McComiskie v Smith[2024] QSC 77

SUPREME COURT OF QUEENSLAND

Background

1. [1]
   This is an application brought by the applicants, Catherine McComiskie, Patricia Canning and Paul Gleeson, in which they seek a declaration, pursuant to s 10 of the Civil Proceedings Act 2011 (Qld), that Paul Gleeson was validly appointed as a director of Gleeson Properties Pty Ltd (‘the Company’) on 5 January 2024.
2. [2]
   The background to the application is described in the affidavit of Catherine McComiskie.  Ms McComiskie is a director of the Company.  The Company is the third respondent in this application.  Ms McComiskie has four siblings:  Therese Smith, the first respondent; Margaret Wolff, the second respondent; and Paul Gleeson and Patricia Canning, who are the other applicants.
3. [3]
   The Company was incorporated by the father of Ms McComiskie and her siblings, the late Mr John Gleeson, on 31 August 1976.  It was incorporated as a trustee company to hold and manage assets on behalf of the family.  The Company is the trustee of two family trusts, the JF Gleeson Family Trust and the JF Gleeson Family Trust No. 2.  The Company is also part of a wider group of entities that comprise what is referred to as the ‘Gleeson Group’.  The first respondent, Mrs Therese Smith, is the managing director of the Company.  The second respondent, Ms Wolff, is also a director of the Company.
4. [4]
   The issue in dispute in this matter is with respect to the purported appointment of Paul Gleeson as a director of the Company, on 5 January 2024, at a general meeting. 
5. [5]
   For a period of time when John Gleeson was alive, the directors of the Company were John Gleeson and each of his five children.  In 2014, Paul Gleeson resigned as a director of the Company on the grounds of apparent ill health.  The minutes of the relevant meeting from 16 June 2014 outline the details of Paul Gleeson’s resignation. It was noted in the minutes that he “tendered his resignation as a director of all the family companies and it was accepted by board from this date. His position will remain vacant with the option of him to return at a future date.”  The minutes also noted that John Gleeson reminded Paul of “his rights and options to rejoin the Board of all companies associated with the JF Gleeson Family Trust.”
6. [6]
   It seems that at the time of 16 June 2014 there had been six directors of the Company up until the point that Paul Gleeson tendered his resignation.  It also seems that subsequently, in November of 2022, a decision was made that the Gleeson Group would divest its assets, separate as a family business group, and distribute the net assets to beneficiaries.
7. [7]
   In more recent times, Paul Gleeson has indicated that he wishes to resume his position as a director of the Company and has sought to do so, first, by writing to the other directors of the Company on 22 November 2023 and providing a consent to act as a director.  In the accompanying letter, Paul Gleeson stated that his appointment is effective immediately in accordance with the resolution of the board at the meeting on 16 June 2014 to the effect that he had the right of option to rejoin the board of all companies associated with the JF Gleeson Family.
8. [8]
   In response to that correspondence and the consent to act as director, Therese Smith, in her capacity as managing director of the Company, wrote to Paul Gleeson and also to Ms Canning and Ms McComiskie, giving notice that Paul Gleeson’s appointment as a director was not valid and he would not be accepted as a director for stipulated reasons.  The reasons given were with respect to apparent conflicts of interest in which it was said that Paul Gleeson had threatened litigation against the Company and that he had disqualified himself from becoming a director due to his conflict of interest which would clearly interfere with his ability to act in the best interests of the Company. It was further noted that there had been no company resolution appointing Mr Gleeson to act as a director in the June 2014 meeting. 
9. [9]
   Following that correspondence, by letter dated 12 December 2023, notice was given by Paul Gleeson, Patricia Canning and Catherine McComiskie that a general meeting of the Company’s shareholders was to be held on 5 January 2024.  The notice was given in the required form and was signed by Paul Gleeson, Patricia Canning and Catherine McComiskie.  The notice set out the business to be discussed at the meeting was:

   1. To consider and discuss the consent to act as a Director of the Company and full disclosure of possible conflict of interests relating to the ‘creditor claim’ tabled by Paul Vincent Gleeson;
   2. If thought appropriate to pass a resolution for the appointment of Paul Vincent Gleeson as a Director of the Company.

