In Portman Iron Ore Limited, re Golden West Resources Limited[2008] FCA 1362, Portman had prepared and sent pre-completed proxy forms to shareholders in Golden West canvassing support in respect of certain resolutions to be proposed at a general meeting of Golden West (Portman Proxy Forms). The Portman Proxy Forms requested shareholders return the proxy forms to Portman, and stated that Portman would then lodge them with Golden West prior to the stipulated deadline (48 hours before the general meeting). At the general meeting, the chair ruled all the Portman Proxy Forms lodged by Portman via this process invalid because they had not been sent directly to Golden West. Portman sought orders in the Federal Court that the chair was wrong to disallow the counting of the Portman Proxy Forms on that basis.
As it turned out, the counting of the Portman Proxy Forms would not have affected the outcome of the resolutions. The Court, accordingly, declined to grant the relief sought by Portman.
Although the Court had therefore found against Portman on this ground, it did go on to consider the validity of proxies forwarded to Portman as an intermediary rather than to the company. The Court stated that, although section 250B of the Corporations Act does not expressly provide that proxy forms are to be returned only to the company or directly to the company, it would have found against Portman and decided that receipt of the Portman Proxy Forms by Portman invalidated them. The Court relied on similar comments in the Victorian Supreme Court decision of Bisan Ltd v Cellante [2002] VSC 430.
Lessons
This decision has potentially wide-ranging ramifications for shareholders in canvassing shareholder support, particularly in heated proxy battles. It is not uncommon for a shareholder to send out pre-completed proxy forms with a direction that it be sent back to that shareholder for lodgement with the company (eg Lion Selection Limited/Indophil Resources NL; Western Australian Newspapers/Seven Network).
The Federal Court’s recent interpretation of section 250B of theCorporations Act, however, now suggests that proxies should only be sent directly to the company (or its agent). So how can a shareholder monitor its own proxies? It appears that the best (and safest) approach for a shareholder to achieve this is to request that the voting shareholder forward a duplicate proxy form to it when the proxy is returned to the company.
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