Supreme Court New South Wales Medium Neutral Citation: In the matter of BG Iron and Steel Pty Ltd [2014] NSWSC 1283 Hearing dates: 22 August 2014 Decision date: 19 September 2014 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Declaration made that the purported resolutions were passed in breach of relevant agreement. Parties to be heard as to specific form of injunctive relief and as to costs Catchwords: CORPORATIONS - management and administration - where fourth plaintiff and sixth defendant entered into agreement for, inter alia, issue of shares in first defendant - where agreement provided that all "major decisions" of first defendant must be agreed by minimum five out of seven directors of its board and for equality of representation on board of subsidiary holding relevant assets - where resolutions purportedly passed by four directors of first defendant to enable removal of second plaintiff as director of that subsidiary without contemporaneous appointment of director nominated by fourth plaintiff to that subsidiary - construction - whether purported passing of relevant resolutions constituted "major decisions" of first defendant - whether declaratory and injunctive relief sought by plaintiff should be granted. Legislation Cited: - Corporations Act 2001 (Cth) Cases Cited: - Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 - Carlow Castle Pty Ltd t/as Greenhill Capital Partners v Aztec Resources Ltd [2014] NSWCA 123 - Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 55 ACSR 185 - Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25 - Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 - Puddephatt v Leith [1916] 1 Ch 200 - Stratton Finance Pty Ltd v Webb [2014] FACFC 110 Texts Cited: - Macquarie Dictionary - Oxford English Dictionary Category: Principal judgment Parties: Francis Xiao (First Plaintiff) Edward Lee (Second Plaintiff) Jianxiong Ye (Third Plaintiff) BG Resources Pty Ltd (Fourth Plaintiff) BG Iron and Steel Pty Ltd (First Defendant) Stephen Chan (Second Defendant) Yi Ying Choi (Third Defendant) Fung Wa Wong (Fourth Defendant) Yingkin Wong (Fifth Defendant) Nanyang Mining Resources Investment Pty Ltd (Sixth Defendant) Representation: Counsel: J R Clarke SC (Plaintiffs) M A Jones SC (Second to Sixth Defendants) Solicitors: Maddocks (Plaintiffs) Lander & Rogers (Second to Sixth Defendants) File Number(s): 2014/52841 Judgment 1By Further Amended Originating Process filed, by leave, on 22 August 2014, the Plaintiffs, Mr Francis Xiao and others, seek a declaration that a resolution purportedly passed at a meeting of directors of BG Iron and Steel Pty Ltd ("BGIS") on 17 February 2014 was passed in breach of cl 10 of a Cooperation and Investment Agreement dated 2 December 2010 ("Cooperation Agreement") between BGIS, two of the shareholders in BGIS, BG Resources Pty Ltd ("BG Resources"), Nanyang Mining Resources Investment Pty Ltd ("Nanyang Mining") and the Second Plaintiff, Mr Edward Lee. That resolution was to the effect that Mr Stephen Chan act as the representative of BGIS for the purposes of attending and voting at a general meeting of 3E Steel Pty Ltd ("3E Steel") on 20 February 2014, at which a resolution for the removal of Mr Lee as a director of 3E Steel was to be considered. An associated resolution directed Mr Chan to vote for the removal of Mr Lee as a director of 3E Steel. I will refer to those resolutions together as the "Relevant Resolutions". 2The Plaintiffs also seek orders that, while the Cooperation Agreement is on foot, BGIS (by itself, its servants or agents including specified persons) be restrained from taking any steps to remove, or facilitate the removal of, Mr Lee as a director of 3E Steel, and that Nanyang (by itself, its servants or agents including specified persons) be restrained from acting in any manner which purports to remove or facilitate the removal of Mr Lee as a director of 3E Steel, in each case unless five out of seven of the directors of BGIS pass a valid resolution approving such a removal. Factual background 3By way of brief factual background, BG Resources and Nanyang each hold 50% of the total issued share capital in BGIS. There are seven directors of BGIS, namely, the First - Third Plaintiffs, Mr Xiao, Mr Lee and Mr Ye, who are associated with BG Resources, and the Second - Fifth Defendants, Mr Chan, Ms Choi, Mr Fung Wa Wong and Mr Yingkin Wong, who are associated with Nanyang. BGIS in turn owns 2,125,000 ordinary shares in 3E Steel, being 85% of the issued shares in 3E Steel. 3E Steel conducts an iron ore exploration and mining development business and holds exploration licences over mining tenements in Cobar, NSW. The directors of 3E Steel are currently Mr Xiao and Mr Lee, who (as I noted above) are associated with BG Resources; Mr Fung Wa Wong and Mr Yingkin Wong who (as I noted above) are associated with Nanyang; and Mr Wang who is not associated with either party. 