In the alternative:

3. If thought appropriate, pass a resolution for the removal of Therese Mary Smith as Director of the Company.

10. [10]
    The correspondence also set out, in attached documents, details of amounts of money said to be owed to Paul Gleeson by the JF Gleeson Family Trust. I understand this to be the details of what is referred to as the ‘Creditor Claim’.
11. [11]
    A general meeting of members was held on 5 January 2024.  In attendance were Patricia Canning, Paul Gleeson and Catherine McComiskie.  Therese Smith and Margaret Wolff were not present, they having previously indicated that they would not be in attendance at the meeting. 
12. [12]
    The minutes record that three resolutions were passed unanimously, they being: 

    1. the Company increase the number of directors by 1 person to a total of 5 Directors; and
    2. the appointment of Paul Vincent Gleeson as a Director of the Company on the below conditions in paragraph (c), his consent to act in full disclosure of a possible conflict of interest relating to the ‘Creditor Claim’ and other directorships having been tabled.
    3. the Conditions of Paul Vincent Gleeson’s appointment as Director are that:

• he excludes himself from any relevant part of any meeting of directors where the board is discussing and/or voting on any matter concerning the ‘Creditor Claim’;
• he excludes himself from any vote in relation to the ‘Creditor Claim’.

13. [13]
    Ms Smith subsequently wrote to Ms McComiskie indicating that she did not accept the appointment of Mr Gleeson as being valid.  In her letter of 29 January 2024, she stated:

I hereby give you notice that Mr Gleeson’s appointment as a director is not valid, nor will Mr Gleeson be accepted as a director, I reiterate the reasons set out in my letter dated 23 December 2023.

14. [14]
    Following that letter, solicitors acting for the applicants wrote to Ms Smith in respect of the purported appointment of Mr Gleeson as a director.  That letter demanded that Ms Smith confirm her acknowledgment and acceptance of Paul Gleeson as a director of the Company and to cooperate with the applicants to ensure that the company register would be updated by notification to ASIC of the appointment of Mr Gleeson as a director. 
15. [15]
    In response to that letter, Ms Smith wrote to the applicant’s solicitors on 1 March 2024, reiterating that Mr Gleeson had not been appointed lawfully in accordance with the governing documents and that his appointment was not valid. 
16. [16]
    The applicants have subsequently commenced the present proceeding by this application.  They maintain that Mr Gleeson has been validly appointed and they seek declaratory relief to that effect.  The application is opposed.  The respondents say that Mr Gleeson was not validly appointed.  They say the resolutions passed on 5 January 2024, to increase the number of directors and to appoint Mr Gleeson as a director, were invalid. 
17. [17]
    The Company was incorporated under previous governing legislation that prevailed at the time, being the Companies Act 1961 (Qld), as amended.  Under that legislation the Company was required to have both a Memorandum of Association and Articles of Association (‘the Constitution’).  Both of those documents are in evidence before me as exhibits to Ms McComiskie’s affidavit.
18. [18]
    Under the former legislation a company could adopt provisions of Table A to the legislation as being the company’s Articles of Association.  The Company did so but with modifications to the regulations in Table A.  It is agreed between the parties that annexures A and B to the written submissions of the first and second respondents accurately reproduce the relevant articles and adopted regulations as amended. For convenience and ease of reference, I attach a copy of those annexures to these reasons.

Issues

19. [19]
    It is agreed by the parties that resolution of the present dispute turns upon the proper construction of the Constitution of the Company. 
20. [20]
    No issue is taken by the respondents with respect to any notice or other formal requirements for the general meeting that was held on 5 January 2024. Therefore, there are three issues that arise for consideration. 
21. [21]
    The first issue is whether resolution (a), purportedly increasing the number of directors from four to five, was valid.  The respondents say that there is no evidence the number of directors had ever been reduced to four as of 5 January 2024, therefore, no resolution could be passed to increase the number to five and therefore, no power to appoint a further director could ever be exercised.
22. [22]
    The second issue is, if resolution (a) was valid, whether upon the proper construction of the Constitution the inherent power of the shareholders of the Company to appoint a director by ordinary resolution passed in a general meeting of members was excluded under the Articles of Association, such that the power to appoint a further director was vested solely in the directors.
23. [23]
    The third issue is that if I decide the Company did have the power to appoint a director at the general meeting, whether the proper construction of the Constitution nevertheless prevents a conditional appointment of a director because either, no such power exists, or it would be repugnant or inconsistent with the Constitution and therefore, resolutions (b) and (c) would be an invalid exercise of power.

