FEDERAL COURT OF AUSTRALIA

Tri-Force Enterprise Limited v Infinite Water Holdings Limited, in the matter of Infinite Water Holdings Limited (administrators appointed) [2024] FCA 78

ORDERS

THE COURT ORDERS THAT:

1.    The Originating Process be dismissed.

2.    The plaintiffs pay the costs of the first and third defendants.

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

REASONS FOR JUDGMENT

GOODMAN J

A.    INTRODUCTION

1    The first plaintiff, Tri-Force Enterprise Limited (TEL), is a New Zealand registered company. The second plaintiff, Dr Yum Keung Ip, is a director of TEL and the holder of 92 per cent of its issued shares. TEL is a member, and Dr Ip is a director, of the first defendant, Infinite Water Holdings Ltd (Administrators Appointed) (IWH), an Australian registered unlisted public company. TEL is also the lender of substantial funds to IWH and its only secured creditor.

2    By originating process filed on 30 November 2023, TEL and Dr Ip seek, inter alia, declaratory relief and orders under section 1322 of the Corporations Act 2001 (Cth) against: (1) IWH; (2) the second defendant, Infinite Water Technologies Pty Ltd (IWT); and (3) the third defendant, Infinite Water International LLC (IWI LLC).

3    IWH’s business is the treatment of water to remove contaminants. At all relevant times its directors were Mr James Elder (Chairperson and non-executive director); Mr Matthew Ng (Chief Executive Officer); Ms Agatha Walczuk (executive director); Mr Gheorghe Duta (Chief Scientist and executive director); Mr David Wong-Tung (non-executive director); Dr Ip (non-executive director); and Mr Bassem Jammal (non-executive director). At all material times Mr Zhouran Tan was the company secretary of IWH. Since 27 December 2023, IWH has been in voluntary administration.

4    IWT is a wholly owned subsidiary of IWH which is registered in New South Wales and owns certain patents which are critical to the systems and products developed by IWH in its water treatment processes. At all relevant times prior to 13 November 2023, the directors of IWT were Dr Ip, Mr Duta and Ms Walczuk.

5    IWI LLC is registered in the State of New York. Mr Ng is its sole member and manager.

6    The events central to this proceeding are:

(1)    the purported conversion, by Mr Ng on 10 November 2023, of part of the debt owed by IWH to TEL into shares in IWH issued to TEL (debt to equity conversion), which the plaintiffs contend is invalid for want of authority;

(2)    the purported ratification of that action by resolution (ratification resolution) at a meeting of the directors of IWH on 13 November 2023 (13 November 2023 meeting), which the plaintiffs contend is invalid because there was insufficient notice that such a motion (ratification motion) was to be moved, and because it was passed in the absence of Dr Ip;

(3)    the purported appointment of Mr Tan and Mr Jonathan Wright to the board of IWT by resolutions of the directors of IWH at the 13 November 2023 meeting (appointment resolutions), which the plaintiffs contend are invalid because of insufficient notice that such motions (appointment motions) were to be moved;

(4)    the purported resolution of the directors of IWT on 14 November 2023 to enter into a licence agreement between IWT and Infinite Water International Inc (IWI Inc) (IWT/IWI Inc licence agreement resolution), which the plaintiffs contend is invalid because insufficient notice was given of that meeting; and

(5)    the entry by IWT on 20 November 2023 into a different licence agreement with IWI LLC (IWT/IWI LLC licence agreement), which the plaintiffs contend is void and of no effect because the directors of IWT did not authorise entry into that agreement.

B.    FINDINGS OF FACT

7    The plaintiffs relied upon affidavit evidence of Dr Ip, Mr Wong-Tung, Mr Duta, Mr Tan, Mr Wright and the plaintiffs’ solicitor, Mr Turner. The administrators of IWH relied upon the affidavit evidence of Mr Brett Lord, one of the administrators. IWI LLC relied upon two affidavits of Mr Ng.

8    The affidavit evidence, including exhibits, exceeds 2,500 pages.

9    It is plain from that evidence that there are many areas of disagreement between the directors of IWH. In particular, there is considerable animus between Dr Ip and Mr Ng. There are numerous areas of disputation covered in the evidence that are of little to no relevance to the issues to be decided on the present application (in contrast to applications under Part 2F.1 or Part 2F.1A of the Act, neither of which are before the Court).

10    The salient facts are within a relatively narrow compass and – save for certain events at the 13 November 2023 meeting – are not substantially in dispute. With the exception of Mr Ng, who was cross-examined by counsel for the plaintiffs, none of the deponents were required for cross-examination. I make the following findings of fact.

11    Between February 2020 and July 2023, TEL advanced $6,524,000 and NZD$1,500,000 to IWH. The terms of those advances are recorded in various agreements. It is uncontroversial that pursuant to those agreements, IWH was entitled to convert some of the debt that it owed to TEL into shares issued by IWH to TEL.

12    Between July and early November 2023, the financial position of IWH deteriorated.

13    On 2 November 2023, Mr Ng, Mr Elder, Mr Jammal and Ms Walczuk met by telephone. They agreed that IWH should restructure its debt to make it more attractive to potential investors and that the debt to equity conversion should occur.

14    On 7 November 2023, Mr Ng sent an email to the other directors of IWH:

On behalf of the Chairman and further to confirmation of our meeting time for next Monday at 3 pm Sydney time, I would like to circulate the agenda in advance of the meeting:

1.    Review and Approval of last Board minutes;

2.    Review and Approval of the SHE IP Agreement;

3.    Review and Approval of the IWI IP Agreement;

4.    Management Proposal on IWH Restructuring;

5.    TEL Proposal on IWH Restructuring;

6.    Resolution to put IWH into VA within 5 days or by 30 November 2023 if majority shareholders cannot agree on a mutually acceptable solution to keep IWH solvent;

7.    Appointment of MathasLaw as Solvency Advisor under Safe Harbour Provision;

8.    Other Business.

Please let the Chairman know if there is any other issues you might want to discuss during this very important board meeting.

(emphasis added)

15    The reference to “next Monday” is to 13 November 2023.

16    Dr Ip gave evidence that the notice of five clear days before the meeting was unusually short and that, ordinarily, the date for meetings of the directors of IWH are set at the conclusion of the previous meeting and a reminder circulated one week before the meeting. However, his evidence did not address when the initial notice of the 13 November 2023 meeting was provided, noting that Mr Ng’s 7 November 2023 email is expressed as being “further to confirmation of our meeting time for next Monday ...”. Mr Ng’s evidence was that directors’ meetings for IWH have previously been called at short notice and that he could not recall there being any issues of significance raised as to notice, prior to the issues now raised by Dr Ip with respect to the 13 November 2023 meeting. Neither version was tested in cross-examination. For the reasons developed below, it is not necessary to resolve which version is to be preferred.

17    Dr Ip, Mr Wong-Tung and Mr Duta all gave evidence that they would have preferred to have more time to consider the matters raised in the agenda, particularly concerning the proposed “IWI IP Agreement”. Dr Ip and Mr Wong-Tung also engaged with Mr Ng in correspondence on this issue and their discontentment with the proposed meeting generally.

