Court injunction against IEL

Press, 27 January 1986, Page 12

Court injunction against IEL

NZPA Sydney The New South Wales Supreme Court has declared invalid an Industrial Equity, Ltd, requisition for an Australian Gas Light Company, Ltd, (AGL) special general meeting and rejected TEL’s claim that five AGL directors were invalidly elected. Mr Justice Cohen handed down the two decisions in the Equity division on Friday, ordering lEL to pay the costs in both actions. lEL delivered the requisition for a special meeting to AGL on December 24 after secretly acquiring a 41.5 per cent take in AGL through a loophole in new legislation designed to raise minimum shareholdings from 2 per cent to 5 per cent. It sought to pass three resolutions which would unseat the directors and elect seven new directors with the lEL chairman, Mr Ron Brierley and deputy chairman, Mr Bill Loewenthal as candidates. AGL contested the requisition and asked that lEL give an undertaking that it would

not attempt to convene a general meeting which was refused. In a typed judgment, Mr Justice Cohen said the principle dispute in both actions was the effect of 1918 and 1935 statutes which gave AGL proprietors the power to pass resolutions to change the original 1837 statutes. Under the original statutes, five shareholders holding more than 50 AGL shares could requisition a special meeting. That condition was changed to shareholders holding more than 10 per cent of issued capital by resolutions passed in 1935 when rules governing election of directors were also changed. AGL argued that lEL held less than 2 per cent of issued capital, as most was held by nominee companies, and as AGL has refused to register the bulk of the secretly acquired shares. lEL’s counsel, Mr Garry Downes, argued in court last week that resolutions could not repeal or amend a statute

and that the original 1837 statutes still stood. “I do not support that view. In my opinion, the proprietors were given the power to pass resolutions which would be binding on them and the company and which would take effect in spite of the provisions of the 1837 act,” Mr Justice Cohen said. “It is difficult to see what other purpose the section served. It was clearly intended to extend the powers of the proprietors in general meeting to formulate the rules which were to govern the company in respect of the number of directors, their qualification and election,” he said. He said any resolution conforming with Section 34 of the 1935 Gas and Electricity Act, which empowered proprietors to change company rules, would have the force of law "despite the fact that it is inconsistent with the 1837 act” Mr Justice Cohen rejected lEL’s accusation that AGL used “secret by-laws” to

refuse its requisition for a general meeting. “It was never suggested that there were no by-laws or that there were none relating to requisitions. A failure to produce any by-law in these circumstances could not amount to representation that there was none.” “The real issue is whether the Court should act to prevent persons who have no right to call a meeting from purporting to do so,” he said. Mr Justice Cohen also ordered an injunction against lEL to prevent its calling another special meeting. Meanwhile, AGL has agreed to a second lEL requisition for a special meeting in March to discuss the abolition of shareholding limits. Mr Justice Cohen said the various legislation covering AGL, when viewed together, created great uncertainty. “The unusual structure of AGL as an entity is one which has seldom, if ever, been seen over the last century of company formations,” he said. He said AGL was a statu-

tory partnership relying on an act of Parliament passed 148 years ago for its constitution and by-laws and resolutions approved by members during that period.