Validity of the resolution increasing the number of directors

24. [24]
    This issue can be disposed of shortly.
25. [25]
    There was no direct evidence of any previous resolutions that had been passed to determine the number or to decrease the number of directors, but it is obvious in my view from the ASIC extract in respect of the Company that has been produced as an exhibit to Ms McComiskie’s affidavit, how many directors there were at any particular time.  As at the time of the 5 January 2024 meeting there were four directors according to the record.
26. [26]
    Section 1274B of the Corporations Act 2001 (Cth) provides that an extract from ASIC records is prima facie evidence of what is stated within it.  In those circumstances, it is open for me to infer that there must necessarily have been a past resolution to determine the number of directors as four before the 5 January 2024 meeting.  Support for that conclusion is also gained from the records produced, which include an ASIC company snapshot showing the current number of directors is four.  I also note that in correspondence from Ms Smith, no issue was taken with respect to the suggestion that there were previously only four directors.  Indeed, in the letter dated 27 November 2023, Ms Smith noted in the second paragraph that: “The notice is addressed to each of the four directors of the Company”, implicitly accepting that there were only four directors at the time.  I am, therefore, satisfied that resolution (a) as passed was valid.

Whether the inherent power to appoint a director had been excluded

27. [27]
    The applicants’ argument is that the shareholders have an inherent power at common law to appoint a director upon an ordinary resolution passed at a general meeting, unless that inherent power is restricted or excluded by the Company’s Constitution.  Further, they argue that reg. 67 of the Table A regulations, adopted as part of the Company’s Articles of Association, is consistent with, and should be construed as reflecting, a retention of that inherent power by the members, authorising them to increase the number of directors and to also nominate the appointment of a particular director, when an ordinary resolution is passed at a general meeting to increase the number of directors.
28. [28]
    In support of those arguments, the applicants relied upon a number of cases.  In particular I was taken to Worcester Corsetry Limited v Witting,^[1] Grant v John Grant Pty Ltd,^[2] Re Railway & Transport Health Fund Limited,^[3] DVT Holdings v Bigshop.com.au^[4]  and Wood v Inglis.^[5]
29. [29]
    The respondents say the proper construction of the Constitution leads to the conclusion that the inherent power to appoint directors by resolution passed by a general meeting of shareholders is excluded.  The respondents say that is clear from the terms of the Constitution, which make plain that the appointment of a director may only happen in the following three particular ways:

    1. upon a director’s resignation, death or disqualification, in accordance with reg. 72 – which then confers power on the directors to appoint a person to be a director under reg. 68 to appoint a person to fill a casual vacancy;
    2. upon removal of a director – the Constitution then confers power on the general meeting to appoint another person in place of the removed director under reg. 69; or
    3. upon an increase in the number of directors under reg. 67 – the Constitution then confers powers on the directors to appoint an additional director pursuant to reg. 68 and for that person to then be an “addition to the existing directors”. 
30. [30]
    The respondents say that those are the only three situations contemplated by the Constitution for appointment of directors. 
31. [31]
    In approaching the construction issue, I bear in mind the Constitution has effect as a contract and further, I have considered and applied the principles with respect to the construction of a company’s constitution that were summarised by Black J in Re Railway, in the following passage:^[6] 

I also bear in mind the principles applicable to the construction of a company’s constitution and, in particular, that the constitution should be read and construed as a whole; general principles of construction of commercial contracts are applicable to a constitution, and the commerciality of a particular construction may tip the balance in its favour where it is implausible that the parties could be taken to have intended otherwise; a constitution should not be construed narrowly or pedantically; words used should be given their natural and ordinary meaning; and a construction of a provision which gives a congruent operation of the various applicable provisions of a constitution should be preferred to another construction which does not Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; 236 ALR 561; 59 ACSR 444; [2006] FCAFC 144; Oil Basins Ltd v Bass Strait Oil Company (2012) 297 ALR 261; 91 ACSR 700; [2012] FCA 1122 at [32]; Donaldson v Natural Springs Australia Ltd [2015] FCA 498 at [148]; Aveo Group Ltd v State Street Australia Ltd (in its capacity as custodian for the Retail Employees Superannuation Pty Ltd (as trustee of Retail Employees Superannuation Trust)) [2015] FCA 1019 at [59].

