In the matter of Cromwell Property Securities Limited in its capacity as responsible entity of the Cromwell Diversified Property Trust and Cromwell Corporation Limited; In the matter of Cromwell Corporation Limited

1. [1]

   HER HONOUR: This is an application by a substantial shareholder under section 247A of the Corporations Act 2001 (Cth) or the general law to be provided with copies of proxies received by the company in advance of an annual general meeting to be held on 28 November 2019. The shareholder’s request, not acceded to by the company, was largely prompted by Colvin J’s decision in Sun Hung Kai Investments Services Limited v Metals X Limited [2019] FCA 1673 handed down a month ago.

2. [2]

   The shareholder has put forward a candidate for appointment as a director of the company at the meeting, whose nomination has not been embraced by the company. The shareholder and the company are each seeking to enlist the votes of shareholders in support of the resolutions which they propose. The shareholder has availed itself of its rights to access the register of members and beneficial ownership registers and has sent communiqués to shareholders encouraging them to elect its candidate. The company has taken similar steps including publishing material on its website and issuing an announcement to the Australian Securities Exchange (ASX) including a video. Each has said things of the other of an uncomplimentary nature. This is a contest between sophisticated, experienced and well-resourced commercial parties. In the result, however, I have concluded that the shareholder is not entitled to copies of the proxy forms, either under section 247A or the common law.

3. [3]

   The plaintiff is ARA Real Estate Investors XXI Pte Limited, a Singaporean company which holds:

4. [4]

   Cromwell Corporation Limited, Cromwell Diversified Property Trust and Cromwell Property Securities are together the Cromwell Property Group (Cromwell), a real estate investor and manager. According to its most recent annual report, Cromwell has a market capitalisation of $3 billion, a direct property investment portfolio in Australia valued at $2.5 billion and total assets under management of $11.9 billion across Australia, New Zealand and Europe. Cromwell has 2,236,000 securities on issue.

5. [5]

   The constitutions of Cromwell Corporation Limited and the Cromwell Diversified Property Trust provide that securityholders are entitled to vote at a general meeting by proxy, with the appointment of a proxy to be received by the company at least 48 hours before the meeting. It is the role of the chairman at the meeting to determine any challenge to a right to vote.

6. [6]

   Clause 90.2 of the Constitution of Cromwell Corporation Limited provides:

7. [7]

   On 3 September 2019, Cromwell engaged Link Market Services Limited to provide meeting services including in respect of the receipt of proxy forms. On 24 September 2019, Cromwell issued its annual report. On 27 September 2019, ARA sent Cromwell a notice nominating Dr Gary Weiss for election as a director of Cromwell Corporation Limited at the annual general meeting and the concurrent general meeting of unitholders of the Cromwell Diversified Property Trust. ARA also provided a statement to be distributed to securityholders in accordance with section 249P of the Corporations Act, which relevantly provides that a member with at least 5% of the votes may request a company to give all its members a statement about a resolution that is proposed to be moved at a general meeting and, on receiving such a request, the company must distribute the statement to all of its members “at the same time … and in the same way, as it gives notice of a general meeting”. This statutory mechanism gives significant shareholders the right and ability to communicate their messages to the entire membership of a company in a manner that is approximately the same as the board, at least when the notice of meeting is issued.

8. [8]

   On 21 October 2019, Cromwell issued a notice of meeting attaching the statement provided by ARA. The directors of Cromwell recommended that securityholders vote against the resolution to elect Dr Weiss and set out their reasons being, essentially: that Dr Weiss may have been nominated for the principal purposes of representing ARA’s interests, which it was said might not be in the best interests of all securityholders as ARA and Cromwell were competitors and thus any representative of ARA might not be able to routinely participate in board deliberations to the full extent required to discharge their duties and obligations given Cromwell’s conflict of interest policy; that Dr Weiss’ skillset, whilst acknowledged, was considered to be already adequately represented on the board; and that Dr Weiss held a number of other board appointments which it was suggested might limit his ability to fully participate in the board’s deliberations. In the statement provided by ARA, Dr Weiss’ intention was stated to be that, if he was appointed to the board, he would review his current public board commitments in order to devote sufficient time to fulfil his duties and obligations as a director of Cromwell. The notice of meeting attached a proxy form which recorded the details of Cromwell’s registry services provider, Link Market Services Limited, to which the proxy form was to be sent.