18    On 8 November 2023, Mr Ng registered IWI LLC in the State of New York.

19    On 9 November 2023 at 4:18pm, Mr Ng sent an email to the other directors of IWH, in which he stated:

Enclosed please find the following for the Monday board meeting:

•    Draft board minutes for last meeting;

•    Executed SHE IP Agreement;

•    Draft IWI IP Agreement and IWI proposal;

•    Proposal from Management;

•    Proposal from TEL;

•    Explanation Note of Voluntary Administration (for general information only)

(emphasis added)

20    This email was the first time that the directors of IWH had been provided with the “Draft IWI IP Agreement and IWI Proposal”. Dr Ip’s evidence was that no explanation was provided as to who negotiated the “IWI IP Agreement”; no legal or financial advice was provided; and the identity of those behind “IWI” was a mystery, with the only details provided being that “Its founding shareholder is a company associated with the current CEO and co-founder of IWH”. The identity of the directors and shareholders of “IWI” was not disclosed.

21    On 10 November 2023 at 6:09 am, Mr Ng sent an email to Dr Ip (to which he copied the other directors of IWH):

In advance of our next Monday’s board meeting which we will discuss the solvency of the company, I enclosed the two certificates and relevant documents for such share issuance as part of the capital restructuring plan to take this business forward. In particular,

1.    I refer to the document entitled TEL 2023 Agreement dated 23 March 2023 to which Tri-Force Enterprise Limited (“TEL”) is a party. Words and expressions defined in that document have the same meaning in this email.

2.    In accordance with clause 2.3 of that document Infinite Water Holdings Limited (“IWH”) has issued TEL with 14,841 Relevant Preference Shares in discharge of the Notes held by TEL.

3.    I also refer to the Deed of Loan dated 9 August 2022 between IWH and TEL. In accordance with clause 2.2(c) of that Deed of Loan IWH has elected to issue 7,049 ordinary shares to TEL by way of prepayment in accordance with that clause.

4.    The issue of the 14,841 Relevant Preference Shares and 7,049 ordinary shares noted above has been recorded in the share register of IWH, which are also attached.

...

(emphasis added)

22    Dr Ip had no prior warning of this conversion of part of TEL’s debt into 14,841 preference shares and 7,049 ordinary shares in IWH. It had not been raised in any meeting of the directors of IWH or with Dr Ip personally, and he was unaware of a “capital restructuring plan”. The evidence of Dr Ip, Mr Wong-Tung and Mr Duta is that Mr Ng had not sought, and did not have, the approval of the directors of IWH prior to the 10 November 2023 debt to equity conversion. In contrast, Mr Ng says that he acted on the basis of authority provided to him by Mr Elder, Mr Jammal and Ms Walczuk obtained on 2 November 2023 (see [13] above).

23    On 12 November 2023 at 11:01am, Mr Ng sent an email to the other directors of IWH setting out an updated agenda, and providing additional information, for the 13 November 2023 meeting:

Further to request by various board members, I enclose the following for you consideration and updated board agenda:

Agenda

1.    Review and Approval of last Board minutes;

2.    Ratification of Share Issuance;

3.    Appointment of directors to IWT;

4.    Review and Approval of the SHE IP Agreement;

5.    Review and Approval of the IWI IP Agreement;

6.    Management Proposal on IWH Restructuring;

7.    TEL Proposal on IWH Restructuring;

8.    Resolution to put IWH into VA within 5 days or by 30 November 2023 if majority shareholders cannot agree on a mutually acceptable solution to keep IWH solvent;

9.    Appointment of MathasLaw as Solvency Advisor under Safe Harbour Provision;

10.    Other Business.

Additional Information

1.    Cashflow forecast as of 6 November 2023 assuming no sales and no capital injection;

2.    Summary balance sheet as of 1 November 2023 for IWH;

3.    October Sales Report as generated by Sales Director;

4.    IWH Opinion on Share Issuance;

5.    IWH Opinion on License Issuance;

6.    Draft ASIC Guidance to prevent insolvent trading to Directors as supplied by MathasLaw

7.    Draft resolution for IWT director appointment

(emphasis added)

24    On 13 November 2023, at approximately 4:00pm, the 13 November 2023 meeting commenced. All of IWH’s seven directors were present at the commencement of the meeting either in person (Mr Elder, Mr Jammal and Mr Ng) or by Zoom (Mr Wong-Tung, Dr Ip, Ms Walczuk and Mr Duta). Others present at the various times during the meeting were Mr Lau (legal adviser to Dr Ip who attended by Zoom), Mr Tan (qua company secretary of IWH who attended in person), Mr Tom Lennox (qua legal adviser to IWH who attended in person) and Mr Mitchell Mathas, the solvency adviser proposed in the updated agenda (who attended by Zoom). The meeting concluded at approximately 7:30pm.

25    Mr Elder, qua Chairperson, opened the meeting. The first item discussed was the solvency of IWH, despite this being the eighth item on the agenda. It was prioritised at the request of Dr Ip. Prior to commencing discussions on that item, Mr Elder stated that Dr Ip had a material personal interest given Dr Ip’s association with TEL, being the only secured creditor of IWH, but asked the other directors of IWH to unanimously approve Dr Ip’s involvement in the discussion pursuant to s 195 of the Act. That motion was passed unanimously.

26    During the course of the discussions referred to in the previous paragraph, Mr Wong-Tung, who attended the meeting by Zoom from New Zealand, commenced to record the meeting on his iPhone. As the recording covers the final three hours and five minutes of the meeting, I infer that the recording commenced approximately 25 minutes after the meeting started (i.e. around 4.25 pm). No objection was taken at the hearing to the tender of the recording. Curiously, Mr Wong-Tung referred to this recording in his second affidavit but did not refer to it in his first affidavit (in which he gave an account of the events of the meeting) and provided no explanation for this omission; and Mr Ng gave evidence that Mr Wong-Tung had previously denied having recorded the meeting, when asked by Mr Elder, at a directors meeting on 29 November 2023 whether he had done so. However, these matters are of little moment for present purposes when Mr Wong-Tung’s credit is not in issue and the veracity of the recording has not been impugned. Having listened to it, I am satisfied that it is a recording of most of the meeting and the most reliable evidence of what occurred during the (substantial) part of the meeting that it covers.

27    After the resolution to allow Dr Ip to participate in the discussion as to the solvency of IWH, the discussion on that topic occurred at length with all of the directors of IWH present. At the conclusion of this discussion, the directors resolved to appoint Mr Mathas as an insolvency adviser to IWH, on the votes of Mr Elder, Mr Ng, Mr Jammal and Ms Walczuk. Dr Ip, Mr Wong-Tung and Mr Duta abstained from voting.

28    Mr Elder then turned to the second agenda item, the ratification motion. Mr Elder indicated his view that Dr Ip would not be allowed to participate in the deliberations concerning that motion because he had a material personal interest. During the lengthy discussion that followed, Mr Wong-Tung moved that Dr Ip be allowed to participate in the discussion of the ratification motion pursuant to s 195 of the Act. That motion was defeated by four votes (Mr Elder, Mr Ng, Ms Walczuk and Mr Jammal) to two votes (Mr Wong-Tung and Mr Duta).