32. [32]
    In support of their argument, the respondents rely upon the various cases and propositions cited and summarised by Black J.  In addition, the respondents also submit that the applicants’ construction argument relies upon an implied term of the Constitution, and as such it would be necessary for the applicants to satisfy the requirements set out in BP Refinery v Shire of Hastings^[7] for implication of a term in a contract. I do not consider here that it is relevant to consider the principles that apply in respect of implied terms of a contract.  The issue here is one of whether an inherent power of the shareholders has been ousted or restricted by the terms of the Company’s Constitution.
33. [33]
    I also make plain that whilst I have been referred to other cases by parties, it is necessary that I decide this matter by construing the particular Constitution for the Company. 
34. [34]
    Nevertheless, given the importance placed upon the case to the applicants’ argument, it is convenient to start by considering what was decided in Worcester and why. 
35. [35]
    In terms of legal principle, Worcester confirms that a company, embodied by its shareholders in a general meeting, has an inherent power to nominate and appoint a director by passing an ordinary resolution to that effect, unless the terms of its constitution have restricted or excluded that power. 
36. [36]
    In that respect, the point was made plain by Lawrence LJ, who stated:^[8]

The company has an inherent power to nominate and appoint its own directors unless that is in any way restricted by the contract contained in the articles of association. Unless you can find that that inherent power has been handed over by the company to the directors, I think they retain that power as a natural result of their having the power to increase their board of directors.

37. [37]
    The principle identified in Worcester continues to be a part of the common law. In that respect, I note that in Link Agricultural Pty Ltd v Shanahan, McCallum & Pivot Ltd,^[9] Kenny J, referring to provisions of the Corporations Act 1989 (Cth), (‘the Corporations Law’) relevantly stated:

The terms of s. 227(3)(b) and (9) imply that, under the Law, the members in general meeting retain the power to appoint a person in place of a director removed by them in accordance with the section. This reflects the position at the position at common law that the company, constituted by the members in general meeting, retains an inherent power to appoint a director by ordinary resolution.^[10]

And then went onto state:

Absent any express or necessary limitation in the articles upon the power of the company in general meeting to appoint a director, the company in general meeting must, it seems to me, retain such a power to appoint. The power is a usual concomitant of the relationship which exists between the members on the one hand and the company's directors on the other.^[11]

38. [38]
    The Court in Worcester was required to consider the validity of two resolutions passed at a general meeting of a company, whereby two persons were purportedly appointed as additional directors of the company. The issue for the Court to determine was whether those persons had properly been appointed by the company at its general meeting or whether the power to appoint additional directors was, under the company’s articles, vested in the directors alone.
39. [39]
    In deciding the issue, the Court considered the construction of similar but not identical articles of association to those which I am considering here.  The company’s articles of association there relevantly provided:

art. 12… Until otherwise determined by a general meeting the number of directors shall not be less than two nor more than seven…

art. 83… The company may from time to time in 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.

40. [40]
    The Court determined that the inherent power to appoint a director held by the members in a general meeting had not been excluded by the terms of the articles in that case, and that the articles and the inherent power should also be construed as not only enabling an increase in a number of directors under art. 83, but also permitted the members to nominate and appoint a particular person to be that director.  In that respect, I note the judgment of Lawrence LJ, where his Honour stated in respect of art. 83:^[12]

It is said that that does not involve the nomination and appointment of particular gentlemen or ladies as directors, but it seems to me that that is necessarily implied in the provision of art. 83.

41. [41]
    Similarly, Slesser LJ concluded:^[13]

The more natural view of art. 83 is that it is not redundant or merely introducing unnecessary machinery which is already provided by art. 12 in dealing with the maximum and minimum, but, as Lawrence L.J. has indicated, is itself conferring a power not only to increase the number but to increase that number by itself appointing directors to the extent to which it is intended to increase the number. That view is supported by the considerations urged by my Lord with regard to the latter part of that clause, which gives to the company power to determine in what rotation the increased or reduced number of directors is to go out of office. It clearly, in my opinion, contemplates, among other things, that the rotation of those persons may be a rotation indicated by their names as well as by the proportion in which they are to retire.

…

For these reasons, and also because I do not think that the inherent power of the corporators to direct the control of their own company by nominating the directors is excluded by any contract contained in the articles of association, I think this appeal must be allowed.

