Supreme Court New South Wales

• Medium Neutral Citation: Beck v L W Furniture Consolidated (Aust) Pty Limited [2011] NSWSC 235
• Hearing dates: 24, 25 February 2011
• Decision date: 01 April 2011
• Jurisdiction: Equity Division - Corporations List
• Before: Barrett J

Decision

Order to be made under Corporations Act 2001 (Cth) s 1322(4)(a) validating appointment of Helen Weinstock as a director. Winding up application to be dismissed.

• Catchwords: CORPORATIONS - winding up - just and equitable ground - plaintiff alleges irremediable constitutional and administrative vacuum by reason of absence of members' voting rights and the circumstance that no directors are in office and none can be appointed - CORPORATIONS - management and administration - all issued shares are of classes expressed to carry no right to vote - certain unissued shares, if issued, would carry voting rights - two persons consider themselves to be in office as directors, one since 1973 and the other since 2004 - first person ostensibly appointed by special resolution of members having no voting rights - those members also the only directors in office at the time - directors had power to appoint directors - whether the appointment ostensibly made by special resolution of members took effect as appointment in fact made by the persons concerned as directors - held that it did - but such appointment "only until" next annual general meeting - appointee accordingly not in office once annual general meeting began - appointee did not retire "at" the meeting - provisions of constitution defining "annual general meeting" by reference to Companies Act 1961 and requiring that such meeting be held in accordance with that Act - effect of those provisions after the Companies (New South Wales) Code came to operate "to the exclusion of" the Companies Act 1961 - effect of the provisions after the First Corporate Law Simplification Act 1995 (Cth) abolished the statutory requirement that the particular company hold an annual general meeting - second putative director appointed by unilateral act of first putative director after all other directors had ceased to hold office - whether appointment would have been valid had appointor been validly in office as a director - held that it would - whether purported appointment susceptible to validation under s 1322(4)(a) - held that it is - whether conditions for making of validating order satisfied - held that they are - validating order to be made in respect of appointment of second putative director - that person then able to act to appoint another director to bring the number up to the quorum of two and thereby establish a functioning board - accordingly no irremediable constitutional and administrative vacuum despite absence for the time being of voting shares - CORPORATIONS - winding up - basis for winding up on the just and equitable ground not shown - obiter observations on questions that would have been relevant to decision to order winding up if basis shown - possibility that surplus assets in winding up will pass to Crown as bona vacantia - possible Anshun estoppel - possible relevance of plaintiff's delay or acquiescence
• Legislation Cited: Companies Act 1961 (NSW), ss 5(1), 16, 29(1), 136(1),140(1)(c); Companies (Application of Laws) Act 1981 (NSW), ss 6, 18, 21; Companies (New South Wales) Code, s 240(1); Company Law Review Act 1998 (Cth); Corporations Act 2001 (Cth), ss 9, 135(1), 136(2), 233, 250E, 461(1)(k), 462(2)(c), 485(2), 1322(2), 1322(4), 1322(6)(a).1322(6)(c); Corporations Law of New South Wales; First Corporate Law Simplification Act 1995 (Cth); Interpretation Act 1897 (NSW), s 25(1); Statute Law (Miscellaneous Provisions) Act 2008 (NSW), s 4
• Cases Cited: Aqua Max Pty Ltd v MT Associates Pty Ltd [2001] VSCA 104; [2001] 3 VR 473; Australian Hydrocarbons NL v Green (1985) 10 ACLR 72; Barron v Potter [1914] 1 Ch 895; Beck v Weinstock [2010] NSWSC 1068; (2010) 241 FLR 235; Birch v Cropper (1899) 14 App Cas 525; Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245; Channel Collieries Trust Ltd v Dover St Margaret's and Martin Mill Light Railway Co [1914] 1 Ch 569; Crawford v De Kantzow [2011] TASSC 9; Eyre v Milton Proprietary Ltd [1936] Ch 244; Gangemi v Osborne [2009] VSCA 297; Grant v John Grant & Sons Pty Ltd [1950] HCA 54; (1950) 82 CLR 1; Illawarra Suburbs Lawn Tennis Association Ltd v Commissioner of Land Tax (1985) 16 ATR 664; Jordan v Avram (1997) 23 ACSR 153; J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VR 891; Lunn v Cardiff Coal Company (No 3) [2003] NSWSC 789; (2003) 177 FLR 411; Mamouney v Soliman (1992) 9 ACSR 63; Massey v Wales [2003] NSWCA 212; (2003) 57 NSWLR 718; Mentha v Colorbus Pty Ltd [2004] VSC 486: (2004) 51 ACSR 677; Nece Pty Ltd v Ritek Incorporation (1997) 24 ACSR 38; New South Wales Rugby League Ltd v Australian Rugby Football League Ltd [1999] NSWCA 9; (1999) 30 ACSR 354; NRMA Ltd v Gould (1995) 18 ACSR 290; Petsch v Kennedy [1971] 1 NSWLR 494; Petsch v Kennedy [1972] UKPC 7 (BAILII); Poliwka v Heven Holdings Pty Ltd (1992) 7 ACSR 85; Poliwka v Heven Holdings Pty Ltd (No 2) (1992) 8 ACSR 747; Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589; Re Ausam Resources Ltd [2004] FCA 823; Re Bleriot Manufacturing Aircraft Co (1916) 32 TLR 253; Re Broadway Motors Holdings Pty Ltd (1986) 6 NSWLR 45; Re Centennial Coal Co Ltd [2006] NSWSC 62; (2006) 226 ALR 341; Re Driffield Gas Light Company [1898] 1 Ch 451; Re East Norfolk Tramways Co (Barber's Case) (1877) 5 Ch D 963; Re Express Engineering Works Ltd [1920] 1 Ch 466; Re George Newman & Co Ltd [1895] 1 Ch 674; Re Love (as liquidator of 007 368 257 Ltd) [2003] NSWSC 58; (2003) 44 ACSR 367; Re Merchant Navy Supply Association Ltd [1947] 1 All ER 894; Re MLC Ltd [2006] FCA 1357; (2006) 60 ACSR 187; Re Pembury Pty Ltd [1993] 1 QdR 125; Re The Chinese Cultural Club Ltd [2004] NSWSC 432; (2003) 83 FLR 33; Re Yanollee Pty Ltd [2006] NSWSC 705; (2006) 24 ACLC 1087; Sheahan v Londish [2010] NSWCA 270; (2010) 244 FLR 64; Sutherland v Robert Bosch (Aust) Pty Ltd [2000] NSWSC 32; (2000) 33 ACSR 680; Swiss Screens (Aust) Pty Ltd v Burgess (1987) 11 ACLR 756; Tomlinson v The Broken Hill Proprietary Co Ltd (unreported VSC, Southwell J, 20; September 1984, BC8400096); Twin v Deputy Commissioner of Taxation [2003] QSC 329; [2004] 1 Qd R 450; Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd [2001] NSWCA 427; (2001) 166 FLR 144; Worcester Corsetry Ltd v Witting [1936] Ch 640
• Category: Principal judgment
• Parties: Tamar Rivqa Beck - Plaintiff; L W Furniture Consolidated (Aust) Pty Limited - First Defendant; Amiram David Weinstock - Second Defendant; Helen Weinstock - Third Defendant
• Representation: Counsel: Mr J B Simpkins SC/Mr F Assaf - Plaintiff; Mr T F Bathurst QC/Mr J O Hmelnitsky - Defendants; Solicitors: Harris Freidman - Plaintiff; Baker & McKenzie - Defendants
• File Number(s): 2010/324963

Judgment

The parties and the proceedings

1 The plaintiff, Tamar Rivqa Beck, and the second defendant, Amiram David Weinstock, are the daughter and the son of the late Leo Aire Weinstock and the late Hedy Jadwiga Weinstock. The third defendant, Helen Weinstock, is the wife of Amiram David Weinstock.

2 For ease of reference, I shall refer to the plaintiff as "Mrs Beck", the second defendant as "A D Weinstock", the third defendant as "Helen Weinstock", the late Leo Aire Weinstock as "Mr Weinstock" and the late Hedy Jadwiga Weinstock as "Mrs Weinstock".

3 Mrs Beck, as plaintiff, seeks an order that the first defendant, L W Furniture Consolidated (Aust) Pty Limited ("LWC"), be wound up and an order that a liquidator be appointed. Her originating process, as filed, contains claims under both s 461(1)(k) and s 233 of the Corporations Act 2001 (Cth). At trial, however, reliance on the latter provision was abandoned and Mrs Beck's winding up application in respect of LWC was advanced solely on the ground that it is just and equitable that the company be wound up (s 461(1)(k)).

4 As will be seen presently, Mrs Beck holds one fully paid share in the capital of LWC. Although, as will also be seen, it is a share carrying restricted rights, the holding of it causes Mrs Beck to be within paragraph (a)(ii) of the definition of "contributory" in s 9 of the Corporations Act . Section 462(2)(c) accordingly gives her standing to apply for a winding up order on a ground specified in s 461.

5 Mrs Beck does not suggest that LWC is insolvent. The basic propositions for which she contends are that LWC has no directors, that none of its members has any right or power to vote at a general meeting and that there is no way in which these deficiencies can be rectified. As a result, she says, there is an entire absence of governance within LWC and no prospects of any normal system of corporate administration being restored. There is, on the view Mrs Beck takes, a constitutional and administrative vacuum. It is on that basis that Mrs Beck contends that it is just and equitable that LWC be wound up and that its affairs be committed to the control of a liquidator: compare Lunn v Cardiff Coal Company (No 3) [2003] NSWSC 789; (2003) 177 FLR 411 at [60] - [61]:

"I may say at once in relation to s470(1)(c)(iii) [of the Companies (New South Wales) Code ] that, having regard to circumstances existing today, I am satisfied that it is just and equitable that the Cardiff Coal Co be wound up. I said as much in my first judgment: (at [33]). The reason for that conclusion was also stated (at [5]):

'The company has, for many years, been dormant. As a result of proceedings instituted in 1989, orders were made in 1996 for the appointment of a receiver of the property of CCC. This occurred in circumstances where it appeared that, in or about 1917, persons best described as interlopers had, through forged transfers, ostensibly come to hold shares and they or their successors had also purportedly been appointed directors. Under CCC's deed of settlement, only proprietors of shares may be appointed as directors. As a result of the proceedings to which I have referred, it was established that there were, in reality, no directors validly in office. As a consequence, Hulme J, by order made on 6 September 1996, appointed Mr A E Lewis of Ferrier Hodgson, Newcastle, to be receiver. Mr Lewis continues in that office and, when these proceedings came before me on Monday last, I made, on Mr Lunn's application, an order approving the receiver's remuneration for the period 1 July 1998 to 30 June 2002 in the sum of $23,119.10.'

The company's situation is one in which, to use words found at p158 of the fourth edition (1999) of McPherson's The Law of Company Liquidation, it has become "impossible for it to carry on business owing to the failure of its internal constitution to function in an effective manner". This is not a case of deadlock. It is, rather, a case of constitutional and administrative vacuum, with one person only recognisable as a shareholder, no directors in office and no apparent prospects of the election or appointment of directors. There is an analogy here with the circumstances in CIC Insurance Ltd v Hannan & Co Pty Ltd (2001) 38 ACSR 245, but with the case for intervention by winding up order being even stronger in this case because there is really no one who can make the company operate effectively."

6 Assessment of the propositions for which Mrs Beck contends will entail an analysis of various acts and proceedings spanning several decades.

7 An interlocutory process filed by A D Weinstock and Helen Weinstock (and ostensibly also by LWC itself) claims a declaration that A D Weinstock and Helen Weinstock are the validly appointed directors of LWC and, in the alternative, relief under s 1322 of the Corporations Act in respect of certain of the acts and proceedings I have mentioned.

8 A D Weinstock and Helen Weinstock also contend that:

(a) even if Mrs Beck succeeds in showing that it is just and equitable that LWC be wound up, discretionary considerations should cause the court to decline to make a winding up order; and

(b) an Anshun estoppel operates against Mrs Beck in any event.

9 One of the discretionary matters that A D Weinstock and Helen Weinstock say militate against the making of any winding up order is that no member is entitled to participate in a winding up beyond receiving a return of the capital paid up on shares held, so that none of the members would take any part of the potentially substantial balance of assets and a liquidator would have to surrender the remainder to the Crown as bona vacantia . The other discretionary matters concern alleged delay and acquiescence.

10 As to the Anshun argument, it is sufficient at this point to note that, in 2007, Mrs Beck commenced proceedings in this Division against A D Weinstock, Helen Weinstock, Zipor Pty Ltd, John Halliday and LWC. Three of those defendants are, of course, the defendants in these present proceedings. The earlier proceedings were disposed of in part by consent orders and as to the remainder by orders made by Hamilton AJ in consequence of reasons delivered on 17 September 2010: Beck v Weinstock [2010] NSWSC 1068; (2010) 241 FLR 235.

The constitution of LWC

11 LWC was incorporated on 30 April 1971 under the Companies Act 1961 (NSW). Its memorandum and articles of association (which, by virtue of the Company Law Review Act 1998 (Cth), are now its constitution) contain a number of provisions to which it will be necessary to refer in some detail.

12 Because of the length of the relevant provisions and the need for the full text of them to be available, they have been included as an appendix to these reasons.

13 Clause 5 of the memorandum of association states that the company's capital is $20,000 divided into 20,000 shares of $1.00 each (the Company Law Review Act changed these shares into shares having no par value or nominal amount). By article 3(1) of the articles of association (reproduced in the appendix), the 20,000 shares were divided into fourteen classes, with each class having a special name introduced by a letter of the alphabet - for example "'A' 5% Convertible Preference Shares" and "'N' Class Ordinary Shares". To avoid unnecessary complication, I shall, in general, refer to shares of a particular class solely by reference to the letter by which the class is designated, so that, for example, an "'A' Class 5% Convertible Preference Share" is called simply an "'A' share" or an "'A' class share".

Bedrock

14 There is no dispute that, immediately after LWC's incorporation on 30 April 1971, its issued share capital consisted of five "A" shares (four held by Mr Weinstock and one by Mr Nagel, a solicitor, who held in trust for Mr Weinstock) and that Mr Weinstock and Mrs Weinstock were the directors, having been appointed by the subscribers to the memorandum of association. Nor is it controversial that

(a) on or about 1 April 1972, three "C" shares were issued, one to Mrs Weinstock, one to Mrs Beck and one to A D Weinstock;

(c) Mr Weinstock died on 29 July 2003; and

(d) Mrs Weinstock died on 6 July 2004.

15 In addition, it was held by Hamilton AJ in the earlier proceedings to which I have referred that the purported redemption of the one "C" share issued to Mrs Weinstock on or about 1 April 1972 (along with further such shares said to have been issued to her at a later time) was not effective.

