King & Wood Mallesons

Asia-Pacific 100 position: 3

High Court confirms broad power of courts to validate corporate contraventions

The High Court has adopted a broad interpretation of what constitutes a ‘contravention’ of the Corporations Act 2001 (Cth) or a company constitution, confirming the power of the courts to validate such acts.

The case arose from a dispute concerning the governance of a closely held company, LW Furniture Consolidated (Aust) Pty Ltd. In 1973, Amiram Weinstock and Tamar Beck were appointed as directors of the company “to hold office until the next annual general meeting of the company”. It was accepted in the litigation that their appointments came to an end at the start of the next annual general meeting, pursuant to the company’s articles.

Resolutions were passed at subsequent AGMs purporting to reappoint retiring directors, but it was accepted that none of those resolutions effected the appointment of either Mr Weinstock or Mrs Beck as directors because none of the issued shares carried voting rights. Nevertheless, both Mr Weinstock and Mrs Beck continued to act as if they were directors until Mrs Beck resigned from office in 1982. Mr Weinstock continued to act as a de facto director for some 30 years, at which time he purported to appoint his wife, Helen, as an additional director under a power contained in the company constitution…

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