42. [42]
    The other member of the Court, Lord Hanworth, reasoned similarly:^[14]

It appears to me that although one may regard art. 83 as containing a complementary power to art. 12 of the Worcester Corsetry, Ld.'s articles, it is not right to construe it as giving a mere arithmetical meaning. Those last words, ‘and may also determine in what rotation the increased or reduced number is to go out of office,’ appear to me to indicate what was intended to be done in the ordinary course by the general meeting.

43. [43]
    The Court in Worcester ultimately concluded that art. 83 was something more than simply being complementary to art. 12 and, therefore, it was implicit the inherent power of the company to appoint a director was not excluded.  The Court was satisfied that the members had not surrendered that power to the directors.
44. [44]
    Whilst the outcome in Worcester was that the Court upheld the validity of the resolutions passed by the general meeting, it is important to understand that the reasons for the Court’s decision turned upon the particular terms of the articles in question in that case.  As each of the members of the Court noted, the inherent power held by the company to appoint directors by ordinary resolution passed at a general meeting was not excluded by the articles and was authorised under art. 83, because it was not merely mathematical in nature, and nor was it just simply an extension of art. 12.  The Court considered art. 12 had all of the machinery for increasing the maximum and minimum number of directors and, therefore, art. 83 must necessarily have had a different purpose. Further, whilst art. 85 of the company’s articles gave the directors limited power to appoint a director, the Court noted that such power was temporary in nature. 
45. [45]
    In comparing the present case to Worcester, it is of particular significance to note that whilst art. 83 in Worcester is in similar terms to reg. 68 of the Company’s Articles of Association, art. 83 included the additional words: “and may also determine in what rotation the increased or reduced number is to go out of office”, which are missing from reg. 68.
46. [46]
    The case of Worcester remains relevant, of course, in terms of the principle of law that it confirmed with respect to the inherent power of the company, but the articles in the present case are not in the same terms as those considered in Worcester.  The result of the construction exercise in Worcester cannot dictate the outcome here.
47. [47]
    The case of Grant to which I was referred stated in the headnote of the report that Worcester was applied.  I was referred on behalf of the applicants to the judgment of Latham CJ who was in dissent in that case.  An issue that arose in Grant concerned the validity of the appointment of two persons as directors.  In the course of his judgment, Latham CJ noted that art. 86 of the articles of the company in question there was in similar terms to the article considered in Worcester for increasing or reducing the number of directors.  The relevant difference there being, however, that it stipulated that any such increase or decrease was to be by extraordinary resolution in a general meeting.^[15]
48. [48]
    The Chief Justice considered the conclusion in Worcester as being supportive of the decision at first instance, noting again there the inherent power of a company to nominate and appoint directors, but as his Honour went on to state in respect of such a power:

No such question arises in the present case. But it is true that the article corresponding to art. 86 [in Worcester] was interpreted as authorizing not only the alteration of the maximum and minimum number of directors but also the actual additional appointment of a person as a director. But the reason for this conclusion was found in the fact clearly stated by Slesser L.J. that there was another article (art. 12) which ‘contained within itself all the machinery for fixing the maximum and minimum number of directors.’ Thus if any effect was to be given to the article corresponding to art. 86 it was necessary to interpret it as authorizing the actual appointment of additional directors.

49. [49]
    The only other reference that was made to Worcester in Grant was by Williams J, who in agreeing with the decision of the learned judge below, stated:^[16]

I agree with his Honour that art. 86 only authorizes the company by extraordinary resolution to increase or reduce the number of directors who are actually to hold office within the limits permitted by art. 71. It does not authorize the company to alter the minimum or maximum number of directors fixed by art. 71. This could only be done by altering art. 71 by special resolution. The articles are not the same as those discussed in Worcester Corsetry Ltd. v. Witting, but the reasoning of the members of the court of appeal in that case, especially the judgment of Lawrence L.J., supports the view that art. 86 only operates within the limits prescribed by art. 71.