29    There followed a discussion in which Mr Wong-Tung and Dr Ip asserted that Mr Ng and Mr Lennox, IWH’s solicitor, should also be excluded on the basis that they each had a conflict of interest. No motion was moved for their exclusion.

30    Dr Ip then requested that the meeting be adjourned for five minutes. Mr Elder indicated that he would adjourn for five minutes and said to Mr Lau that he would also have to leave the meeting. After Dr Ip and Mr Lau left the meeting, the meeting was not adjourned but instead immediately continued, with discussion of the ratification motion. During the discussion of the ratification motion, Mr Wong-Tung proposed and Mr Duta seconded, a motion that the ratification motion be adjourned to another meeting so as to ensure that the directors of IWH were provided with the relevant materials to be able to consider this motion, including the provision of adequate independent legal advice, and so as to enable proper investigations to be undertaken. That motion was defeated by four votes (Mr Elder, Mr Ng, Ms Walczuk, and Mr Jammal) to two votes (Mr Wong-Tung and Mr Duta).

31    About 25 minutes after Dr Ip left the meeting, the directors resolved to pass the ratification motion.

32    Mr Elder then indicated that Dr Ip and Mr Lau should be allowed to return to the meeting. No business other than the ratification motion was conducted during Dr Ip’s absence.

33    There was then a period of silence of approximately seven to eight minutes, I infer because those present were waiting for Dr Ip to rejoin the meeting. There followed discussions consistent with there being technical difficulties in Dr Ip rejoining, and he rejoined the meeting approximately 11 minutes after the making of the ratification resolution. No business was conducted during that 11 minute period.

34    Thus, the period of Dr Ip’s absence from the meeting was approximately 36 minutes and during that period, the only business conducted was the ratification motion. During Dr Ip’s absence, and in anticipation that the meeting would proceed to pass the ratification motion in his absence, he prepared some statements.

35    Upon Dr Ip’s return to the meeting, he was informed of the ratification resolution. He then delivered his pre-prepared statements. Those statements are broadly as recorded in amended draft minutes he subsequently circulated (see [51] below) as follows:

1.     What has occurred in our absence?

2.     Why was Matthew Ng not excluded from the meeting for his own conflict / material personal interest. That is, the resolution seeks to absolve him through ratification of his potential breach of the Constitution and Corporations Act by unilaterally progressing the issue of the preference and ordinary shares without: notice to the Board, prior consideration of the issue, or a Board resolution.

3.     I reject that the Board could have properly determined this issue without a proper explanation, with the lack of documents, and its rushed through nature.

4.     I reserve all TRI-Force Enterprise’s rights to challenge and seek the reversal of any determination by the Board, and as regards TEL’s position as secured creditor.

5.     I maintain the position that any issue at this meeting other than as to the solvency of IWH should be adjourned.

6.     To the extent the Board is being asked to determine solvency on the basis of potential injections of capital or funds, this ought to be properly explained with supporting documentation setting out the terms of any such funding, with due notice and discussion. It ought to be adjourned pending clarification and provision of a definitive proposal.

36    I note that Mr Ng’s evidence concerning the ratification resolution in his affidavit evidence was sparse. That evidence included the proposition that Dr Ip recused himself from the ratification motion. I do not accept this evidence, as it is clearly contrary to the recording, the minutes prepared by both Dr Ip and Mr Ng and Dr Ip’s unchallenged evidence.

37    The next item discussed was the proposed SHE IP agreement (agenda item 4). Dr Ip had a material personal interest in this item but was permitted to participate by reason of a unanimous vote taken under s 195(2) of the Act. After some discussion, a unanimous resolution was passed that IWH direct IWT to approve and ratify the licence agreement between IWT and SHE Aqua Ltd.

38    The meeting then turned to the proposed “IWI IP Agreement” (agenda item 5). Mr Ng excused himself from the discussion of this item.

39    Ultimately, the IWT/IWI Inc licence agreement motion was passed by three votes (Mr Elder, Ms Walczuk and Mr Jammal) to two votes (Dr Ip and Mr Wong-Tung). Mr Duta was not permitted to vote, ostensibly on the basis that he had a voting agreement with Mr Ng, and despite Mr Duta’s indications that he did not consider himself bound by that agreement. I note that whilst the plaintiffs submitted that the IWT/IWI Inc licence agreement resolution was invalid because Mr Duta had been wrongly excluded from voting on it, no relief to this effect was sought. This was confirmed in a subsequent written submission in which it was submitted that the conduct concerning the exclusion of Mr Duta from this vote was nevertheless potentially relevant to the relief sought with respect to the IWT/IWI Inc licence agreement resolution.

40    The meeting then considered the appointment motions (agenda item 3). Those motions were passed by four votes (Mr Elder, Mr Ng, Mr Jammal and Ms Walczuk) to three votes (Dr Ip, Mr Wong-Tung and Mr Duta).

41    Further business was then conducted which is not presently relevant.

42    On 14 November 2023 at 12:04pm, Ms Walczuk sent an email to Dr Ip, Mr  Duta, Mr Tan and Mr Wright:

Following on from the IWH resolutions from yesterdays board meeting, I’m calling a IWT Board meeting to ratify the resolutions.

Please find enclosed:

1)    Meeting Agenda

2)    IP Licence Agreement between IWT and Infinite Water International Inc

1.    IP Licence Agreement with SHE Aqua Technology Co. Limited

I proposed the meeting to take place today at 4.30pm. Please let me know your availability.

...

43    The agenda was in the following form:

Infinite Water Technology Pty Limited (ACN 618 452 494)

Board of Director Agenda meeting 14 November 2023

at Unit 17, 809-821 Botany Road, Rosebery, NSW 2018, Australia and via zoom

1.    Appointment of Chair

Resolved that Agatha Walczuk be appointed Chairperson of Infinite Water Technology Pty Limited (ACN 618 452 494).

2.    Execution of Licence agreement with Infinite Water International Inc

A draft Intellectual Property Licence Agreement (“Licence Agreement”) between Infinite Water Technology Pty Limited (ACN 618 452 494) (“IWT”) and Infinite Water International Inc was tabled.

The directors noted that the board of directors of Infinite Water Holdings Limited (“IWH”) (the holding company of IWT holding all of the shares in IWT) had resolved that the Licence Agreement was in the interests of IWH and that it should be executed by IWT.

Resolved that Infinite Water Technology Pty Limited (ACN 618 452 494) (“IWT”) execute the Intellectual Property Licence Agreement (“Licence Agreement”) between IWT and Infinite Water International Inc and that any two directors of IWT so execute the Licence Agreement and that Agatha Walczuk (or in her absence any director of IWT) be authorised to do all acts matters and things in relation to the Licence Agreement.

3.    Ratification of the Execution of Licence agreement with SHE Aqua Technology Co. Limited

An Intellectual Property Licence Agreement (“Licence Agreement”) between Infinite Water Technology Pty Limited (ACN 618 452 494) (“IWT”) and SHE Aqua Technology Co. Limited was tabled.