16 It is also relevant to record that the matter was argued on the agreed footing, emerging from the pleadings, that Mr Weinstock and Mrs Weinstock, having been appointed directors upon incorporation by the subscribers to the memorandum, continued in office beyond the first annual general meeting (which was held on 30 October 1972) and were therefore in office as directors on 29 June 1973, the significance of which will appear presently.

17 Beyond this, the parties take different views about the significance and effect of events affecting the composition of the board of LWC and other matters relating to the company.

Members' voting rights

18 Section 140(1)(c) of the Companies Act 1961, as it stood on 30 April 1971, provided:

"So far as the articles do not make other provision in that behalf -

...

(c) in the case of a company having a share capital every member shall have one vote in respect of each share or each twenty dollars of stock held by him and in every other case every member shall have one vote."

19 The only provision of the Corporations Act in force today that specifies members' voting rights is s 250E. The rule it lays down is, however, a "replaceable rule" with the result that, by force of s 135(1), it will not apply to LWC unless it repealed its constitution after 1 July 1998. Since there is no suggestion of any such repeal, s 250E may be ignored and it is safe to proceed on the footing that the voting rights of members of LWC are as prescribed by its constitution, the initially applicable provision of the 1961 Act (s 140(1)(c)) having been displaced by the articles adopted at the time of incorporation (which have not changed since).

20 It is common ground that the only shares that have ever been issued are "A" shares, "C" shares and perhaps "D" shares. I say "perhaps 'D' shares" since two "D" shares were ostensibly issued in April 1975 but whether they were validly issued depends on whether the persons who purported to act as directors in issuing them then held office as directors.

21 The provisions with respect to shares of these classes - "A", "C" and "D" classes - appear in article 3 which is set out in the appendix. This article 3 formed part of the constitution at incorporation and, so far as members voting rights are concerned, caused s 140(1)(c) of the Companies Act 1961 to be displaced from inception.

22 The "A" shares issued upon incorporation carried, at that point, no right to vote at a general meeting: article 3(2)(a). They continued under that disability subject to the possibility that voting rights might come to attach to them as a result of their conversion under article 3(2)(e): see article 3(2)(e)(i). But, as article 3(2)(e) makes clear, conversion could be effected only by Mr Weinstock while living. It is common ground that the conversion mechanism ceased to be available when Mr Weinstock died in 2003 without having activated it. It follows that, in terms of article 3(2)(a), the "A" shares will continue indefinitely as shares conferring no right to vote at general meetings.

23 The "C" shares, when issued in April 1972, carried no right to vote at a general meeting: article 3(4)(a). No provision of the constitution envisages the attaching of voting rights to the "C" shares at any time after their issue.

24 The position in relation to the "D" shares, if they were in truth issued in April 1975, is the same as that prevailing in relation to the "C" shares: see article 3(5)(a).

25 The matter of voting at general meetings of LWC is dealt with in article 56. The general rule is that, on a show of hands, every member has one vote and, on a poll, every member has one vote for every share held; but this is:

"Subject to any special rights or restrictions for the time being attaching to any special class of shares in the capital of the Company".

26 The "A" shares, "C" shares and "D" shares each constitute a "special class of shares", so that the voting disability imposed by the provisions specific to those shares displaces the voting entitlement that would otherwise arise from article 56.

27 It is possible for the provisions of the constitution denying voting rights to be modified by special resolution ( Corporations Act , s 136(2)), although it would no doubt be necessary to comply with provisions about modification of class rights in connection with any change to the constitution to attach voting rights. As things now stand, however, the possibility of any such modification is academic only, since the passing of a special resolution depends, in terms of the s 9 definition of "special resolution", on "votes cast by members entitled to vote on the resolution" and no member is so entitled.

28 Mrs Beck's contention is that there is, at shareholder level, a vacuum, in the sense that no resolution of shareholders can ever be passed and that that position can never change. That contention is valid in the circumstances existing today. It does not help to refer to some perceived residual, reserve or supervisory power of members since, if any such power truly exists (which it probably does not: see Massey v Wales [2003] NSWCA 212; (2003) 57 NSWLR 718), it is a power that belongs to the company in general meeting and is therefore incapable of being exercised when no member is able to vote at a general meeting.

29 The present situation of vacuum regarding voting rights at a general meeting may not, however, be permanent if there are directors in office. Under article 69, the directors have power to allot or otherwise dispose of unissued shares. None of the "E" to "N" shares is subjected by the constitution to a voting disability. If shares of any of those classes were issued, each holder of them would, at any general meeting, enjoy the voting rights specified in article 56, that is, the right to one vote on a show of hands and to one vote per share on a poll.

Board composition - the constitution

30 Article 65 fixes the number of directors at a minimum of two and a maximum of five, subject to any contrary determination of a general meeting. Mr Weinstock and Mrs Weinstock are named as the first directors. Under article 86, a quorum of directors is two.

31 Article 69 empowers the board of directors to appoint any person to be a director either to fill a casual vacancy or as an addition to the existing directors. A director so appointed "shall hold office only until the next following annual general meeting" as is "then eligible for re-election".

32 Article 66 states that, "[a]t every annual general meeting", each director is to retire from office and is to be eligible for re-election.

33 Article 67 then specifies what is to happen "at the meeting at which a director so retires". The meeting may fill the vacated office. In default, "the retiring director", if "offering himself for re-election" and not being disqualified, is deemed to have been re-elected unless the meeting expressly resolves not to fill the vacated office or a resolution for the re-election of the retiring director is put to the meeting and lost.

34 An "annual general meeting" thus plays a central role in fixing the composition of the board. A director appointed under article 69 holds office "only until" the next "annual general meeting". At every "annual general meeting", every director must retire. The "annual general meeting" may fill vacancies. A default mechanism may operate if a particular vacancy is not filled at an "annual general meeting".

35 The meaning of "annual general meeting" will be considered presently.

Board composition - relevant events

36 Mrs Beck says that there are no directors in office. If that is correct, it is a situation that cannot be rectified. The members cannot elect directors since they are unable to vote at a general meeting and there is, in any event, no provision of the constitution allowing members to elect directors except by filling offices vacated by retirement at an annual general meeting in conformity with article 67 - although the power under article 68 to "increase . . . the number of directors" might allow a general meeting to install new directors in new positions it created: Worcester Corsetry Ltd v Witting [1936] Ch 640; Grant v John Grant & Sons Pty Ltd [1950] HCA 54; (1950) 82 CLR 1. In the circumstances now existing, that possibility is academic . Members' inability to vote at a general meeting also means that they cannot modify the constitution to create new director electing machinery. Under article 69, the directors have a power to appoint directors but, if there are no directors, the power obviously cannot be exercised.

37 In considering the question whether there are currently directors in office, it is necessary to refer to a number of meetings the minutes of which are included in the minute book put into evidence.

38 The first of these is a meeting of 29 June 1973. The document in evidence carries the name of LWC and is headed:

"MINUTES OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS HELD AT THE REGISTERED OFFICE OF THE COMPANY ON 29 JUNE 1973."

39 Recorded as present are Mr Weinstock and Mrs Weinstock. There is then a record of consent to the holding of the meeting at short notice. Finally, the following is recorded:

"RESOLVED that the following resolution be passed as a Special Resolution -

That Tamar Beck and Amiram David Weinstock be appointed Directors and they shall hold office until the holding of the next Annual General Meeting of the Company."

40 At the foot of the document appears Mr Weinstock's signature, above the typed word "CHAIRMAN".

41 It is accepted on both sides that, on the basis of this document, it is sufficiently established that Mr Weinstock and Mrs Weinstock participated together in a meeting the upshot of which was the concurrence of both of them in a decision (recorded as a "special resolution") that Mrs Beck and A D Weinstock should be appointed directors to hold office until the next annual general meeting.

42 Furthermore and having regard to what is said at paragraph [14] above, the parties accept that, as at 29 June 1973, Mr Nagel, Mrs Beck and A D Weinstock were members, in addition to Mr Weinstock and Mrs Weinstock; also that Mr Weinstock and Mrs Weinstock were then the only directors.

43 Mrs Beck contends that, if and to the extent that, as the minutes declare, there was an "extraordinary general meeting" of LWC on 29 June 1973, that meeting was incompetent to appoint Mrs Beck and A D Weinstock as directors. This is because the only relevant power of appointment rested with the directors under article 69; and Mr Weinstock and Mrs Weinstock, although they were the only directors in office, did not act as directors in doing what they did, with the result that the available power of appointment was not exercised.

44 Minutes in evidence show (and it is not controversial) that a meeting purporting to be an annual general meeting took place on 31 December 1973. Recorded as present are Mr Weinstock, Mrs Weinstock, Mrs Beck, A D Weinstock and Mr Nagel. The last of the resolutions the minutes record as having been passed at the annual general meeting is this:

"RESOLVED that any director retiring in accordance with the provisions of the Company's Articles of Association be re-appointed."

45 Mrs Beck maintains that this resolution did not apply to Mrs Beck and A D Weinstock even if, contrary to the position she takes in relation to the resolution of 29 June 1973, each had been appointed on that day to hold office only until the next annual general meeting. This is because, even on the assumption that the 29 June 1973 appointments were effective, neither Mrs Beck nor A D Weinstock was, at the annual general meeting of 31 December 1973, a person capable of being elected a director.

46 The minutes of annual general meetings in 1974, 1975 and 1976 are in evidence. In each case, there was supposedly a resolution in the same terms as that passed at the 31 December 1973 meeting. Again, all five members were recorded in the minutes as present.

47 The minutes of the meetings said to have been annual general meeting in each of the years 1977 to 1982, record that all five members were present and that the following resolution was passed:

"RESOLVED that Directors retiring by rotation be and are hereby reappointed for the ensuing year."

48 The minute book in evidence contains minutes of annual general meetings in the year 1983 and several (but not all) of the subsequent years. For reasons to be stated presently, it is not necessary to refer to proceedings at these meetings. The minute book also contains minutes of numerous meetings of directors.

49 Reference is made finally to a "resolution" passed at a "meeting of directors" held on 30 July 2003 at which A D Weinstock alone is said to have been present. Minutes refer to the death of Mr Weinstock on the immediately preceding day, 29 July 2003. It is then said that Mrs Weinstock "who has advanced Alzheimer's disease" was "declared incapable of performing the duties of Director/Secretary of the company according to clause 73(d) of the Articles of Association of the company". Then follows a "resolution" as follows:

"It was RESOLVED in accordance with clause 87 of the Articles of Association of the company which states;

'... if and so long as their number is reduced below the number fixed by or pursuant to the Articles of the Company as quorum of directors, the continuing directors or director may act for the purpose of increasing the number of directors to that number or of summoning a general meeting of the company, but for no other purpose.'

That Amiram David Weinstock being the sole remaining director of the company appoint Helen Weinstock as an additional director."

The meeting of 29 June 1973 - assessment

50 Whether each of Mrs Beck and A D Weinstock became a director on 29 June 1973 depends on the efficacy of steps taken by Mr Weinstock and Mrs Weinstock on that day.

51 The meeting of 29 June 1973 was, according to the minutes, an "extraordinary general meeting" convened with "the consent of all members" to its being held "at short notice" for the purpose of considering and if thought fit passing a particular resolution (being the resolution later recorded as having been passed) "as a special resolution". The resolution in question is set out at paragraph [39] above.

52 For reasons already stated, there could not have been any valid and effectual exercise of members' voting rights at that supposed general meeting. Neither person recorded as present was capable of exercising such rights because the shares the member held carried no right to vote ("A" shares in the case of Mr Weinstock and a "C" share in the case of Mrs Weinstock). It is also relevant to note that there were, at the time, three other members.

53 The two persons who participated on 29 June 1973 - Mr Weinstock and Mrs Weinstock - were, however, the only directors of the company. They were therefore able to exercise all the powers confided by the constitution to the directors. Among these was the power under article 69 "to appoint any person to be a director . . . as an addition to the existing directors", provided that the number of directors did not then exceed the maximum of five stated in article 65.

54 It follows that Mrs Beck and A D Weinstock were validly appointed as directors on 29 June 1973 if the collective action of Mr Weinstock and Mrs Weinstock recorded in the minutes is properly regarded as action of the directors taken in a way recognised as effective for action of the directors. I would note, as an aside, that the minutes of 29 June 1973 record an immediate and present decision and are not comparable with the document considered in Sheahan v Londish [2010] NSWCA 270; (2010) 244 FLR 64 which merely notified a decision made in the past.

55 Under article 82, the principal way in which the directors may act as directors is at a meeting. Mr Weinstock and Mrs Weinstock attended and participated in a meeting on 29 June 1973 and passed a resolution for the appointment of Mrs Beck and A D Weinstock as directors. This is made clear by the minutes. To that extent, therefore, their action on that day satisfied the procedural requirements for a valid and binding decision of the directors.

56 It was submitted on behalf of Mrs Beck, however, that it is impermissible to treat a purported meeting of members as something other than that which it is represented to be and that one cannot, as it were, pretend that what is recorded as having been a meeting of members was in reality a meeting of directors and that the resolution the two persons are recorded as having passed as a special resolution of members was in reality a resolution passed by them as directors.

57 Counsel for Mrs Beck referred, in this connection, to Re East Norfolk Tramways Co (Barber's Case) (1877) 5 Ch D 963. The question in that case was whether the fact that six out of the seven directors of a company had, as shareholders, voted in favour of the election of a person as a director at a meeting of shareholders satisfied a requirement that a candidate for election be recommended by the board. It was held that the requirement was not satisfied as there had been no separate action by the board of directors.

58 I do not think that that case is of assistance here. The situation was one in which votes as shareholders to elect were said to be also simultaneous votes as directors to recommend. There are at least four points of distinction from the present case: the two functions were different; one function was a necessary preliminary to the other; separate action by directors and by shareholders was required; and less than the full complement of directors participated.

59 Here, by contrast, there is only one relevant act - that of electing or appointing directors. Mr Weinstock and Mrs Weinstock were competent, under the constitution, to appoint directors by acting together as the only members of the board of directors. They clearly intended to act as company functionaries on 29 June 1973. This was not a case of a casual encounter between two persons who happened to be company functionaries which one later attempted to turn into a company meeting without the consent of the other: Barron v Potter [1914] 1 Ch 895 (a case involving what Brooking JA, Charles JA and Chernov JA, in Aqua Max Pty Ltd v MT Associates Pty Ltd [2001] VSCA 104; [2001] 3 VR 473, described as an "unsuccessful attempt to waylay Canon Barron at Paddington Station"). Nor was it a case where a conversation over lunch at a caf was later put forward as a corporate proceeding: Poliwka v Heven Holdings Pty Ltd (No 2) (1992) 8 ACSR 747.

60 The meeting of 29 June 1973 was from start to finish a proceeding at which company functionaries intended to act as company functionaries and to achieve a particular result for and within the company.

61 Assume that the following conversation had occurred on 29 June 1973:

Mr Weinstock: "We have talked before about putting Tami and Ami on to the board of the company. They have agreed to become directors and I think it is time that we made them directors."

