Clifton v Mount Morgan Ltd [1940] HCA 16; (1940) 63 CLR 329 (13 August 1940)

HIGH COURT OF AUSTRALIA

Clifton and Another Plaintiffs, Appellants; and Mount Morgan Limited and Others Defendants, Respondents.

H C of A

On appeal from the Supreme Court of New South Wales.

13 August 1940

Starke, Dixon, and Evatt JJ.

Mason K.C. (with him Miller), for the appellants.

Maughan K.C. (with him Harper), for the respondents.

Mason K.C., in reply.

The following written judgments were delivered:—

Aug. 13

Starke J.

The appellants in this appeal claim that they and not the respondents Moore and Morgan were elected as directors of the Mount Morgan Ltd. at an annual meeting held on 30th October 1939.

The articles of association of the company provided that every question to be decided by any general meeting should be decided by a simple majority on a show of hands by the members personally present unless immediately on the declaration of the result of the show of hands a poll was demanded in the manner prescribed. The articles also provided that any person entitled to vote might from time to time appoint any person entitled to vote as his proxy at any poll. A form of proxy was given in the articles. The voting power of every member entitled to vote whether present in person or by proxy was also regulated by the articles.

The question depends upon the allowance of certain votes upon a poll demanded at the meeting and cast by certain shareholders who held proxies for other shareholders. Ballot papers setting forth the names of the candidates were issued to the shareholders. Three of the shareholders who held proxies signed the ballot paper, "For self and all proxies in my favour." Eight shareholders who held proxies merely signed the ballot paper with their names. Objection was taken during the counting of the poll that the only votes that could be validly counted on these latter ballot papers were the individual votes of the shareholders who signed the ballot paper and not the votes of any shareholders for whom they held proxies. The chairman of the meeting disallowed the objection. The result of this decision was that Moore and Morgan were declared elected and the appellants consequently defeated by small majorities.

Now it was contended that a shareholder or other person claiming to vote as proxy for another should unequivocally and explicitly vote for and on behalf of his principal. But I would rather say that the question is one of intention to be gathered from the ballot paper and the circumstances surrounding the poll and the voting. Some intention to act for his principal as well as for himself should appear. Ex post facto declarations that a proxy has acted for his principal as well as for himself would be inadmissible. But to mark a ballot paper, "For self and all proxies in my favour," would evince a clear intention to act for his principal as well as for himself (Foerster v. Newlands (West Griqualand) Diamond Mines (Ltd.)[1]). A ballot paper bearing merely the signature of a shareholder is equivocal, but in conjunction with the surrounding circumstances in the present case it is a legitimate inference that the intention of the shareholders who so signed their ballot papers was to poll full strength; that is, to act for their principals as well as for themselves.

The company, with the notice of the general meeting, issued proxy forms to shareholders and a large number were lodged in the company's office, checked, and tabulated; some proxies were from shareholders in England. At the meeting itself a show of hands was taken, but a poll was demanded, which contemplated the use of proxies or, as the learned primary judge said, an appeal to a larger body of shareholders than those actually present. The qualifications of the rival candidates for election as directors was the subject of some discussion and it is plain that the election of directors was the subject of a keen contest. Further, the chairman of the meeting referred to the subject of proxy voting. "Members," he said, "will be handed a ballot paper with the names of all candidates and you are asked to strike out those for whom you do not wish to vote. That is, three names will be struck out and the remaining two will represent your choice. ... If any shareholders have given proxies and do not intend to alter their votes I would suggest that they refrain from filling in a ballot paper as this procedure will assist the scrutineers. If however some of you have given proxies and desire to vote you can do so as your proxy will be automatically cancelled." In this setting it is a reasonable conclusion and one open to the learned trial judge that the shareholders who merely signed the ballot papers with their names intended to and did vote for their principals as well as for themselves. Otherwise they disfranchised their principals, whether intentionally or ignorantly, which is not a conclusion that should be lightly adopted when another, more reasonable and businesslike, is suggested and made more probable by the surrounding circumstances. The case of Spurr v. Albert Mining Co.[2] was much relied upon during the argument. But, when the reasons stated[3] are examined, it will be found that the decision is based upon the special facts of the case and does not propound a rigid rule of law as suggested by the appellants, namely, that a person claiming to vote must clearly and distinctly put forward such claim and unequivocally and explicitly vote in the name and on the behalf and as the representative of the shareholders whose proxies he holds. Both Evans' Case[4] and Foerster's Case[5] are opposed to so rigid a rule.

In my opinion the learned trial judge was right in dismissing the appellants' suit and this appeal should also be dismissed.

Dixon J.

I agree.

The articles of association provided for voting by proxy and entrusted the chairman with the duty of directing in what manner the poll should be taken. If he had made a full statement to the meeting explaining how proxy votes would be ascertained, this litigation might not have been persisted in, but I have no doubt that the reason why he thought it unnecessary to do so was because every one present knew that the poll was demanded so that the proxies should be used and because no reasonable man who read the face of the ballot paper and listened to what the chairman in fact said could fail to understand that, as it stood, the ballot paper was intended to operate as an indiscriminate exercise of the voter's entire voting strength, both as a shareholder and as a proxy. I feel sure that this was the conventional basis on which the poll proceeded, and I think that there is neither need nor room for the application of any presumption as to the significance of ambiguous acts done by a person bearing two capacities. I entirely agree with the reasons which Williams A.J. gave for dismissing the suit.

Evatt J.

Mr. Mason has put the case for the appellant with admirable clearness and candour; but I am of opinion that the reasoning of Williams A. J. admits of no satisfactory answer, and that his judgment should be affirmed. The precise question is whether, in the particular circumstances and the particular setting, the ballot cast by a shareholder who was entitled to vote not only on his own account, but on account of other shareholders for whom he was proxy, should be reckoned as having been cast in respect of those shares for whom he was proxy, as well as his own. In my opinion, the inference in favour of the finding that the ballot was to be conducted in such a way as to exert the maximum effective voting power of each person marking a paper, is irresistible. The facts are carefully set forth in the judgment under appeal; and nothing is to be gained by repeating them here.

Perhaps some reference should be made to the case of Spurr v. Albert Mining Co.[6] upon which the appellant strongly relied. In my opinion, that case cannot be regarded as laying down any broad doctrine which controls the method by which proxy votes must be recorded. The circumstances there proved to exist were exceptional, indeed unique. The shareholder who claimed to have exercised proxy votes had disputed the legality of the meeting of shareholders, and, for that purpose, had carefully kept his proxies in reserve, the documents of proxy having been previously laid in a vault, access to which seemed to be a very slow and cumbersome process. It was only at a comparatively late stage of the meeting, during scenes of considerable disorder, that the shareholder in question seemed desirous of recanting in order that he might elect his own group of directors. Upon the production of the proxies, he exclaimed:—"We can now outvote everything. You can do nothing, we have over 3,000 proxies"; and, about the same time, some other person exclaimed: "I move that everything heretofore done be rescinded." In these peculiar circumstances, it is not surprising that the court considered that the shareholder who had blown hot, but afterwards wished to blow cold, should "clearly," "distinctly," "unequivocally" and "explicitly" state that, contrary to his first intention, he was going to use the proxies for the purpose of electing the directors. This requirement is to be regarded rather as invoked by common sense and fair play than as a rigid general rule of law. Such a general rule is, in my opinion, non-existent.

The appeal should be dismissed.

Appeal dismissed with costs.

Solicitors for the appellants, Campbell, Campbell & Campbell.

Solicitors for the respondents, Minter, Simpson & Co.