9. [9]

   On 24 October 2019, ARA requested a copy of the register of members under section 177(3) of the Corporations Act for the purpose of considering contacting securityholders in relation to the exercise of voting rights at the upcoming meeting. ARA also made a request under section 672DA(7) of the Corporations Act to inspect the beneficial ownership registers. Cromwell complied with these requests and ARA has regularly made similar requests since, which have also been complied with.

10. [10]

    On 7 November 2019, ARA wrote to securityholders encouraging them to elect Dr Weiss for a variety of reasons, including by reference to concerns about Cromwell’s strategic direction. ARA’s letter enclosed a pre-completed proxy form complete with the mailing address of ARA’s registry service, Computershare Investor Services Pty Limited. If completed as requested, such proxies would thus go to ARA’s registry service without Cromwell having any knowledge of the existence of the proxy or the voting intention expressed therein. Cromwell referred to this as an ‘information asymmetry’. The pre-completed proxy form does give the impression, whether intended or not, that ARA’s registry service is that of Cromwell.

11. [11]

    On 11 November 2019, ARA acquired the maximum number of shares to which it was entitled under the “creep” provisions of Chapter 6 of the Corporations Act, being 23.731%. David Blight, Chief Executive Officer of ARA Australia, said that ARA did not request proxy information until it had reached its maximum share entitlement as it did not want to inadvertently obtain ‘inside’ information that would prevent it from acquiring further Cromwell securities. That same day, ARA requested, by reference to Metals X, that Cromwell provide a copy of proxy forms received, being either:

12. [12]

    ARA offered to pay Cromwell’s reasonable costs of providing the information, to destroy all copies of the information within five days of the meeting and:

13. [13]

    The “Purpose” for which the information was sought, as clarified by Mr Blight in his affidavit, is so that ARA can:

14. [14]

    On 13 November 2019, Cromwell wrote to Link Market Services Limited in a letter entitled “Use of Proxy Information”, referring to the letter of engagement of 3 September 2019 stating:

15. [15]

    On 14 November 2019, Cromwell wrote to ARA in relation to its request for proxies, advising that it had established an independent board sub-committee to consider the request. The same day, Cromwell published material on its website and made an announcement to the ASX encouraging members to ignore ARA’s proxy form and made various comments, including that ARA was attempting to exert control of Cromwell without paying a control premium. ARA takes great exception to these statements, noting that the constitution of Cromwell Corporation Limited provides that it must have a minimum of three directors and a maximum of nine directors, and electing one director can hardly be described as taking control.

16. [16]

    On 15 November 2019, Cromwell wrote to ARA expressing concern about ARA’s proxy form, suggesting that the form was liable to mislead securityholders into thinking that the form was issued by Cromwell, thereby causing securityholders to unintentionally cast votes against the recommendations of Cromwell’s directors. The letter concluded:

17. [17]

    On 15 November 2019, ARA and Cromwell each filed Originating Processes seeking to determine whether ARA is entitled to the proxy forms it seeks, or whether Cromwell is justified in not provided the forms. The parties agreed it was only necessary to determine ARA’s Originating Process in order to make orders dispositive of both proceedings.

18. [18]

    Section 247A(1) of the Corporations Act provides:

19. [19]

    Whilst Cromwell submitted that ARA’s request goes beyond inspecting the books and making copies, as anticipated by section 247A(1) and (2), ARA submitted that if there was any difficulty with the precise mechanism by which the proxy forms were made available, ARA would be content to attend Cromwell’s offices and inspect the forms on a daily basis. It seems to me that, aside from the mechanics of any access which may be ordered, three issues arise: whether the proxy forms are “books of the company”; whether ARA is acting in good faith and for a proper purpose; and whether the Court should exercise its discretion to make an order authorising ARA to inspect the books of the company.