Mrs Weinstock: "You are right. We should go ahead and do it."

Mr Weinstock: "So, we are agreed that we are now appointing them as directors until the next AGM - right?"

Mrs Weinstock: "Yes"

Mr Weinstock: "Good, I will get the solicitor or accountant to draw up the minutes."

62 It cannot, to my mind, be doubted that, if this conversation had occurred, the situation would be one in which the two persons who, as the company's only directors, had the power to appoint new directors exercised that power. They did not say, in their imagined conversation that they were directors. They did not need to do so. They acted in the way described by Bryson J in Swiss Screens (Aust) Pty Ltd v Burgess (1987) 11 ACLR 756 at 758:

"To my mind any event, even most fleeting, in which two directors who are married to each other and are the company's only directors reach concurrence in taking some course in the company's affairs can be part of their management of the business of the company, and can be described with accuracy as a meeting of the directors and as a proceeding at such a meeting. In the course of human affairs it is not to be expected that a recognisable meeting would often take place in which somebody took the chair, there was a call to order, a resolution was made, seconded, debated and voted on. What does seem to me to be essential is that they should both concur in some decision in the management of the business of the company."

63 Mr Weinstock and Mrs Weinstock were the company's only directors. We cannot know precisely what passed between them on 29 June 1973. But we do know that it was such as to cause Mr Weinstock to sign a minute recording a resolution that Mrs Beck and A D Weinstock be appointed directors to hold office until the next annual general meeting. The fact that the minute stated that the meeting at which the decision was made was a general meeting does not detract from the fact of the concurrence of the two persons in the resolution. And if they had been asked, "Did you really intend to pass that resolution as a special resolution of shareholders when you have no voting rights as shareholders, three other persons who also have no voting rights would have been entitled to attend with you but were not involved, the purported consent to short notice in the minutes was ineffective because of non-compliance with s 138(3)(b) of the Companies Act 1961 and any supposed resolution you adopted as shareholders achieved absolutely nothing?" their response would have been, "Of course not; we intended to exercise the power we actually had to appoint directors."

64 As McGarvie J said in J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VR 891 at 932:

"It is to be taken that as businessmen they acted at particular times in the capacity or capacities in which they had power to act."

65 That observation was made by reference to Re Express Engineering Works Ltd [1920] 1 Ch 466 and repeats words in one of the judgments. The case concerned a group of five persons who formed a company of which they were the only shareholders and directors. They sold to the company for 15,000 in debentures property they had purchased for 7,000 a few days earlier. The contract for sale and the issue of the debentures for payment were determined upon at a meeting of the five persons that was described as a directors' meeting. The articles of the company prohibited a director voting in respect of any contract or arrangement in which he might be interested. In an action by the liquidator seeking to have the transactions set aside, Astbury J refused relief on the ground that since every member of the company had assented to the transactions; the company was bound in a matter intra vires by the unanimous agreement of its members. On appeal, Lord Sterndale MR said at 470:

"It was said here that the meeting was a directors' meeting, but it might well be considered a general meeting of the company, for although it was referred to in the minutes as a board meeting, yet if the five persons present had said, "We will now constitute this a general meeting", it would have been within their powers to do so, and it appears to me that that was in fact what they did."

66 It was Younger LJ who used the words later picked up by McGarvie J. Younger LJ said at 471:

"Inasmuch as they could not in one capacity effectually do what was required but could do it in another, it is to be assumed that as business men they would act in the capacity in which they had power to act."

67 It was considered appropriate in Re Express Engineering Works Ltd to regard the expressed assent of the totality of the membership as sufficient to achieve a result within the powers of a meeting of members where those persons had expressed that assent at a meeting at which they alone were present, even though the meeting was recorded and minuted as a meeting of directors. So too here, it is appropriate to regard the expressed assent of the totality of the directorate as sufficient to achieve a result within the powers of a meeting of directors where those persons had expressed that assent at a meeting at which they alone were present, even though the meeting was recorded and minuted as a meeting of members.

68 Although Mr Weinstock and Mrs Weinstock chose, perhaps on the basis of misguided advice, to dress their decision in the clothes of extraordinary general meeting and special resolution, it remained no more and no less than a decision made by both of them in relation to the company.

69 The action of Mr Weinstock and Mrs Weinstock recorded in the minutes of 29 June 1973 was effective under article 69 to cause Mrs Beck and A D Weinstock to become directors on the basis stated in that article, that is, that they were to hold office "only until the next annual general meeting".

Annual general meetings - a preliminary point

70 Reference has been made to the part that "annual general meetings" play in the provisions of the constitution concerning the composition of the board of directors. Reference has also been made to the minutes of a number of meetings said to have been "annual general meetings" and to resolutions regarding directors purportedly passed at such meetings.

71 The circumstance that, on my findings, there was never any member capable of voting at a general meeting raises the question whether any of these supposed annual general meetings was in truth an annual general meeting at all. Before addressing that issue, however, I should look at the constitution's concept of "annual general meeting".

72 The meaning of "annual general meeting" in the constitution is of significance in understanding the provisions about the appointment, election and tenure of directors. Reference has already been made to article 69 which allows appointment of a director by the directors themselves until the next "annual general meeting". Attention will be given in due course to articles 66 and 67 which deal with retirement and election of directors at an "annual general meeting" and make those matters part of the business of an "annual general meeting".

73 The articles contain no explicit definition of "annual general meeting", in the sense that there is no provision beginning, "In these articles, 'annual general meeting' means . . .". There are, however, two provisions of significance. First, article 45 requires that an annual general meeting "be held in accordance with the provisions of the Act". Second, article 1 says:

"In these Articles . . . words or expressions contained in these Articles shall be interpreted in accordance with the provisions of the Interpretation Act of 1897 and of the Act as in force at the date at which there Articles become binding on the Company."

74 In both these provisions, "the Act" takes its meaning from the following part of article 1:

"In these Articles . . . 'the Act' means the Companies Act, 1961."

75 Section 136 of the Companies Act 1961 required that a company hold an "annual general meeting" at least once in every calendar year and not more than fifteen months after the holding of the last such meeting. Section 5(1) contained the following definition:

"'Annual general meeting' in relation to a company means a meeting of the company required to be held by section 136."

76 This definition formed part of the Companies Act 1961 at the time of LWC's incorporation on 30 April 1971 and therefore at the date at which the articles became binding on the company. It follows that article 1, by means of the words quoted at paragraph [73] above, picked up the statutory definition of "annual general meeting" in s 5(1) and carried it into the articles as a whole. This imported statutory definition, reinforced by article 45, makes it clear that a particular general meeting will properly be regarded as an "annual general meeting" if the holding of it is "required" by s 136 of the Companies Act 1961.

77 Section 18 of the Companies (Application of Laws) Act 1981 (NSW) had the effect that, on 1 July 1982, the Companies (New South Wales) Code (being the provisions of the Companies Act 1981 (Cth) applied as laws of New South Wales by s 6 of the Companies (Application of Laws) Act ) came to "operate to the exclusion of the provisions of the Companies Act 1961 . . . in relation to acts, matters and things in relation to which" the Companies (New South Wales) Code provisions applied. Section 240(1) of that Code required every company to hold a general meeting called the "annual general meeting" at least once in every calendar year and within other timing constraints imposed by the section. That provision of the Code therefore operated "to the exclusion of" s 136 of the Companies Act 1961. It follows that, from and after 1 July 1982, no company was "required" by the Companies Act 1961 to hold an annual general meeting and that any annual general meeting in fact held could not properly be described as "held in accordance with the provisions of" the Companies Act 1961 (to quote the words of article 45) or as "required to be held by" s 136 of the Companies Act 1961 (to quote the words of the statutory definition imported into the articles).

78 After 1 July 1982, the pre-existing articles of LWC continued to be its articles. This was the effect of s 21 of the Companies (Application of Laws) Act . On that day, however, the requirement under article 45 that an annual general meeting be held "in accordance with the provisions of the Act" (that is, the Companies Act 1961) and the articles' imported definition of "annual general meeting" became devoid of content and meaning, unless, upon a proper construction of the articles, as continued in operation, each reference to "the Act" in the articles included a reference to replacing or superseding legislation so that the articles' express and imported references to the annual general meeting provisions of the Companies Act 1961 came to include a reference to the substituted provisions on that subject in s 240(1) of the Companies (New South Wales) Code .

79 The possibility that the reference to "the Act" in article 45 might be read in that way makes it necessary to refer again to the part of article 1 set out at paragraph [73] above.

80 The Companies Act 1961, as in force on 30 April 1971, obviously did not contain any provision that might cause references to it in a company's articles to include references to legislation replacing or superseding it. The Interpretation Act 1897 (NSW) then in force dealt, in s 25(1), with the case where an Act was "repealed and re-enacted" (with "re-enacted" including "re-made"). Section 25(1) provided that a reference to that Act in "an Act or an instrument made under an Act" included a reference to the Act "as amended or re-enacted".

81 This provision of the Interpretation Act 1897 in force on 30 April 1971 did not, via the words of article 1 quoted at paragraph [73] above, cause the reference to the Companies Act 1961 in the article 1 definition of "the Act" (and in the imported definition of "annual general meeting") to become a reference instead to the provisions applying in this State from 1 July 1982 as the Companies (New South Wales) Code . There are two reasons for this. First, the process by which the Code provisions came to be operative did not entail the repeal and re-enactment of the Companies Act 1961. As stated at paragraph [77] above, the Code provisions were made by the legislature of New South Wales to operate from 1 July 1982 "to the exclusion of" those of the Companies Act 1961, which Act remained unrepealed for a further quarter of a century: see Statute Law (Miscellaneous Provisions) Act 2008 (NSW), s 4 and the first item in part 1 of schedule 4. Second, the articles of LWC are not "an instrument made under an Act". As is made clear by s 16 of the Companies Act 1961, persons desiring the incorporation of a company having articles of association from inception were required to lodge those articles as a prerequisite to obtaining incorporation, while s 29(1) made it clear that the articles so lodged were "registered with the memorandum". There is thus no concept of a company's articles somehow proceeding from or being produced pursuant to the Companies Act so as to be "an instrument made under an Act".

82 On this analysis, therefore, the position is as follows:

(1) The Companies Act 1961 ceased, on 1 July 1982, to be the source of any requirement that LWC hold annual general meetings.

(2) The provisions of the Companies (New South Wales) Code with respect to annual general meetings applied of their own force to LWC from and after 1 July 1082.

(3) Neither the reference in article 45 to the holding of an annual general meeting "in accordance with the provisions of the Act" nor the definition of "annual general meeting" imported into the articles from the Companies Act 1961 was altered, as of 1 July 1982, so as to refer instead to an annual general meeting held in conformity with the Companies (New South Wales) Code .

83 It follows that annual general meetings of LWC held after 1 July 1982 in obedience to the requirements of the Companies (New South Wales) Code - and later the Corporations Law of New South Wales - were not "annual general meetings" within the articles' definition imported from the Companies Act 1961 and were accordingly not meetings referred to in articles 66, 67 and 69 and elsewhere in the articles as "annual general meetings".

84 It is also relevant to note that a proprietary company such as LWC has not been subject to any statutory obligation to hold an annual general meeting since the First Corporate Law Simplification Act 1995 (Cth) came into operation on 9 December 1995. That Act abolished the requirement for an annual general meeting in relation to relevant companies. Thus, even if

(a) it is wrong to think that, after 1 July 1982, the definition of "annual general meeting" in the constitution was devoid of meaning and there was no requirement under article 45 that such a meeting be held); and

(b) the article 1 definition of "annual general meeting" and the article 45 requirement, both referring to "the Act", are properly regarded as referring to any provision for the time being in force that requires a company such a LWC to hold an annual general meeting,

the position was that, after 9 December 1995, there was no statutory requirement for the holding of such a meeting and therefore no content to either the article 1 definition or the article 45 requirement.

Annual general meetings - the lack of voting rights

85 LWC's articles contemplate that an annual general meeting will transact certain business. Article 48, for example, refers to declaring dividends, considering the accounts and reports, electing directors in place of those retiring and the appointment and fixing of the remuneration of auditors. Article 48 does not say that these things must be done at an annual general meeting - merely that it is not necessary for them to be referred to in the notice convening the meeting. Articles 66 and 67, which play a central part in this case, deal with retirement of directors at "every annual general meeting" and the ability of the meeting to fill vacancies on the board of directors.

86 What, then. are the implications of the circumstance that no member had a right to vote at any such meeting?

87 It cannot, I think, be said that the entire lack of members' voting rights and voting power meant that it was impossible for an annual general meeting to be held. The holders of "A" shares were given by article 3(2)(a) the right to "notice of and to attend any general meeting of the Company". The same right was enjoyed by the holders of the "C" shares (article 3(4)(a)) and, if any "D" shares were validly issued, by the holders of those shares (article 3(5)(a)). There were thus, at all times, members capable of attending an annual general meeting. Although those members could not vote, they could, for example, consider accounts and reports laid before the meeting by the directors and to engage in the discussion that is part of that process: Re Love (as liquidator of 007 368 257 Ltd) [2003] NSWSC 58; (2003) 44 ACSR 367 at [11].

88 I am satisfied, therefore, that, subject to what is said at paragraphs [83] and [84] above, the several meetings of which minutes are in evidence and which are represented as having been annual general meetings were annual general meetings even though it was impossible for any resolution to be passed at them by the exercise of members' votes.

The meeting of 31 December 1973 - assessment

89 The appointment of Mrs Beck and A D Weinstock as directors on 29 June 1973 was an appointment under article 69. That is the only kind of appointment that it was open to Mr Weinstock and Mrs Weinstock, as directors, to make. The appointees were therefore appointed on the basis stated in that article, that is:

". . . shall hold office only until the next following annual general meeting and shall then be eligible for re-election but shall not be taken into account in determining who are to retire by rotation at that meeting."

90 The "next following annual general meeting" was that held on 31 December 1973. The Companies Act 1961 was then in force and there is no difficulty in accepting the meeting as an "annual general meeting" within the meaning of the articles. The minutes of the 31 December 1973 meeting show that all five members were present. The resolution purportedly passed at the meeting concerning directors was that "any director retiring in accordance with the provisions of the Company's Articles of Association be re-appointed" (see paragraph [44] above).

91 Since none of the five members present had any ability to vote, there was in truth no such resolution passed on 31 December 1973. It is therefore unnecessary to decide whether such a resolution would have been effective to cause Mrs Beck and A D Weinstock to be elected as directors. Because no member could vote, the purported resolution did not operate upon or in relation to them or any other person.

92 The effect of the second part of article 67 - the part beginning "and in default" (which I shall call the "default" part) - and the question whether it operated in relation to Mrs Beck and A D Weinstock must therefore be addressed.

93 Article 67 is set out in the appendix and must be read in conjunction with the immediately preceding article 66. Article 66 requires "each director" to retire from office at "every annual general meeting". The reference in article 67 to "the meeting at which a director so retires" is therefore a reference to an annual general meeting at which a director required by article 66 to retire does so; and a director who "so retires" is one who retires in conformity with article 66, being also the "retiring director" referred to in article 67.

