Members in pursuit of their rights Law Reporter

Wednesday, 01 August 2001


    How hard can members push for meetings to question the activities of directors? - quite hard it seems.

    Last year in the Pinnacle case (Law Reporter, February) the Victorian Supreme Court showed that the courts will look closely at the ability of members to call meetings as a result of amendments to the Law. Now, in NRMA Limited v Snodgrass (2001) 37 ASCR 382 it seems the courts may be prepared to go even further in ensuring members can pursue these rights. The facts of this case are taken from the Butterworths Company Law Reports. Talbot, a former director of NRMA Limited (NRMA) opposed the demutualisation of that organisation and its associated company, NRMA Insurance Limited. This opposition was taken in the courts (this required him to challenge the schemes of arrangement etc). While he was unsuccessful in the court challenges, the court ordered that the NRMA companies should pay a reasonable proportion of Talbot's solicitor's client's costs. These legal fees amounted to $528,827. Snodgrass, a member of the NRMA, collected the signatures of more than 100 NRMA members to convene a meeting to vote on certain resolutions which he proposed. In particular, he wanted the NRMA to amend its constitution to provide that the NRMA should pay Talbot's legal costs. He also wanted all the directors appointed in the 1999 elections, and any election thereafter, to publish details of their election campaign funding. A further resolution proposed was that directors who failed to disclose this kind of information in the future should be disqualified from serving on the NRMA board. NRMA issued a summons in the Supreme Court of New South Wales seeking an order to restrain Snodgrass from presenting the requisitions to the meeting. It sought a declaration that the requisitions were neither valid nor effective. Windeyer J, in a very important judgment, rejected these applications. In his view, section 249Q of the Corporations Law had brought about no change to the existing common law. Provided that the resolutions proposed by the shareholders were within the power of members to consider and pass, and provided that an appropriate meeting was called for the relevant purpose, and not an extraneous purpose so as to constitute an abuse of power, there was no restriction on the power of members to requisition meetings and to have resolutions considered. However, he also ruled that any resolution that was beyond the powers of the members to consider at the relevant time would be able to be challenged. This was not the case here. He then examined each of the resolutions the members sought to have considered. In his view they were not beyond the power of the members in general meeting to pass. While the company's constitution vested management control of the company's business and affairs in the company "subject to the law and to any other provision"" of the constitution in the directors, this did not affect the power of the members to requisition a meeting. Windeyer J held that the members did have the power to requisition the meetings and that there was nothing in the language of either the constitution of the company or, in the general law, which prevented them from calling the meeting to consider these various issues. The question of whether the shareholders could seek disclosure from the directors was clear. As long as the resolution was not retrospective in nature, there was nothing inappropriate or improper in the shareholders asking for directors to provide a disclosure of what they received by way of funding. In his view, the directors did have a right to expect that their terms of office and nature of their obligations could not be amended retrospectively by a change of constitution. But any prospective change would be pursued by the members. In all the circumstances, the motions brought by the company were dismissed. It will be interesting to see whether appeals are brought against this decision as it is one of a number involving the NRMA company which has, as we have noted in the past, been the subject of quite an extraordinary amount of litigation. What the case does clearly demonstrate is that some judges at least are determined to ensure that the shareholders, and in particular minority shareholders, are given appropriate opportunities to pursue their rights as new shareholders as openly and as fully as possible.


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