4The Cooperation Agreement records, under the heading "Background", that 3E Steel and a third party established an iron ore joint venture for the exploration and development of mineral resources and that BG Resources then held one-third of 3E Steel's shares, with another two companies holding the balance of those shares. Clause 1 provided that Nanyang would invest $1 million and provide an interest free loan of $2 million to BGIS to facilitate the purchase of shares from 3E Steel's other two shareholders so as to hold not less than 76% (targeting 80%) of the shares in 3E Steel and take certain other steps. Clause 2 set out certain pre-conditions to the agreement, including the issue of ordinary shares in BGIS to Nanyang and the issue of additional ordinary shares in BGIS to BG Resources so that it and Nanyang would each hold 50% of the shares in BGIS; that the board of BGIS would consist of seven members, with four directors to be nominated by Nanyang, including Mr Yingkin Wong who must be nominated chairman of the board of BGIS; and that BG Resources must transfer shares which it then held in 3E Steel to BGIS. As the Plaintiffs point out, the commercial effect of the Cooperation Agreement was that BG Resources and Nanyang would hold an equal number of shares in BGIS, which would in turn be the majority shareholder in 3E Steel which in turn would hold the relevant mining assets. 5Clause 2.3 of the Cooperation Agreement required that BGIS provide Nanyang with a copy of: "the resolution that all major decisions of [BGIS] must be agreed by minimum 5 out of its 7 members of the board". Clause 10, which is in issue in these proceedings, provided that: "All major decisions of [BGIS] must be agreed by minimum 5 out of its 7 members of the board." By cl 11 of the Cooperation Agreement, the parties in turn agreed that they would nominate directors to the board of 3E Steel and that: "Both Nanyang and [BG Resources] agree that they will nominate an equal number of directors and that they will vote for these nominations." By cl 15 of the Cooperation Agreement, Mr Lee personally guaranteed, inter alia, that the number of directors on the board of 3E Steel would not change, unless in accordance with the Cooperation Agreement or with Nanyang's consent. 6On 23 December 2013, Nanyang and others commenced proceedings against Mr Lee and others in the Commercial List of this Court which alleged that Nanyang had paid $1 million to be paid to the two other entities that held shares in 3E Steel as compensation for the dilution of their shares in 3E Steel and that Mr Lee did not disclose the availability of those funds to those entities but retained them himself or in companies in which he held a financial interest. Those proceedings are ongoing. 7On 10 January 2014, Mr Fung Wa Wong, as a director of 3E Steel, sent a notice of a meeting of the directors of 3E Steel, which proposed a resolution that a general meeting of 3E Steel be called to consider and, if thought fit, pass an ordinary resolution removing Mr Lee as a director of 3E Steel. 8By letter dated 15 January 2014, the solicitors for Mr Lee and BG Resources wrote to the solicitors for Nanyang conveying an offer by Mr Lee to resign from the board of 3E Steel, on condition that the board of 3E Steel approve the appointment of a named other person as a director of 3E Steel at the relevant meeting, and pointing to the terms of cl 11 of the Cooperation Agreement, dealing with the equality of representation between BG Resources and Nanyang on that board. 9The resolution to call a general meeting of 3E Steel to consider the resolution for Mr Lee's removal was purportedly approved at a meeting of the directors of 3E Steel held on 16 January 2014 and, on that date, notice was given of that general meeting which was to take place on 20 February 2014. There are two competing versions of the minutes of that directors meeting. The minutes of that meeting signed by Mr Fung Wa Wong recorded that: "Fung [Wa Wong] referred to an email sent by Edward [Lee]'s legal advisers to him, which proposes that [Mr Lee] resigns on the condition that [named person] is to be appointed as a director to replace him. Fung [Wa Wong] remarked that Edward [Lee] can resign but appointment of a director is entirely a separate matter and it cannot be a condition for Edward [Lee] to resign. Any directors can propose for the Board to consider and the Board recommends to shareholders who to appoint as director. Edward [Lee] and Francis [Xiao] point out that Nanyang appointed directors must accept appointment of a director nominated by [BG Resources] as per the Cooperation Agreement between Nanyang, [BG Resources] and BGIS. Fung [Wa Wong] stated that Nanyang will abide by the Cooperation Agreement as well as guide by any other relevant rule closely, but the purpose of this meeting is not for the discussion whether to appoint a new director or to negotiate conditions of voluntary resignation by a director." An alternate set of the minutes of that meeting prepared by Mr Xiao recorded Mr Lee's offer to resign as a director of 3E if the named third party's appointment was accepted and recorded that Mr Wong stated that: "the board does not accept the appointment as they did not know any background of [named third person], whether [named third person] has committed any criminal acts or not ..." and that: "Mr Lee can resign but appointment of a director is a separate issue. It cannot be a condition for Mr Lee to resign." 