94 Article 67 goes on to deal with "the vacated office", that is the office vacated by the retirement of a director required by article 66 to retire "at" the particular annual meeting. The meeting may, if it chooses, fill "the vacated office" by electing a person to it - something that, in this company, was not possible on 31 December 1973 since the absence of members' voting power denied the general meeting the ability to pass any resolution, whether for the election of directors or otherwise. Article 67 next describes (in what I have called its "default part") what is to happen "in default", that is, if the meeting does not fill the vacated office by electing a person to it. In that event, the "retiring director" is deemed to have been re-elected if two conditions are satisfied. The first condition is that the "retiring director" is "offering himself for re-election". The second is that the meeting itself has not done one of two things: expressly resolved not to fill the office; or considered and rejected a motion for the re-election of the person concerned.

95 What I have said to this point about articles 66 and 67 reflects the meaning those provisions have when read in isolation form other provisions. It is now necessary to expand the inquiry to include the question whether each of Mrs Beck and A D Weinstock was, in relation to the 31 December 1973 meeting, a "retiring director", that is, a director who "so retires" as referred to in article 67.

96 Case law indicates a general principle that a director who holds office "only until" a particular annual general meeting is not in office once that meeting has begun and therefore cannot retire "at" the meeting. The situation is one of tenure up to a particular point ("until" the meeting), not one of tenure brought to an end by retirement "at" the meeting. This is the construction that was put on relevantly identical articles in Eyre v Milton Proprietary Ltd [1936] Ch 244. It was there decided that two directors appointed onder an article indistinguishable from the present article 69 whose tenure was "only until the next following ordinary general meeting" ceased to be in office before that meeting began so that "at the moment when the next following ordinary general meeting begins they are no longer in office" (per Lord Wright MR at 254, Romer LJ concurring at 257); and their "status . . . when the ordinary meeting opens is that they are not directors" (per Greene LJ at 258). Those two directors, not being in office at any point during the meeting "only until" which they held office, could not retire "at" that meeting.

97 Hodgson J construed very similar provisions in the same way in Australian Hydrocarbons NL v Green (1985) 10 ACLR 72 at 78. In New South Wales Rugby League Ltd v Australian Rugby Football League Ltd [ 1999] NSWCA 9; (1999) 30 ACSR 354, it was said by Powell JA (Meagher JA concurring) that directors appointed to hold office "only until" the next annual general meeting ceased to be in office "either just before, or immediately upon, the commencement of" the meeting.

98 It is, of course, possible that, as a matter of construction of particular provisions, the offices of directors holding office "only until" an annual general meeting may be included among those put at the disposal of the meeting by a provision similar to article 67. That was the position in Tomlinson v The Broken Hill Proprietary Co Ltd (unreported VSC, Southwell J, 20 September 1984, BC8400096) where article 101 referring to vacation of office under three distinct provisions (article 101 itself, article 88 and article 99, the last being a provision containing the "only until" terminology) was followed by article 102 in these terms:

"The Company at any annual general meeting at which any Directors retire in manner aforesaid may fill up all or any of the vacated offices by electing a like number of qualified persons to be Directors."

99 In that particular context, the correct construction was as follows:

"It is clear that article 101 acknowledges the difference between a director appointed under article 88 who vacates office, a director ceasing to hold office under article 99 and a director retiring under article 103, but when one looks at the next following article, and where the reference is made to the words, "At which any directors retire in manner aforesaid", it seems to me that the words, "in manner aforesaid" must refer to the three methods by which a director may cease to be a director either by vacating office or by ceasing to hold office or retiring. Accordingly, it seems to me to follow that the word, "retire" in article 102 encompasses those three means by which a person may cease to be a director."

100 The reference in Tomlinson v BHP to a meeting "at which any directors retire in manner aforesaid" thus included a reference to vacation of office by reason of the holding of the office "only until" the meeting, on the footing that "retire in manner aforesaid" referred to all three methods of vacation of office expressly mentioned in the immediately preceding provision.

101 There is no room for any similar approach in this case. The words "so retires" in article 67 can only refer to retirement under the immediately preceding article 66, which is retirement "at" the meeting itself, that is, after it has begun. The reference to a person holding office "only until" the meeting does not appear until the second part of article 69; and the words "so retires" in article 67 - placing emphasis on "so", in the sense of "thus" or "in this way" - obviously cannot refer forward to article 69 as well as back to article 66.

102 The clear conclusion, as a matter of construction, is that, since the second part of article 67 (beginning "and in default") refers only to the case where an office vacated by retirement "at" the meeting is not filled by the meeting itself, the default mechanism cannot and does not apply to a position on the board that was held "only until" the meeting by a person appointed under article 69.

103 It follows that, since the positions occupied by Mrs Beck and A D Weinstock from 29 April 1973 were of that kind, the default mechanism in the "default" part of article 67 could not operate in relation to either of them at the 31 December 1973 annual general meeting, with the result that neither of them was a director beyond the point at which that meeting commenced.

Subsequent annual general meetings

104 My conclusion in relation to the 31 December 1973 annual general meeting means that neither Mrs Beck nor A D Weinstock was in office as a director at the time of the next annual general meeting, being the meeting that took place in 1974. As previously, no member was capable of voting at that meeting and the purported resolution that directors be "re-appointed" was in truth not a resolution of the meeting at all. In addition, since neither Mrs Beck nor A D Weinstock had been a director since the point at which the annual general meeting began on 31 December 1973, neither was required by article 66 to retire at the 1974 annual general meeting, from which it follows that the default mechanism in the "default" part of article 67, to the extent that it may have operated at all, did not operate upon or in relation to either Mrs Beck or A D Weinstock at that 1974 annual general meeting.

105 The position was the same in relation to each subsequent annual general meeting before 1 July 1982 (or, at all events, before 9 December 1995) at which there was a purported resolution of shareholders of one kind or another to re-appoint directors. None of those resolutions was effectively passed and, to the extent that the default mechanism in the "default" part of article 67 may have operated, its operation did not extend to Mrs Beck or A D Weinstock.

106 The view I have expressed about the meaning of "annual general meeting" in articles 66 and 67 means that those articles did not operate to limit tenure by reference to, or direct retirement at, any meeting held after 1 July 1982 (or alternatively after 9 December 1995).

Other matters in relation to directorships

107 I have said little, to this point, about the status of Mr Weinstock and Mrs Weinstock as directors. It is not necessary to decide whether they continued in office as directors from annual general meeting to annual general meeting by virtue of the article 67 default mechanism. I say this because each ceased to be a director on death (in 2003 or 2004), if then still in office (in the case of Mrs Weinstock, as will be seen, the office of director was vacated at an earlier time) and the question before me is whether there is, in the circumstances existing today, an irremediable constitutional and administrative vacuum.

108 The conclusion that neither Mrs Beck nor A D Weinstock was a director after 31 December 1973 (and that Mr Weinstock and Mrs Weinstock ceased to be directors when they died, if not earlier) will be relevant in answering that question unless it is seen that the remedial power of the court is available and should be exercised so as to produce the contrary conclusion.

109 It is also necessary to refer to the position of Helen Weinstock. She and A D Weinstock contend that Helen Weinstock became a director on 30 July 2003 by virtue of the determination of A D Weinstock set out at paragraph [49] above. Reference is made, in that connection, to article 73(d) (which causes the office of a director to become vacant if the director "becomes of unsound mind") and article 87 and article 69, both of which appear in the appendix. The reference in the former to "the necessary quorum of directors" takes its meaning from article 86 (also set out in the appendix). There is no suggestion that the directors have ever made any determination of a number under that provision.

110 Because A D Weinstock was not a director after 31 December 1973, the action taken by him on 30 July 2003, even if of a kind that would have been effective if taken by a director, was not effective. But had A D Weinstock been at the time the only director validly in office, his unilateral action to appoint Helen Weinstock as a director would have been effective under articles 87 and 69, noting, in particular, the words "the continuing directors or director " [emphasis added] in the former (and see Channel Collieries Trust Ltd v Dover St Margaret's and Martin Mill Light Railway Co [1914] 1 Ch 569) .

111 As to this last matter, Mr Weinstock was no longer in office as a director on 30 July 2003 because of his death on the previous day (or, perhaps, because the default mechanism in article 67 did not operate in relation to him following his compulsory retirement under article 66 at some annual general meeting). Mrs Beck, like A D Weinstock, had not been a director since 31 December 1973 (she had, in any event, purported to resign as a director on 8 January 1982, and that would have caused her office to become vacant pursuant to article 73(e) had she still been in office). That leaves Mrs Weinstock in relation to whom there is a question of fact, namely, whether she had, before 30 July 2003, become "of unsound mind" as contemplated by article 73(d). It is unnecessary for me to determine that question since Mrs Beck avers, in her points of claim, that Mrs Weinstock had, by 29 July 2003, suffered a total loss of capacity, while A D Weinstock and Helen Weinstock admit this in their points of defence. Mrs Weinstock therefore ceased to be a director on or before 29 July 2003 (there exists, in relation to her the same possibility as to non-operation of the article 67 default mechanism as has been noted in relation to Mr Weinstock).

112 It follows that Mr Weinstock and Mrs Weinstock were on no conceivable basis in office as directors on 30 July 2003 and that Helen Weinstock's purported appointment as a director on that day would have been valid and effective, but for the fact that A D Weinstock was no longer a director when he purported to appoint her.

Conclusions in relation to directorships

113 The overall result, so far as the constitution of the board of directors is concerned, is that no director is in validly in office today.

114 The only persons who have ever been validly in office as directors are Mr Weinstock, Mrs Weinstock, Mrs Beck and A D Weinstock.

115 A D Weinstock ceased to be a director on 31 December 1973, as did Mrs Beck, although each purported to act as a director thereafter - Mrs Beck until her supposed resignation on 8 January 1982 and A D Weinstock up to the present time.

116 Mr Weinstock ceased to be a director on his death on 29 July 2003, assuming that his office was not lost at some earlier time because retirement under article 66 was not followed by deemed re-election under article 67 (there could never have been actual re-election because of the inability of every member to vote at a general meeting).

117 The position in relation to Mrs Weinstock is the same save that, in her case, it was supervening mental incapacity before 29 July 2003 that put an end to her tenure, assuming that it had not ended at an earlier time.

118 Helen Weinstock was not validly appointed as a director on 30 July 2003. She has therefore never been a director, even though she has acted in fact as a director continuously since her purported appointment.

119 In relation to A D Weinstock and Mrs Beck, it is relevant to record that each is recorded as having been present at meetings of the directors held in 1974, 1975, 1976, 1977, 1978 and 1979. A D Weinstock is recorded as having been present at some meetings at which there is no record of attendance by Mrs Beck. At some meetings held in the years mentioned, A D Weinstock was given authority to act for the company in certain ways.

120 The last board meeting at which Mrs Beck is recorded as present is that of 10 December 1981. She, as I have said, lodged a notice of resignation dated 8 January 1982.

121 A D Weinstock is recorded as having been present at virtually every board meeting held after the date of Mrs Beck's purported resignation. He and Helen Weinstock alone are recoded as having been present at every board meeting held after Helen Weinstock's purported appointment as a director on 30 July 2003 (the first such meeting was on 13 May 2004).

122 I mention these matters concerning A D Weinstock and Helen Weinstock in order to show that each of them in fact acted as a director from the date of appointment or purported appointment (29 June 1973 in one case and 30 July 2003 in the other) and has continued to do so up to the present. Mrs Beck likewise acted in fact as a director from the date of appointment (29 June 1973) and continued to do so until shortly before her purported resignation on 8 January 1982. Each was thus clearly a de facto director at material times. A D Weinstock and Helen Weinstock continue to be de facto directors today. It was at their instigation, for example, that LWC filed its interlocutory process in these proceedings.

The "offering" question

123 My conclusion that neither Mrs Beck nor A D Weinstock was in office once the annual general meeting of 31 December 1973 had begun (so that neither was, in terms of article 67 a director who "so retires" or a "retiring director") makes it unnecessary to decide whether either was a person "offering himself" (or herself) for re-election as referred to in article 67. The question may, however, be relevant to the s 1322(4)(a) application to which I am about to turn. For that reason, I consider it now.

124 The question whether either Mrs Beck or A D Weinstock "offered" herself or himself for re-election at the 31 December 1973 meeting is a question of fact. The only evidence available is that each was present at the meeting and that each continued, after the meeting, to act on the footing that she or he was a director.

125 The matter is illuminated by observations of Jacobs JA (with whom Holmes JA agreed) in Petsch v Kennedy [1971] 1 NSWLR 494. It is appropriate to quote at some length from the judgment (at 496):

"The answer to the question whether he should be deemed to

have been re-elected depends upon whether the condition was fulfilled that he offer himself for re-election. As I have said, there is no evidence that in any notice prior to the meeting or at the annual general meeting Mr. Kennedy expressly offered himself for re-election. If an express offer is necessary then Mr. Kennedy fails to show that he was a director. However, I am of the opinion that no express offer is necessary. The intention of art. 66 is primarily to ensure that there is no inadvertent gap in the directorate of

a company. It is not intended that an unwilling director should have the office foisted upon him simply because the company does not appoint a director in his place when he retires under the company articles. For that reason the condition is inserted that the director in question offer himself for re-election. By these words I take no more to be meant than that the director by his words or by his conduct at or prior to the meeting in question shows that he is prepared to continue in the office of director. If he does not attend the meeting and has done nothing previously to disclose a willingness to continue as director then he cannot be deemed to be re-elected under art. 66. However, if he attends the meeting and, as Mr. Kennedy did, takes the chair and remains in the chair throughout the meeting and concludes the meeting with himself apparently still chairman, if a resolution be passed which envisages that there will be directors to carry it into effect, such as the resolution for the fixing of the auditors' fees by the directors, then I think that there is considerable evidence from conduct

to show that Mr. Kennedy was offering himself for re-election. I agree with Street J. that it is a question of fact whether in the circumstances a retiring director has offered himself for re-election. I also agree that an offer can be implied. I agree that both general meetings were conducted and concluded on the basis that the directors were continuing in office. There was no suggestion that any other person could or would be a director and,

very significantly, Miss Petsch did not challenge Mr. Kennedy's capacity as a director at any point of time until after the disputed meeting."

126 Observations of the Privy Council in the advice on the appeal from the Court of Appeal should also be noted. Their Lordships said in Petsch v Kennedy [1972] UKPC 7 (BAILII):

"The facts are that at a meeting of the subscribing shareholders, who were Miss Petsch and Mr. F. H. Kennedy, held on 14 th July 1967 it was resolved that the first directors should be Mr. F. H. Kennedy, Miss Petsch and Mr. G. W. Kennedy. Mr. G. W. Kennedy never took up his qualifying share and it is common ground that he was not a director after 1968. Neither at the annual general meeting of the Company held on 30 th December 1968 nor at any subsequent general meeting was any business transacted regarding the election of directors. Miss Petsch and Mr. Kennedy acted at all times as de facto Directors. At the Annual General Meeting held on 1 st December 1969 - the last before the events in question - at which Miss Petsch and Mr. Kennedy were present, it was resolved that the Directors' report be received and adopted, and also that the Auditors be re-appointed at a fee to be fixed by the Directors . It was obviously contemplated that Miss Petsch and Mr. Kennedy not only were but would continue to be Directors for the coming year.

