Mancini v Mancini [1999] NSWSC 799 (6 August 1999)

Last Updated: 11 August 1999

NEW SOUTH WALES SUPREME COURT

CITATION: Mancini v Mancini [1999] NSWSC 799

CURRENT JURISDICTION: Equity

FILE NUMBER(S): 2955/99

HEARING DATE{S): 19 & 20/07/99, 26/7/99-28/7/99

JUDGMENT DATE: 06/08/1999

PARTIES:

Valda Lynne Mancini V John Peter Mancini

JUDGMENT OF: Bryson J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

Mr C Hodgekiss with Ms E. Glover for Plaintiff

Ms McColl SC, Mr Beale and Mr Chrysostomou for Defendant

SOLICITORS:

Coleman & Greigg for Plaintiff

McGrath Dicembre and Company for Defendant

CATCHWORDS:

CORPORATIONS - director - removal - purported removal of one of two directors by the other director at a meeting where she claimed to act in two capacities, first as herself and secondly under power of attorney for the other - removal was ineffective for (1) non-service in fact of the default notice which would have given rise to power of attorney (2) no notice of directors' meeting (3) attendance and voting at directors' meeting was not an act authorised by PA (4) Attorney under power cannot represent a director and provisions of Articles for alternate directors not complied with (5) one director in two capacities cannot form quorum of 2 (6) lack of good faith in purported exercise of power (7) lack of power of directors to remove a director by resolution, as power conferred by Articles on the company.

ACTS CITED:

DECISION:

See paragraph 46

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

BRYSON J.

FRIDAY 6 AUGUST 1999

2955/99 VALDA L. MANCINI v JOHN P. MANCINI

JUDGMENT

1 HIS HONOUR: This judgment relates to Mr Mancini's Notice of Motion dated 20 July 1999. The parties were formerly married to each other; their marriage has been dissolved. They were, until 29 June 1999 the only directors of three companies which are the subject of claims for relief in the plaintiff's Summons dated 1 July 1999. Each held one of the two issued shares in each of Wesco Industries Pty Ltd, Wesco Quarry Products Pty Ltd and Wesco Ready Mixed Concrete Pty Ltd. These and several others controlled by the same persons, are referred to as the Wesco Group. The plaintiff and the defendant are the only shareholders and they are the persons most substantially interested in the companies' affairs.

2 On 29 June 1999 there were held what were or purported to be meetings of the directors of Wesco Industries Pty Ltd, Wesco Ready Mixed Concrete Pty Ltd and Wesco Quarry Products Pty Ltd. At those meetings Mrs Mancini purportedly resolved to appoint Mr Ray Azzopardi and to remove Mr Mancini as a director. The plaintiff Mrs Mancini's case is that the defendant Mr Mancini ceased to be a director of each of those three companies on 29 June 1999, and in her Summons she claims (Claim 1) a declaration that he was an officer of each company until 29 June 1999 and (Claim 6) an order restraining him from taking any steps relating to their management. She also makes a number of other claims for declarations that in various ways he has failed to act honestly, failed to exercise care and diligence, made improper use of his position as an officer and is in breach of fiduciary duties to the companies, and has claimed damages and other relief. The Notice of Motion of 20 July 1999 claims declarations in relation to each of the three companies that a meeting held on 29 June 1999 was invalid and declarations that the removal of Mr Mancini as a director on that day was invalid.

3 The questions raised by these claims for declarations are basic to affairs of the companies and the conduct of Mrs Mancini's proceedings, and also to the continuing business of the companies. The continuance of business under the control of Mrs Manacini and Mr Ray Azzopardi is under challenge, and there is room for confusion and loss if any lengthy period passes without resolution. Both parties have pending applications to join the companies as parties: Mrs Mancini wishes to join them as plaintiffs and Mr Mancini wishes to join them as cross-defendants. Although the individuals whose interests are affected in substance are already parties, it is important in point of form that the companies should be bound by any further decisions, both parties wish to join them as parties, and with their joinder will come difficulties of knowing whether purported instructions to lawyers or other steps in the proceedings are effectual. There is also the important question of control of the companies' funds, including the application of funds for the purposes of litigation.