10On 11 February 2014, Mr Fung Wa Wong, as a director of BGIS, sent a notice of a meeting of the directors of BGIS which proposed the Relevant Resolutions. 11The Relevant Resolutions were purportedly passed at a meeting of the directors of BGIS held on 17 February 2014. The minutes of that meeting in turn record discussion of the question of an appointment to the board of 3E Steel in place of Mr Lee as follows: "Mr Lee state that Cooperation and Investment Agreement provides that [BG Resources] and Nanyang need to have equal representations on the board of 3E Steel, and removal of him without replacement will lead to Nanyang to have majority control of the Board of 3E Steel. Mr Xiao reiterates Mr Lee's point. Mr F W Wong also acknowledge the clause regarding equal representation on the board of 3E Steel and state he have no intend [sic] of disregarding that, but that the appointment of a replacement director of 3E Steel is the matter of the board of 3E Steel and not the matter for today's meeting." There was an issue as to the validity of the resolution passed at that meeting, noted in my earlier interlocutory judgment, since Mr Fung Wa Wong purported to vote at that meeting for himself and as alternate for his father, Mr Yingkin Wong, and his mother, Ms Yi Ying Choi, with the effect that his exercise of a vote was treated as amounting to three directors voting in favour of the resolution. 12In the event, a further resolution of four directors of BGIS was signed by Mr Fung Wa Wong, Mr Yingkin Wong, Ms Choi and Mr Chan on 17 February 2014 which recorded that: "1. In accordance with section 250D of the Corporations Act 2001 (Cth), Stephen Chan is appointed as representative of the Company for the purpose of attending and voting at the general meeting of 3E Steel ... to be held on Thursday 20 February 2014. ... 2. Mr Stephen Chan vote, in his capacity as the representative of the Company, in favour of the proposed resolution to remove Edward Lee as a director of 3E Steel ... at the general meeting of 3E Steel ... " That further resolution took effect under cl 12.12 of BGIS's constitution which provided that: "A resolution in writing, signed by a majority of the Directors for the time being entitled to receive notice of a meeting of the Directors, shall be as valid and effectual as if it had been passed at a meeting of the Directors duly convened and held. Any such resolution may consist of several documents in like form, each signed by one or more of the Directors." Accordingly, the Relevant Resolutions took effect, as a matter of BGIS's constitution, and the remaining question is whether the Defendants should be restrained from acting in a manner that would give effect to them, so far as they involve the claimed breach of the Cooperation Agreement. 13On 19 February 2014, I heard an application for interlocutory injunctive relief brought by Mr Xiao and others and held that the matters raised involved serious questions to be tried and that the balance of convenience favoured the grant of interlocutory relief, so far as any action taken by BGIS would be founded on the Relevant Resolutions. Whether clause 10 of the Cooperation Agreement applies to a resolution to bring about the removal of a director of 3E Steel 14As I noted above, cl 10 of the Cooperation Agreement provides that: "All major decisions of [BGIS] must be agreed by minimum 5 out of its 7 members of the board." The requirement that five out of the seven directors of BG Resources agree to a "major decision" was plainly intended, as a matter of its practical operation, to ensure that such a decision could only be made if one of the persons nominated by BG Resources to the board of BGIS voted in favour of that decision, where three persons associated with BG Resources were directors of BGIS and four persons associated with Nanyang were directors of BGIS. 15The Cooperation Agreement does not define the term "major decisions". It is common ground between the parties that the term "major" should be given its ordinary meaning, reflected in the definition of "major" in the Macquarie Dictionary as "very important or significant" and in the Oxford English Dictionary as "[g]reater in size, importance etc ... also: unusually important, serious, or significant; main, chief, principal, leading". The Defendants also submit, and I accept, that the question of what is a "major" decision for the purposes of the Cooperation Agreement must be determined having regard to the context of that agreement. The relevant principles were summarised by Bergin CJ in Eq in Carlow Castle Pty Ltd t/as Greenhill Capital Partners v Aztec Resources Ltd [2014] NSWCA 123 at [70] (with whom Barrett JA agreed at [1]) as including, relevantly, that the meaning of words in a contract are to be determined objectively, with attention to be given to the language of the contract, the commercial circumstances the contract addresses, the purpose of the transaction and the objects intended to be secured by it. The Court must also construe the words of the Cooperation Agreement in the context of the surrounding circumstances: Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25 at [35]; Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 at [71]; Stratton Finance Pty Ltd v Webb [2014] FACFC 110 at [40]. 