What was lacking was a formal offer of himself for re-election on the part of Mr. Kennedy. But in a case such as this, where only two persons had any interest in the Company, and had met together in formal general meeting, with the clear understanding that they both were and would be Directors of the Company, a formal offering by either of them of himself for re-election would be little short of a pantomime: and it would be legally unnecessary (though in hindsight it might have been desirable) for the minute to do more than record the reality of what took place rather than to translate the plain wishes of the corporators into the language of formality."

127 Even though the evidence is sparse, I would have held, having regard to the observations of the Court of Appeal and Privy Council just quoted, that each of Mrs Beck and A D Weinstock "offered" herself or himself for election as a director at the meeting of 31 December 1973. Having accepted a position on the board some six months earlier and having attended the annual general meeting, each must be taken to have had a desire to play the allotted role in the company's affairs. That, coupled with the likelihood of an understanding by each that he or she was caught by the re-election resolution (in which both apparently participated) and the fact that each afterwards functioned as a director implies, clearly enough' that the stance taken by each at the meeting was one of wishing to continue in office beyond the meeting and, to that end, to submit to such election at the meeting as might be necessary for that to happen.

128 As I have said, however, the fact that each "offered" himself or herself for election produced no consequence under article 67. This is because neither retired "at" the relevant meeting.

The application under s 1322(4)(a)

129 A D Weinstock and Helen Weinstock (and ostensibly LWC itself) seek relief under s 1322(4)(a) of the Corporations Act . The particular order they seek is described in their interlocutory process as:

"an order declaring that:

"(a) the resolution of the First Defendant made on 29 June 1973, being,

'that Tamar Beck and Amiram David Weinstock be appointed Directors and they shall hold office until the holding of the next Annual General Meeting of the Company'; and

(b) the matters referred to in paragraphs 13(c), 13(d), 14, 20 and 21 of the Points of Claim filed by the Plaintiff on 28 October 2010,

were not invalid by reason of any contravention of any provision of the Corporations Act 2001 (Cth) or the constitution of the First Defendant."

130 Paragraph (b) of this form of order makes it necessary to set out paragraphs 13(c), 13(d), 14, 20 and 21 of the points of claim (the references to "Tami" are references to Mrs Beck, the references to "Ami" are references to A D Weinstock and the references to "Helen" are references to Helen Weinstock):

"13. (c) At the AGM held on 31 December 1973 the members passed a resolution that 'any Director retiring in accordance with the provisions of the Company's Articles of Association be re-appointed';

(d) Tami and Ami did not 'retire' at that AXGM or, if they did so, did not do so 'in accordance with the Company's Articles of Association in that Tami and Ami's purported appointments as directors (if effective, which is denied) came to an end as a result of the terms of their appointment rather than retirement under Article 66.

14. Alternatively, if the resolution took effect as a resolution of members and Tami and Ami were re-elected at the AGM held on 31 December 1973 (both of which are denied);

(a) There was no resolution passed that retiring directors be re-elected;

(b) Tami and Ami did not offer themselves for re-election as directors at the AGM held on 30 December 1990;

(c) Accordingly, Tami and Ami were not deemed to have been re-elected pursuant to Article 67.

20. On or about 30 July 2003 Ami purported to pass a resolution appointing Helen as a director.

Particulars

Minutes of purported meeting of directors held on 30 July 2003.

21. The said resolution purporting to appoint Helen as director was void and of no effect by virtue of the fact that Ami is not a director of the Company as pleaded herein."

131 The form of the order sought shows (and submissions confirmed) that A D Weinstock and Helen Weinstock seek to invoke s 1322(4)(a) of the Corporations Act . I should set out s 1322(4)(a), as well as the relevant part of s 1322(6):

"(4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes:

(a) an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation;

...

and may make such consequential or ancillary orders as the Court thinks fit.

...

(6) The Court must not make an order under this section unless it is satisfied:

(a) in the case of an order referred to in paragraph (4)(a):

(i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;

(ii) that the person or persons concerned in or party to the contravention or failure acted honestly; or

(iii) that it is just and equitable that the order be made; and

...

(c) in every case--that no substantial injustice has been or is likely to be caused to any person."

132 A D Weinstock and Helen Weinstock do not call in aid s 1322(2) which is confined in its operation to proceedings under the Corporations Act and the effect of "procedural irregularity". They seek an order under s 1322(4)(a).

133 It is clear that, subject to a matter to be mentioned presently, the application advanced by A D Weinstock and Helen Weinstock is, in terms of s 1322(4)(a), made by "an interested person". A D Weinstock is an interested person as regards the question of his status as a director and the effectiveness of his 2003 actions calculated to make Helen Weinstock a director. Helen Weinstock, in turn, is an interested person in relation to her own appointment and therefore has an interest also in the ability of A D Weinstock to make that appointment. Both are interested persons as to the general question of the present composition of the board of directors of LWC.

134 The application is an application for an order declaring that each of seven things is "not invalid by reason of any contravention of" any provision of the present Corporations Act or LWC's constitution. Since the Corporations Act was not in force at the time of any of the relevant events except those concerning installation of Helen Weinstock as a director in 2003, the application can be regarded as one concerned, except as to that 2003 matter, only with "contravention of . . . a provision of" LWC's constitution.

135 The things that A D Weinstock and Helen Weinstock wish to see the court declare "not invalid" by reason of a relevant "contravention" are:

(a) the 29 June 1973 resolution for the appointment of Mrs Beck and A D Weinstock as directors (paragraph (a) of the prayer for relief in the interlocutory process);

(b) the resolution at the 31 December 1973 annual general meeting purporting to re-appoint any director retiring in accordance with the articles (paragraph 13(c) of the points of claim);

(c) the expiry of the terms of office of Mrs Beck and A D Weinstock as a consequence of their having been appointed "only until" the 31 December 1973 annual general meeting (paragraph 13(d) of the points of claim);

(d) the absence of any resolution of the 31 December 1973 annual general meeting that retiring directors be re-elected (paragraph 14(a) of the points of claim);

(e) the absence of any "offering" by Mrs Beck and A D Weinstock of themselves for re-election at the 31 December 1973 annual general meeting (paragraph 14(b) of the points of claim);

(f) the failure of the "default" part of article 67 (beginning "in default") to cause Mrs Beck and A D Weinstock to be deemed to have been re-elected at the 31 December 1973 annual general meeting (paragraph 14(c) of the points of claim); and

(g) the act of A D Weinstock in July 2003 by which he, acting alone, purported to appoint Helen Weinstock as a director (paragraphs 20 and 21 of the points of claim).

136 It is necessary to consider whether and, if so, how an order under s 1322(4)(a) might sensibly be formulated in relation to each of these matters - in other words, whether, leaving to one side the merits of the case, the circumstances are such as to accommodate the making of a validating order under the section.

Items (a), (b), (d) and (e)

137 It can be said at once that no order under s 1322(4)(a) will be made in relation to either item (a), item (b), item (d) or item (e) above.

138 As to item (a), the conclusion already stated in relation to the 29 June 1973 appointment of Mrs Beck and A D Weinstock as directors is that it was a valid appointment under article 69 causing them to hold office until the next annual general meeting. There is accordingly, in that respect, nothing requiring validation.

139 As to items (b) and (d), the conclusion that neither Mrs Beck nor A D Weinstock was, in terms of article 67, a director who "so retires" or a "retiring director" means that the purported resolution for re-appointment at the 31 December 1973 meeting had nothing to do with them and is irrelevant to the question whether either of them remained in office beyond that date. Accordingly, neither A D Weinstock (nor, through him, Helen Weinstock) is an "interested person" as regards that matter. This is particularly the case since, to the extent that the issue of who was a "retiring director" has any bearing on the question of the composition of the board after 31 December 1973, it goes to the positions of Mr Weinstock and Mrs Weinstock only and they are obviously not directors today.

140 As to item (e), my finding that Mrs Beck and A D Weinstock "offered" themselves for re-election at the 31 December 1973 meeting means that there is, in that respect, nothing in need of validation.

141 Remaining for consideration under s 1322(4)(a), therefore, are items (c), (f) and (g) at paragraph [135] above.

Item (c)

142 In relation to item (c), the first step is to identify the "provision of the constitution" of LWC "by reason of" the "contravention" of which the matter in question is (or, perhaps, may be) "invalid". That process of identification is necessary since the order under s 1322(4)(a) is one declaring a matter to be "not invalid by reason of" a "contravention", so that it is the invalidating effect of the "contravention" that is displaced or reversed by the order. The search for the relevant provision and the contravention of it must be made in relation to the "act, matter or thing purporting to have been done" or the "proceeding purporting to have been instituted or taken" the invalidity of which it is sought to cure.

143 Item (c) is concerned with the operation of article 69, according to its terms, to fix the point identified by the words "only until the next following annual general meeting" as the expiry of the tenure arising from appointment as a director under that article. The relevant "act, matter or thing" is elusive, as is the relevant "proceeding". It is either the appointment itself or its expiry. But neither of those is called into question, as to its validity, by any "contravention" of the constitution. It is true that "contravention", in this context, has a wide meaning and has been held to extend beyond failure to obey some positive command and to include failure to execute some voluntary step in a conforming way: see, for example, NRMA Ltd v Gould (1995) 18 ACSR 290 at 293; Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd [2001] NSWCA 427; (2001) 166 FLR 144 at [74]; Re Centennial Coal Co Ltd [2006] NSWSC 62; (2006) 226 ALR 341 at [15]; Gangemi v Osborne [2009] VSCA 297 at [67]. In Sheahan v Londish (above), Young JA observed at [160] that "contravention" of a provision entails not just infringing the provision but also failing to take advantage of it. Lindgren AJA expressed a similar opinion at [234] - [235].

144 But even allowing for the broad meaning of "contravention", I confess myself unable to identify a "contravention" in relation to item (c) at paragraph [135] above. No provision of the constitution was disobeyed. An attempt to take some course allowed by the constitution did not miscarry because of failure to take a step contemplated by the constitution. Mr Weinstock and Mrs Weinstock made appointments under article 69. The appointments took effect in accordance with that article and continued until the end point fixed by the article. There was no "contravention" when, at that end point, the appointments expired.

145 It follows from what I have just said that there was not, in relation to the item (c) matter, any invalidity capable of being remedied pursuant to s 1322(4)(a) or otherwise.

Item (f)

146 I consider next item (f) at paragraph [135] above. Again, I must say that I can see no "contravention" of the constitution, even allowing for the broad meaning of "contravention" appropriate to the context.

147 The constitution operated in such a way that Mrs Beck and A D Weinstock were not caught by any deeming that might have been effected by the "default" part of article 67 on 31 December 1973. This is because neither was a director "who so retires" or a "retiring director". That conclusion and its consequences are in no sense a product of anyone's failure to observe or abide by a provision of the constitution; nor do they involve any departure from the terms of the constitution. The conclusion and its consequences arise simply from the operation of the constitution upon and in relation to the particular factual situation.

Item (g)

148 Remaining for consideration in relation to the s 1322(4)(a) claim, therefore, is item (g) at paragraph [135] above.

149 The true characterisation of the events relevant to that matter is that a person who was not validly in office as the company's sole extant director purported to do something that, if it were to be validly and regularly done, had to be done by the person who was, at the time, validly in office as the company's sole extant director. This, unlike the other items considered, was a case of positive action in relation to the company and an attempt, by means of that positive action, to bring about a particular result for and within the company, namely, the appointment of Helen Weinstock as a director.

150 There was, in my view, a "contravention" of the constitution in that the person who purported to make the appointment allowed by the constitution did not formally and regularly occupy the position of director necessary to make the appointment a valid appointment. It cannot be said that there was no action or that the person acting was a mere interloper. A D Weinstock was not only a member holding one "C" share but also a former director whose appointment, validly made, had expired and who had then functioned as a de facto director for some thirty years. Those connections with the company did not make him capable of acting under the combination of article 87 and article 69 under which he ostensibly acted.

151 The conclusion that there was, in these circumstances, a "contravention" of the constitution is confirmed by the following passage in the judgment of Lehane J in Nece Pty Ltd v Ritek Incorporation (1997) 24 ACSR 38

". . . [C]ases such as North Sydney Brick & Tile [ North Sydney Brick & Tile Co Ltd v Darvall (1989) 17 NSWLR 327 ] and Omega Estates [ Omega Estates Pty Ltd v Ganke (1962) 80 WN (NSW) 1218] proceed on the basis that if something is done which has not been properly authorised because, for example, appropriate resolutions have not been passed or because there is in office no validly elected board of directors, the doing of it without authority may be regarded as a contravention, for these purposes, of the articles of association."

152 Acceptance here of the proposition that something not properly authorised "because there is in office no validly elected board of directors" is a "contravention" of the constitution is of particular significance. The absence of the formal status of sole extant director that would have enabled A D Weinstock to act as he purported to act on 30 July 2003 is of the same quality as non-existence of a validly elected board of directors and therefore within the relevant concept of "contravention".

153 The particular contravention - entailing, as it did, absence of necessary status and authority - was, moreover, a matter of substance rather than of form or procedure. Its effect was not that there was a defective appointment but that there no appointment at all. That raises the question whether the remedial force of s 1322(4) is available in a case of nullity.

154 The section itself readily provides the answer. The court is given power to declare "not invalid" that which is in truth "invalid", so that a case of nullity is clearly covered. This is confirmed by the decision of Gillard J in Jordan v Avram (1997) 23 ACSR 153 the facts in which were in some ways similar to those of the present case.

155 In Jordan v Avram , the board of directors had been reduced by death and resignation to one. Arthur Avram was the only director. Peter Jordan wrote a letter to the company's external accountant referring to an agreement compromising proceedings between the Jordan family and the Avram family who were, in a beneficial (although not a direct) sense, the shareholders of the company. In his letter, Peter Jordan nominated himself and another Jordan family member to replace Jordan directors who had died or resigned and asked the accountant to make "the necessary alterations which will bring the company's records up to date". Notification of appointment of two new directors was later lodged. Arthur Avram at no time took issue with the appointment of the two Jordan family members as directors. A few days after the purported appointments he participated in a meeting of directors at which they too were present.

156 Gillard J's assessment of the effect of what had been done in relation to the purported appointment of the two new directors was as follows (at 156):

"The purported appointment does not conform with the articles of association.

The purported appointment by notice pursuant to the agreement of 7 April 1997 did not in any way enliven the procedures laid down in the articles. Accordingly, the purported appointment was not performed in accordance with the constitution of the corporation and was in contravention of it."

