Supreme Court New South Wales

• Medium Neutral Citation: In the matter of Chameleon Mining NL [2011] NSWSC 1384
• Hearing dates: 15 November 2011
• Decision date: 15 November 2011
• Jurisdiction: Equity Division - Corporations List
• Before: Barrett J

Decision

Originating process adjourned to 12 December 2011

• Catchwords: CORPORATIONS - public companies - giving of "financial benefit" to "related party" - statutory requirement for approval by resolution passed at a meeting of members - statutory process includes lodgment of material with ASIC before despatch to members and despatch of any ASIC comments with notice of meeting - through inadvertence ASIC lodgment not made before despatch of notice - ASIC's review in any event raises no concern - application for declaration under s 227 in respect of steps concerning ASIC lodgment - various other aspects of the statutory procedure lie in the future - application adjourned as s 227 permits declaration only in respect of the process as a whole
• Legislation Cited: Corporations Act 2001 (Cth), Division 3 of Part 2E.1, ss 208, 210 to 216, 217 to 227, 218, 219, 220, 221, 224, 225
• Category: Interlocutory applications
• Parties: Chameleon Mining NL
• Representation: Mr J Arkoudis; Mr J Arkoudis
• File Number(s): 2011/00364954

Judgment

1 The annual general meeting of Chameleon Mining NL (which I shall call "Chameleon") is to be held on 7 December 2011.

2 Six of the proposed resolutions set out in the notice of meeting are stated to be resolutions serving particular purposes, including "the purposes of section 208 of the Corporations Act ."

3 Section 208 of the Corporations Act 2001 (Cth) requires that, for a "public company" (which Chameleon is) to give a "financial benefit" to a "related party" of the public company where none of the exceptions in ss 210 to 216 applies, the company must, among other things, "obtain the approval of the public company's members in the way set out in sections 217 to 227."

4 Sections 217 to 227 make up the whole of Division 3 of Part 2E.1 headed, "Procedure for obtaining member approval". The central element of the procedure is the passing of an approving resolution at a meeting of members. The Division 3 provisions set out a number of detailed steps that must taken, including, in particular, steps with respect to lodgment with Australian Securities and Investments Commission ("ASIC") of material proposed to be submitted to members for the purposes of the meeting and steps that ASIC is to take in relation to material so lodged.

5 Under s 220, ASIC may give to the public company written comments on the lodged documents; and under s 221, the notice of meeting must be accompanied by a copy of such comments as ASIC has made.

6 The difficulty in the present case is that the requirement for lodgment with ASIC in advance of the despatch of the notice of meeting was overlooked and the notice had already been despatched before the material sent to members was submitted to ASIC.

7 Although the statutory procedure was, in that respect, not followed, ASIC did in fact review the relevant documents submitted by Chameleon, including the notice of meeting, and notified Chameleon by email of 8 November 2011 that it did not propose to raise any comment in relation to disclosure. It thus appears that, as to all matters of substance, the review that ASIC in fact undertook did not give it any cause for concern.

8 In those circumstances and with the meeting scheduled, as I have said, to be held on 7 December 2011, Chameleon has approached the court this afternoon seeking a declaration of compliance with the particular sections concerning ASIC lodgment and ASIC review, being ss 218 and 219.

9 The application is advanced under s 227:

"(1) The Court may declare that the conditions prescribed by this Division have been satisfied if it finds that they have been substantially satisfied.

(2) A declaration may be made only on the application of an interested person."

10 The terms of s 227 refer to the whole of the conditions prescribed by Division 3 of Part 2E.1 and permit the court to make a declaration with respect to the whole if it finds that all conditions "have been substantially satisfied". The question of substantial compliance is to be addressed in the light of the totality of the circumstances as they exist after the process of submission to and decision by members at the relevant meeting has been completed.

11 The provision is not one under which the court has power to make declarations on a piecemeal basis, that is to say, declarations which deal with individual conditions while the process is in train and uncompleted.

12 Because the provision is cast in that way, it is not open to the court to make any declaration in respect of the s 218 and s 219 conditions until the events the subject of all the other conditions have happened or, at least, the time for the happening of them has passed.

13 Some of those events have yet to happen. Sections 224 and 225, for example, deal with voting at the relevant meeting of members. They say that a vote "must not be cast" by or on behalf of certain persons and what the effect is of the casting of votes that "must not be cast". Under s 226, a separate lodgment with ASIC is required following the passing of the resolution, if it is passed. The events with which s 224, s 225 and s 226 are concerned, as well as others (including, of course, the passing of the resolution itself), lie, at this point, in the future and, given the omnibus nature of the s 227 power, the court is not yet in a position to consider the appropriateness of a declaration under that section.

14 It can, however, be said that if, after all relevant steps have been taken, the only matter of non-compliance (or what s 227 regards as non-satisfaction of conditions) were the matter involving late lodgment with ASIC to which I have referred and which was the subject of ASIC's statements in the email of 8 November 2011, there would be no apparent reason why the court would not, at that later stage, make the s 227 declaration if the application were then renewed. The substance of the particular aspect of the conditions is that members receive with the notice of meeting any comments ASIC has made as a result of its review of the material proposed to be sent to members. The email sent by ASIC after review of the material actually despatched to members and then lodged with ASIC shows that adoption of the correct procedure would have resulted in no ASIC comments accompanying the notice of meeting - which is the position that in fact prevails.

15 In the circumstances, the best course is to stand over the present application until after the date fixed for the meeting.

16 The originating process is to stand over before the Corporations Judge at 9.30 am on 12 December 2011.

**********

Decision last updated: 16 November 2011