16The Plaintiffs submit that, as a matter of construction of the Cooperation Agreement, any decision on the part of BGIS to bring about the removal of a director of 3E Steel, or at least any such decision which is not combined with the appointment of a replacement director nominated by the other party, constitutes a "major decision" of BGIS. The Plaintiffs point to matters supporting that construction as including that the purpose of the Cooperation Agreement is, by cl 1, to reflect a "long term strategic cooperation" by which Nanyang and BG Resources would invest in BGIS for the specified purposes; that the Cooperation Agreement itself provides for important matters including the shareholding and directorships of BGIS (cl 2) and of 3E Steel (cl 3); and that cl 11 of the Cooperation Agreement provides for the nomination of an equal number of directors and for the parties to vote for those nominations. In particular, Mr Clarke, who appeared for the Plaintiffs, put the proposition in oral submissions that the relevant resolutions were a "major decision" and a breach of cl 10 of the Cooperation Agreement because what was to be done was to remove one of the directors of 3E Steel, who was a nominee appointee of BG Resources, without an immediate replacement, with the consequence that BG Resources and Nanyang would then have unequal representation on the board of 3E Steel (T5). 17On the other hand, the Defendants submit that, when the Cooperation Agreement is considered as a whole: "It is plain that the concept of "major decisions" is directed to matters concerning the business undertaking of 3E [Steel], being financial arrangements for, and exploration and development of the tenements." The Defendants refer to cl 6 of the Cooperation Agreement as supporting that construction, and I readily accept that decisions falling within the scope of that clause may fall within the concept of "major decisions". However, it does not follow from the proposition that such decisions may constitute "major decisions", that other decisions may not also constitute "major decisions". 18The Defendants in turn seek to treat the Relevant Resolutions as separate resolutions, and submit that whether each of them is a "major decision" should be considered separately. They submit that a decision that BGIS would be represented at the shareholder's meeting of 3E Steel and that Mr Chan would be its representative does not amount to a "major decision" when the alternative is that the majority shareholder allows a shareholder's meeting to occur without participating, and where Mr Chan's role within BGIS and 3E Steel was recognised in other provisions of the Cooperation Agreement. They submit that the second resolution that he should vote to remove Mr Lee as a director of 3E Steel is also not a major decision since, even without an express limitation imposed on his appointment, Mr Chan would be entitled to vote as he considered fit, subject to the honest exercise of his powers, and consistent with what he perceived to be the best interests of his appointor, BGIS. 19I do not accept those submissions. First, it seems to me that the question whether the Relevant Resolutions amounted to "major decisions" needs to be considered on the basis that, even if they are treated as separate resolutions, they took effect at the same time and had cumulative effect. The question whether the appointment of Mr Chan as a corporate representative was a "major decision" is therefore to be determined by reference to the fact that he would be directed to vote for the removal of one of BG Resources' appointees to the board of 3E Steel, with the impact on the constitution of that board and the control of 3E Steel to which I refer below. I am also not persuaded that the decision to direct Mr Chan to vote in a manner which would lead to that result was not a "major decision" because he could have voted in that manner if not directed so to vote. It seems to me that, if it be assumed that he could have voted in that manner without such a direction, that reinforces the conclusion that his appointment to vote at such a meeting is in fact a "major decision" of the board of BGIS. It also does not seem to me that that result is excluded by the fact that, if BGIS did not vote at such a meeting, then minority shareholders in 3E Steel might nonetheless be entitled to do so. That is a possible consequence of the working out of the provisions of the Cooperation Agreement, so far as particular requirements were imposed on the making of "major decisions" by BGIS and not on minority shareholders, but it does not seem to me to cast any light on what is or is not a "major decision" of BGIS for the purpose of those provisions. 