The directors noted that the board of directors of Infinite Water Holdings Limited (“IWH”) (the holding company of IWT holding all of the shares in IWT) had resolved that the Licence Agreement was in the interests of IWH and that it should be executed by IWT.

Resolved that Infinite Water Technology Pty Limited (ACN 618 452 494) (“IWT”) ratify the execution of the Intellectual Property Licence Agreement (“Licence Agreement”) between IWT and SHE Aqua Technology Co. Limited and that any two directors of IWT so execute the Licence Agreement and that Agatha Walczuk (or in her absence any director of IWT) be authorised to do all acts matters and things in relation to the Licence Agreement.

(emphasis in original)

44    There had not previously been a meeting of the directors of IWT. This email was the first notice that Dr Ip, Mr Tan and Mr Wright had of the proposed meeting. Dr Ip’s evidence is that: (1) given the limited time available before the proposed meeting (just over four hours), he sought to contact Mr Duta and ensure that he was aware of the meeting and that he could join; and (2) he did not have time before the meeting to undertake any further investigations into IWI Inc or whether or not any such agreement would be beneficial to IWT.

45    Mr Wright’s evidence is that he had only a limited opportunity to review the supporting documents in advance of the meeting. He felt rushed however, given that he had never been a board member before, he had nothing against which to compare it.

46    The meeting commenced at 4:30 pm that day.

47    Dr Ip joined the meeting five minutes late. Ms Walczuk (qua Chairperson), Mr Tan, Mr Duta and Mr Wright were already in attendance. Dr Ip’s evidence of the meeting is that:

(1)    although he sought to raise his concerns as to the short notice of the meeting and that the quality of the information provided to him did not allow him to properly consider whether or not it was in the best interests of IWT to enter into the proposed agreement, Ms Walczuk repeatedly said that this was simply a “formality” as the directors of IWH had approved entry into that agreement, and that accordingly it should be “ratified” as this was a direction from IWH;

(2)    there was no “real” discussion as to why the proposed agreement should be entered into or of the benefits for IWT or IWH;

(3)    there was no discussion as to the specific terms of the proposed agreement;

(4)    the draft agreement circulated to the board of IWT and that was the subject of the licence agreement resolution, contemplated that the counterparty would be IWI Inc and did not include any address details in respect of this entity. As such, at this time, Dr Ip remained unsure as to the details of this entity. The draft agreement also did not contain a patent summary; and

(5)    the ITW/IWI Inc licence agreement resolution was passed by three votes (Ms Walczuk, Mr Tan, and Mr Wright) to two votes (Dr Ip and Mr Duta).

48    Mr Wright and Mr Tan both gave evidence to the effect that they considered themselves as required to vote in favour of the IWT/IWI Inc licence agreement resolution, but they may have voted differently if they were aware that that resolution was invalid or had been improperly obtained.

49    On 17 November 2023 at 9:14pm, Mr Ng sent an email to Mr Elder (which he copied to the other directors of IWH) attaching draft minutes of the 13 November 2023 meeting, and seeking comments upon that draft.

50    On 20 November 2023, the IWT/IWI LLC licence agreement was signed by Ms Walczuk and Mr Tan, as directors of IWT and by Mr Ng on behalf of IWI LLC. In addition to the counter-party now being IWI LLC rather than IWI Inc, this version of the licence agreement contained some textual amendments to the proposed IWT/IWI Inc licence agreement that was the subject of the IWT/IWI Inc licence resolution.

51    On 29 November 2023, Dr Ip forwarded to the other directors of IWH a letter prepared by his solicitors in response to a notice of meeting sent by Mr Ng that morning which included as an agenda item the approval of minutes of previous meetings including the 13 November 2023 meeting. In their letter, the solicitors for the plaintiffs enclosed an amended version of the minutes for the 13 November 2023 meeting, and foreshadowed that Dr Ip would move at the next meeting for the adoption of that amended version. The amended version included, with respect to the ratification resolution, the following (marked up as against the draft minutes sent by Mr Ng on 17 November 2023):

Agenda: Ratification of Share Issuance

Mr. Elder addressed the Board, stating that Dr Ip should be recused due to his alleged material personal interest in the resolution. stating that Mr. Ip and his lawyer, Mr. Lau, requested to be recused from the meeting due to Mr. Ip’s conflict of interest regarding the agenda item Mr Wong-Tung proposed that Dr Ip could remain if he sought an exemption. Dr Ip opposed his exclusion statement, and sought an exemption to participate in the discussion.. Mr. Ip opposed the request and sought an exemption to participate in the discussion. Mr. Elder requested the Board’s approval for Dr. Ip to stay, and the matter was put to a resolution. Mr Ip proposed that Mr Lennox had a conflict of interest as he is a shareholder and advisor in the issuance of the shares. Dr Ip raised the issue of Mr Lennox and Mr Ng as the architects for the conversion of his debt to equity without his authority and notification.

Mr Wong-Tung said Mr Ng had a conflict of interest as Mr Ng issued the shares without Board consent and knowledge.

Proposed Resolved Resolution: That Dr Ip being a person with a material personal interest in the proposed resolution to ratify the issue of preference and ordinary shares on 10 November 2023, be permitted to attend the board meeting and vote on that matter pursuant to section 195.

The resolution was rejected (Mr Duta, Mr Wong-Tung voting in favour and Mr Elder, Mr Ng, Mr Jammal and Ms Walczuk voting against).

Mr Ip requested that the meeting be adjourned for 5 minutes to allow him to obtain legal advice. Mr Elder agreed to this request for a brief adjournment, and the meeting was adjourned. Dr Ip and Mr Lau left the meeting.

Consequently, Mr. Elder requested Dr. Ip and Mr. Lau to excuse themselves from the meeting, and they complied. Although Dr Ip did not agree to further business being conducted in his absence, Mr Elder continued the meeting while Dr Ip was seeking legal advice and excluded Dr Ip and Mr Lau on the basis of them being persons who had material personal interest in the resolution. .

...

Mr Wong-Tung proposed a motion that consideration of this resolution be adjourned to another meeting date at a convenient date and time suggested by the Chair, for the purpose of ensuring that the board of directors are provided with the relevant materials to be able to consider this resolution, including the provision of adequate independent legal advice and in order to enable proper investigations to be undertaken. Mr Duta seconded the motion.

The majority of the Board disapproved Mr Wong-Tung’s motion (Mr Wong Tung and Mr Duta voted in favour and Mr Elder, Mr Ng, Mr Jammal and Ms Walczuk voted against).

Mr Lennox further advised that TEL’s lawyer Lander & Rodgers did not challenge IWH’s right to convert debts into equity but rather the procedure of the share issuance, hence the purpose of this board meeting for ratification if the board sees fit.

Mr Wong-Tung disagreed with Mr Lennox and said that was why he was wanting the adjournment, so the Board could undertake further investigation.

Mr Ng commented that an adjournment would only lead to Landers & Rogers going to Court to get an interlocutory order stopping the meeting and stopping the issuing of the shares.

Mr Elder said he is comfortable with the legal advice and this issuance of shares were triggered by a TEL loan being demanded to be paid in the first place. Hence he moved the resolution to ratify the share issuance The Board then approved the ratification of the share issuance of TEL, with Mr Wong-tung and Mr Duta voting against. Mr Elder, Mr Ng, Mr Jammal and Ms Walczuk voted in favour.