50. [50]
    His Honour went on, then, to consider that the purported resolution there had not been done by extraordinary resolution as would be required and, therefore, the appointments of the directors by the company there were void. 
51. [51]
    In Re Railway Black J also considered Worcester, noting that:

… a constitutional provision that confers a power upon the directors to appoint a director in certain cases does not deprive a company of its inherent power to nominate and appoint its own directors in general meeting. That proposition does not address the position where a company’s constitution specifically confines or delimits the scope of the company’s power to appoint directors in general meeting.^[17]

52. [52]
    In DVT Holdings, Windeyer J also considered Worcester and the principle of law it identified.  The articles in DVT are an example of clear words excluding the inherent power at common law of the company to appoint a director in a general meeting. 
53. [53]
    I was also given the decision of Wood, but no submissions were made about it.  However, I note that it does tend to provide some support for the applicants’ interpretation.  There, Barrett J noted the terms of the article in question was stated in these terms:^[18]

The Company may from time to time by ordinary resolution passed at a general meeting increase or reduce the number of Directors.

54. [54]
    I note that article is in similar terms to the relevant article in this case, which is that adopted from Table A, reg. 67.  His Honour then went on to state:

An article in this form allows not only the creation of a new position but also installation of a person in that position: see, in particular, Worcester Corsetry Ltd v Witting; Grant (citations omitted).^[19]

55. [55]
    It is to be noted that this statement made by Barrett J was seemingly made without considering the context of the whole of the company’s constitution. Further, the terms of the article were not in the same form as the relevant article in Worcester. 
56. [56]
    Ultimately, none of the cases beyond Worcester that have been provided advance the principle stated in Worcester any further.  They are not determinative of the issues in this application.  It remains a question of construing the particular articles in the Constitution of this Company, according to the principles that I have outlined.  Nevertheless, the cases are instructive.

Conclusion

57. [57]
    I have undertaken the exercise of construction in light of the principles that I have identified above.  In doing so, I have borne in mind that the Company is a small proprietary company, with five members, all of whom being related family members who are beneficiaries of family trusts of which the Company is a trustee.  I also have regard to the objects for which the Company was established, as set out in cl. 3 of the Memorandum of Association. 
58. [58]
    It does seem to me from the whole of the Constitution that it is apparent the objective intention of the articles as drafted and adopted, is that directors would hold office for unrestricted terms.  There would be no need for any regular retirements or rotations or nominations for reappointment, such as might be the case under other articles or other constitutions of other companies, and that there would be likely few occasions to change directors, which I consider reflects the nature and purpose of the Company.
59. [59]
    As I have noted, the result in Worcester is not determinative, but it does remain instructive. That is particularly so when comparison is made between the articles in that case and those here. I consider that the articles here are materially different from those in Worcester.  In particular, contrast can be made between art. 12 in Worcester and art. 7 of the Company’s Constitution.
60. [60]
    Article 12 in Worcester provided:

Unless otherwise determined by a general meeting, the number of directors shall not be less than two nor more than seven.

Whereas the Company’s art. 7, which has been adopted in lieu of Table A reg. 63 states:

Unless and until otherwise determined by the Company in a general meeting, the number of directors shall not exceed ten.  The subscribers to the Memorandum of Association shall in writing determine the first director or directors.

61. [61]
    Whilst in Worcester the relevant article dealt with both the minimum and maximum number of directors, here the article in question provides for a maximum of 10, unless otherwise determined by the company, but does not refer to a minimum. 
62. [62]
    In Worcester, art. 83 which was the particular article there relevant to and related to the inherent power stated:

The company may from time to time in 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.

63. [63]
    The first part of that article corresponds with the amended reg. 67, here.  But what is omitted here are the words: “And may also determine in what rotation the increased or reduced number is to go out of office”, so that the article simply reads:

The company may, from time to time, by ordinary resolution passed at a general meeting, increase or reduce the number of directors. 

64. [64]
    In my view, those words have been intentionally omitted.  It seems to me that what remains and what is stated in the amended reg. 67, is limited to determining how many directors may hold office at any particular given time, subject to the maximum of 10 provided by art. 7.
65. [65]
    Further in Worcester, arts. 84 and 85 dealt with two particular instances where the directors may appoint a director.  Art. 84 was where there was a casual vacancy occurring in the board of directors, but also provided that:

…the person so chosen 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.

And art. 85 provided for the appointment of an additional director, the terms being:

The directors shall have power at any time, and from time to time, to appoint a person as an additional director who shall retire from office at the next following ordinary general meeting, but shall be eligible for election by the company at that meeting as an additional director.

66. [66]
    Articles in those terms are not included in the Company’s articles.  There is instead an amalgam of sorts of these articles which is in contained in reg. 68, which states:

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 regulations.

