Some months ago we commented on the interesting decision of the Western Australian Supreme Court (Anderson J) in Atkins & Anor v St Barbara Mines Ltd & Anor ((1996) 22 ACSR 187) [Company Director, March 1997]). This case has received a lot of publicity in the daily press because of the implications of the dispute within the company and the role of the two directors whose interests were at the heart of the battle for St Barbara Mines Ltd. Now, the Western Australian Full Supreme Court has upheld the decision of Anderson J and made some important rulings on the difference between proxies and representatives at meetings of companies especially where the companies are closely held (Atkins & Anor v St Barbara Mines Ltd & Anor (1997) 15 ACLC 800).
The facts are again taken from the CCH headnote.
Atkins and Birchmore were the only directors and shareholders of Bengal Star Pty Ltd (Bengal Star). Bengal Star itself held over half of the issued share capital of St Barbara Mines Ltd (St Barbara). Atkins had been appointed as the representative of Bengal Star to vote at all meetings of St Barbara.
Atkins and Birchmore agreed that each would own one half of Bengal Star's shareholding in St Barbara. This meant that each of them could deal freely with the shares which they "controlled". Pursuant to this arrangement Bengal Star served a document on St Barbara (signed by Atkins and Birchmore as directors) that:
1. Atkins was no longer to act as Bengal Star's representative at meetings of St Barbara; and
2. Atkins was appointed (purportedly) as Bengal Star's representative in relation to only half of the shareholding of St Barbara while Birchmore was the representative in relation to the other half of Bengal Star's shareholding of St Barbara.
At a meeting of shareholders of St Barbara Atkins attempted to vote his "50 percent shareholding" in favour of certain motions. The chairman (who happened to be Birchmore) refused to recognise these votes. He was advised that it was inappropriate for the shareholdings of Bengal Star to be split in this way.
Atkins challenged the decision of the chairman which rejected his vote. As noted in our earlier commentary on this case, Anderson J held that the original voting authority which had given Atkins the right to represent Bengal Star had been properly revoked and a new authority had been given. However, this new authority to appoint Atkins and Birchmore both as corporate representatives of Bengal Star was invalid. Section 249(3) of the Corporations Law did not allow multiple appointments as corporate representatives to another company. The words of section 249(3), held Anderson J, were pretty specific – they referred to a specified person to act as a company's representative. Therefore, his Honour held that the chairman had been correct to rule that Atkins' vote was invalid.
In the appeal Atkins did not challenge the holding by Anderson J that a company could not appoint more than one representative to another company. Instead, he argued the following:
1. The authority appointing Birchmore and Atkins as holding half interest each in Bengal Star was in effect a proxy for Bengal Star – two proxies were appointed and they could each vote.
2. If the appointment of Birchmore as a proxy made Atkins' appointment invalid then Birchmore's appointment should be severed (that is cut out of the arrangement) on the basis that it was repugnant to the appointment of Atkins. In other words he argued that the document in so far as it affected Atkins' appointment should be "saved" while the invalid aspect of the appointment should be removed.
3. If the appointment of Atkins and Birchmore were both invalid, the revocation of the original authority should be treated as having lapsed – in other words the original appointment of Atkins as the representative of Bengal Star was reinstated. Because the new authority failed, the old authority was revived.
4. The authority to cancel Atkins' appointment by Bengal Star was invalid.
The Full Court of the Western Australian Supreme Court, one suspects with some regret, dismissed the appeal.
1. It was plain on the facts that the board of Bengal Star had intended to appoint both Atkins and Birchmore as representatives to St Barbara. They were not appointed as proxies. The word "representative" had been used. This was an invalid appointment.
2. The doctrine of repugnancy had no application to this matter. The intention was to make a dual appointment. The two appointments were interdependent. If anything was repugnant, the whole document was repugnant in effect – nothing could survive.
3. The revocation of the original authority which had appointed Atkins as the representative of Bengal Star was not made conditional upon the valid appointment of Atkins and Birchmore. What the board of St Barbara had done was to change its view as to how Bengal Star was to be represented on St Barbara. The intention was that both Atkins and Birchmore were to be representatives. The fact that this was done in error was no justification for treating the original decision to cancel Atkins' appointment as having no effect in reinstating his position as the representative of Bengal Star.
4. The invalidity of the appointment did not leave Bengal Star disenfranchised as was suggested by counsel for Atkins. It could always appoint a new representative. That fact that it probably was impossible for the two parties to agree to appoint new representatives does not seem to have concerned the court in the context of the dispute before it.
In the event that there could be no appointment then one assumes that there would be a position of deadlock and the court would have to try to find another solution to the difficulties that the company faced.
In the course of its judgment the court made some interesting comments on the differences between a representative under the Corporations Law and a proxy. These are the words of Ipp J on behalf of the Full Supreme Court:
"The kernel of the distinction [between a representative and a proxy] is that, unlike a proxy, a representative 'is really a statutory example of an official acting as an organ of the company rather than a mere agent'. ... Thus, if a person comes to a meeting as the representative of another company [under section 249 of the Corporations Law] he comes as the embodiment of his company not as a proxy (who was a mere agent). It is for this reason that there are material distinctions between a representative and a proxy and also for that reason 'the two concepts should be carefully distinguished'."
The court then went on to note a number of ways in which the distinction is apparent. Under section 249(3) of the Corporations Law a corporation has a general right to appoint a representative. In a proprietary company, however, the power to appoint a proxy exists only if the articles allow the company to appoint or if a court gives leave in certain circumstances. The proxy, unlike a representative, is not entitled to vote except on a poll (section 250(2) of the Corporations Law – unless the articles of association otherwise provide). Furthermore, the articles of association may allow the instrument appointing a proxy to be received by the company up to say 48 hours before a meeting (or even less). Because the representative is not a proxy he cannot be required to notify the appointment of the company before the actual meeting is held.
These distinctions (among others) made it clear that the two positions are different and this rather technical interpretation has the result of a very difficult situation facing the company. Nevertheless, the court could not in these circumstances (where there were very real commercial and other interests at the heart of the dispute) intervene so as to favour one party over another which is basically what would have been the result had the court accepted the arguments put forward by Atkins.
It is unknown whether special leave is being sought to appeal this decision to the High Court or whether more commercial solutions will resolve the difficulties.
That fact that it probably was impossible for the two parties to agree to appoint new representatives does not seem to have concerned the court in the context of the dispute before it
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