Resolved: That the issue of preference and ordinary shares in the Company to TRI-Force Enterprise Limited on 10 November 2023 (and all acts matters and things done or to be done in connection with that issue of shares) is hereby approved and ratified.

Despite Mr Ip only seeking a 5 minute adjournment, he and Mr Lau were excluded from the meeting until approximately 40 minutes later, after the resolution in respect of the issue of shares had been approved. Subsequently, Mr. Ip and Mr. Lau re-joined the meeting.

Upon his return, Mr. Ip firstly challenged why Mr Ng was allowed to stay in the meeting for the share issuance ratification and provided his prepared statement to the board, reserving his right to further legal action. Mr Ip made the following statement to the Board:

[The statements made by Dr Ip are set out at [35] above.]

(strikeout and underlined additions as per the original; bold emphasis added)

52    At a meeting of IWH’s directors held on 5 December 2023, the version of the minutes as drafted by Mr Ng was adopted (by majority vote).

53    On 27 December 2023, the directors of IWH unanimously resolved, pursuant to s 436A of the Act, to appoint Mr Lord and Mr Richard Stone as voluntary administrators of IWH.

54    On 8 January 2024, the first meeting of creditors of IWH occurred. For the purposes of that meeting, TEL submitted a proof of debt for $9,130,591 (representing the debt owed by IWH to TEL without the purported debt to equity conversion), however this was only admitted for $2,048,758.33 (representing the amount of the debt on the basis that the debt to equity conversion was valid).

55    The second meeting of creditors of IWH was scheduled for 8 February 2024 but has been adjourned, pending the publication of these reasons for judgment.

C.    CONSIDERATION

56    As noted at [6] above, the plaintiffs seek relief with respect to: (1) the debt to equity conversion; (2) the ratification resolution; (3) the appointment resolutions; (4) the IWT/IWI Inc licence agreement resolution; and (5) the IWT/IWI LLC licence agreement.

57    These are discussed in turn below.

C.1    The debt to equity conversion

58    The plaintiffs seek the following relief:

1.     A declaration that the issue to TEL of ordinary shares and preference shares in IWH on or about 10 November 2023 was and is invalid.

...

3.    An order, pursuant to section 175 and/or section 1322(4)(b) of the Act, that IWH do all things necessary to correct the share register of IWH as if the ordinary and preference shares referred to in prayer 1 had never been issued.

59    As noted at [22] above, Dr Ip, Mr Duta and Mr Wong-Tung gave evidence that Mr Ng did not have the authority of the IWH board of directors to perform the debt to equity conversion; and Mr Ng’s evidence is that he had the authority of Mr Elder, Mr Jammal and Ms Walczuk which, together with his own vote, gave him the authority of a majority of the directors of IWH. This gives rise to a question as to whether the permission of four of seven directors was sufficient authority in the absence of a meeting of all of IWH’s directors. However, it is not necessary to resolve this issue because of the conclusion that I have reached concerning the ratification resolution, to which I now turn.

C.2    The ratification resolution

60    The plaintiffs seek the following relief:

2.    Pursuant to the inherent jurisdiction of the Court and/or section 1322(2) of the Act, a declaration that resolution 3 carried by the board of directors of IWH on 13 November 2023 purporting to approve and ratify the issue of ordinary and preference shares referred to in prayer 1 was and is invalid.

3.    An order, pursuant to section 175 and/or section 1322(4)(b) of the Act, that IWH do all things necessary to correct the share register of IWH as if the ordinary and preference shares referred to in prayer 1 had never been issued.

61    Resolution 3, which is referred to in prayer 2, is the ratification resolution. It is in the following form:

3.    Resolved: That the issue of preference and ordinary shares in the Company to TRI-Force Enterprise Limited on 10 November 2023 (and all acts matters and things done or to be done in connection with that issue of shares) is hereby approved and ratified.

C.2.1    The passing of the ratification resolution in the absence of Dr Ip

62    Despite the form of the relief sought by the plaintiffs, they did not address the elements of s 1322 of the Act in their submissions on this aspect of the proceeding. Instead, the plaintiffs’ central submission concerning the ratification resolution was, in essence, that: (1) the ratification motion was considered in the absence of Dr Ip and after the 13 November 2023 meeting had been adjourned; (2) no business may be conducted following the adjournment of a meeting and any resolution that is passed following an adjournment is void; and (3) thus, the ratification resolution is void.

63    In support of that submission the plaintiffs relied upon [13.8] of Horsley’s Meetings: Procedure, Law and Practice (7th ed) and an authority referred to in that paragraph, namely Johnson v Beitseen (1988) 41 IR 395 (Gray J). Paragraph [13.8] concerns the vacation of the Chair by the Chairperson and as such is not of direct relevance to the present proceeding, given that Mr Elder at no time during the meeting vacated the Chair. However, within [13.8] is the following:

Later cases suggest the position will be different where the Chair makes a bona fide ruling closing the meeting, particularly when there is no motion of dissent from that ruling. In such circumstances, those people who, hearing the Chair close the meeting, depart in reliance on that closure are entitled to do so, on the basis that no further business can be transacted validly: Johnson v Beitseen (1988) 41 IR 395.

64    I do not accept the plaintiffs’ submission, for the following reasons.

65    First, the 13 November 2023 meeting is a “proceeding under the Act” for the purposes of s 1322 of the Act, as is the ratification resolution: see, e.g., Atlas Holdings Pty Ltd v Allied Resource Partners Pty Ltd [2017] FCA 923; (2017) 122 ACSR 345 at 351 [31].

66    Secondly, I have come to the conclusion that the discussion of the ratification motion and its passing, in circumstances where Mr Elder had indicated that here would be an adjournment and instead continued the meeting after Dr Ip left, was a procedural, rather than a substantive, irregularity.

67    The “thing to be done” (picking up the expression used by Palmer J in Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 194 FLR 322 at 346 [103] and by Barrett J (as his Honour then was) in Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120; (2010) 80 ACSR 11 at 14 [8]) was the discussion of, and the taking of a vote on, the ratification motion; and the irregularity was the continuation of the meeting in the absence of Dr Ip. This irregularity was procedural in that it related to the order of proceedings at the 13 November 2023 meeting rather than the substance of the vote on the ratification motion, which was unaffected.

68    In this regard, it may be accepted that the exclusion of a director from a meeting when the meeting is considering a motion on which that director has a right to vote is a substantive irregularity: see Cordiant at 346 to 347 ([105] to [107]). However, that is not the present case. For the following reasons, Dr Ip has not established that he had a right to vote on the ratification motion.

69    Section 195 of the Act provides, in so far as is presently relevant:

195      Restrictions on voting—directors of public companies only

Restrictions on voting and being present

(1)     A director of a public company who has a material personal interest in a matter that is being considered at a directors’ meeting must not:

(a)     be present while the matter is being considered at the meeting; or

(b)     vote on the matter.

(1A) Subsection (1) does not apply if:

(a)     subsection (2) or (3) allows the director to be present; or

(b)     the interest does not need to be disclosed under section 191.