4 The matters raised by Mr Mancini's Notice of Motion of 20 July must be established if the court is to dispose of the claim made by Mrs Mancini in her Notice of Motion of 7 July 1999 for an injunction restraining Mr Mancini from attempting to wind up the various companies or from taking part in their internal management; that claim appears to be based either largely or wholly on the view that Mr Mancini has no standing to take part in the internal management of the companies and that there is no substance in his complaints about his exclusion or in any supposed deadlock demonstrated by the exclusion.

5 The objection made by Mrs Mancini's counsel that the companies should be parties to the Notice of Motion leads to the question who can make their decisions and represent them. Unless and until someone other than Mr and Mrs Mancini is put in a position of control of their affairs they will be paralysed, unable to give effectual instructions without the concurrence of both of them, which is very unlikely to occur, and unable to take any but a passive part in the litigation. Their joinder as parties to the Notice of Motion would attain no more than formal objects. It also would be desirable as a matter of form that Mr Azzopardi should be a party to the application and be bound by the result. However his part in the controversy is very minor. It is unfortunate that the form of the application means that Mr Mancini is asking for declaratory orders which if made will bind only Mrs Mancini and Mr Mancini, and will not bind other persons whose interests are involved. However those other persons namely the companies and Mr Ray Azzopardi are less directly concerned in the declarations claimed than Mrs Mancini and Mr Mancini, and I regard the possibility that they may in the future in some way wish to debate the subject matter of the declarations as no more than a theoretical possibility.

6 The most important consideration is that Mrs Mancini chose to give the litigation the shape it has by commencing the proceedings herself claiming remedies in the interest of the companies without joining them as parties; this procedural choice of hers moulded Mr Mancini's conduct in making the present application at a time when the companies were not parties. The persons principally involved are the only members of these two-member companies, and they are parties to the application and will be bound by the outcome .

7 I was referred to observations in the judgment of the Full Court of the Federal Court in News Limited v Australian Rugby Football League Limited [1996] FCA 1256; (1996) 139 ALR 193 at 298 and 299. I am mindful of their Honours' observations to the effect that a declaratory order "... which directly affects the third person's rights against all liabilities to a party should not be made unless the person is also joined as a party" (line 23) but also of their Honours' observations at l.45 relating to the test for a direct interest for this purpose - "The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected." In appraising the practical realities of the case I have not thought it important that the companies are not on the record when their only members are, while Mr Azzopardi's interest in maintaining that he is a director does not appear to me to be an interest of any real value or importance; and the lengthy dealings with the issues by the parties here leaves me of the view that there is no practical possibility that his position could be upheld.

8 All in all it is important that the questions raised by the Notice of Motion should be determined soon after the outset of the litigation.

9 It was not appropriate to seek declaratory relief of this kind by Notice of Motion, which is the usual means for making an interlocutory application. The nature of the declarations claimed establishes that the claim is not interlocutory, but is a claim for declaratory orders which will establish the parties' rights on the subjects with which they deal. It was a misnomer to name the application a Notice of Motion; the substance of the application is that it is a cross-claim and as I indicated during argument, I will amend the document so as to give it that correct name.

10 The business activities of the Wesco Group principally relate to trucking operations and supply and transport of ready mixed concrete and basic materials. The companies operate from premises at Toohey Road, Wetherill Park, where there are offices, a work shop and a yard for marshalling trucks, and also have a concrete plant at Little Street and Victoria Street, Smithfield. The Toohey Road premises are at the west of Wetherill Park. The Smithfield plant is said to be about 7 kilometres away by road: it is to the east near the Cumberland Highway and was referred to by at least one witness as being in Wetherill Park. The map in evidence shows it as situated in Smithfield to the east of Wetherill Park.

11 There is a considerable body of evidence about the business dealings and conflicts of the parties before the resolution of their family property dispute on 29 March 1999. I do not regard it as important to establish by detailed findings the history of their matrimonial differences and property disputes. It appears that the parties separated in or about 1996 and notwithstanding their state of conflict continued to function as directors of and to control the companies in the Wesco Group; both were active as directors and participants in company business and affairs. Exhibit B is a copy of Consent Orders, signed by the parties on 23 March 1999 and embodied in orders of the Family Court of Australia on 29 March 1999, which disposed of their matrimonial property proceedings. The first six clauses provide, for each of six companies, "that the applicant and respondent do all things necessary and execute all such documents in accordance with the Corporations Law and the Memorandum and Articles of Association ... to ensure that its day to day operations are maintained and its goodwill and assets are protected and preserved." There was also provision (cl.7) for transfer of property at 7 Oxford Street Smithfield to Mr Mancini, (cl.8) for Mrs Mancini to pay him $100,000 and (cl.9) for Mr Mancini to transfer property at 2 Toxteth Street Austinmere to Mrs Mancini. By cl.10 each party was declared to have the sole right, title and interest in various classes of property including "any ... other property ... at the date hereof in their possession respectively." Clause 11 is in these terms:

