Supreme Court New South Wales Medium Neutral Citation: In the matter of Print Mail Logistics Limited [2012] NSWSC 792 Hearing dates: 30 April 2012 Decision date: 30 April 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Declarations that purported special resolution to approve constitutional changes and purported constitutional changes for the Defendant are invalid and of no legal effect. Defendant to pay costs of proceedings as agreed or as assessed. Catchwords: CORPORATIONS - General meetings - Poll - Chairman appointed proxy - Whether chairman obliged to call a poll - Whether failure to call a poll invalidates resolutions passed on show of hands. Legislation Cited: - Corporations Act 2001 (Cth) Pt 2F.2, ss 140, 250BD(1)(c), 674 - Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2001 (Cth) Cases Cited: - McKerlie v Drillsearch Energy Ltd [2009] NSWSC 488; (2009) 74 NSWLR 673 - Second Consolidated Trust Ltd v Ceylon Amalgamated Tea & Rubber Estates Ltd [1943] 2 All ER 567 - Whitlam v Australian Securities and Investments Commission [2003] NSWCA 183; (2003) 57 NSWLR 559 Category: Interlocutory applications Parties: Landav Pty Limited and Lance Bear Pty Limited (Plaintiffs) Print Mail Logistics Limited (Defendant) Representation: Counsel: G. Drew (Plaintiffs) S. Keizer (Defendant) Solicitors: Norton Rose Australia (Plaintiffs) Allens Arthur Robinson (Defendant) File Number(s): 12/119951 Judgment - EX TEMPORE 1The Plaintiffs, Landav Pty Limited and Lance Bear Pty Limited, seek declarations that a special resolution to approve changes in the constitution of the Defendant, Print Mail Logistics Limited ("Print Mail"), purportedly passed by its members at an extraordinary general meeting on 23 March 2012 was invalid and of no legal effect; and that any changes to Print Mail's constitution, purportedly made pursuant to that special resolution, were invalid and of no legal effect. Certain other orders sought in the Originating Process were not pressed by reason of undertakings previously given and noted by the Court. 2The relevant facts are not disputed. The Plaintiffs hold 6.985 million shares in Print Mail, constituting approximately 26 percent of its issued ordinary shares. On 21 February 2012, Print Mail gave notice of an extraordinary general meeting to consider, first, a special resolution to amend Print Mail's constitution in a manner which would authorise the issue of shares described as "Partly Paid 2012 Convertible Preference Shares" ("2012 Preference Shares") and include the terms and conditions for those shares in Schedule 1 to Print Mail's constitution and, second, an ordinary resolution to issue up to 10 million 2012 Preference Shares at an issue price of $0.20 per share to raise up to $2 million. An explanatory memorandum issued with the notice of extraordinary general meeting properly drew attention to the fact that the issue of the 2012 Preference Shares would, on conversion to ordinary shares, dilute the value of ordinary shares currently on issue. 3On 20 March 2012, the Plaintiffs appointed the chairman of Print Mail as proxy for the extraordinary general meeting and gave instructions that he should vote against the resolution. The special resolution to amend Print Mail's constitution to authorise the issue of the 2012 Preference Shares would necessarily have been defeated had the Plaintiffs' shares been voted on that resolution. 4When the extraordinary general meeting took place, the chairman did not call for a poll and the resolution amending the constitution was passed unanimously on a show of hands, without the proxy for the Plaintiffs being voted as it would have been on a poll. I pause here to note that Print Mail's constitution provides that each question is to be decided in the first instance by a show of hands and that a poll may be demanded, inter alia, by the chairman or a shareholder with at least 5 percent of the votes that may be cast on the resolution on a poll. 5The question before me is therefore whether Print Mail's chairman was obliged to call for a poll and, if so, whether the effect of his failure to do so is to invalidate the resolutions passed on a show of hands, including the resolution to amend Print Mail's constitution. In a case involving very similar facts, in Second Consolidated Trust Ltd v Ceylon Amalgamated Tea & Rubber Estates Ltd [1943] 2 All ER 567, Uthwatt J observed that a chairman of a meeting was under a legal duty to exercise the right to demand a poll to give effect to the real sense of the meeting and that, on the facts of that case, the chairman should have demanded a poll and voted the proxies which he held and that his failure to do so had the result that the resolution was not properly carried. 