Note:     A defendant bears an evidential burden in relation to the matter in subsection (1A), see subsection 13.3(3) of the Criminal Code.

(1B)     An offence based on subsection (1) is an offence of strict liability.

Note:     For strict liability, see section 6.1 of the Criminal Code.

Participation with approval of other directors

(2)     The director may be present and vote if directors who do not have a material personal interest in the matter have passed a resolution that:

(a)     identifies the director, the nature and extent of the director’s interest in the matter and its relation to the affairs of the company; and

(b)     states that those directors are satisfied that the interest should not disqualify the director from voting or being present.

Participation with ASIC approval

(3)     The director may be present and vote if they are so entitled under a declaration or order made by ASIC under section 196.

...

(emphasis in original)

70    As noted above, as at 13 November 2023, Dr Ip was a director of IWH, and that company was a public company. He had a material personal interest in the ratification resolution in circumstances where, as at that date: (1) he owned 92 per cent of the issued shares in TEL; (2) IWH owed TEL an amount in the order of $9 million; and (3) the effect of the ratification motion, if passed, would have been to reduce that debt from an amount in the order of $9 million to an amount in the order of $2 million and to increase the level of TEL’s shareholding in IWH.

71    The interest that Dr Ip held was both personal and material as the effect of the ratification motion if passed would, or may have, changed the value of his shareholding in TEL. It was an interest involving a substantial relationship to the matters under consideration as part of the ratification motion and as such one which should be regarded as having the capacity to influence Dr Ip’s vote on that motion: see McGellin v Mount King Mining NL [1998] WASC 96; (1998) 144 FLR 288 at 304 (Murray J); Southern Wine Corporation Ltd (in liq) v Perera [2006] WASCA 275; (2006) 33 WAR 174 at 179 [19] (Steytler P; McLure and Pullin JJA agreeing); Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) [2008] WASC 239; (2008) 70 ACSR 1 at 261 [4511] (Owen J); Grand Enterprises Pty Ltd v Aurium Resources Ltd [2009] FCA 513; (2009) 256 ALR 1 at 15 to 16 ([63] to [68]) (Barker J).

72    As a consequence, and subject only to s 195(1A), s 195(1) prohibited Dr Ip from being present during the discussion of, and voting on, the ratification motion.

73    Section 195(1A) provides that the prohibition in s 195(1) does not apply in three scenarios.

74    The first – where the directors without a material personal interest have resolved in accordance with s 195(2) to allow the director with such an interest to be present – does not apply because there was no such resolution. Indeed, as noted at [28] above, a motion to that effect was moved but defeated. The second – where ASIC has made a declaration that the director may be present and vote – has not been proven on the facts before the Court on the present case. The third – where the interest is one for which disclosure is not required by reason of s 191 of the Act – also has not been proven on the facts before the Court on the present case. I note for completeness that the plaintiffs did not contend that s 195(1) did not operate upon Dr Ip with respect to the ratification motion.

75    Thus, s 195(1) of the Act prevented Dr Ip from being present during the meeting while the ratification motion was being considered; and from voting on that motion.

76    Thirdly, as there was a procedural irregularity in relation to a proceeding, it follows that s 1322(2) of the Act applies of its own force, with the result that the ratification resolution is not invalidated unless the Court: (1) is of the opinion that the continuation of the meeting and the consideration of the ratification motion in the absence of Dr Ip caused or may cause irremediable substantial injustice; and (2) declares the ratification resolution to be invalid. As Black J observed in Re Deposit Power Pty Ltd [2018] NSWSC 1484 at [15], s 1322 of the Act validates the step taken (here, the ratification resolution), without further order of the Court, where the Court would not find in the circumstances that the irregularity (here, the continuation of the meeting has caused (or may cause) substantial injustice. A validating order is thus unnecessary: Re Mosaic Oil NL (No 2) [2010] FCA 1186; (2010) 80 ACSR 281 at 283 [15] (Jacobson J).

77    Finally, I do not accept that the irregularity has caused or may cause irremediable substantial injustice in circumstances where: (1) Dr Ip bears the onus of demonstrating this (Atlas at [31]); and (2) Dr Ip has not established that he had an entitlement to vote at the 13 November 2023 meeting for the reasons set out at [69] to [75] above.

78    If, contrary to the above analysis, the irregularity was substantial rather than procedural, I would decline to make the declaration sought for the reasons set out above and because the present case is materially different to Johnson v Beitseen.

79    In that case, the relevant meeting was a meeting of the committee of management of the Confectionary Workers’ Union held on 25 November 1988. At that meeting, a point of order was taken as to whether the meeting had been properly convened. The Chairperson (Ms Judges) upheld the point of order and declared the meeting closed. Ms Judges and five other members of the committee then left the room. The remaining eight members of the committee then purported to continue the meeting, appointed a replacement Chairperson and passed a motion of a Mr Frizziero.

80    At 417 to 419, Gray J explained:

It was not the full meeting of the committee of management that passed Mr Frizziero’s motion concerning the request of the Industrial Registrar. By the time that motion was passed, seven of the members of the committee of management had left. Ms Hill was the first to go, having excused herself to attend to other commitments. The remaining six walked out after Ms Judges upheld a point of order and declared the meeting closed. ...

Mr Kenzie argued that the unanimous passage of Mr Frizziero’s motion after seven people had left the meeting was an indication of the will of the meeting, and that the will of the meeting should prevail. The seven persons left the meeting at their own risk, provided that a quorum remained behind. If Ms Judges’s ruling was correct, however, it was an occasion on which a point was taken as to procedural matters. In my view, it was correct. It was therefore not open to the meeting thereafter to consider that motion. The seven who left the meeting were entitled to do so, confident that that motion could not be put before the meeting. In the absence of a ruling by the chairman that the motion was out of order, the seven may have been induced to stay and to press their point in debate, seeking to win the day on a vote. It is therefore my view that the meeting of 25 November had no power to pass Mr Frizziero’s motion.

There was also some argument about whether Ms Judges acted correctly in declaring the meeting closed. ... Even if she acted otherwise than in accordance with the rules in doing so, the meeting was nonetheless closed, no-one having moved dissent from the chairman’s ruling, and no order having been sought under s 141 of the C and A Act or s 209 of the Industrial Relations Act that anyone disregard the ruling as being in breach of the rules. In response, Mr Kenzie relied on a number of authorities indicating that, where a chairman purports to close a meeting without authority to do so, it is proper for the meeting to continue. See Wishart v Henneberry (1962) 3 FLR 171 at 173-174, Rowling v Harding (1976) 27 FLR 369 at 377-378, Rochfort v Ryan (1965) 8 FLR 283 at 290, National Dwelling Society v Sykes [1894] 3 Ch 159 at 162 and Ward v Williams (1982) 4 IR 78 at 81-82. In none of those cases is there anything said as to the position of people who, hearing the chairman close a meeting, depart in reliance on that closure. If a person attending a meeting cannot rely upon the statement by the chairman that the meeting is closed, all sorts of business might be done after such a statement, in the absence of persons who would have remained had they known business was to be discussed. This is particularly so in circumstances where no-one present moves a motion of dissent from the chairman’s ruling. The evidence is clear that no-one attempted to move such a motion. Those who left were, therefore, entitled to leave, in the view that no further business could be transacted validly.