"11. That upon notice in writing served upon the defaulting party stating the nature of the default with particularity the defaulting party is to rectify the default within seven days of the date of the said notice. Should the defaulting party not rectify the default within the specified time the non-defaulting may rectify the default and preserve the orders stated herein by any of the following:-

(i) execute documents;

(ii) make payments;

(iii) deal with any matter in the ordinary course of business;

that the non-defaulting party is enabled to do such things and take such actions as the Attorney for the defaulting party."

12 Clause 12 in the alternative authorised the Registrar of the Family Court to execute any dealing or instrument, and there was an acquittance of claims under the Family Provision Act.

13 Mrs Mancini alleges that a Default Notice, a copy of which is Exhibit J, was served on Mr Mancini on 9 June 1999. Her case is that the notice is a notice under cl.11 of the Consent Orders and that some steps which she took on 29 June 1999 at the meetings were steps within the authorisation conferred by cl.11 on a non-defaulting party to act as attorney for a defaulting party. The notice stated that Mr Mancini was required, within 7 days of the date of the notice, to rectify breaches of the consent orders, and specified what were said to be nine defaults. In each case the steps which he was required to carry out to rectify the default were specified. What are said to be defaults vary widely in their nature; some are simple requirements for payments to be made but some require complex action. The parties put conflicting submissions before me about whether the matters charged against Mr Mancini as defaults in fact were breaches of the consent orders by him, whether he was in fact in default in any respect, and for some of them whether the underlying events happened at all. Although I will not address the submissions in detail, significant aspects were that it was contended that when the consent orders, which have contractual force as well as being orders of the Family Court, are set in the matrix of facts of the parties' relationship, their meaning is such that they only operate on rights, obligations and events which come into being after the date of the consent orders when they impose obligations to ensure that day to day operations are maintained and goodwill and assets are protected and preserved. Mr Mancini's contention was to the effect that the consent orders do not create any obligation, as alleged in cl.1 of the Default Notice, of Mr Mancini to pay to Wesco Industries Pty Ltd a sum of $50,000 which he received in a transaction in 1997.

14 The evidence of the Minutes of the meetings of the Wesco Group held on 29 June 1999 show that each meeting was conducted at 4.30 pm, and that the persons present were Mrs Mancini Mrs Mancini and Mr R.B. Azzopardi, who is an employee of the Wesco Group. Mrs Mancini was shown twice in the list of those present, first by her own name and second with the formula "John Peter Mancini by his attorney Valda Lynne Mancini". In each case the Minutes record that Mrs Mancini tabled the Family Court Orders and the Default Notice and stated that defaults in various paragraphs of the Default Notice had not been rectified. (She stated different groups of defaults for each company). Then it was resolved that Mr Azzopardi be appointed director, that Mr Mancini be dismissed as a director and that Mr Mancini's signature be removed from the bank's record as a person authorised to operate the bank accounts. The Company Secretary was directed to notify bankers and to file a Change of Office Holders form with ASIC.

15 When the meetings began the only director present was Mrs Mancini. The claim made on her behalf was that she was present in two capacities or as counsel said wearing two hats, one as herself and the other as attorney for Mr Mancini.

16 In the Cross-claim the burden lies on Mr Mancini of establishing that this chain of events was ineffectual to bring about his removal from office as a director of each company. The onus of proof of facts lies on him, including proof of any negatives.

17 In my view the resolutions appointing Mr Azzopardi and removing Mr Mancini were invalid and the cross-claim should succeed and the declaration sought should be made. Although several different grounds exist on each of which alternatively Mr Mancini's success could be based, I regard it as appropriate to set out each ground upon which I regard Mr Mancini as entitled to succeed, because several hearing days and considerable expense and endeavour were used for the hearing of the Notice of Motion and a number of matters debated are likely to be important for the conduct of the litigation generally. It is as well that they be established early.

