FEDERAL COURT OF AUSTRALIA

Sun Hung Kai Investment Services Limited v Metals X Limited [2019] FCA 1673

ORDERS

BY CONSENT THE COURT ORDERS THAT:

1.    Nigel Pakes and Bernie Cummins of Murcia Pestell Hillard Lawyers, Suite 183, Level 6, 580 Hay Street, Perth, Western Australia (Plaintiff's Nominees) are separately authorised on the plaintiff's behalf to inspect, and make copies of the following documents:

(a)    all proxy forms received by the defendant and the defendant's share registry, Computershare Investor Services Pty Ltd (Share Registry), in relation to Resolution 6 to be voted on at the defendant's annual general meeting to be held on 24 October 2019 at 10.30 am at The Stirling Room, Parmelia Hilton Perth, 14 Mill Street, Perth, Western Australia (Annual General Meeting) (Proxy Forms). The defendant must make available for inspection and copying:

(i)    where a Proxy Form was received by mail or facsimile, a copy of the Proxy Form without redaction; and

(ii)    where a Proxy Form was received electronically, an electronic proxy lodgement equivalent prepared by the Share Registry which identifies:

i.    the shareholder's name and address;

ii.    who the shareholder appoints as the proxy; and

iii.    how the shareholder has directed the proxy to vote in respect to Resolution 6.

(b)    daily Proxy Tabulation Reports prepared by the Share Registry recording the live count of proxies in relation to Resolution 6 (Live Count Information); and

(c)    a third party share register of the defendant which discloses the contact details of all shareholders of the defendant which are eligible to vote on Resolution 6, including but not limited to each shareholder's postal address, email address and telephone number(s) and where the shareholder is a corporate entity, the relevant contact person of that shareholder, to the extent such information is held by the Share Registry, including if provided by the shareholder when submitting an electronic proxy for the Annual General Meeting (Shareholder Contact Information).

2.    The defendant:

(a)    will make the Proxy Forms, the Live Count Information and Shareholder Contact Information available for inspection and copying at the offices of the defendant's solicitors, HopgoodGanim Lawyers, Level 27, 77 St George's Terrace, Perth, Western Australia, each business day during the period 11 October 2019 to 23 October 2019 (inclusive) between the hours of 9.00 am and 5.00 pm and upon receipt of 4 hours written notice from the Plaintiff's Nominees sent to the defendant's solicitors (Attention: Robyn Ferguson, by email: r.ferguson@hopgoodganim.com.au and Nino Odorisio, by email: n.odorisio@hopgoodganim.com.au); and

(b)    will forthwith make copies of the Proxy Forms, the Live Count Information and the Shareholder Contact Information for the Plaintiff's Nominees upon their undertaking to pay the reasonable cost of such copying.

3.    Subject to each of APAC Resources Limited and APAC Resources Strategic Holdings Limited (together, the APAC Companies) submitting themselves to the jurisdiction of this Honourable Court (Court) in respect of this order and undertaking that they will abide by the terms of this order, by Andrew Ferguson, a director of both APAC Companies, signing and providing to the Court the Undertaking in the form attached in Schedule 1 and marked 'Undertaking', the Plaintiff's Nominees:

(a)    may provide copies of the Proxy Forms, the Live Count Information and the Shareholder Contact Information to the APAC Companies and to the plaintiff's solicitors, Addisons of Level 12, 60 Carrington Street, Sydney, New South Wales; and

(b)    must otherwise keep the copies of the Proxy Forms, the Live Count Information and the Shareholder Contact Information confidential and will not disclose those documents or the information contained in them to any other person.

4.    Save for making the Proxy Forms, the Live Count Information and the Shareholder Contact Information or the information contained in them available to their officers and employees for the use permitted by paragraph 5(a) or the provision of legal advice in relation thereto, the APAC Companies and the plaintiff's solicitors must otherwise keep the copies of the Proxy Forms, the Live Count Information and the Shareholder Contact Information confidential and must not disclose those documents or the information contained in them to any other person.

5.    The APAC Companies:

(a)    must not use the Proxy Forms, the Live Count Information and the Shareholder Contact Information or the information contained in them for purposes other than proxy and vote solicitation in relation to Resolution 6; and

(b)    must not disclose to a shareholder the voting intentions of any other shareholder, other than those of the Plaintiff and the APAC Companies.