81    Integral to Gray J’s decision was the right to participate in the business conducted after the closure of the meeting held by those who did not participate. The committee members who left the meeting had a clear entitlement to participate in the motion and were deprived of that entitlement when the remaining members purported to continue the meeting despite Ms Judges having declared the meeting closed on the basis that it had not been properly convened. The present case is quite different. As noted above, Dr Ip has not established that he had a right to participate in the deliberations concerning the ratification motion (whenever those discussions occurred).

C.2.2    Sufficiency of notice

82    The plaintiffs also submitted that the ratification resolution was invalid because insufficient notice was given that the ratification motion was to be considered at the 13 November 2023 meeting. In particular, the plaintiffs submitted that ratification appeared as an agenda item for the first time on 12 November 2023, the day prior to the 13 November 2023 meeting and that – as it was an item of some significance – the period of notice was insufficient.

83    Clause 65 of IWH’s Constitution provides:

The Board may meet together, adjourn and otherwise regulate its meetings as it thinks fit. Until otherwise determined by the Board, four Directors form a quorum (and of those four directors at least two must be non-executive Directors. The Board may at any time, and the Secretary, on the request of any two Directors, must, convene a meeting of the Board. Notice of a meeting of the Board may be given by mail (electronic or otherwise), personal delivery or facsimile transmission to the usual place of business or residence of the Director or at any other address given to the Secretary by the Director or by any technology agreed by all the Directors.

84    Neither cl 65, nor any other provision in IWH’s Constitution, provides for a particular period or form of notice of meetings of IWH’s directors.

85    In these circumstances, the plaintiffs’ submission – which is not that the period of notice for the meeting was insufficient, but rather that sufficient notice of a particular agenda item was not provided – must be rejected as it is contrary to long-standing authority to the effect that there is no obligation, absent the imposition of such an obligation in the Constitution of a company, for the business proposed to be transacted to form part of the notice of meeting: see e.g., La Compagnie de Mayville v Whitley [1896] 1 Ch 788 at 797 to 799 (Lindley LJ; AL Smith LJ agreeing at 809 to 810; Kay LJ at 804 to 805); Eastern Resources of Australia Ltd v Glass Reinforced Products (GRP) Pty Ltd [1987] 2 Qd R 31 at 35 to 36 (Connolly J); Toole v Flexihire Pty Ltd (1991) 6 ACSR 455 at 461 (Demack J); Bell v Burton (1993) 12 ACSR 325 at 328 (Tadgell J); Cummings v Macks [2000] FCA 55; (2000) 96 FCR 345 at 347 to 348 ([9]) (Drummond J; Sundberg J agreeing); Wilson v Manna Hill Mining Co Pty Ltd [2004] FCA 912 at [26] (Lander J); Dhami v Martin [2010] NSWSC 770; (2010) 241 FLR 165 at 174 [47] (Barrett J (as his Honour then was)); Bentley Capital Ltd v Keybridge Capital Ltd [2019] FCA 1675; (2019) 139 ACSR 289 at 296 [39] (Banks-Smith J). See also Horsley’s Meetings at [4.16] and Joske’s Law and Procedure at Meetings in Australia (12th ed) at [26.24].

86    The position was succinctly summarised by Barrett J in Dhami at 174 [ 47]:

No provision of the constitution requires the notice by which a meeting of directors is convened to state the business proposed to be transacted. Nor is there any general law requirement to that effect, so far as meetings of directors are concerned: La Compagnie de Mayville v Whitley [1896] 1 Ch 788; Eastern Resources of Australia Ltd v Glass Reinforced Products (GRP) Pty Ltd [1987] 2 QdR 31. The general principle is that directors should come together whenever called on notice of reasonable length and without any expectation of being told why they are being summoned to a meeting.

87    For the reasons set out at [62] to [86], the ratification resolution was not invalid.

C.3    The appointment resolutions

88    The plaintiffs seek the following relief:

4.    Pursuant to the inherent jurisdiction of the Court and/or section 1322(2) of the Act, a declaration that resolution 7 carried by the board of directors of IWH on 13 November 2023 purporting to appoint Mr Jon Wright as a director of IWT was and is invalid.

5.    Pursuant to the inherent jurisdiction of the Court and/or section 1322(2) of the Act, a declaration that resolution 8 carried by the board of directors of IWH on 13 November 2023 purporting to appoint Mr Zhuoran Tan as a director of IWT was and is invalid.

89    Resolutions 7 and 8 are the appointment resolutions:

7.    Resolved: That Mr Jon Wright is appointed to the board of Infinite Water Technology Pty Limited is approved and that a director of the Company do all acts matters and things to effect that appointment (and that any acts matters and things which have been done to effect such an appointment are hereby approved and ratified).

8.    Resolved: That Mr Tan is appointed to the board of Infinite Water Technology Pty Limited is approved and that a director of the Company do all acts matters and things to effect that appointment (and that any acts matters and things which have been done to effect such an appointment are hereby approved and ratified).

90    The plaintiffs contended that the appointment resolutions were invalid because of an insufficiency of notice of the appointment motions.

91    As this is a complaint as to the sufficiency of notice as to a particular item of business to be conducted at the meeting, and not as to the meeting itself, the analysis set out at C.2.2 ([82] to [86]) above with respect to the ratification resolution is equally applicable. It follows that the appointment resolutions are not invalid for insufficiency of notice.

C.4    The IWT/IWI Inc licence agreement resolution

92    The plaintiffs seek the following relief:

7.    Pursuant to the inherent jurisdiction of the Court and/or section 1322(2) of the Act, a declaration that resolution 2 carried by the board of directors of IWT on 14 November 2023 authorising entry into the “Intellectual Property Licence Agreement” between IWT and IWI was and is invalid.

93    Resolution 2 is the IWT/IWI Inc licence agreement resolution:

Resolved that Infinite Water Technology Pty Limited (ACN 618 452 494) (“IWT”) execute the Intellectual Property Licence Agreement (“Licence Agreement”) between IWT and Infinite Water International Inc and that any two directors of IWT so execute the Licence Agreement and that Agatha Walczuk (or in her absence any director of IWT) be authorised to do all acts matters and things in relation to the Licence Agreement.

94    In this aspect of the proceeding, the plaintiffs do challenge the sufficiency of notice for the meeting, rather than the sufficiency of notice for a particular item of business to be conducted at the meeting. The plaintiffs submitted that: (1) insufficient notice of the meeting was provided, in circumstances where: (a) notice of the meeting was given at 12:04pm on 14 November 2023 for a meeting scheduled to commence at 4:30pm the same day; (b) the question of reasonableness of the notice given requires consideration of, inter alia, the nature of the business to be conducted at the meeting and the relative urgency of that business; and (c) the nature of the business – entry into a licence agreement with respect to valuable intellectual property patents held by IWT – was a significant issue in respect of which there was no urgency requiring a meeting on such short notice; (2) the insufficiency of notice was a procedural irregularity; and (3) that procedural irregularity was productive of substantial injustice in that it prevented the proper consideration of, and opposition to, the licence agreement motion.