Books of the company

1. [20]

   The question of whether proxies fall within the description “books of the company” has been considered, or at least referred to in passing, in three cases. In Cescastle Pty Limited v Renak Holdings Limited (1991) 6 ACSR 115, Young J permitted a shareholder to have access to proxies tendered at a meeting which had already taken place to see whether it would be worth requisitioning a meeting or bringing an oppression suit. Whilst Young J did not consider whether proxies formed part of the “books of the company” under section 319 of the Corporations Law, a precursor to section 247A, and expressed some doubt as to whether inspection of the proxies fell within a proper purpose, an order was made to permit the shareholder to inspect the proxies as he inferred the shareholder’s purpose was in connection with exercising rights as a shareholder, either by asking questions at the next annual general meeting or convening a meeting or commencing litigation: at 118. Whether the proxy forms formed part of the books of the company does not appear to have been argued.

2. [21]

   In In the matter of Jervois Mining Ltd [2009] FCA 316, a director and shareholder, Mr Campbell, had remote electronic access to the company’s registry, Computershare, by a password provided to him as a director and could thereby see proxies lodged and a live ‘count’ of proxies. The director’s password was cancelled and he sought access inter alia under section 247A. Per Goldberg J at [51]:

3. [22]

   Jervois Mining was doubted in Sun Hung Kai Investments Services Limited v Metals X Limited, where Colvin J was asked to make consent orders under section 247A. As Colvin J was uncertain as to whether he had jurisdiction to do so, he proceeded to make consent orders by reference to common law rights. In explaining his uncertainty — well-founded if I may say — Colvin J provided a comprehensive review of the legislative history of section 247A, concluding at [20]–[21]: (emphasis added)

4. [23]

   His Honour referred to consideration of the expression “books of company” in different sections of the Corporations Act in Hall v Sherman (2001) 40 ACSR 40; [2001] NSWSC 810 and Caratti v Harris & Kirman as Joint Liquidators of GH1 Pty Ltd [2019] FCAFC 124. Pausing to examine those authorities, in Hall v Sherman, Austin J considered the meaning of “books of the corporation” under section 431 (rights of a controller of property of a corporation to inspect books of the corporation that relate to that property) and “books of the company” under section 530B (the liquidator’s entitlement to the books of the company). In respect of section 530B, his Honour held at [47]: (emphasis added)

5. [24]

   In respect of section 431, Austin J (at [72]) followed the long-standing decision of Gobbo J in Re Jet Corp of Australia Pty Ltd (in liq); Hunter v Touche Ross & Co [1985] VR 716 at 717; (1985) 9 ACLR 641 at 642: (emphasis added)

6. [25]

   In Caratti v Harris & Kirkman, consistently with this, the Court considered section 530A(1) of the Corporations Act (which obliges officers of the company to provide a liquidator with books “that relate to the company”) at [95]:

7. [26]

   In Areva NC (Australia Pty Ltd v Summit Resources (Australia) Pty Ltd [No 2] [2008] WASC 10, Martin CJ was asked to determine whether draft statements of evidence in the possession of the company’s solicitor were “books of the company”, such that they ought to have been produced pursuant to an order made under section 247A, or ought to be the subject of a further order. His Honour, in applying Hall v Sherman and Re Jet Corporation, said at [8]–[9]:

8. [27]

   Engel v Natural Biodiesel Ltd (2015) 245 FCR 436; [2015] FCA 1114 deals with the opposite situation, where books in the possession of the company are potentially not its property. Markovic J was asked to make an order which included categories which seemed to include “confidential agreements entered into by subsidiaries, to which NBL is not a party”: at [25]. Her Honour, after setting out the relevant passage from Areva, said, at [29] (emphasis added):

9. [28]

   ARA submitted that the issue in Hall v Sherman was the interpretation of a provision which was directed to regulating the priorities between a liquidator’s right to take the company’s property under his or her control, and a receiver’s right to property of the company covered by a debenture: see [48]. That is, the whole concern of section 530B is with competing rights to property. It did not, it was submitted, follow that “books of the company” has the same meaning wherever it appears in the Corporations Act. It is commonplace for different words to have different meanings depending on the context in which they are used in the Act, for example, In the matter of Centro Properties Ltd (2011) 87 ACSR 131; [2011] NSWSC 1171 at [48]–[49] concerning the meaning of “creditor”. That may be so, but the fact that the books must be “of” the company connotes that the books either belong to the company or are created by the company or are in its possession in circumstances which permit the company to make the books available for inspection and copying. If the books are those of a third party but are in the company’s possession, and providing these books for inspection may infringe the right of the third party, then I do not think it follows that a member is entitled to inspect those books under section 247A.

