, that the proceeding was being defended by the defendant in a way in which their interests were being advanced. Their point of departure is the form of the relief that should now be granted. Their application to intervene now has not resulted in any real delay in the hearing or determination of the further final relief to be granted.

21    As to the second matter, I am not persuaded that the BIM mills’ lack of forbearance in voting on the resolution on 8 December 2015 stands as a sufficient discretionary reason to refuse the application for intervention if the application is otherwise meritorious, as in fact I find it to be.

22    In the circumstances, I am satisfied that leave should be granted to the BIM mills to intervene in this proceeding for the purpose of adducing evidence and making submissions on the appropriate form of the further final relief to be granted. However, such intervention will be on the basis that the BIM mills bear their own costs.

What relief should be granted?

23    It is convenient to turn first to the submissions of the BIM mills. Their principal submission, supported by evidence, is that the amendments proposed by the single resolution on 8 December 2015 constituted a “package”. The package had been negotiated over some period of time, not only among the BIM mills, but also with cane grower representatives (principally, Queensland Cane Growers Organisation Limited which, as I mentioned at [10] of my earlier reasons, is the peak body for Australian sugar cane growers) and the Independent Directors of the defendant.

24    The Chief Executive Officer of Mackay, Jason Donald Lowry, gave evidence that the package of amendments involved a number of compromises. He said that a number of amendments were “not entirely satisfactory” to Mackay; however, it was prepared to accept these amendments in an effort to “get the entire package up for consideration and with the understanding that we would have a director on the board to actively get [Mackay’s] views across”. He gave as examples the amendments to Article 29A(b) and Article 35(d), to which I have made brief reference at [5] above, as being amendments of the kind that were “not entirely satisfactory”. He said that Mackay was prepared to make concessions “to get the wider package of proposed amendments over the line”.

25    The Chief Executive Officer of Bundaberg, Raymond Hatt, gave evidence that some of the proposed amendments were “not ideal”. He said that Bundaberg saw the amendments as a complete package which required them “to be ratified as one agenda item and not dealt with on a piecemeal basis”. Like Mr Lowry, he referred to the amendment to Article 35(d) as an example. He said that Bundaberg was prepared to “accept this type of amendment” if it meant that the “complete suite” of changes proposed by the BIM mills would be supported.

26    The BIM mills submit, and I accept, that they would not have voted for the 2015 amendments if those amendments had been proposed in a piecemeal fashion rather than as a package. I also accept that, having regard to the terms of Article 19(b) of the Constitution, the resolution proposing the 2015 amendments would not have passed without the combined vote of the BIM mills.

27    The plaintiff submits, with the support of the defendant, that the order they propose should be made. The plaintiff argues that only Article 31 was found to be oppressive or prejudicial. It submits that there is nothing to suggest that the other 2015 amendments are oppressive or prejudicial or, more specifically, that those other amendments are oppressive or prejudicial to the BIM mills.

28    The plaintiff points to the fact that the BIM mills do not argue against the modification of the Constitution to restore Article 31 to its pre-2015 amendments form. It also points to the fact that no-one has come forward to argue that Article 30 should be restored to its pre-2015 amendments form. The plaintiff argues that the amendments to Articles 30 and 31 were the major amendments brought into effect by the resolution on 8 December 2015 and that the other amendments now referred to by the BIM mills are of lesser importance. In the case of Article 35(d), the plaintiff argues that the amendment reflects the modern practice of providing additional remuneration to directors when such remuneration is warranted.

29    These are persuasive arguments. However, they should be considered in the context of the following additional matters.

30    First, the relief claimed by the plaintiff in its originating process included an order which, if made, would have the effect of modifying the defendant’s Constitution by deleting the 2015 amendments and restoring the Constitution to its pre-2015 amendments form. In other words, the order which the BIM mills propose, and which the plaintiff now opposes, is an order that the plaintiff sought, although it also sought, as an alternative, a more limited order directed to the restoration of the former Article 31.

31    Secondly, the plaintiff accepts that it suffers no prejudice should the order proposed by the BIM mills be made. I should point out that the defendant did not seek to advance an argument that any prejudice would arise should such an order be made.

32    Thirdly, as a general principle, the power of the Court to alter a company’s constitution should be exercised sparingly and only to the extent necessary to protect the interests of the members: National Electrical Contractors Association v Electrical and Electronic Group Training Ltd [1995] FCA 836. The reason for this is obvious. Subject to the operation of provisions such as s 232 of the Act, and other requirements of the law, the members are best placed to determine how their affairs, as members, should be regulated between themselves and the company.

33    It might be thought that this principle would be observed in the present case by doing no more than modifying the Constitution in the way proposed by the parties. However, I am not persuaded that this would be so. If it be accepted, as I do accept, that the 2015 amendments were a “package” of amendments proposed and agreed upon as such, and which would never have been passed except as a “package”, then the least interference with the Constitution, and the members’ right to regulate their affairs, would be to restore the Constitution to the form it took before the 2015 amendments. To do otherwise would be to impose on all members a form of Constitution which does not reflect their will and represents a greater interference with their affairs than is warranted. In effect, they would be left with a residue of amendments which they did not separately vote for and which, on the evidence, they would never have approved if those amendments had been separately proposed.

34    For these reasons, it seems to me that the better course is simply to restore the Constitution to its form before the 2015 amendments.

Should an order be made under s 233(3)(a) of the act?

35    This brings me to the order which the defendant seeks, and which the BIM mills support, under s 233(3)(a) of the Act. The order sought by the defendant is as follows:

The Defendant has the power under section 136 of the Corporations Act to make any amendment to its constitution, except an amendment which reinserts Article 31 in the form which was found by the court to be oppressive, notwithstanding any other provision of this order.

36    The plaintiff opposes this order essentially because it says that it should not be at risk of any reoccurrence of the oppressive conduct which I have found and because the defendant has not pointed to particular circumstances which would warrant a departure from the “default position” imposed by s 233(3) of the Act.

37    For its part, the defendant says that there is no reason for the Court to think that, in light of the Court’s findings and reasons, there will be repeated conduct of the particular kind that has been found to be oppressive. Further, and importantly, the defendant submits that if the Court is persuaded to make an order that the Constitution be restored to its pre-2015 amendments form, then there is greater reason to make an order under s 233(3)(a) of the Act because only Article 31 in its amended form was found to be oppressive. Thus, the defendant argues, it is at least conceivable that the members might in the future wish to make amendments to the Constitution which take the form of those 2015 amendments that could not be said to offend s 232 of the Act.

38    The plaintiff replies by arguing that an order under s 233(3)(a) of the Act, if appropriate to be made, could be made in a form that enumerates those parts of the 2015 amendments which were not found to be oppressive.

39    I am persuaded that it is appropriate to make an order under s 233(3)(a) of the Act. I am further persuaded that the form proposed by the defendant is appropriate. I am not persuaded that the Court should embark upon the process of isolating amendments within the 2015 amendments that might be inoffensive if passed at a later time. I agree with the cautionary observation made by counsel for the defendant that such a task is not as simple as it might first seem.

Disposition

40    Orders in accordance with these reasons will be made.

Associate:

Dated:    3 March 2016