67. [67]
    It is apparent that what is omitted from the adopted Table A regulation are the following words:

Any director so appointed shall hold office only until the next following annual general meeting, which they will then be eligible for re-election but shall not be taken into account in determining the directors who are to retire the rotation at the meeting.

68. [68]
    It is notable, in comparing the articles in Worcester with reg. 68 in this case, that the Worcester art. 85 referred to an ‘additional director’ and provided that they might be eligible for election again at the next ordinary general meeting as an additional director.  That, to my mind, suggests some form of auxiliary role, not simply filling an increase in the number of directors.  In this case there is no such term in the articles.  I note though that reg. 94 of the adopted Table A regulations permits directors to appoint an ‘associate director’. 
69. [69]
    Furthermore, there is an obvious distinction in respect of the powers provided to the directors here.  Here, directors may appoint a director to fill a casual vacancy or, as ‘an addition to’ the existing directors, as opposed to how it was stated in Worcester as ‘an additional director.’
70. [70]
    The casual vacancy situation seems to me to be the situation where a current director is unable to continue.  Regulation 72 provides for when the office of a director shall become vacant in certain prescribed circumstances.  It seems to me that that is the first aspect which is addressed by reg. 68, whereby the directors may appoint a director to fill a casual vacancy.
71. [71]
    The other power is to appoint a person as an addition to the existing directors.  In my view, that is where a director is added to the existing number of directors, and that must necessarily be where the members have resolved under reg. 67 to increase the number of directors.  The directors could not, of themselves, appoint a further director under reg. 68 that exceeded the maximum number of directors provided by art. 7, or which exceeded the number determined by the company under reg. 67. Therefore, in my view, the power in reg. 68 in respect of the appointment of a director as an addition to the existing directors must follow an increase in the number of directors under reg. 67. 
72. [72]
    The articles in Worcester provided no other instances where the directors could appoint other than those which were described as being temporary or special emergency powers of appointment in arts. 84 and 85. That is not the case here in respect of when directors may make appointments under reg. 68.  Again, noting the intentional amendment and omission of the retirement terms in reg. 68.
73. [73]
    It is also notable that other regulations which were in Table A have been omitted from the Company’s Articles of Association, those being regs. 63 to 66, which each dealt with retirement from office after certain terms.  All references to retirement from office have been omitted or substituted in the articles adopted by the Company from Table A, save for an apparent oversight in respect of adopted reg. 69.
74. [74]
    Finally, I also note that reg. 69, which was not an article apparently in the constitution of the company in Worcester, provides for the company’s power to remove a director and power to “appoint another in his stead.”  It seems to me that there are two powers there. One is the power by ordinary resolution to remove any director before the expiration of his period; and the other is the power by ordinary resolution to appoint another person in his stead. In my view, that adopted article has been included so that the members do retain a right of control over the management of the company, permitting them to remove and replace a director if it is considered necessary or appropriate to do so by the members.  Under reg. 69, the members could remove and replace any director appointed by the directors under reg. 68.
75. [75]
    In my view, the articles here, in the way that I have referred to, do demonstrate an intention that the Company may increase the number of directors in office but it is the directors who may appoint a person to fill the increase in office.  However, the company then retains the power to remove any such appointed person and to replace them, if considered necessary and appropriate to do so. Alternatively, they may pass a resolution to remove a director under reg. 69 and instead of passing a resolution to appoint another person in their stead, pass a resolution under reg. 67 to decrease the number of directors.
76. [76]
    In my view, it is clear on its proper construction, therefore, that the Company’s Constitution here has, by necessary implication, excluded the common law inherent power of the company constituted by its members in a general meeting to appoint a director by passing an ordinary resolution to that effect.  In my opinion, the Constitution evinces an intention to confine the power to appoint directors to the three instances identified by the respondents, and in doing so the inherent power of the company to appoint a director is necessarily excluded or restricted to those instances referred to in the articles.
77. [77]
    Given that conclusion, it is not necessary that I go on to consider and determine issue 3, which was whether on its proper construction a director may be conditionally appointed.  Ultimately, I am not satisfied the applicants have established the validity of the appointment of Mr Gleeson such as would justify the relief sought.
78. [78]
    Accordingly, the application is dismissed.