6.    The Plaintiff's Nominees, the APAC Companies and the plaintiff's solicitors must, within 5 business days of the conclusion of the Annual General Meeting, destroy all copies of the Proxy Forms, the Live Count Information and the Shareholder Contact Information and any other documents recording the information contained in those documents, except for legal advice provided to the APAC Companies which refers to information contained in those documents, and confirm the same to the defendant's solicitors in writing.

7.    Costs of the plaintiff's application are reserved.

8.    The parties have liberty to apply on 24 hours written notice for the enforcement of or any necessary modification to this order.

9.    The application otherwise be adjourned to a directions hearing at 9.15 am on 2 December 2019.

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

REASONS FOR JUDGMENT

COLVIN J:

1    A shareholders meeting of the defendant (MXL) was requisitioned by the plaintiff (SHKIS). In response to the requisition, MXL included in the notice papers for the annual general meeting of MXL to be held on 24 October 2019 (Meeting) a resolution that Mr Brett Smith be appointed as a director of the company (Resolution). The Board of MXL recommended to shareholders that they vote against the Resolution.

2    SHKIS requested that MXL provide to it certain proxy information for the Meeting as proxies are lodged with MXL. The request was refused. SHKIS then sought orders under s 247A of the Corporations Act 2001 (Cth) requiring MXL to provide to it the proxy information. It sought the information for the express and sole purpose of lobbying proxy holders and members of MXL as to how they will vote on the Resolution.

3    The proxy information sought by SHKIS was described in correspondence sent by solicitors to the company secretary of MXL in the following terms:

(a)    all proxy forms received by [MXL] or [MXL's] share registry, Computershare Investor Services Pty Limited … in relation to the [Meeting];

(b)    all information relating to the count of proxies in relation to the [Meeting] … ; and

(c)    the live proxy counts, so …

4    The matter came before me on an urgent basis. Shortly prior to the hearing, the parties proposed consent orders under s 247A.

5    For the following reasons, I formed the view that there was uncertainty as to the jurisdiction under s 247A to make the orders. However, I was satisfied that there was a common law jurisdiction to make them. I was also satisfied that there was appropriate protection of the interests of third parties being the shareholders who had lodged the proxies with MXL. On that basis, the subject matter jurisdiction of this Court having been validly invoked by the matter raised by the application, there being a proper basis for the making of the orders which were proposed to be made by consent and there being proper provision for the consequences for third parties who might be affected by the orders, I concluded that it was appropriate for the orders to be made. I indicated that having regard to the question of the power to make the orders and the possible consequences for third parties that I would publish my reasons for concluding that there was power to make the orders and it was appropriate to do so having regard to the interests of third parties. These are my reasons.

The statutory power conferred by s 247A

6    Section 247A provides, relevantly for present purposes, that on application by a member of a company the Court may make an order authorising the applicant to inspect the books of the company if it is satisfied that the applicant is acting in good faith and for a proper purpose. If an order is made, then the member may make copies unless the Court otherwise orders. Section 247A confers a general power to make orders for the inspection of books of the company. It is not a provision concerned with the particular issues that arise where the board of a company and certain of its shareholders have different views concerning the composition of the board.

The legislative origins of s 247A

7    In 1985, amendments were made to the then Companies Act 1981 (Cth) to insert a new Division in relation to the inspection of records of a company. At that time s 267 allowed a director to apply to the Court for an order authorising a registered company auditor acting for the director to inspect the accounting records of the company. The auditor could not disclose the information to anyone other than the director. There was also an express obligation upon the company to make the accounting records available for inspection by a director.

8    By the explanatory memorandum for the Companies and Securities Legislation (Miscellaneous Amendments) Bill 1985 (Cth), reference was made to the decision in Edman v Ross (1922) 22 SR (NSW) 351 to illustrate that the common law rights of members to inspect documents in circumstances not provided for by the articles of association were not clearly defined. In that decision, Street CJ said as to the common law right of a shareholder to inspect the company's documents:

… the authorities establish that it must be shown that inspection is necessary with reference to some specific dispute or question in which the party applying is interested, and that it is only then granted to such an extent as may be necessary for the particular occasion …

9    In that context, the explanatory memorandum stated that the proposed amendment would leave to the courts the question of what constitutes 'proper purpose', but gave two examples:

(a)    the ascertainment of whether allegations of mismanagement are sustained (i.e. in an Australian context, discovery as preliminary to proceedings … ); and

(b)    the ascertainment of a fair market value of shares in those companies whose articles provide for pre-emption rights to share sales.