157 His Honour then stated his view of the applicability of s 1322(4)(a) to the circumstances before him (at 157):

"In my opinion s 1322(4)(a) is not confined to procedural irregularities. It covers irregularities, errors or mistakes of a general nature and is expressed in very wide language. It clearly gives power to declare an act which is not in accordance with the articles of association, not invalid. . . . There are different approaches to what might be described as procedural irregularities and other irregularities. In my view the act under consideration, that is, the purported appointment, is clearly capable of falling within the wide words of s 1322(4)(a) and if thought appropriate the court could declare the appointment not invalid. I am satisfied the court has the jurisdiction, in the present circumstances."

Section 1322(4)(a) is available in relation to item (g)

158 On that basis, I am satisfied that the act of A D Weinstock by which he ostensibly appointed Helen Weinstock as a director on 30 July 2003 was an act purporting to have been done in relation to LWC which is invalid by reason of a contravention of the company's constitution.

159 The discretionary power of the court under s 1322(4)(a) is therefore exercisable in relation to that act if s 1322(6) does prevent its exercise.

Whether s 1322(6)(a) precludes a s 1322(4)(a) order

160 Section 1322(6) is set out at paragraph [131] above. Section 1322(6)(a) says that the court "must not" make an order under s 1322(4)(a) unless it is satisfied as to one of the three matters to which s 1322(6)(a) refers, while s 1322(6)(c) says that the court "must not" make such an order unless it is satisfied that no substantial injustice has been or is likely to be caused to any person. Even if the court is satisfied as to these and thereby freed from the s 1322(6) prohibition, it retains discretion whether or not to make a validating order.

161 The questions to which s 1322(6)(a) directs the court's attention are:

(a) whether the act, matter or thing (or the proceeding) in question is "essentially of a procedural nature" (s 1322(6)(a)(i));

(b) whether the person or persons concerned in or party to the contravention or failure acted honestly (s 1322(6)(a)(ii)); and

(c) whether it is just and equitable that the order be mad e (s 1322(6)(a)(iii)) .

162 The prohibition imposed on the court by s 1322(6) does not operate if the court is affirmatively satisfied as to any one of these three s 1322(6)(a) matters, as well as the s 1322(6)(c) matter. That the s 1322(6)(a) barrier is removed by a positive finding on any one of the three matters in (i) to (iii), regardless of any view that might be formed on the other two, was confirmed in Sheahan v Londish (above) at [160] by reference to cases including Re MLC Ltd [2006] FCA 1357; (2006) 60 ACSR 187. The matter was put thus by French J in Re Ausam Resources Ltd [2004] FCA 823 at [19]:

"The conditions referred to in s 1322( 6) have been treated as disjunctive by Barrett J in a decision which he made which is referred to in the submissions. That was Re Continental Pacific Insurance Co [2002] NSWSC 789 and I am prepared to accept that that construction is a correct construction and that notwithstanding that the act, matter or thing is not necessarily of a procedural nature it may be validated when the person or persons concerned in or party to the contravention or failure have acted honestly or it is just and equitable that the order be made."

163 In relation to the first of the three s 1322(6)(a) matters, I cannot be satisfied that the matter at hand is "essentially of a procedural nature" (s 1322(6)(a)(i)). As I have said, the purported appointment of Helen Weinstock by a de facto director having no formal power to appoint is a matter of substance going beyond mere procedure or form.

164 As to s 1322(6)(a)(ii), it has not been suggested that A D Weinstock, as the person "concerned in or party to the contravention", acted dishonestly. That negative conclusion is, however, insufficient for the purposes of s 1322(6)(a)(ii). It must be affirmatively proved that the person in question acted honestly: Mentha v Colorbus Pty Ltd [2004] VSC 486: (2004) 51 ACSR 677 at [24]. There is, in the present case, no evidence upon which to base any such positive finding of honesty.

165 That leaves for consideration the question posed by s 1322(6)(a)(iii), that is, whether it is "just and equitable" that a validating order be made.

166 The circumstances on 30 July 2003, as A D Weinstock must have seen them, were that

(a) his parents had recently ceased to be directors of the company (his father through death on 29 July 2003 and his mother through mental infirmity);

(b) his sister, who had been appointed a director when he was himself appointed some thirty years earlier, had lodged her resignation on 8 January 1982 and was no longer a director;

(c) he was left as the sole director, having acted as a director continuously and without challenge from 1973;

(d) the company needed another director, since two was the minimum allowed by article 65 and the quorum prescribed by article 86; and

(e) his wife would be a suitable director of a family company.

167 There is and could be no suggestion that, for someone in A D Weinstock's position who did not know of the various technical and legal deficiencies discussed in this judgment, it was otherwise than perfectly rational and reasonable to act as he did in the belief that his action was effective to install his wife as the second director of the family company. Furthermore, that rational and reasonable action stood unchallenged until the commencement of these proceedings more than seven years later. During that period, Mrs Beck initiated other proceedings (referred to at paragraph [10] above) and, as will be seen presently (paragraph [212] below), those proceedings called into question the purported redemption of shares but not on any basis going to the capacity of A D Weinstock and Helen Weinstock to act as directors in the matter of redemption. Neither Mrs Beck nor any other relevant person sought to question the purported appointment of Helen Weinstock - itself a rational and reasonable response to the situation existing when it was purportedly made - for a period of seven years; and this was despite attempts by Mrs Beck during that period to challenge other aspects of proceedings within LWC.

168 The question of what is "just and equitable" is a question of fact to be answered by reference to the surrounding circumstances: Re Bleriot Manufacturing Aircraft Co (1916) 32 TLR 253 at 255 . The context that I have just described makes it just and equitable, in terms of s 1322(6)(a)(iii), that the well-established de facto position of Helen Weinstock as a director should be validated by an order under s 1322(4)(a) - unless substantial injustice has been caused or is likely to be caused to any person. The absence of such injustice is, in terms of s 1322(6)(c), something about which the court must be satisfied in order to allow it to make a s 1322(4)(a) order; and unless the court were so satisfied, it is unlikely that it could come to a positive conclusion on the s 1322(6)(a)(iii) matter: Re The Chinese Cultural Club Ltd [ 2004] NSWSC 432; (2003) 83 FLR 33 at [23].

169 I turn therefore to s 1322(6)(c). The question it poses relates to the impact of the defective process itself: did "substantial injustice" arise from the purported appointment of Helen Weinstock as a director on 30 July 2004?

170 It is not permissible to inquire into prejudice that might flow from things that could or might be done as a consequence of Helen Weinstock's appointment. The question is whether "substantial injustice" arose from the circumstance that she was purportedly appointed a director, not whether "substantial injustice" arose more remotely from what she did or could do in exercise of the powers thereby obtained: Re Broadway Motors Holdings Pty Ltd (1986) 6 NSWLR 45 at 58; Re Pembury Pty Ltd [1993] 1 QdR 125 at 127; Poliwka v Heven Holdings Pty Ltd (1992) 7 ACSR 85 at 97-98; Mamouney v Soliman (1992) 9 ACSR 63 at 71; Sutherland v Robert Bosch (Aust) Pty Ltd [2000] NSWSC 32; (2000) 33 ACSR 680 at 690; Twin v Deputy Commissioner of Taxation [2003] QSC 329; [2004] 1 Qd R 450 at 457-458.

171 No basis has been suggested on which Mrs Beck or anyone else connected with LWC - or indeed the company itself - could be said to be prejudiced by the presence of Helen Weinstock as a director. There is no suggestion that she is an unsuitable person to be a director. And even if, contrary to what I have just said about remoter matters, it were permissible to have regard to what Helen Weinstock could do as a director (or has done, to this point, as a de facto director of more than years standing), there is not and, on the material before me, could not be any basis for concluding that prejudice has accrued or will accrue to anyone from her actions in the performance of her functions of a director. The history of family litigation in recent years shows that there is mutual animosity between Mrs Beck and her brother A D Weinstock and that Helen Weinstock is probably bound up in this. But that, for present purposes, is beside the point.

172 Section 1322(6) does not preclude the making of an order under s 1322(4)(a) in relation to item (g) at paragraph [135] above.

Decision on the s 1322(4)(a) application

173 Helen Weinstock has acted in the office of director of LWC continuously for more than seven years. She has done so on the apparent understanding that her husband is also a director, he having acted in that office for more than 37 years.

174 The true legal position is that A D Weinstock, although previously validly in office, was not a director when he purported to appoint Helen Weinstock. Had he then been a duly appointed director rather than a person in fact acting in the office of director without due appointment, Helen Weinstock's appointment would have been valid.

175 The matters that have resulted in the stated conclusions on the s 1322(4)(a)(iii) and s 1322(6)(c) aspects make it appropriate to exercise the discretion to make an order under s 1322(4)(a) validating the act or proceeding of 30 July 2003 by which A D Weinstock purported to appoint Helen Weinstock as a director of LWC.

176 That validating order will have no curative effect upon A D Weinstock's directorship. But it will mean, first, that Helen Weinstock's status is that she was validly appointed as a director on 30 July 2003 under a combination of article 87 and article 69 and, second, that, since the limitation on tenure in article 69 ("only until the next following annual general meeting") has been devoid of content since 1982 (see paragraph [83] above) or, at the latest, since 1995 (see paragraph [84] above), Helen Weinstock's validated appointment is not subject to any time limit under article 69 and will be a continuing appointment.

Returning to the central issue

177 Because, as just stated, the s 1322(4)(a) order will produce the result that Helen Weinstock is validly in office as a director, the situation will not in truth be one in which there is an irremediable absence of workable governance mechanisms within LWC.

178 On the contrary, Helen Weinstock will be able to act under the combination of article 87 and article 69 to appoint an additional director to bring the number of directors in office up to the quorum of two (which is also the permitted minimum). Indeed, she will no doubt consider herself duty-bound to do so in order that a functioning board may exist. Any director so appointed by Helen Weinstock will hold office free from the limitation on tenure stated in article 69.

179 Helen Weinstock and the new appointee will be able to exercise all the powers of the board of directors, including the power to manage the business of LWC and to exercise all the powers of the company that are not reserved to the company in general meeting (article 75).

180 Among the powers thus at the disposal of the board of directors will be the power to issue new shares (article 4), including shares in classes "E" to "N" which carry voting rights. I say nothing about whether it would or might be appropriate for that power to be exercised. The point is that there exists (or, rather, can be brought into existence) a means of changing the present situation in which no member is entitled to vote at a general meeting of the company.

181 These conclusions are sufficient to dispose of the application for an order that LWC be wound up on the just and equitable ground. In short, the making of the order under s 1322(4)(a) in relation to the purported appointment of Helen Weinstock's as a director will mean that the company is not affected by incurable paralysis making it impossible for it to function. Rather, means will be at hand to restore a validly appointed and fully functioning board of directors.

182 Having regard to the basis on which the winding up application is advanced, it is unnecessary to come to any view about the likelihood that voting members will be introduced. The company will be able to function through its reconstituted board of directors whether or not that happens, although it can be said, in an abstract sense, that elements of ideal corporate governance will be lacking until there exists a body of voting shareholders capable of exercising the power of a general meeting to remove directors (article 70) and to increase or reduce the number of directors (article 68). Until such a body of voting shareholders exists, it will not be possible for the directors to be remunerated (article 71 and Re George Newman & Co Ltd [1895] 1 Ch 674 at 686).

The outcome of the proceedings

183 There will be an order under s 1322(4)(a) validating the purported appointment of Helen Weinstock as a director on 30 July 2003. I am inclined to think that the order should be to the following effect:

"Declare that the proceeding purporting to have been taken on 30 July 2003 by which Amiram David Weinstock purported to act as a director of L W Weinstock Furniture Consolidated (Aust) Pty Ltd and in that capacity to appoint Helen Weinstock to be a director of that company is not invalid by reason of the contravention of the provision of the constitution of that company consisting of non-observance of the requirement that such proceeding be taken only by a person in office as a director by virtue of valid appointment or election as such."

184 I shall, however, invite the parties to submit an agreed form of the order or, in default of agreement, to make submissions on the matter.

185 Beyond that, the only order that could be made is the order sought in item 5 of the originating process:

"A declaration that none of the issued shares of the first defendant have voting rights."

186 It is desirable, however, that I hear submissions on the question whether, in the circumstances, there is real utility in the making of such a declaration.

187 The claims in items 1 to 4, 6 and 7 of the originating process will be dismissed.

188 As to costs, I can, at this stage, see no reason why the plaintiff should not be ordered to pay the costs of the defendants. I shall hear submissions on the subject should a party so wish.

Other matters

189 This outcome makes it unnecessary for me to decide certain of the questions that were the subject of submissions. It is desirable, however, that I express my conclusions on some of those questions in case the matter is taken further.

190 I will address:

(a) the question (relevant to the undoubted discretion under s 467(1)(a) to withhold a winding up order even where grounds for making the order are established) whether, upon any winding up of LWC, any surplus remaining after repayment of capital paid on "A" class, "C" class and "D" class shares would pass to the Crown as bona vacantia (see paragraph [9]) above;

(b) the question whether an Anshun estoppel would have operated operate to defeat Mrs Beck's claim for a winding up order had she made out a case for that relief (see paragraph [10] above); and

(c) the question (also noted at paragraph [9] above) whether delay or acquiescence on the part of Mrs Beck would have resulted in the withholding of a winding up order even if grounds for winding up had been established.

Surplus on any winding up - bona vacantia ?

191 The shares now on issue are confined to "A" shares, "C" shares and perhaps "D" shares.

192 By article 3(2)(c)(i), the "A" shares "shall rank . . . in a winding up both as regards return of capital and dividend accrued up to the commencement of the winding up and not declared . . . in priority to all other shares in the Company". Article 3(2)(d) then says that the "A" shares "shall not carry the right to any further participation in surplus assets or profits".

193 By article 3(4)(b), the "C" shares "shall rank as regards return of capital in a winding up" next after any issued "A" shares and the "B" shares "and subject thereto (but pari passu with any ['D' shares]) in priority to all other shares in the capital of the Company". By virtue of article 3(4)(f), the "C" shares "shall not carry the right to any further participation in surplus profits or assets".

194 By article 3(5)(b), the "D" shares "shall rank as regards return of capital in a winding up" next after the "A" shares and the "B" shares "and subject thereto (pari passu with any ['C' shares]) in priority to all other shares in the capital of the Company". Article 3(5)(f) states that the "D" shares "shall not carry the right to any further participation in surplus profits or assets".

195 There are also analogous provisions with respect to the "B" shares, none of which have been issued. In relation to the several classes of ordinary shares ("E" class to "N" class), nothing is said in the specific provisions applying to those shares about rights on a winding up, whether in relation to return of capital, participation in surplus assets or otherwise.