20The Defendants also submit that: "... cl 11 [of the Cooperation Agreement] is concerned with the nomination of an equal number of directors to the Board of 3E. ... It is to be inferred from this that the object behind cl 11 is that each of Nanyang and BG Resources would have equal influence on the 3E Board. BG Resources did not achieve agreement that any particular individual would make up its number of board nominees, in contrast to Nanyang." The reference to a contrast with Nanyang is to cl 3.1.2 of the Cooperation Agreement which recognises Mr Wong's position on the board. I accept the Defendants' submission that there is no basis in the Cooperation Agreement, or in the evidence before me, for a finding that the removal of Mr Lee, in itself, would be a "major decision" of BGIS. However, as will emerge below, the course that was in issue in the present case was not the removal of Mr Lee, combined with the appointment of another director nominated by BG Resources so as to preserve the equality of votes on the board of 3E Steel contemplated by the Cooperation Agreement, but the removal of Mr Lee without such an appointment in a manner that subverted that position. 21It seems to me that the combined effect of the Relevant Resolutions, the holding of a general meeting of 3E Steel and the consequential removal of Mr Lee as a director of 3E Steel would have been to place Nanyang in a position where it could more readily control 3E Steel's board, after Mr Lee had been removed as BG Resources' nominee on that board and where Nanyang (or at least Mr Fung Wa Wong) had reserved the position of a further appointment to be dealt with in accordance with the Cooperation Agreement and any "other relevant rule" at some future time. On the removal of Mr Lee, persons associated with Nanyang would have been two of the four remaining directors of 3E Steel; one person associated with BG Resources would be a remaining director of 3E Steel; and a fourth person, associated with other shareholders, would be a director of 3E Steel. At that point, Nanyang could have controlled the board of 3E Steel if its appointees voted together and one other director voted with them or did not attend the meeting, or if one of its appointees to that board had a casting vote (a matter which was not explored in submissions), or if it used the same approach adopted in respect of Mr Lee then to remove the second of BG Resources' nominees to that board, or if it could (as I will note below) procure the appointment of a person associated with it to fill the casual vacancy created by Mr Lee's removal. 22Mr Jones, who appears for the Defendants, recognised in his submissions that the directors of 3E Steel appear to have proceeded, at their meeting on 16 January 2014, on the basis that the removal of a director was a matter for shareholders and, on the creation of the casual vacancy, the replacement would be a matter for the directors. He points out that that approach is consistent with cl 6.1 of 3E Steel's constitution which provides, in cl 6.1(c)(ii), for removal of a director by shareholders and, in cl 6.1(d), for the filling of a casual vacancy by the directors. Mr Jones also accepted in submissions that the Defendants' position was that the directors on 3E Steel's board were entitled to make an assessment of whether a person nominated by BG Resources was "suitable" for appointment to the board of 3E Steel, at least by reference to whether he or she had a criminal conviction which would make him or her "obviously unsuitable" for appointment (T11). Mr Jones accepted in submissions that the criteria applied by the directors appointed by Nanyang to the 3E Steel board "may well" also include other matters, and he also accepted (as he had to) that it was also possible that several appointees proposed by BG Resources might be considered unsuitable, so far as the directors appointed by Nanyang to the 3E Steel Board were concerned, for various reasons (T12). The difficulty with that position is, however, that, once it be accepted that the directors associated with Nanyang on the 3E Steel board would exercise an evaluation of whether BG Resources' nominee(s) to that board was or were suitable for appointment, then there was a significant range of potential dispute as to that question. It follows that there was also a significant risk that BG Resources would be unable to achieve such an appointment so as to retain equal representation on that board, once Mr Lee was removed, whether in the short term or at all. 23The removal of a director of 3E Steel appointed by BG Resources would also put Nanyang in a position that it could - if its directors voted together and one of its appointees had a casting vote or the director appointed by minority shareholders voted with it or did not attend the meeting - determine the director who was to be appointed to fill the casual vacancy created by Mr Lee's removal, potentially obtaining a majority of directors on that board. It would at least be open to Nanyang then to contend that the directors it had appointed to the board of 3E Steel were not obliged (in their personal capacity as directors) to have regard to the obligations imposed on Nanyang under the Cooperation Agreement when appointing a director to fill a casual vacancy. 