10    The amendment was passed and became law. It provided in s 265B for a member of a company to be able to apply for an order authorising a registered company auditor or a legal practitioner to inspect the books of the company on the member's behalf where the Court was satisfied that the application was made in good faith and for a proper purpose.

11    A provision to similar effect continued in s 319 of the Corporations Law.

12    In November 1991, the House of Representatives Standing Committee on Legal and Constitutional Affairs published its report on Corporate Practices and the Rights of Shareholders (Report). It noted that s 319 did not allow for access to be granted to a member personally. It noted views that its availability should be extended by amendment: paras 6.3.35 to 6.3.39. The Committee recommended that s 319 be amended to provide that when the Court accedes to a request for access, such access be provided to a suitable person to be determined at the discretion of the Court. It also recommended that a person with standing to seek leave to proceed on behalf of a company should be able to invoke s 319 in preparation for an application for leave to pursue a derivative action.

13    When the terms of s 319 were addressed by the Company Law Review Act 1998 (Cth) they were amended to give effect to the recommendation in the Report that s 319 be altered to allow a Court to authorise any person (and not only a registered company auditor or legal practitioner) to inspect the books on behalf of a member and extended the provision to apply to members of a registered managed investment scheme: see para 9.11 of the explanatory memorandum for the Company Law Review Bill 1997 (Cth). The explanatory memorandum also referred to the then existing provision as conferring upon the Court 'wide discretionary powers'. It continued a restriction on disclosing the information to anyone other than the regulator or the member on whose behalf an inspection was carried out: see para 9.12.

14    The new provision was enacted as s 247A which, save for minor changes not relevant for present purposes, is reflected in the terms of the current provision now in the Corporations Act. Section 247B now authorises the making of ancillary orders including orders as to the use that a person who inspects the books may make of the information obtained or limiting the right to make copies. Section 247C provides that the person who inspects the books must not disclose information obtained during inspection provided that they may be disclosed to the regulator (the Australian Securities and Investments Commission) or the applicant for inspection.

15    The process of statutory construction is text-based and involves the Court giving meaning to the legislative command in the form in which it has been expressed. However the task is to ascertain contextual meaning. The legislative history and extrinsic material may assist. These matters of context may assist by narrowing the semantic breadth or linguistic ambiguity that might otherwise attach to the words of the provision considered out of context. I summarised the principles to be applied in Fair Work Ombudsman v Spotless Services Australia Ltd [2019] FCA 9 at [8]-[22].

16    The legislative context indicates an intention to clarify common law uncertainty as to the extent of the rights of a member of a company to access the documents of the company by conferring on the Court power to allow access where it was sought for a bona fide and proper purpose. The provision is not conditioned upon the member demonstrating that access will aid some claim or action that the member may be entitled to bring against the company. However, it is also not a provision that alters the fundamental nature of the relationship between the company and its members. So, since Claremont Petroleum NL v Australian Gas Light Company [1990] 2 Qd R 31, it has been recognised that the statutory power to allow access is not constrained by a need to demonstrate a particular right or interest on the part of the member as against the company that is different to other members or some common law right to access: at 34. Further, applying Re Augold NL [1987] 2 Qd R 297 at 308, an order will not be made solely because a member disagrees with a management decision: at 32.

17    Initial restrictions on the manner in which access might be allowed by the Court have been relaxed over time, but no new or expanded purpose for the provision is suggested by the history. The common law requirement for a specific dispute or question was replaced with a power for the Court to allow access for a bona fide and proper purpose. However, it is evident that the legislature was not conferring a power to grant access that was different in character to that which was previously available to members. It was still concerned with access to documents by a member; that is, access motivated by the concerns that members may properly have about the affairs of the company.

18    The difficulty with qualifying the power by a requirement that it be exercised for a proper purpose is that it begs the question as to what is the purpose of the provision. The examples given and the focus upon the ability to provide materials to the regulator indicate an intention to facilitate scrutiny by members of the manner in which the affairs of the company are being conducted in respects in which members might properly be interested (that is, respects which go beyond seeking to challenge a managerial decision).

19    So, it is a proper purpose to seek documents that seek to protect the member's investment in the company as a shareholder: Intercapital Holdings Ltd v MEH Ltd (1988) 6 ACLC 1068 and Barrack Mines Ltd v Grants Patch Mining Ltd (No 2) [1988] 1 Qd R 606. However, it is an improper purpose if access is sought to support a proposed takeover bid for shares in the company: Re Augold at 310.