10. [29]

    Returning to Metals X, having considered Hall v Sherman and Caratti, and consistently with the authorities to which I have referred, Colvin J concluded at [23]:

11. [30]

    His Honour then considered, in a most learned exposition, the character of proxy documents and whether such documents form part of the books of the company, concluding at [42]:

12. [31]

    ARA referred to the legislative history of section 247A, which was enacted to address the limited rights of a member under the common law: see Re Claremont Petroleum NL [1990] 2 Qd R 31 at 34; (1989) 1 ACSR 504 at 507 (Full Court). In these circumstances, it was submitted that there is no reason to give “books of the company” a limited meaning, as referring only to books which the company owns. The provision, it is said, is beneficial in character, having been introduced to remove a perceived limitation in the common law; it should not be read in a manner which limits shareholders’ rights unnecessarily. That is so, but consistently with the authorities to which I have referred, the proper statutory construction of “books of the company” is now well settled and does not extend beyond books which belong to the company or in which it has a proprietary interest or which form part of the company’s records.

13. [32]

    ARA relied on The King v Merchant Tailors’ Company (1831) 109 ER 1086 at 1090; 2 B & Ad 115, where reference was made by Littleman J to those “who have the care of the documents”. The reference was to documents in the care of the Master and Wardens, they being the natural persons capable of possessing the company’s records. This is consistent with the leading judgment of Lord Tenterden CJ (with whom Littleman J was in effect agreeing), who referred to documents “belonging to such body”. In a case where an application by members to inspect records was refused by four justices, neither phrase reflects a considered pronouncement by either justice or the Court. ARA also submitted that the argument in Armstrong v Landmark Corporation Ltd [1967] 1 NSWR 13 at 14 proceeded on the basis that a director’s common law rights of access extended to documents in the company’s “control”. I think, however, that was the position contended for by the director, disputed by the company and which Street J (as Sir Laurence then was) found it was not necessary to determine, his Honour noting that, “I shall confine my decision to the matter before me”: at 14. Reliance on authorities which substantially pre-date a statutory right is of limited assistance in interpreting its scope.

14. [33]

    It follows that the proxy forms are not “books of the company” and the application under section 247A to inspect and copy the forms fails. It is not necessary to consider the other elements of the section and, given the urgency with which this judgment is sought, I will not do so.

15. [34]

    ARA submitted that it was entitled to the proxy forms under the general law, citing Street CJ in Eq’s classic exposition of the principle in Edman v Ross (1922) 22 SR (NSW) 351. The case concerned a closely-held company of the “quasi-partnership” type, where the plaintiff and two defendants were each shareholders and directors. They held, between them, “nearly all the shares” and had a long-running dispute. Street CJ in Eq (as Sir Philip then was) was thus asked to determine the scope of the plaintiff’s right of access in his capacity as a shareholder and as a director. Of the first capacity, his Honour said, at 358:

16. [35]

    No relief was granted on this basis. His Honour went on to consider in detail the authorities relating to a director’s right of access. At 361:

17. [36]