24It also seems to me that the question whether the relevant steps were a "major decision" must also be determined in the context that, if the board of BGIS (comprised, at all relevant times, by a majority of persons appointed by Nanyang) could take steps to bring about the removal of the first director nominated by BG Resources to the board of 3E Steel in this manner, without the appointment of a replacement nominated by BG Resources, then it could also arguably remove the second director or any replacement director appointed by BG Resources to 3E Steel, also without the appointment of a replacement nominated by BG Resources, in the same manner, and thereby deprive BG Resources of any representation on the 3E Steel board. 25Mr Jones submits that the Plaintiffs should have taken the step of Mr Lee resigning and then seeking to require Nanyang to support the appointment of the nominated third party to the 3E Steel board in accordance with the terms of the Cooperation Agreement. It does not seem to me that the question what BG Resources could, as a matter of commercial expediency, have done casts any particular light on whether the relevant decisions were or were not "major decisions" for the purposes of the Cooperation Agreement. In any event, the approach which Mr Jones contends that the Plaintiffs should have followed has the substantial practical difficulty that, if Nanyang or the 3E Steel board did not make the requested appointment, then BG Resources would be deprived of one of its representatives on that board and exposed to the risks noted above, during the period in which BG Resources was seeking to enforce its rights under the Cooperation Agreement, presumably by an order for specific performance or a mandatory injunction which would be difficult to obtain on an interlocutory basis. I can readily infer that a power of control or potential control over the board of a company holding significant assets, potentially over a significant period while BG Resources sought to enforce its rights to the appointment of a director to 3E Steel, could readily have been used to advance Nanyang's interests. Mr Jones responds that the directors of 3E Steel would be obliged to act in accordance with the general law and statutory duties, and that is plainly correct. However, in assessing whether the relevant decisions were a "major decision", it does not seem to me that the Court can ignore the facts that, from time to time, views may differ as to whether a particular course is consistent with a director's duties and that directors or their advisers may also take a robust or incorrect view of the content of those duties. 26Mr Jones also submits that the Plaintiffs have not sought to explain in the evidence how the removal of Mr Lee is of "major" significance for BGIS or 3E Steel. It seems to me that the Plaintiffs have in fact explained that matter, so far as the removal of Mr Lee, without a contemporaneous appointment of another appointee of BG Resources to the board of 3E Steel, would deprive it of the equality of votes on 3E Steel's board contemplated by the Cooperation Agreement and confer potential control of that board upon Nanyang in the manner to which I have referred above. 27For all these reasons, I am satisfied that the passage of the Relevant Resolutions, so far as they would have enabled the removal of a nominee director of BG Resources to the board of 3E Steel, without another director nominated by BG Resources being appointed at the same time, amounted to a "major decision" falling within the scope of cl 10 of the Cooperation Agreement. Whether declaratory relief should be granted 28By paragraph 8 of the Further Amended Originating Process, the Plaintiffs seek: "A declaration that, if otherwise validly passed, the Purported Resolution[s] was passed in breach of clause 10 of the Cooperation and Investment Agreement dated 2 December 2010." The Plaintiffs submit that a declaration in that form will assist in quelling the controversy between the parties as to their rights under the Cooperation Agreement. The Defendants resist such a declaration on the basis that the giving effect to the Relevant Resolutions would not breach cl 10 of the Cooperation Agreement. I do not accept that submission for the reasons noted above. The Defendants also submit that the relief sought by the Plaintiffs lacks utility unless it is able to attack the Relevant Resolutions passed on 17 February 2014 and, unless it does so, no discretionary relief in the form of declarations or injunctions should follow: Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 at 582. It seems to me that such a declaration will have utility, both because there is a real and continuing controversy between the parties as to the relevant matter, and so far as it supports interlocutory relief that is also sought by the Plaintiffs. 