20    Therefore, it is both scrutiny of the company's own activities and its own records that are the focus of the statutory provisions, not documents that the company might have in its possession that might be relevant to a concern about the activities of third parties or steps that a member might want to take that are not related to scrutiny of the company's activities, such as making a takeover bid. Construction of the provision, particularly the scope of what constitutes a proper purpose, should be guided by the above aspects which are manifested by the legislative history.

21    Notably in the present context, there is no suggestion that the provision was concerned particularly with documents relating to the exercise by proxy of member voting rights.

The expression 'books of the company'

22    The term 'books' is broadly defined for the purposes of the Corporations Act. It includes a register, any other record of information, financial reports or financial records and a document: s 9.

23    The expression 'books of the company' when used in s 530B (a provision concerned with when a person can retain possession of the books of a company as against a liquidator) has been held to mean those books that belong to the company: Hall v Sherman [2001] NSWSC 810 at [47]. Other authorities to similar effect were referred to with apparent approval in Caratti v Harris & Kirman as Joint Liquidators of GH1 Pty Ltd [2019] FCAFC 124 at [95]. The expression is also used elsewhere in the Corporations Act: see, for example, s 310 (auditor's power to obtain information) and s 438C (administrator's right to company books). However, I note that other provisions of the Corporations Act refer to books in a person's possession (s 597(9)), books required to be kept under the Corporations Act (s 1306) and books affecting or relating to the affairs of a company (s 1307). In those contexts, had it been intended that s 247A would apply to all documents in the possession of the company then it would be expected that language to that effect would have been used. For those reasons, the reference to books of the company does not encompass all documents that are in the possession of the company. Rather, they must form part of the company's records.

24    As to the issue whether proxy documents form part of the books of the company, it is first necessary to consider the nature of the right to vote by proxy at a meeting of the members of the company and the character of the documents prepared for such purposes.

The character of proxy documents

25    An understanding of the character of proxy documents is properly informed by an understanding of the nature of the right being exercised by a shareholder voting at a meeting of members. That begins with a consideration of the legal character of a company.

26    Ontologically, a company is a collection of individuals united in the form of one perpetual body. It is well established that the company exists separately as an entity that acts in the collective interests of the members as a whole. The rights of the individuals as members may be succeeded to, but the company has a continuous existence independent of changes in its membership. The company remains the same legal person even though its members are not the same.

27    Members rights are conferred by the constitution, by statute and by general principles of company law. Their personal rights as members include the right to participate in and vote at general meetings of the company. The right to participate in the decision-making of the company in general meeting is a personal right that is not to be diminished by the will of the majority: Residues Treatment and Trading Co Ltd v Southern Resources Ltd [No 4] (1988) 51 SASR 177 at 202 (King CJ); and Efstathis v Greek Orthodox Community of St George [1989] 1 Qd R 146 at 151 (Kelly SPJ). The exercise of voting rights by the majority may be constrained by an obligation to exercise them for the benefit of the company as a whole. However, it is not the case that shareholders must always have the benefit of the company in view: Peters' American Delicacy Co v Heath [1939] HCA 2; (1939) 61 CLR 457. The boundaries for the exercise of the power of shareholders are now regulated by statutory provisions proscribing oppressive or unfairly prejudicial or discriminatory conduct: see Chapter 2F of the Corporations Act.

28    There is no common law right to vote by proxy: Harben v Phillips (1883) 23 Ch D 14 applied in New South Wales Henry George Foundation Ltd v Booth [2002] NSWSC 245; (2002) 54 NSWLR 433 at [9], [14]. Therefore, any such rights must be conferred by the constitutional documents of the company or by statute. They are now provided for in Part 2G.2 Division 6 of the Corporations Act.

29    Proxy forms completed by a shareholder are an authority to the chairman of a meeting of members of the company, or an agent, to exercise the shareholder's right to vote at the meeting. Modern practice involves delivery of proxies to the company in advance of the meeting. However, delivery of proxies occurs for the purposes of the shareholders meeting not for the conduct of the affairs of the company.