18 Ground 1:No Service of Default Notice on Defendant. Mrs Mancini alleges that she served the notice of default on Mr Mancini on 9 June 1999 at the Wesco Group's office at Toohey Road Wetherill Park at about 3.30 pm. Her credibility was severely damaged by cross-examination. Her demeanour was extremely unsatisfactory and I formed a very poor impression of her as a witness. It appeared to me that at times her behaviour was deliberately disruptive; the extent to which she answered unresponsively and argumentatively went beyond anything which was likely to have been real expression of difficulties of personality or difficulties of coming to terms with the courtroom situation and the task of giving evidence. I formed the view that she was not frank but was concealing matters of which she had knowledge with respect to participation of Mr Alan Chapman in the conduct of her legal business and preparation of correspondence. Many times she forced on the cross-examiner extraneous answers which could be thought of as in some way adverse to Mr Mancini or favourable to herself. Cross-examination made it clear that her evidence was wrong about the time and manner of preparation of the Notice of Default; it refers to an event which was said to have happened at Wetherill Park at 11 o'clock on 9 June whereas she says it was prepared at a meeting with a lawyer in Parramatta which began about 9 am and was concluded by 11 o'clock. She made an affidavit (Exhibit Q) in earlier litigation which contained statements directly in conflict with evidence she gave before me. It appeared to me that she attempted to evade dealing in substance with facts put to her in relation to the preparation of that affidavit. She admitted in her evidence some confusion as to dates. I do not accept that she had difficulties of recollection of the times of events and the substance of events which she claimed to have. I do not regard her evidence about service of the default notice on Mr Mancini as reliable.

19 Mrs Mancini's evidence was corroborated by evidence of Mr Ray Azzopardi and of two other employees of the Wesco Group Mr Valageorgiou and Mr Ellison. Mr Azzopardi's evidence did not directly corroborate the delivery of the document but would place Mr Mancini at the companies' office, and in possession of papers, at times in the afternoon of 9 June not altogether inconsistent with Mrs Mancini's evidence about when she gave the default notice to Mr Mancini. He also said that Mr Mancini made an observation to him which would seem to show that he had papers which required action within seven working days; that is papers consistent with the Default Notice. In a manner, Mr Azzopardi's evidence if accepted would provide corroboration of Mrs Mancini's evidence. Two junior employees gave evidence of Mr Mancini being present at the premises on that afternoon, and of his being observed at about 5.30 pm on the premises with a yellow envelope in his hands. Neither of these witnesses gave any evidence which would identify what document he may have had, and neither gave any satisfactory evidence which would establish why the event was significant or memorable; except in one case by referring to the circumstance that it was the last occasion Mr Mancini attended the premises; it is clear however that 9 June was not the last such occasion.

20 There were some departures in Mr Azzopardi's oral evidence from his statements about time. Indeed the subject of fixing the exact time of events was shown to be difficult for each witness who dealt with it on either side, and this is unremarkable as none of them had any discernible strong reason for making careful observation of the time of any of the events that they spoke of. There does seem to be some room for Mr Azzopardi who has worked in the organisation for 14 years, and perhaps also Mr Ellison and Mr Valageorgiou to have been influenced towards adherence to the person who is now in charge of the organisation. Mr Azzopardi acknowledged that he saw his position as tenuous if Mr Mancini regained control.

21 When Mr Mancini returned from Queensland about a week after 9 June he went to the Wesco premises at Toohey Road, Wetherill Park from time to time on business over a period of about a fortnight up to 30 June when he was confronted with his supposed removal as a director and was required no longer to attend. It was not a remarkable or a memorable event that Mr Mancini should be on the premises late on a business day, that he should speak to staff in a way indicating that he was leaving or that he should have an envelope in his possession. There are no circumstances which would explain why the events which Mr Valageorgiou and Mr Ellison speak of would be sufficiently memorable for them recall the events, complete with the date of the events, when asked to give their attention to the matter late in July. There is ample opportunity for Mr Ellison and Mr Valageorgiou to have seen him on other occasions later than 9 June, and to have made the brief observations which they attribute to that day.