6In McKerlie v Drillsearch Energy Ltd [2009] NSWSC 488; (2009) 74 NSWLR 673, Barrett J referred to that decision and observed that, although the power to call a poll is frequently conferred on a chairman in apparently unfettered terms: "[I]t is clear that the power is to be exercised not according to the chairman's personal desire or preference but to ensure that the true will of the membership is discovered on the particular proposal." His Honour also pointed to the fact that a director who accepts appointment as a member's proxy for the purposes of a general meeting incurs the fiduciary duties of an agent towards his or her appointor: Whitlam v Australian Securities and Investments Commission [2003] NSWCA 183; (2003) 57 NSWLR 559 at 600. 7I should add that s 250BD(1)(c) of the Corporations Act 2001 (Cth), introduced by the Corporations Amendment (Improving Accountability on Director Executive Remuneration) Act 2011 (Cth) expressly requires the chair to vote a directed proxy on a poll. That section appears to assume that, having regard to the case law to which I have referred, the chair will call a poll where necessary to give effect to the will of the meeting so that provision will be given effect. 8It follows that the resolution amending Print Mail's constitution was not properly carried at the extraordinary general meeting and Print Mail did not contend to the contrary before me. Print Mail did, however, submit that there was no utility in making the declarations sought by the Plaintiffs where Print Mail had previously undertaken to the Court and to the Plaintiffs on a permanent basis that it would not, relevantly, utilise any powers provided to the directors of Print Mail in its present constitution which were not available prior to the special resolution of 23 March 2012. It should be noted that that undertaking seems to proceed on the basis that the Constitution was validly amended by the special resolution of 23 March 2012 so as to introduce such powers. 9I consider that the declarations sought by the Plaintiffs do have practical utility and should be made for several reasons. First, a declaration of invalidity avoids the position that, as between the Plaintiffs and Print Mail, the constitution is treated as amended and that amendment as legally effective, so that the Plaintiffs' rights are protected only by Print Mail's undertaking not to exercise powers which have not, as a matter of law, been conferred on it. The Plaintiffs are entitled, in my view, to a declaration that makes clear the terms of Print Mail's constitution, which takes effect as a statutory contract under s 140 of the Corporations Act, rather than to be required to rely on an undertaking which presumes the effectiveness of an invalid amendment to the constitution. Second, the declaration of invalidity preserves the operation of the provisions relating to class rights in Pt 2F.2 of the Corporations Act, which should be applied on the basis that Print Mail's constitution provides for one class of shares, as was the case prior to the purported amendment, and not for the issue of the 2012 Preference Shares. Third, in my view, a declaration has utility in making clear, as a matter of public record, that the amendments to Print Mail's constitution made on 23 March 2012 were not legally effective. That result will presumably be disclosed to the National Stock Exchange of Australia, on which Print Mail is listed, in accordance with Print Mail's continuous disclosure obligations under r 6.4 of the NSX's Listing Rules and s 674 of the Corporations Act and it is to be hoped that Print Mail will also take such steps as may be available to it to ensure that ASIC's records correctly reflect the position, if it has not already done so. 10Accordingly, I make the following declarations: 1. A declaration that the special resolution to approve constitutional changes for the Defendant, Print Mail Logistics Limited (ACN 103 116 856), purportedly passed by its members' extraordinary general meeting held on Friday 23 March 2012 was invalid and of no legal effect. 2. A declaration that any changes to the constitution of the Defendant, purportedly made pursuant to the special resolution passed by its members at the extraordinary general meeting held on Friday 23 March 2012, were invalid and of no legal effect. 11The Plaintiffs seek an order that Print Mail pay their costs of the proceedings. Print Mail, responsibly, has not sought to be heard in opposition to that order. Accordingly, I order that Print Mail pay the costs of the proceedings as agreed or as assessed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 July 2012