30    Section 250B requires proxy documents to be received by the company at least 48 hours prior to the meeting. For listed companies, the company must specify in the notice of meeting a place and fax number for receipt of proxies and may specify an electronic address for such receipt. However, receipt of such documents in accordance with those provisions does not give proxy forms the character of documents that belong to the company. They are notifications to the company for the purposes of the meeting of members. They are provided for the purpose of exercise by the member of the private right to vote at the general meeting. The separate legal person that is the company does not participate in the meeting or have any power or authority to exercise concerning the proxies. The company is performing a secretarial role, imposed by statute, for the purposes of its members being able to participate in a general meeting by proxy. Indeed, it was once the case that articles provided for proxies to be simply 'deposited' with the company for later use at the meeting of members: see, for example, McLaren v Thomson [1917] 2 Ch 261.

31    Requirements for early lodgment of proxies allow for the investigation of voting power to be completed so as to allow the meeting to proceed to consider the business before the meeting: New South Wales Henry George Foundation Ltd v Booth at [19]. The requirement in s 250B is a sensible provision that enables the investigation of voting power and the validity of proxy appointments to be completed prior to the meeting. It does not identify who is to carry out such checking. No doubt it will be convenient for duly appointed officers of the company to undertake an assessment of the proxies before the meeting. But the character of the task is one undertaken for the purposes of the members meeting. Section 250B is not a requirement that makes that activity one that the company undertakes for its own purposes or one that gives proxy forms the character of company documents.

32    The company itself has no part to play in the shareholders meeting. The meeting is constituted only by the members. When exercising their individual votes as members of the company they do not embody the corporate character of the company.

33    It is not for the company to consider and decide upon the validity of the proxies. Rather, they are to be provided to the chairman of the meeting of shareholders (who may or may not be the chairman of the board of directors of the company and who, in any case, acts in a different capacity) for the purposes of conducting the meeting. Therefore, if the chairman is a member of the board then the duties owed in relation to dealings with proxies in favour of the chairman are not directors duties, they are duties owed as chairman to the party who appointed the chairman as proxy: Whitlam v Australian Securities and Investments Commission [2003] NSWCA 183; (2003) 57 NSWLR 559.

34    The conduct of any polls at the meeting is a matter for the chairman of the meeting of members so that the will of the members may be reliably ascertained: Link Agricultural Pty Ltd v Shanahan [1998] VSCA 3; [1999] 1 VR 466 at [38]-[40] (Kenny JA, Batt JA and Buchanan J agreeing). It is for the chairman of the meeting of members to determine whether a proxy should be rejected (not the company): Re K Wong Holdings Pty Ltd (1983) 1 ACLC 738 (Needham J, a case concerned with the approval of a scheme of arrangement); and Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd [2005] NSWSC 1005 at [92]-[107] (Palmer J, a case that reviewed a number of authorities concerned with the effect of an erroneous ruling by a chairman as to acceptance of proxies). The chairman's ruling on proxies is a substantive matter and is a decision reviewable for error of law: Portman Iron Ore Limited, in the matter of Golden West Resources Limited [2008] FCA 1362; (2008) 170 FCR 409 at [43]-[44] (McKerracher J); Australian Olives Limited v Livadaras [2008] FCA 1407; (2008) 172 FCR 34 at [67]-[70] (Greenwood J); and Carpathian Resources Ltd v Hendriks [2011] FCA 41 at [65]-[69] (Gilmour J). Although, there may be waiver if no objection is taken at the meeting: Fast Scout Ltd v Bergel [2001] WASC 343; (2001) 25 WAR 244 at [74]-[77] (Templeman J).

35    Proxies that are otherwise valid that have been properly lodged should be counted at the members meeting: Re English, Scottish and Australian Chartered Bank [1893] 3 Ch 385. The company itself is not involved in that process.

36    A requirement that proxies be lodged with the company before the general meeting of members does not alter the well-established position that it is the chairman of the members meeting that is entrusted with the task of adjudicating whether each proxy is valid. In cases where the validity is contentious, the chairman must discharge that role independently. All of which is to say that the proxies are not provided for the purposes of the conduct of the affairs of the company and the requirement for proxies to be provided to the company does not make the proxies company documents.

37    It was once accepted that directors could arrange for the company to send out proxy forms expressed in their own favour: Re Dorman Long & Co Ltd [1934] Ch 635 at 658. However, questions have been raised as to the validity of pre-completed proxy forms: Totally & Permanently Incapacitated Veterans' Association of New South Wales Ltd v Gadd (1998) 146 FLR 161; and Fast Scout Ltd v Bergel at [47]-[59]; cp Capital Energy NL v Stirling Resources NL [1996] FCA 525 (Sheppard J). The fact that proxies are dispatched by the company for the purposes of a meeting of members does not make the documents company documents. In doing so, the company is performing a statutory requirement for the purposes of the shareholders meeting.