196 The only provision that says anything about distribution by a liquidator is article 115 which allows the liquidator, with the sanction of a special resolution, to "divide amongst the members in kind the whole or any part of the assets of the Company", to ascribe a fair value to any such property "for that purpose" and to "determine how the division shall be carried out as between members or different classes of members". This, at least, contemplates that, in a winding up, there will be a division of assets "amongst the members".

197 If accrued but unpaid dividends are left to one side, the effect of the provisions in article 3 to which I have referred is that each "A" share, each "C" share and any "D" share enjoys a certain priority as regards "return of capital in a winding up" and does not "carry the right to any further participation in surplus assets or profits". The articles thus do not give to a holder of "A" shares, "C" shares or "D" shares does not have any right to participate in surplus assets remaining in a liquidator's hands after the capital paid up on the shares has been repaid.

198 Nor, having regard to what the articles actually say, however, would any holder of ordinary shares of any class have, by virtue of the holding of those shares, any right to participate in those surplus assets, although the fact that a priority is conferred in relation to certain shares as regards "return of capital" implies that other shares are entitled also to "return of capital" albeit on a deferred or subordinated basis by comparison with the shares given the priority. The position is thus that a right to have capital returned in a winding up is, in relation to all shares, recognised expressly or by implication and that, as regards participation in surplus assets after capital has been returned, there is, in relation to certain shares, an explicit statement that the shares do not carry any right to participate and, in relation to all other shares, no statement either that they carry or that they do not carry a right to paticipate.

199 It is useful to consider a hypothetical situation. Assume that the company is wound up, that "A" shares, "C" shares, "D" shares and "N" shares are the only shares on issue and that a surplus remains after creditors have been paid in full. The holders of the "A" shares, "C" shares and "D" shares would assert a right, by virtue of the constitution, to have the surplus applied first in repaying the capital paid up on their shares, with the relativities among them as stated in the provisions of the constitution I have mentioned. The holders of the "N" shares would then assert a right, by virtue of the constitution, to prevent any part of the remaining surplus being paid to the holders of the "A" shares, "C" shares and "D" shares. But no member could, at that point, point to a positive right to enjoyment of that remaining surplus. The holders of the "N" shares would, however, no doubt assert an implied right to such enjoyment to the exclusion of the holders of the "A" shares, "C" shares and "D" shares. They would argue that the implication was a necessary corollary of a combination of, first, the explicit statement that the holders of the "A" shares, "C" shares and "D" shares were not entitled to participate in surplus assets beyond return of capital paid up and, second, the absence otherwise of any statement as to the destination of surplus.

200 The void thus caused could be filled in one of two ways: first, by implying a right on the part of the holders of the "N" shares to the whole of the surplus not absorbed by the explicitly stated rights of the holders of the "A", "C" and "D" shares to a return of capital out of surplus; or, second, by adopting a construction under which surplus was to be applied in satisfying those explicitly stated rights of the holders of the "A", "C" and "D" shares and, as to any balance, was not to be applied at all and, as far as the constitution was concerned, was simply to be left undisposed of.

201 The court would, in my opinion, adopt the second of these approaches only if it found in the constitution a very clear expression of intention that the balance of surplus was not in any circumstances to pass to any member: see the observation of Vaisey J in Re Merchant Navy Supply Association Ltd [1947] 1 All ER 894 at 895 that, had it been the intention of those forming the company that no member should enjoy surplus in a winding up, "they should have put in an express provision to deal with the surplus in a winding up", such as the usual provision in the case of charitable and like companies to the effect that surplus is to be transferred to some entity with objects like those of the company (see also Re Yanollee Pty Ltd [2006] NSWSC 705; (2006) 24 ACLC 1087 at [29]).

202 Thus, in the case postulated at paragraph [199] above, it seems to me that the court would conclude that, despite the silence regarding rights of the holders of "N" shares in respect of surplus in a winding up, the constitution reflected, by implication, an intention that they, as the holders of shares in the company's capital, should have such of the surplus as remained after fulfilment of the specific rights in that regard of the holders of the "A", "C" and "D" shares.

203 The statutory directive to be obeyed by the liquidator regarding surplus in a court-ordered winding up is in s 485(2) of the Corporations Act :

"The Court must adjust the rights of the contributories among themselves and distribute any surplus among the persons entitled to it."

204 The Act itself does not seek to prescribe the entitlements to which s 485(2) refers. To the extent that Re Merchant Navy Supply Association Ltd , (above) and Illawarra Suburbs Lawn Tennis Association Ltd v Commissioner of Land Tax (1985) 16 ATR 664, may appear to hold otherwise, those declarations are, in my respectful opinion, not supportable. The entitlements come not from the legislation but from a combination of the holding of shares in the company's capital and the provisions of the constitution. This was made clear by Wright J in Re Driffield Gas Light Company [1898] 1 Ch 451 at p.455 :

"The winding-up sections (s.109 and s.133) of the Companies Act , 1862, do not of themselves supply any rule for the mode of adjusting loss of capital or of distributing surplus, but only supply the necessary powers for giving effect to the rights and interests of the parties."

205 Wright J continued:

"Those rights in the case of a company constituted under the Companies Act must, in the absence of any provision in the memorandum or articles of association, be ascertained, in the view of one of the noble and learned Lords who took part in the decision of Birch v Cropper (1889) 14 App Cas 525, by recourse to general principles of equity; in the view of another of them, by reference to the principles and provisions of the Companies Acts . But in either view the result is the same, namely, that the capital account must first be equalized, and then there remains no ground for appropriating the balance in any other way than according to the nominal amount of the shares in the capital."

206 The approach taken by all members of the House of Lords in Birch v Cropper (1889) 14 App Cas 525 was that shareholders are prima facie "entitled", in the sense now reflected in s 485(2), in proportion to their shareholdings, measured by the nominal amounts of shares (since the abolition of par value referred to at paragraph [13] above, the proportions are measured by numbers of shares: Re Yanollee Pty Ltd (above). The basis of proportionate participation according to shareholdings may, however, be altered by the constitution. These matters were recently summarised by Crawford CJ in Crawford v De Kantzow [2011] TASSC 9 as follows (at [48]):

"The general principle is that a surplus upon winding up belongs to the members according to their proportionate interests in the share capital, measured according to the nominal amount - subject, however, to recognition of any preferred or superior claims created by the company's constitution. Birch v Cropper (1889) 14 App Cas 525 at 543; Re Driffield Gas Light Company [1898] 1 Ch 451 at 455. That general principle applies equally to the holders of all classes of shares, although its application is subject to the provisions of the company's constitution and the terms on which the respective shares have been issued by the company. The right of a member in accordance with the principle is a legal right that attaches to the shareholding itself. Archibald Howie Pty Ltd v Cmr of Stamp Duties (NSW) (1948) 77 CLR 143 at 153; Re BM2008 Pty Ltd (in liq) [2010] VSC 337 at para [11]. Since the abolition of the concept of par value and nominal amount of shares by the Company Law Review Act 1998 (Cth), the reference to nominal amount in the general principle is now taken to mean the sum of all amounts paid to the company at any time for the share, not including any premium. Re Yanollee Pty Ltd (in liq) (2006) 24 ACLC 1087 ; [2006] NSWSC 705 at para [13]".

207 In the hypothetical case outlined at paragraph [199] above, proportionate participation according to shareholdings would be modified by the constitution so that the holders of the "A" shares, "C" shares and "D" shares received priority distributions of surplus by way of return of the capital paid up on their shares and the balance of surplus thereafter remaining was enjoyed by the holders of "N" class shares alone. Proportionate participation according to shareholdings would, in those circumstances, be overtaken by the terms of the constitution making it subject to the superior (in terms of ranking) but limited (in terms of amount) rights of participation in surplus expressly created by the constitution in relation to the "A" shares, "C" shares and "D" shares. The holders of the "N" shares, as the only other members, would enjoy proportionate sharing in the balance available after the superior but limited rights had been satisfied.

208 In fact, of course, the only shares on issue are "A" shares, "C" shares and perhaps "D" shares. All those shares are affected by a provision of the constitution which, after conferring a preferential right to return of capital, says that the shares in question do not carry any right to further participation in surplus assets. On the view I consider to be correct, however, that is a provision that aims to preserve the rights of other members to participation in proportion to shareholdings and to ensure that, after the priority rights of the holders of "A" shares, "C" shares and "D" shares to return of paid up capital have been satisfied, those holders are required to stand back and to cede to other members (according to their proportionate shareholdings) exclusive participation in the remaining surplus.

209 If, when the time for distribution of surplus arrives, there are no such other members - that is, there are no members who are not affected by a provision limiting participation in surplus to return of paid up capital - there are no beneficiaries of the requirement that the holders of "A" shares, "C" shares and "D" shares stand back and cede exclusive participation in remaining surplus. The requirement to stand back and cede to others exclusive participation therefore does not operate, with the result that the rights of the holders of "A" shares, "C" shares and "D" shares to proportionate participation in the balance of surplus according to shareholdings is not denied. The denial operates only in favour of members not affected by the denial.

210 On this basis, any winding up at a time when there were on issue either "A" shares and "C" shares or "A" shares, "C" shares and "D" shares (and no other shares) would be on the basis that surplus assets remaining after payment of all debts and expenses payable in the winding up were to be applied, first, in satisfying the preferred rights of the holders of the outstanding shares with respect to return of capital paid up (according to the respective rankings of the classes) and, thereafter, equally among all members in proportion to the numbers of the shares held by them. There would be no basis on which it could be said that the balance should be transferred to the Crown as bona vacantia .

The Anshun question

211 It is necessary, at this point, to say more about the proceedings commenced in 2007 (see paragraph [10] above).

212 Those proceedings raised a large number of issues concerning family dealings and arrangements over a long period, including matters relevant to a number of family companies and trusts, the estates of Mr Weinstock and Mrs Weinstock and the use of a power of attorney. As they touched upon LWC and its affairs, the 2007 proceedings seem to have raised only the issues already briefly mentioned, that is, issues concerning the purported redemption of shares held by Mrs Weinstock and the question whether they were truly redeemable preference shares. The only claims for relief concerning LWC were claims for a declaration that the shares in question were not preference shares and were accordingly not able to be redeemed by the company, a declaration that the purported redemption of the shares was void and of no effect, an order rectifying the register of members of LWC by reinstating the supposedly redeemed shares and an order for "compensation". All these claims were based on the characteristics of the shares themselves.

213 The principle associated with Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 is, in essence, that there cannot be raised in later litigation matters that should have been put in issue in earlier proceedings between the same parties. The test is whether the matter sought to be litigated subsequently is "so relevant" to the matters litigated previously that it was "unreasonable" not to raise it in the earlier proceeding: Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245 at [4] per Allsop P, at [52] per Giles JA.

214 I am not satisfied that the question whether LWC should be wound up was so relevant to the matters in issue with respect to that company in the 2007 proceeding that it was unreasonable for Mrs Beck not to have raised it there. Her objective regarding LWC in the 2007 case was to establish that the relevant shares had not been validly redeemed and that the register should be rectified so as to reflect their continuing existence. She succeeded in that part of her case and thus produced certainty as to the state of the company's share capital and the way in which it is held (or, at least, such certainty as exists in the context of a pending appeal from Hamilton AJ's decision). The attainment of that certainty may, in my view, be regarded as a legitimate preliminary to any decision whether or not to institute winding up proceedings in relation to the company.

215 I am not persuaded that Mrs Beck should, in the relevant sense, have put the question of winding up of LWC in issue in the 2007 proceedings. I therefore do not accept the defendants' submission that Anshun principles would have precluded the making of a winding up order in these proceedings.

Delay or acquiescence

216 The circumstances on which Mrs Beck relied in making her winding up application have existed for many years. This is not a case in which the application has been precipitated by some recent event. Nor is it a case in which Mrs Beck has only just become aware of relevant facts. The relevant circumstances prevailing today have existed in their present form since 2003. Mrs Beck could have commenced the proceeding at any time after her parents ceased to be directors and the supposed vacuum and paralysis on which she relies arose.

217 Mrs Beck did not act at any such earlier time. In 2007 she initiated litigation on a wide front. Her claim that the purported redemption of "C" class shares was invalid was put solely on the basis that those shares were not redeemable preference shares and could not lawfully be redeemed. The supposed redemption flowed from a purported resolution recorded as having been passed at a meeting of directors on 21 July 2004 by A D Weinstock and Helen Weinstock. Mrs Beck did not take issue with their ability to function as directors.

218 If, in these present proceedings, the court had found the legal position to be such that the constitutional and administrative vacuum postulated by Mrs Beck existed, her past actions and attitudes would have been relevant to the ultimate question whether it was just and equitable that the company be wound up. The question would not have been as to the availability of equitable defences based on delay or acquiescence. Rather, Mrs Beck's acceptance over a long period of the ability of A D Weinstock and Helen Weinstock to function as directors would have been one of the factors to be weighed in deciding whether the justice and equity of the case required the making of a winding up order.

219 Had complete and irremediable corporate paralysis been established, the circumstance that the company simply could not function would have caused a winding up order to be made. Delay or acquiescence on Mrs Beck's part, although a relevant consideration, would not have stood in the way of the practically unavoidable step of creating, through a winding up order, the only available remedy for the complete and irremediable corporate paralysis that would otherwise have continued indefinitely.

Conclusion

220 The outcome of the proceedings is as stated at paragraphs [183] to [188] above. I will make directions for the settling of orders and for any submissions on costs.

221 If, contrary to my findings, Mrs Beck had succeeded in establishing a case for winding up on the just and equitable ground, none of the matters discussed at paragraphs [191] to [219] would have caused the court to withhold a winding up order in the exercise of its discretion.

*********

 

APPENDIX

 

Article 3:

(1)          The Capital of the Company is Twenty thousand dollars ($20,000.00) divided into twenty thousand (20,000) shares of One dollar ($1.00) each including 5 ‘A’ 5% Convertible Preference Shares, 5 ‘B’ Redeemable Preference Shares, 10 ‘C’ Redeemable  Preference Shares,  10 ‘D’ Redeemable Preference Shares, 1,997 ‘E’ Class Ordinary Shares, 1,997 ‘F’ Class Ordinary Shares, 1,997 ‘G’ Class Ordinary Shares, 1,997 ‘H’ Class Ordinary Shares, 1,997 ‘I’ Class Ordinary Shares, 1,997 ‘J’ Class Ordinary Shares, 1,997 ‘K’ Class Ordinary Shares, 1,997 ‘L’ Class Ordinary Shares, 1,997 ‘M’ Class Ordinary Shares and 1,997 ‘N’ Class Ordinary Shares.

 

(2)         The rights privileges and conditions attached to the said 5 ‘A’ 5% Convertible Preference Shares are as follows:-

 

(a)           The said ‘A’ 5% Convertible Preference Shares shall not confer any right to vote at any general meeting of the Company but the holders thereof shall be entitled to notice of and to attend any general meeting of the Company.

 

(b)          The said ‘A’ 5% Convertible Preference Shares shall carry the right to a fixed cumulative preferential dividend at the rate of 5% per annum on the capital paid up thereon respectively in priority to all other shares in the Company.