29The Defendants also submit that the relief in paragraph 8 of the Further Amended Originating Process ought to be refused because the passage of either resolution, as a corporate act, cannot be a breach of the Cooperation Agreement and refer to Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd [2005] NSWSC 1005, (2005) 55 ACSR 185 in support of that submission. I understand the Defendants to be relying on the observation of Palmer J in that case (at [131]) that: "Contractual rights as between shareholders or as between shareholders and third parties, while they may ultimately affect what happens in a company's affairs, should not intrude into the administration of the company's affairs as governed by the Corporations Act and by the company's constitution. For example, it would produce an impossible situation if a company with a large membership had to ascertain at every general meeting whether every shareholder was subject to contractual or other obligations to third parties which regulated whether the shareholder was entitled to attend and vote, or was required to vote in any particular way. In determining the voting rights of shareholders, a company should be required to have regard to nothing more than the Corporations Act and its constitution." 30It does not seem to me that that observation assists the Defendants here. The Plaintiffs do not seek to impose any obligation on 3E Steel to ascertain how BGIS is entitled to vote at a general meeting, or to require 3E Steel to have regard to anything more than what the Corporations Act 2001 (Cth) and its constitution requires in determining the validity of votes passed at a general meeting. Here, the proposed general meeting of 3E Steel has not yet occurred; the resolution to remove Mr Lee has not yet been passed; and the relief sought seeks to restrain implementation by BGIS, which is party to the Cooperation Agreement, of a resolution passed in breach of it. That course would give effect to the relevant contractual obligations, as between the parties to the Cooperation Agreement, without requiring 3E Steel to look behind its constitution and the Corporations Act, since BGIS will not vote at the general meeting once restrained from doing so. In other words, the relief sought here, by contrast to that at issue in Cordiant Communications above, will have effect anterior to the meeting of 3E Steel, by preventing BGIS from voting at such a meeting in a manner inconsistent with the Cooperation Agreement. Whether injunctive relief should be granted as sought by the Plaintiffs 31Paragraphs 9 and 10 of the Further Amended Originating Process seek orders restraining BGIS and Nanyang, while the Cooperation Agreement is on foot, from taking certain steps to remove Mr Lee unless 5 out of 7 of the directors of BGIS pass a resolution approving such a removal. 32The Defendants did not submit that an injunction could not be granted, in principle, to restrain a breach of a shareholders agreement or, in this case, the Cooperation Agreement. In Cordiant Communications above at [160]ff, Palmer J referred to authorities, including Puddephatt v Leith [1916] 1 Ch 200, which supported the grant of such relief, and observed (at [162]) that: "Agreements as to how votes attaching to shares will be exercised are not uncommon and there is no obstacle in principle in enforcing them by the remedies of specific performance and injunction." However, there is a dispute as to the form and scope of the injunctive relief sought by the Plaintiffs. 33The Plaintiffs submit that the injunction sought by paragraph 9 of the Further Amended Originating Process is required where the Defendants have previously sought to act in breach of cl 10 of the Cooperation Agreement and have declined, by correspondence between the parties' respective solicitors, to give an undertaking not to take steps which would constitute the alleged breach. The Defendants submit that the relief sought by that paragraph ought to be refused because a step preceding Mr Lee's removal does not, because of its cause or consequence, result in it being a "major decision" and because the injunction is too wide in its reach. It seems to me the relief sought by that order should not be granted because the conclusions that I have set out above do not have the consequence that the removal of Mr Lee, as a director of 3E Steel, is itself a "major decision" of BGIS requiring the approval of five out of seven of BGIS's directors. In the present case, it is the removal of Mr Lee without a contemporaneous appointment of a nominee of BG Resources to the board of 3E Steel which has that character and cannot be effected without breach of the Cooperation Agreement, unless 5 out of 7 of the directors of BGIS pass a valid resolution to bring it about. The injunction sought in paragraph 10 of the Further Amended Originating Process also seems to me to be too wide, both for the reason noted above so far as it seeks to restrain the removal of Mr Lee as a director of 3E Steel, and because it is not limited to the particular mechanism by which such a removal is presently sought to be achieved. 34I will hear the parties as to whether relief should granted, by way of injunctive relief, reflecting the additional qualification that Mr Lee may not be removed without the contemporaneous appointment of a nominee of BG Resources to the 3E Steel board. Costs 35The Plaintiffs also seek costs of the interlocutory relief obtained on 19 February 2014, which were reserved. I will also hear the parties as to costs. ********** 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: 07 October 2014