The decision in Armstrong v Landmark Corporation Ltd

38    The above analysis is broadly reflected in the decision of Street J in Armstrong v Landmark Corporation Ltd [1967] 1 NSWR 13, a decision made before the enactment of the current statutory provisions concerned with the procedure to be followed in relation to voting by proxy. In that case, a shareholder and director of Landmark applied for a mandatory injunction directing Landmark to produce for his inspection all proxies lodged with Landmark for use at the annual general meeting of Landmark. In granting the relief sought, ultimately on terms that the entitlement to inspect not be exercised until after the meeting (so that auditors could be left in peace to undertake their task of scrutinising the proxies before the meeting), Street J reasoned:

… Under these articles a shareholder is given a right, now recognized by statute but having no existence in the eyes of the common law, to appoint a proxy to represent him and to vote in his name at general meetings. A condition of the casting of this vote through a proxy is that the instrument be lodged in accordance with the requirements of the article. A vote cast by a proxy, in circumstances where the instrument has not been lodged as required by the article, is an invalid vote and all of the members of the company are entitled to have such invalid votes excluded from being counted when motions are placed before a meeting.

In my view each shareholder of the company is entitled to have the articles faithfully observed in relation, in particular, to the regulation of the rights to cast votes at meetings, whether those rights be conditioned upon the lodgment of instruments or upon the payments of calls or otherwise. Being rights inherent in individual shareholders of a company, it appears to me to fall properly within the province of any director of a company to interest himself in the question of whether those rights are being recognized or are being repudiated; and as an aspect of a director investigating and considering questions of this nature it appears to me that the decisions upon which Mr. Staff relies require that I should hold that an individual director has the right to inspect such documents as may cast light directly upon the observance or otherwise by the company and its officers of the individual rights of shareholders.

I am accordingly of the view that the plaintiff, as a director of the company, does have a right to inspect the instruments of proxy lodged in respect of a meeting to be held on Friday next. But the recognition of this right does not necessarily carry with it a right to have such inspection forthwith. The instruments will in the ordinary course, I have no doubt, require to be examined by the secretary or the auditors or some other employee of the company in reference, inter alia, to the signatures affixed to them. Doubtful instruments will then, in the ordinary course, require to be referred to the person who will be occupying the chair at the meeting for his decision upon the validity or otherwise of the instruments. These processes must not be interfered with by an inspection such as is now sought by an individual director of the company.

39    Significantly, the interest of the director in being able to inspect the proxy documents is derivative. It is because of the preservation of the voting rights of individual shareholders and the role of a director in protecting the exercise of those rights and ensuring that the company observes those rights that the director has such an interest. There is no separate and direct interest of the company itself in being able to influence the provision of proxies by shareholders.

40    In Bisan Ltd v Cellante [2002] VSC 430, Dodds-Streeton J considered issues bearing upon whether particular shareholders had validly called and arranged a general meeting under s 249F which allows members with at least 5% of the votes that may be cast at a general meeting to call such a meeting. An issue arose as to whether the provision in the notice concerning proxies conformed to s 250B. In dealing with that aspect, her Honour observed at [41]:

The statutory requirement that the proxy appointments be returned to the company at least 48 hours before the meeting would appear to reflect the purpose of ensuring that the directors may exercise their entitlement, and fulfil any obligation, to inspect and assess the proxy appointments. The result of the proxy votes can then be announced to the meeting. An orderly and efficient meeting is facilitated.

(citations omitted)

41    Reference was made by her Honour to the decision in Armstrong v Landmark Corporation Ltd. However, the decision by Street J was to the effect that the task of considering the validity of doubtful proxies fell to the chairman of the general meeting. It was because the directors were not considered to have a direct involvement in that process that the application was brought for Mr Armstrong as director to have access. If it were the case that the proxies were company documents then there would have been no need for the application. The distinction was not one of importance for the purposes of the resolution of the issues in Bisan Ltd v Cellante. However, for reasons I have given, proxy documents are not provided to the company for the purpose of any deliberation by the company through its directors as to the validity of the proxies. The arbiter of the validity of the proxies is the chairman of the meeting (who may or may not be the chairman of the company and who, in any case, acts in a different capacity).