Costs

79. [79]
    As to costs, although the respondents successfully resisted the application, this is not a situation in my view where costs should simply follow the event. The determinative argument was introduced at a late stage, in written submissions that were provided by the respondents just prior to the hearing of the application. Although the applicants sought to meet that argument without requiring a further adjournment of the application, they had late notice of the point upon which the respondents were successful. While there was no formal direction or requirement for the respondents to identify that argument at any earlier stage, in my view that should have been done as a matter of fairness. Although there was correspondence in the past from Ms Smith, before the commencement of the proceeding, which identified the general basis upon which it was said the purported appointment of Mr Gleeson was invalid, the determinative argument was not articulated at that stage.
80. [80]
    In all the circumstances, I consider the just order to make is that each party bear their own costs.

Orders

81. [81]
    I order:

1. Application is dismissed.
2. Parties to bear their own costs.

ANNEXURE A

Constitution of Gleeson Properties Pty Ltd ACN 009 984 187

Extract of Articles [63]-[73] as amended by Memorandum dated 31 August 1976 (clean)

DIRECTORS: APPOINTMENT, ETC.

81. 63.
    Unless and until otherwise determined by the Company in general meeting the number of directors shall not exceed ten. The subscribers to the Memorandum of Association shall in writing determine the first director or directors.

81. 67.
    The company may from time to time by ordinary resolution passed at a general meeting increase or reduce the number of directors.

81. 68.
    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 regulations.

81. 69.
    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.

81. 70.
    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.

81. 71.
    A director shall not be required to hold any share qualification.

81. 72.
    The office of director shall become vacant if the director-

1. (a)
   ceases to be a director by virtue of the Act;
2. (b)
   becomes bankrupt or makes any arrangement or composition with his creditors generally;
3. (c)
   becomes prohibited from being a director by reason of any order made under the Act;
4. (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;
5. (e)
   resigns his office by notice in writing to the company;

POWERS AND DUTIES OF DIRECTORS

81. 73.
    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 regulations, required to be exercised by the company in general meeting, subject, nevertheless, to any of these regulations, to the provisions of the Act, and to such regulations, being not inconsistent with the aforesaid regulations 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 have been valid if that regulation had not been made.

ANNEXURE B

Constitution of Gleeson Properties Pty Ltd ACN 009 984 187

Extract of Articles [63]-[73] as amended by Memorandum dated 31 August 1976 (marked up)

DIRECTORS: APPOINTMENT, ETC.

81. 63.
    Unless and until otherwise determined by the Company in general meeting the number of directors shall not exceed ten. The subscribers to the Memorandum of Association shall in writing determine the first director or directors. [article 7]

63. The number of the directors and the names of the first directors shall be determined in writing by the subscribers of the memorandum of association or a majority of them. [substituted for article 7]

64. At the first annual general meeting of the company all the directors shall retire from office, and at the annual general meeting in every subsequent year one-third of the directors for the time being, or, if their number is not three or a multiple of three, then the number nearest one-third, shall retire from office. A retiring director shall be eligible for re-election.

65. The directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot.

66. 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.

81. 67.
    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.

81. 68.
    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 regulations. 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 the meeting.

81. 69.
    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.

81. 70.
    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.

81. 63.
    A director shall not be required to hold any share qualification. [article 8]

71. The shareholding qualification for directors may be fixed by the company in general meeting, and unless and until so fixed shall be one share. [substituted for article 8]

81. 72.
    The office of director shall become vacant if the director-

1. (a)
   ceases to be a director by virtue of the Act;
2. (b)
   becomes bankrupt or makes any arrangement or composition with his creditors generally;
3. (c)
   becomes prohibited from being a director by reason of any order made under the Act;
4. (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;
5. (e)
   resigns his office by notice in writing to the company;
6. (f)
   for more than six months is absent without permission of the directors from meetings of the directors held during that period;
7. (g)
   without the consent of the company in general meeting holds any other office of profit under the company except that of managing director or manager; or
8. (h)
   is directly or indirectly interested in any contract or proposed contract with the company and fails to declare the nature of his interest in manner required by the Act.

POWERS AND DUTIES OF DIRECTORS

81. 73.
    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 regulations, required to be exercised by the company in general meeting, subject, nevertheless, to any of these regulations, to the provisions of the Act, and to such regulations, being not inconsistent with the aforesaid regulations 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 have been valid if that regulation had not been made.