    The common law right is illustrated by the authorities cited in Edman v Ross. Returning to Merchant Tailors’ Company, Lord Tenterden CJ referred to a shareholder’s right to the records of a company as “limited to the inspection of particular documents which related to a subject then in discussion, and in which the applicant had an interest”, but his Lordship could see no good reason for allowing a member “to inspect every document belonging to such body. I am sure it would lead to great inconvenience and much expensive litigation”: at 1090. Similarly, Littledale J considered that members may be entitled to documents “if a proper occasion is made out, in a matter affecting the members of the corporation”: at 1090–1. According to Patteson J, the member must “shew a specific ground of application, and that the granting of it is necessary to prevent his suffering injury, or to enable him to perform his duties. But he must state a definite object …”: at 1091. The members of the company were refused relief, having only deposed to a very general intention to review alleged instances of mismanagement by the Master and Wardens (that is, the board). In Mutter v Eastern and Midlands Railway Co (1888) 38 Ch D 92 a debenture stockholder sought to inspect and copy the register of debenture stockholders and was refused by the company as he had bought stock on behalf of a rival company. Lindley LJ, with whom Cotton & Bowen LLJ agreed, considered that the extent of a common law right to inspect and copy documents “depends on the interest which the applicant has in what he wants to copy, and on what is reasonably necessary for the protection of such interest”: at 106.

18. [37]

    The right of a member at general law to inspect documents was described as “extremely limited” in Rowland v Meudon Pty Ltd (2008) 66 ACSR 83; [2008] NSWSC 381 at [23], where Bryson AJ comprehensively reviewed the common law right since 1746 and its intersection with section 247A. His Honour considered that section 247A “appears to embody the previous law and restate it, but not in a way which limits the operation of s 247A to the earlier general law”: at [30].

19. [38]

    In Armstrong v Landmark Corporation Limited, a shareholder and director of Landmark sought production of all proxies lodged with the company by shareholders in advance of a meeting. There was evidence of two competing factions bidding for the support of shareholders at the meeting. His Honour Street J, in an ex tempore judgment, granted the plaintiff the right to inspect the instruments of proxy in his capacity as a director of the company rather than as a shareholder. At 14:

20. [39]

    It is against this review of the case law that I return to Metals X. Having decided that section 247A did not provide power to make a consent order requiring the company to provide proxy forms to the shareholder, Colvin J stated at [50]:

21. [40]

    Whilst Armstrong v Landmark Corporation Limited did reflect that shareholders had an interest in the proper scrutiny of proxies, and that interest founded the orders, it was an order that the plaintiff as director have access to the proxies. The same approach was taken by Goldberg J in Re Jervois at [28]–[35] citing Edman v Ross; Conway v Petronious Clothing Co Limited [1978] 1 WLR 72 (Slade J); Burn v London and South Wales Coal Co (1890) 7 TLR 118 (North J); Molomby v Whitehead (1985) 7 FCR 541 (Beaumont J), Boulus v Carter; Re Tarbs World TV Australia Pty Limited (2005) 220 ALR 572; [2005] NSWSC 891 (Barrett J); Berlei Hestia (NZ) Limited v Fernyhough [1980] 2 NZLR 150 (Mahon J) and Kriewald TV Independent Direction Limited (1996) 14 ACLC 73 (de Jersey J). Whilst there is ample authority for a director to be given access to documents including proxy forms, I have been taken to no decision prior to Metals X giving a shareholder access to proxy forms under a common law right.

22. [41]

    The shareholder in this case is interested, in part, in ensuring that the constitution of Cromwell Corporation Ltd is observed but, more significantly, in promoting the election of its candidate as a director of the company. The question is whether inspection of the proxy forms is necessary with reference to some specific dispute or question in which the shareholder is interested. In circumstances where the Corporations Act provides other avenues — tried and tested — to enable a shareholder in this position to communicate its message to all members of the company, both by providing a statement under section 249P to be circulated with the notice of meeting, and by accessing the register of members and obtaining the contact details of the members and communicating with them directly, it does not seem to me to be necessary to give the shareholder access to the proxy forms. By its application, ARA seeks, effectively, to have a ‘level playing field’ to solicit votes from shareholders by access to the proxies in the same way that the directors may access proxies. Whilst I accept that the Corporations Act does not provide a ‘level playing field’, nor does the common law right of a shareholder to the books of the company provide the levelling effect sought.

23. [42]

    For these reasons I make the following orders in proceedings 359416 of 2019:

    1. (1)

       Dismiss the Originating Process filed on 15 November 2019.

    2. (2)

       Order the plaintiff to pay the defendants’ costs of the proceedings.

24. [43]

    In proceedings 358438 of 2019, I make the following order:

    1. (1)

       Dismiss the proceedings with no order as to costs.