42    Therefore, having regard to the separate legal personality of a company and the distinct and separate rights that remain with its members, I have considerable doubts as to whether proxies delivered to the company in accordance with the statutory provisions for shareholders to vote by way of proxy at a meeting of members comprise part of the books of the company. When received by the company they are taken into its possession. However, they are not part of the records of the company. They are received for the purpose of the meeting of members and it is for the chairman of that meeting to adjudicate upon whether they are valid. Steps taken by way of preparation to assist that adjudication are not a basis upon which the company or the directors may treat the proxy documents as if they are documents available for their use. Nor do they make the documents part of the books of the company.

Directors and solicitation of proxies

43    It has been observed that the participation by directors in proxy battles requires scrupulous conduct and special care where the conduct is directed at influencing the outcome of an election in favour of themselves or their colleagues: Advance Bank of Australia Ltd v FAI Insurances Ltd (1987) 9 NSWLR 464 at [485] (Kirby P, Glass JA agreeing). The same might be said if directors take the course of seeking to influence shareholders not to appoint a particular person as a director. However, even if it be the case that directors acting appropriately may consider it to be in the interests of the company to solicit proxies and they properly form that view, the fact that they may pursue such a course is a matter that is separate from the receipt of the proxies themselves. So, in Capital Energy NL v Stirling Resources NL the provision of pre-completed proxies to shareholders occurred separately from the provision of uncompleted proxies as part of the notice papers for the general meeting of shareholders and for that reason was found not to be in breach of provisions requiring proxy forms to be provided.

The decision in Jervois Mining

44    SHKIS relied upon the decision of Goldberg J in Jervois Mining Limited, in the matter of; Campbell v Jervois Mining Limited [2009] FCA 316 for the proposition that proxy information is part of the books of the company. In that case it was not in issue that the books of the company included the proxies lodged with the company's share registry: at [51]. However, Goldberg J went on to say '[c]ounsel for the Company did not submit that the books of the Company did not include those records and documents, and in my respectful view that was an appropriate and correct position for the Company to take'. His Honour found expressly that the purpose of seeking the proxies which included 'the lobbying of proxy holders' was a proper purpose for an application under s 247A: at [59].

45    The decision in Jervois Mining appears to be the only authority on the point. A judge of this Court should follow an earlier decision of another judge unless convinced that it is plainly wrong: Hicks v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 757 at [75]; and Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 492. Indeed, there is a judicial duty to do so: CAL No 14 Pty Ltd v Motor Accidents Insurance Board [2009] HCA 47; (2009) 239 CLR 390 at [49].

46    A decision may be plainly or clearly wrong even though the error is not of a kind that may be described as 'patent or obvious or easily perceived'. Rather, the words plainly or clearly 'bespeak the quality of the error or the level of conviction of error that must be perceived': Gett v Tabet [2009] NSWCA 76 at [283]. There must be a strong conviction that the earlier decision 'was erroneous and not merely the choice of an approach which was open, but no longer preferred' and the nature of the error must be able to be 'demonstrated with a degree of clarity by the application of correct legal analysis': at [294].

47    In determining whether the decision in Jervois Mining should be followed there are five significant matters. First, it must now be considered in light of the view expressed by the Full Court in Caratti v Harris & Kirman as to what is meant by books of the company. They do not include documents merely in the possession of the company. Second, reasoning by reference to first principles, it is important that the role of the company and its directors in relation to the proxy process be appropriately differentiated from the role of members. The directors of the company are not to determine the validity of proxies. The right to vote by proxy is an important private right of members. The conflict that would arise if directors as officers of the company were seen to have a role generally in dealing with proxy documents means that the distinction between the records of the company and those of its shareholders in general meeting is an important one. These matters suggest a different answer to that reached in Jervois Mining. Third, the decision in Armstrong v Landmark Corporation Ltd appears to be inconsistent as a matter of principle with the view that proxy documents submitted to the company are company documents to which a director may have access as a matter of course (on the basis that they are part of the company's books). Fourth, the decision in Jervois Mining was reached without detailed consideration and upon a concession, albeit one with which Goldberg J expressed unqualified agreement. As a result, there is no reasoning expressed for the view taken in that case. Fifth, the decision has not been applied in any subsequent decision. It was referred to in Re Motasea Pty Ltd [2014] NSWSC 69 at [51], but only on a point concerned with the proof required to support an application under s 247A.

