Reported Decision : (2002) 20 ACLC 431 New South Wales Supreme Court CITATION : Nagler v Volski (No 2) [2001] NSWSC 1106 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 5342/01 HEARING DATE(S) : 29/11/01 JUDGMENT DATE : 29 November 2001 PARTIES : Lucie Nagler - Plaintiff H Volski & Co Pty Limited (In Liquidation) - Defendant JUDGMENT OF : Barrett J COUNSEL : Mr D. Neggo, Solicitor - Plaintiff SOLICITORS : Koffels - Plaintiff CATCHWORDS : CORPORATIONS - procedural irregularity - absence of resolution of shareholder company authorising representative to act at general meeting - all directors of shareholder company approving action of representative - curative order made LEGISLATION CITED : Corporations Law Corporations Act 2001 Clamp v Fairway Investments Pty Ltd [1971-73] CLC 40-077 Deputy Commissioner of Taxation v ACN 001 330 203 Pty Ltd [1999] NSWSC 798 CASES CITED : Re Duomatic Ltd [1969] 2 Ch 369 Re Inventive Marketing Pty Ltd (2000) 36 ACSR 206 Sutherland v Robert Bosch (Aust) Pty Ltd (2000) 33 ACSR 680 DECISION : Refer paragraph 11 4 IN THE SUPREME COURT REVISED OF NEW SOUTH WALES EQUITY DIVISION BARRETT J THURSDAY 29 NOVEMBER 2001 5342/01 - LUCIE NAGLER v H VOLSKI & CO PTY LTD (IN LIQUIDATION) (NO 2) JUDGMENT HIS HONOUR: 1 When this matter was before the court earlier in the week, a question arose as to whether a special resolution for voluntary winding up purportedly passed at a general meeting of H Volski & Co Pty Ltd on 25 June 1998 had been validly and effectively passed. The question arose because the two persons recorded as having been at the supposed meeting held on 25 June 1998 were the plaintiff, Mrs Nagler, who has been shown to have been a member of the company, and her husband, Mr Nagler, "representing HLP Holdings Pty Ltd", that company being the only other member. There was, however, no evidence that Mr Nagler had been appointed to be the proxy or representative of HLP and the matter was adjourned to provide the plaintiff with an opportunity to pursue the possibility of an application under s.1322 to deal with the situation. Such an application is now before me. 2 Under s.249(3) of the Corporations Law in force at the time of the purported meeting, it was competent for the board of directors of HLP, by resolution, to appoint a person to be the representative of that company at a general meeting of H Volski & Co Pty Ltd. A resolution of the board, if it had named Mr Nagler as representative, would have been effective to constitute a complete and regular appointment under s.249(3). A certificate under the seal of HLP would have been prima facie evidence of the appointment, but the absence of such a certificate would not have affected the validity of an appointment duly made. 3 There is no evidence that the board of directors of HLP passed a resolution of the kind contemplated by s.249(3) to make Mr Nagler HLP's representative at the general meeting of H Volski & Co Pty Ltd. Mr Neggo has, however, produced evidence this morning that Mr Nagler and Mrs Nagler were the sole directors of HLP; also that when the ownership of shares in HLP is traced back through intervening companies and trusts, the only natural person found at the end of the line is Mrs Nagler. 4 It follows that, at both shareholder level and director level, the only human brains and wills at work within HLP were those of Mr and Mrs Nagler. Both of them were, of course, present at the supposed general meeting of H Volski & Co Pty Ltd. The minutes disclose that both of them voted for the proposed special resolution, thereby showing that they wished it to be effective. They may therefore be taken to have assented to the notion that Mr Nagler attended and acted on behalf of HLP, since that was something necessary for the existence of the meeting and, therefore, the effective passing of the special resolution. 5 In these circumstances, it seems to me that there is clear evidence that HLP wished to have Mr Nagler represent it at the general meeting and that he may properly be regarded as having attended at the instigation of HLP and with its authority to act for it in the way in which he in fact did. 6 The missing element was creation of that authority by resolution of the board of HLP, that being a procedural step required by the former s.249(3). The term "resolution" generally connotes a decision achieved through voting at a meeting. But that is not the only meaning, as is shown by ss.248A and 248B of the Corporations Act which proceed on the basis that a "resolution" may be passed by certain paper-based procedures. Where there is a manifested meeting of the minds of all persons capable of participating in a resolution but they do not express it in such a manner as to constitute a "resolution", the absence of that form of expression seems to me clearly to be a procedural irregularity rather than a substantive one. At shareholder level, this is exemplified by the unanimous assent principle illustrated by the decision in Re Duomatic Ltd [1969] 2 Ch 369. I would take the same view of the absence of the formal step of a directors' resolution in relation to the meeting of 25 June 1998 of H Volski & Co Pty Ltd. 7 This is not a case where there was no resolution of the board of HLP because there was no board: cf Deputy Commissioner of Taxation v ACN 001 330 203 Pty Ltd [1999] NSWSC 798. Nor is it a case where insufficient persons for a resolution participated: Clamp v Fairway Investments Pty Ltd [1971-73] CLC 40-077. It is rather a case where the two persons making up the whole of the board had obviously decided upon a course of action for HLP, but had not taken the formal step of framing and recording that decision in the form of a resolution of the board. That, to my mind, brings the situation within cases such as Re Inventive Marketing Pty Ltd (2000) 36 ACSR 206 and Sutherland v Robert Bosch (Aust) Pty Ltd (2000) 33 ACSR 680. 8 The procedural irregularity, I hasten to emphasise, is a procedural irregularity affecting and in relation to the "proceeding" (in s.1322(1)(a) terms) consisting of the meeting of members of H Volski & Co Pty Ltd. This is so even though the lack or error occurred, in a direct sense, within HLP. 9 The case is clearly one where rectification of the procedural irregularity by an order under s.1322(4) will not cause any hardship or injustice, nor is there any suggestion whatsoever that there has been any lack of honesty at any point. The reality is that Mrs Nagler is the owner of H Volski & Co Pty Ltd in every realistic commercial sense. There are no creditors. There is a substantial quantity of assets. There are no negative aspects of the kind to which s.1322(6)(a) directs attention which would prevent the order being made. 10 Mr Nagler should be regarded as having acted at and, in relation to, the purported general meeting of H Volski & Co Pty Ltd held on 25 June 1998 as if he was the representative of HLP Holdings Pty Ltd appointed under s.249(3) of the Corporations Law as then in force. 11 I declare that the special resolution purportedly passed at a general meeting of H Volski & Co Pty Ltd on 25 June 1998 by the affirmative vote of Lucie Nagler and the affirmative vote of Jacob Nagler "representing HLP Holdings Pty Ltd" is not invalid by reason of any contravention of a provision of the Corporations Law or of the constitution of H Volski & Co Pty Ltd consisting of lack of due authorisation of Jacob Nagler in accordance with s.249(3) of the Corporations Law to attend, act and vote as the representative of LHP Holdings Pty Ltd. ****** Last Modified: 12/04/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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