95    I do not accept that submission for the following reasons.

96    The Constitution of IWT provides that a director may, whenever that director thinks fit, convene a meeting of the directors (cl 6.8(a)). Clause 6.9 of that Constitution provides in so far as is presently relevant:

6.9    Notice of meetings of directors

(a)    Subject to this constitution, notice of a meeting of directors must be given to each person who is at the time of giving the notice:

(i)     a director, other than a director on leave of absence approved by the directors; or

(ii)     an alternate director appointed under rule 6.15 by a director on leave of absence approved by the directors.

(b)    A notice of a meeting of directors:

(i)     must specify the time and place of, or form of technology for, the meeting;

(ii)     must state the nature of the business to be transacted at the meeting;

(iii)     may be given in person or by post, or, subject to the Corporations Act, by a form of technology;

...

(f)    Attendance by a person at a meeting of directors waives any objection that person may have to a failure to give notice of the meeting...

97    IWT’s Constitution does not specify a period of notice with respect to the calling of meetings of its directors. However, s 248C of the Act provides that a meeting of directors may be called by a director giving “reasonable notice” individually to every other director.

98    The principles relevant to a consideration of whether the notice given was reasonable were conveniently summarised by Flanagan J (as his Honour then was) in Career Employment Australia Ltd v Shepley [2021] QSC 235; (2021) 166 ACSR 54 at 71 [79]:

... Mr Shepley gave notice of the 4 February Board Meeting at 3.39pm on 3 February. The question is whether, in the circumstances of the case, that notice was reasonable. It is a question of fact that is to be determined by reference to notions of fairness to all parties. It is a context-specific inquiry that accounts for the nature and urgency of the business to be done and the practicability of providing longer notice. It is relevant to consider the Board’s previous practice. It is also relevant to consider whether, by reason of the lack of notice, the directors were unable to attend the meeting.

(citations omitted)

99    The last matter mentioned by Flanagan J is whether by reason of the (contended) lack of notice, a director was, or directors were, unable to attend the meeting. That is a matter of central importance in the present case. As noted at [47] above, Dr Ip attended the meeting, as did all of the other directors of IWT. Dr Ip, having attended the meeting, cannot now seek to impugn the meeting on the basis that notice of the meeting was insufficient. Such attendance amounted to a waiver: see cl 6.9(f) of IWT’s Constitution (set out at [96] above) and s 140(1)(b) of the Act, which section provides that a company’s Constitution operates as a contract between the company and each director.

100    Further, cl 6.9(f) of IWT’s Constitution reflects a well-established principle that a director who attends and participates in a meeting of directors will be held to have waived the requirement of notices: see Petsch v Kennedy (unreported, Street J, 16 November 1970), a decision upheld by the Court of Appeal of the Supreme Court of New South Wales in Petsch v Kennedy (1971-1973) CLC ¶40-015; [1971] 1 NSWLR 494), and by the Judicial Committee of the Privy Council in Petsch v Kennedy [1972] UKPC 7; Spicer v Mytrent Pty Ltd (1984) 8 ACLR 711 at 720 (Needham J); and Carew Reid v Public Trustee (1996) 20 ACSR 443 (Owen J). In Carew, Owen J explained at 456:

Notice of a directors meeting must be given unless all board members are present: Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1990) 3 ACSR 649. If all directors are present and a resolution is passed that decision will not be invalid because formal notice of the meeting was not given to each of the directors. A director who attends and participates in a meeting will be held to have waived the requirement of notice in that instance: Petsch v Kennedy [1971] 1 NSWLR 494.

101    Dr Ip attended and actively participated in the meeting. Having done so, he waived his right to impugn the meeting for insufficiency of notice. It follows that the IWT/IWI Inc licence agreement resolution is not invalid for insufficiency of notice of the meeting of the directors of IWT held on 14 November 2023.

C.5    The IWT/IWI LLC licence agreement

102    The plaintiffs seek the following relief:

6.    A declaration that the “Intellectual Property Licence Agreement” between IWT and IWI executed on 20 November 2023 is void and of no effect.

103    The plaintiffs contended that: (1) the IWT/IWI LLC licence agreement differed from the IWT/IWI Inc licence agreement, which was the subject of the IWT/IWI Inc licence agreement resolution; (2) the directors of IWT had not made a decision to enter into the IWT/IWI LLC licence agreement; (3) thus, the plaintiffs are entitled to a declaration that the IWT/IWI LLC licence agreement is void and of no effect.

104    I accept the first of these contentions. The second is not established on the evidence, which is of itself a sufficient basis for this part of the plaintiffs’ case to fail.

105    In any event, the third contention does not follow from either of the first two contentions, for the following reasons.

106    First, it is not apparent that either plaintiff has standing to seek the relief sought. Any direct cause of action with respect to the setting aside of the IWT/IWI LLC licence agreement belongs to IWT (or IWI LLC). Any cause of action that the members of IWT may have pursuant to Part 2F.1 of the Act is not available to either plaintiff, as neither plaintiff is a member of IWT (and, as noted at [4] above, the only member of IWT is IWH). Dr Ip, as a director of IWT has standing, pursuant to s 236(1)(a) of the Act, to seek leave to bring a derivative action pursuant to Part 2F.1A of the Act on behalf of IWT, but no application for leave to bring such action is before the Court.

107    Secondly, I am not satisfied that the relief sought should be provided in circumstances where the interests of a third party (IWI LLC) are involved and IWI LLC has the benefit of the indoor management rule (Royal British Bank v Turquand (1856) 119 ER 886) and ss 128 and 129 of the Act. More particularly: (1) the IWT/IWI LLC licence agreement was executed by Ms Walczuk and Mr Tan, apparently as two directors of IWT, a method of execution contemplated by s 127(1)(a) of the Act ; (2) Mr Ng (and through him, IWI LLC) was entitled by dint of s 128(1) of the Act to make the assumptions set out in s 129 of the Act, including assumptions that: (a) the provisions of IWT’s Constitution had been complied with (s 129(1)); (b) Ms Walczuk and Mr Tan had authority to exercise the power and perform the duties by directors of similar companies (s 129(2)(b)); (c) they properly performed their duties to IWT (s 129(4)); and (d) the IWT/IWI LLC licence agreement had been duly executed by IWT (ss 129(5)(a) and 127(1)(a)), unless Mr Ng knew or suspected that such assumptions were incorrect (s 128(4)); and (3) it has not been established on the evidence that Mr Ng had such knowledge or suspicion. Nor was such a proposition put to him in cross-examination. At best, the evidence establishes that Mr Ng was aware: (1) that IWH had approved the entry by IWT into the IWT/IWI Inc licence agreement; (2) that a different agreement with IWI LLC had been executed on 20 November 2023; and (3) of the terms of each of those agreements. This does not establish that Mr Ng had knowledge or suspected that any of the assumptions were incorrect.

108    For the above reasons, the relief sought in prayer 6 of the Originating Process should not be granted.

D.    CONCLUSION

109    The Originating Process should be dismissed with costs. I will make orders accordingly.

Associate:

Dated:    15 February 2024