 

(c)          The said ‘A’ 5% Convertible Preference Shares shall rank

 

(i)           in a winding up both as regards return of capital and dividend accrued up to the commencement of the winding up and not declared, and

 

(ii)          in a reduction of capital as regards return of capital

 

                           in priority to all other shares in the Company.

 

(d)         The said ‘A’ 5% Convertible Preference Shares shall not carry the right to any further participation in surplus assets or profits.

 

(e)          Until the death of LEO AIRE WEINSTOCK or until he shall cease to be the registered holder of at least four of the said ‘A’ 5% Convertible Preference Shares (whichever shall first happen) the said LEO AIRE WEINSTOCK may by notice in writing left at the registered office of the Company elect to convert the 5 ‘A’ 5% Convertible Preference Shares into 5 ‘A’ 5% Preference Shares having attached thereto the following right privileges and conditions viz:-

 

(i)           Until the death of the said LEO AIRE WEINSTOCK or until he shall cease to be the registered holder of at least four of the said ‘A’ 5% Preference Shares (whichever shall first happen) the said ‘A’ 5% Preference Shares shall be the only shares in the capital of the Company which shall confer the right to vote at any general meeting of the Company.

 

(ii)          Except as hereinbefore provided the said ‘A’ 5% Preference Shares shall not confer any right to vote at any general meeting of the Company but the holders thereof shall be entitled to notice of and to attend any general meeting of the Company.

 

(iii)         The said ‘A’ 5% Preference Shares shall carry the right to a fixed cumulative preferential dividend at the rate of 5% per annum on the capital paid up thereon respectively in priority to all other shares in the Company.

 

(iv)             The said ‘A’ 5% Preference Shares shall rank

 

(a)         in a winding up both as regards return of capital and dividend accrued up to the commencement of the winding up and not declared, and

 

(b)          in a reduction of capital as regards return of capital

 

in priority to all others shares in the Company.

 

(v)            The said ‘A’ 5% Preference Shares shall not carry the right to any further participation in surplus assets of profits.

 

and the said ‘A’ 5% Convertible Preference Shares shall thereupon become ‘A’ 5% Preference Shares as aforesaid.

 

(3)         The rights privileges and conditions attached to the said 5 ‘B’ Redeemable Preference Shares are as follows:-            

 

(a)          If upon the death of the said LEO AIRE WEINSTOCK or upon his ceasing during his lifetime to be the registered holder of at least four of the said ‘A’ 5% Convertible Preference Shares or ‘A’ 5% Preference Shares HEDY JADWIGA WEINSTOCK (wife of the said LEO AIRE WEINSTOCK) shall be living and shall be the registered holder of at least four of the said ‘B’ Redeemable Preference Shares then from and after the death of the said LEO AIRE WEINSTOCK or the date of his ceasing to be the registered holder of at least four of the said ‘A’ 5% Convertible Preference Shares or ‘A’ 5% Preference Shares (whichever shall first happen) and until the death of the said HEDY JADWIGA WEINSTOCK or until she shall cease to be the registered holder of at least four of the said ‘B’ Redeemable Preference Shares (whichever shall first happen) the said ‘B’ Redeemable Preference Shares shall be the only shares in the capital of the Company which shall confer the right to vote at any general meeting of the Company.

(b)          Except as hereinbefore provided the said ‘B’ Redeemable Preference Shares shall not confer any right to vote at any general meeting of the Company but the holders thereof shall be entitled to notice of and to attend any general meeting of the Company.

 

(c)          The said ‘B’ Redeemable Preference Shares shall carry the right to a fixed cumulative preferential dividend at the rate of 5% per annum on the capital paid up thereon respectively and shall rank for dividend pari passu with the said ‘A’ 5% Preference  Shares and subject thereto in priority to all other shares in the Company.

 

(d)         The said ‘B’ Redeemable Preference Shares shall rank in a winding up and in a reduction of capital both as regards return of capital and dividend accrued but not declared pari passu with the said ‘A’ 5% Preference Shares and subject thereto in priority to all other shares in the Company.

 

(e)          The said ‘B’ Redeemable Preference Shares shall not carry the right to any further participation in surplus profits or assets.

 

(f)           Subject to the provisions of section 61 of the Act and subject to the company having given to LEO AIRE WEINSTOCK seven (7) days notice in writing of its intention to exercise such option the said ‘B’ Redeemable Preference Shares shall at the option of the Company be liable to be redeemed at par at any time prior to whichever is the earlier of

 

(i)            30^th June, 2016, or

 

(ii)           the date upon which the said LEO AIRE WEINSTOCK shall die or cease during his lifetime to be the registered holder of at least four of the said ‘A’ 5% Convertible Preference Shares or ‘A’ 5% Preference Shares (whichever shall first happen).

 

Any such redemption shall be effected by notice in writing to the holders at their respective registered addresses and each notice shall be accompanied by the Company’s cheque or by a bank cheque bank draft or money order for the amount payable to the holder to whom the notice is sent.

 

(4)         The rights privileges and conditions attached to the said 10 ‘C’ Redeemable Preference Shares are as follows:-

 

(a)         The said ‘C’ Redeemable Preference Shares shall not confer any right to vote at any general meeting of the Company but the holder thereof shall be entitled to notices of and to attend general meetings of the Company.

 

(b)         The said ‘C’ Redeemable Preference Shares shall rank as regards return of capital in a winding up and in a reduction of capital next after any ‘A’ 5% Convertible Preference Shares or ‘A’ 5% Preference Shares and any ‘B’ Redeemable Preference Shares issued in the capital of the Company and subject thereto (but pari passu with any ‘D’ Redeemable Preference Shares) in priority to all other shares in the capital of the Company.

 

(c)         Subject to the provisions of section 61 of the Act the said ‘C’ Redeemable Preference Shares shall at the option of the Company be liable to be redeemed at par on or before 30^th June 2016 by notice in writing to the holders at their respective registered addresses and each such notice shall be accompanied by the Company’s cheque or by a bank cheque bank draft or money order for the amount payable to the holder to whom the notice is sent.

 

(d)          Notwithstanding anything hereinbefore contained the said ‘C’ Redeemable Preference Shares or the number thereof then issued and unredeemed shall be redeemed  by the Company upon the death of the holder thereof and in the event of redemption in consequence of the death of the holder payment of the amount required for such redemption to the auditor for the time being of the Company on trust for such holder’s personal representatives shall be deemed payment to such holder’s personal representatives and such payment to the said auditor shall be a full and sufficient discharge to the Company for such payment and shall relieve the Company and its directors from all liability to see to the application of the moneys so paid.

 

(e)          The said ‘C’ Redeemable Preference Shares shall confer on the holders thereof the right to receive such dividends as may be declared thereon pursuant to Article 101 hereof and subject to the provisions of sub-clause (3) of that Article shall rank as regards such dividends pari passu with the Ordinary Shares in the Company.  Such dividends (if any) shall be non-cumulative.

 

(f)           The said ‘C’ Redeemable Preference Shares shall not carry the right to any further participation in surplus profits or assets.

 

(5)         The rights privileges and conditions attached to the said 10 ‘D’ Redeemable Preference Shares are as follows:-

 

(a)         The said ‘D’ Redeemable Preference Shares shall not confer any right to vote at any general meeting of the Company but the holder thereof shall be entitled to notices of and to attend general meetings of the Company.

 

(b)          The said ‘D’ Redeemable Preference Shares shall rank as regards return of capital in a winding up and in a reduction of capital next after any ‘A’ 5% Convertible Preference Shares or ‘A’ 5% Preference Shares and any ‘B’ Redeemable Preference Shares issued in the capital of the Company and subject thereto (pari passu with any ‘C’ Redeemable Preference Shares) in priority to all other shares in the capital of the Company.

 

(c)            Subject to the provisions of section 61 of the Act the said ‘D’ Redeemable Preference Shares shall at the option of the Company be liable to be redeemed at par on or before 30^th June 2016 by notice in writing to the holders at their respective registered addresses and each such notice shall be accompanied by the Company’s cheque or by a bank cheque bank draft or money order for the amount payable to the holder to whom the notice is sent.

 

(d)            Notwithstanding anything hereinbefore contained the said ‘D’ Redeemable Preference Shares or the number thereof then issued and unredeemed shall be redeemed by the Company upon the death of the holder thereof and in the event of redemption in consequence of the death of the holder payment of the amount required for such redemption to the auditor for the time being of the Company on trust for such holder’s personal representatives shall be deemed payment to such holder’s personal representatives and such payment to the said auditor shall be a full and sufficient discharge to the Company for such payment and shall relieve the Company and its directors from all liability to see to the application of the moneys so paid.

 

(e)            The said ‘D’ Redeemable Preference Shares shall confer on the holders thereof the right to receive such dividends as may be declared thereon pursuant to Article 101 hereof and subject to the provisions of sub-clause (3) of that Article shall rank as regards such dividends pari passu with the Ordinary Shares in the Company.  Such dividends (if any) shall be non-cumulative.

 

(f)             The said ‘D’ Redeemable Preference Shares shall not carry the right to any further participation in surplus profits or assets.

 

(6)         The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘E’ Ordinary Shares.

 

(7)         The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘F’ Ordinary Shares.

 

 (8)         The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘G’ Ordinary Shares.

 

 (9)         The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘H’ Ordinary Shares.

 

 (10)       The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘I’ Ordinary Shares.

 

 (11)       The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘J’ Ordinary Shares.

 

 (12)       The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘K’ Ordinary Shares.

 

 (13)       The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘L’ Ordinary Shares.

 

  (14)      The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘M’ Ordinary Shares.

 

  (15)      The Company shall be at liberty from time to time to create and issue further shares ranking in all respects pari passu with the said 1,997 Class ‘N’ Ordinary Shares.

 

Article 4:

 

The shares of the Company for the time being unissued (whether forming part of the original capital or of any increase in capital) shall be under the control of the directors who may allot or otherwise dispose of the same to such persons on such terms and conditions and at such times as the directors think fit without regard to any implied rights of the holders of any of the issued shares for the time being to participate in such allotment or disposition and with full power to give to any person the call of any shares either at par or at a premium during such time and for such consideration as the directors think fit.

 

 

Article 45:

 

An annual general meeting of the Company shall be held in accordance with the provisions of the Act.  All general meetings other than the annual general meetings shall be called extraordinary general meetings.

 

Article 48:

 

All business shall be special that is transacted at an extraordinary general meeting and also all that is transacted at an annual general meeting, with the exception of declaring a dividend, the consideration of the accounts, balance-sheets, and the report of the directors and auditors, the election of directors in the place of those retiring, and the appointment and fixing of the remuneration of the auditors.

 

Article 56:

 

Subject to any special rights or restrictions for the time being attaching to any special class of shares in the capital of the Company -

 

(a)          on a show of hands every member (not being a corporation) present in person shall have one vote and every member being a corporation present by a representative authorised pursuant to the Act or by proxy or by attorney shall have one vote.

 

(b)          on a poll every member (not being a corporation) present in person or by proxy or by attorney shall have one vote for every share held by him and every member being a corporation present by a representative authorised pursuant to the Act or by proxy or by attorney shall have one vote for every share held by it.

 

Article 65:

 

Until otherwise determined by a general meeting the number of directors shall not be less than two nor more than five.  The first directors shall be LEO AIRE WEINSTOCK and HEDY JADWIGA WEINSTOCK.

 

Article 66:

 

At every annual general meeting each director shall retire from office and be eligible for re-election.  Retiring directors shall act as directors throughout the meeting at which they retire.

 

 

Article 67:

 

The Company at the meeting at which a director so retires may fill the vacated office by electing a person thereto, and in default the retiring director shall if offering himself for re-election and not being disqualified under the Act from holding office as a director be deemed to have been re-elected, unless at that meeting it is expressly resolved not to fill the vacated office or unless a resolution for the re-election of that director is put to the meeting and lost.

 

Article 68:

 

The Company may from time to time by ordinary resolution passed at a general meeting increase or reduce the number of directors and may also determine in what rotation the increased or reduced number is to go out of office.

 

Article 69:

 

The directors shall have power at any time and from time to time to appoint any person to be a director either to fill a casual vacancy or as an addition to the existing directors but so that the total number of directors shall not at any time exceed the number fixed in accordance with these Articles.  Any director so appointed shall hold office only until the next following annual general meeting and shall then be eligible for re-election but shall not be taken into account in determining the directors who are to retire by rotation at that meeting.

 

Article 70:

 

The Company may by ordinary resolution remove any director before the expiration of his period of office and may by an ordinary resolution appoint another person in his stead; the person so appointed shall be subject to retirement at the same time as if he had become a director on the day on which the director in whose place he is appointed was last elected a director.

 

Article 71:

 

The remuneration of the directors shall from time to time be determined by the Company in general meeting.  That remuneration shall be deemed to accrue from day to day.  The directors may also be paid all travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the Company or in connection with the business of the Company.

 

Article 73:

 

The office of director shall become vacant if the director:-

 

(a)          ceases to be a director by virtue of the Act;

 

(b)          becomes bankrupt or makes any arrangement or composition with his creditors generally;

 

(c)         becomes prohibited from being a director by reason of any order made under the Act;

 

(d)          becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental health;

 

(e)          resigns his office by notice in writing to the Company;

 

(f)           for more than six months is absent without permission of the directors from meetings of the directors held during that period.

 

 

Article 75:

 

The business of the Company shall be managed by the directors, who may pay all expenses incurred in promoting and registering the Company and may exercise all such powers of the Company as are not, by the Act or by these Articles, required to be exercised by the Company in general meeting, subject nevertheless, to any of these articles, to the provisions of the Act and to such regulations being not inconsistent with the aforesaid Articles or provisions as may be prescribed by the Company in general meeting; but no regulation made by the Company in general meeting shall invalidate any prior act of the directors which would haved been valid if that regulation had not been made.

 

Article 82:

 

The directors may meet together for the despatch of business adjourn and otherwise regulate their meetings as they think fit.  A director may at any time and the secretary shall on the requisition of a director summon a meeting of the directors.

 

Article 86:

 

The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall be two.

 

Article 87:

 

The continuing directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to the Articles of the Company as the necessary quorum of directors, the continuing directors or director may act for the purpose of increasing the number of directors to that number or of summoning a general meeting of the Company, but for no other purpose.

 

Article 115:

 

If the Company is wound up the liquidator may, with the sanction of a special resolution of the Company, divide amongst the members in kind the whole or any part of the assets of the Company (whether they consist of property of the same kind or not) and may for that purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how the division shall be carried out as between members or different classes of members.  The liquidator may, with the like sanction, vest the whole or any part of any such assets in trustees upon such trust for the benefit of the contributories as the liquidator, with the like sanction, thinks fit but so that no member shall be compelled to accept any shares or other securities whereon there is any liability.

 

Decision last updated: 15 June 2011