48    Section 247A is a general provision that may be expected to be relied upon to support applications that are brought in a wide variety of factual circumstances to seek all types of documents. Specific concerns relating to the way the provision may apply where the documents sought are proxies for a general meeting of members do not inform the proper construction of such a general provision.

49    In all the circumstances, I was doubtful whether the decision in Jervois Mining established the power for which SHKIS contended. It appeared quite possible that the decision should not be followed and, properly analysed, proxy documents received by a company as provided for by s 250B of the Corporations Act are not books of the company for the purposes of s 247A.

A common law basis for making the proposed consent orders

50    However, the absence of power under s 247A would not mean that there is no basis for the present application. As the decision in Armstrong v Landmark Corporation Ltd reflects, shareholders have an interest in the proper scrutiny of proxies by the chairman so as to ensure that the provisions in relation to voting by proxy are observed. I would add that all shareholders have a further interest in ensuring that each shareholder understands the effect of expressing a proxy in a particular form. It is an interest that provided the foundation for the orders allowing access to the proxy documents that were made in Armstrong v Landmark Corporation Ltd. In my view, if there is no jurisdiction to make the orders sought under s 247A then there is power to make the orders in recognition of common law rights.

51    When the issue of power was raised with counsel for SHKIS, he supported the making of the proposed consent orders on the basis of either s 247A or the common law. Counsel for MXL submitted that there had been some doubt as to whether the decision Jervois Mining supported the orders sought, but supported the making of the orders by consent on the basis that there was, at least, a common law basis for them to be made.

Use of proxy information for solicitation of proxies in this case

52    In this case the directors of MXL, as distinct from independent auditors or officers appear to be undertaking the process for the purposes of the Meeting and they have free and open access to a considerable amount of information concerning the proxies. It appears to be assumed by MXL that the company has a right to access the proxy information.

53    The affidavit evidence in support of the application deposed to a belief that the management of MXL has appointed an external agency to poll or influence shareholders to vote against the Resolution. The affidavit evidence for MXL refuted that claim. The evidence also indicated that the share registry company for MXL is collating proxy information and that information is available to the company and its directors. The terms of the proposed consent orders reflected that position. However, until its consent to the proposed orders, MXL was refusing to make the same information available to SHKIS.

Confidentiality and logistics of access

54    It is no longer the case that proxy information is collected physically and scrutinised at the time of the shareholders meeting (aided by auditors or officers appointed to investigate the voting power of the parties submitting proxies). The provisions requiring proxies to be delivered to the company more than 48 hours prior to a meeting are designed to facilitate consideration of the proxies before the meeting. Further, technology now permits that information to be collated and made available for ready access.

55    For reasons I have given, I have some doubts as to whether directors are entitled to free access to the proxy information in order to be able to solicit proxies. However, no argument was presented to me as to that aspect and I express no view as to the propriety of such conduct. Nevertheless where, as here, there is evidence that the directors of a company are accessing the proxy information for a general meeting of the members of the company and are doing so for the purpose of soliciting proxies, it seems to me that it is important for the integrity of the proxy process that the information concerning the proxies is made available by the company to interested shareholders. Otherwise, the statutory provision facilitating voting by proxy will be able to be used to support the incumbency of the existing members of the board when the evident purpose of the provision was to confer rights on members, not directors.

56    The position may be different in a case where the directors are not accessing the proxy information and there are officers who have been appointed to undertake an independent and confidential process of consideration of the proxies before the meeting for the purpose of assisting the chairman of the members meeting to rule as to whether particular proxies should be accepted and how to receive votes exercised in accordance with those proxies.

57    The proposed consent orders included qualifying terms as to the use to which the proxy information might be put by SHKIS. Shareholders might reasonably expect that information they provide for the purposes of exercising a right to vote by proxy would not be publicly available and would only be used for the purpose of the exercise of that right. However, those shareholders also have an interest in the integrity of the proxy voting process at the Meeting. An order that is made to facilitate the integrity of that process is made in the interests of all shareholders. As matters presently stand, the proxy information is available to be used by the directors who have taken a public position against the Resolution. SHKIS seeks only to engage in the same form of solicitation that, on the evidence, shareholders are being subjected to in any event.

58    In those circumstances, I was satisfied that there was a proper basis for the making of the orders proposed and there was appropriate protection as to confidentiality and use of the information.

Associate:

Dated:    15 October 2019