22 Mr Mancini's evidence was that the Default Notice was not served on him on 9 June (and that it was not served on him at any other time.) Although cross-examined severely he was unshaken in his evidence denying the happening of any such event. He gave evidence of a number of circumstances and I regard his evidence as well corroborated. In his evidence, although earlier in the day he was at the offices at Toohey Road where service is alleged to have occurred he left the premises and went to Rose Hill Race Course, which is about 17 kilometres away, and attended a function conducted there by Ampol Australia Pty Ltd in conjunction with a race meeting. He first put the time of attendance there between the hours of 1 pm and 6 pm, and although after cross-examination it seems clear that he left somewhat before 6 pm, his evidence is altogether inconsistent with his having been at the Wesco offices at Toohey Road Wetherill Park at 3.30 pm or at any time in the afternoon which could be mistaken for 3.30 pm, within two hours either way. His evidence about where he was was corroborated by the evidence of Ms Skara, a witness in whom I have confidence having regard to her demeanour and the clarity and confidence of her account and her adherence to the substance of her evidence under cross-examination.

23 Mr Mancini's evidence was also sought to be corroborated by an extract from the record of calls made on his mobile telephone, including one which he says he made to Mr Ray Azzopardi at the company premises from Rose Hill Race Course at 3.46 pm. In the absence of any evidence establishing the workings of the mobile telephone system I do not regard the record of the telephone calls as of much corroborative value.

24 When I consider which of these inconsistent bodies of evidence I should accept, my finding is that Mrs Mancini's case is far outweighed by the evidence of Mr Mancini and of Ms Skara, and in my finding it is clearly established that the default notice was not served on Mr Mancini on 9 June 1999, and was not served on him at all. This finding of itself establishes Mr Mancini's entitlement to the declarations claimed as there can have been no authority to act as attorney unless the Default Notice was served. There are however some further grounds which I regard as clearly established.

25 Ground 2: No notice given of directors' meeting. It is clear from Mr Mancini's evidence and confirmed by Mrs Mancini's evidence that no notice that there were to be directors' meetings was given to Mr Mancini. It would have been easy to give him notice as he attended at the offices on most business days, but I find that Mrs Mancini deliberately refrained from telling Mr Mancini that there were to be directors' meetings because she was taking the position that she could act on his behalf as his attorney. Plaintiff's counsel contended that notice of the meeting of directors was effectively given in that it was given to Mrs Mancini herself and also to Mr Mancini through Mrs Mancini acting as his attorney under the power of attorney. There is no evidence whatever which could support this submission; on the evidence she did nothing which even in form could constitute receiving notice of the directors' meeting on behalf of Mr Mancini as his attorney. Mrs Mancini gave no evidence of giving notice, or of the receipt by her of notice of the meeting in exercise of the power of attorney; she simply did not deal with the subject and said that she convened the meeting, not stating when or how and not establishing the happening of any event which, even in ceremony, could be thought of as the receipt of notice by an attorney for Mr Mancini. These points are not as sterile as they may seem, as for Mrs Mancini's case to succeed it would have to be established that receiving notice as attorney for Mr Mancini was authorised by cl.11, that is to say, it was a step required for rectification of a default; and in my view that could not be established. No measure of rectification of the defaults would be brought about or contributed to in any way by receiving notice of the directors' meeting which Mr Mancini was entitled to have. On this ground the proceedings at the meeting had no effect and Mr Mancini is entitled to succeed.

26 Ground 3: Form of Notice of Default. Mr Mancini's counsel submitted that any notice of default must specify a default under the agreement in the Consent Orders, that the specification must be clear on the face of the notice, must show how the default related to the consent orders, and must show what action would be taken if the notice was not complied with, so as to enable the recipient to understand what corrective behaviour would be taken to cure the default. It was submitted that the Notice of Default was defective in that it did not warn Mr Mancini of the action that would be taken. It was contended that evidence showing claims disputes and attempted resolution of the obligations referred to in Defaults 1 and 8 before the negotiations which led to the Consent Orders shows that it was the intention of the parties that those claims be resolved by the Consent Orders; and it was said that this was further shown by the terms of cl.10, together with other provisions which resolve property disputes. It was also submitted that if this is not so, that the Notice of Default was defective in that there would not be a default in respect of an earlier obligation unless after 29 March 1999 there had been a demand for compliance; that is, that before a default could be relied on in a default notice there would have to be an earlier demand for compliance followed by failure to comply. It is not necessary to come to a conclusion on these contentions.

27 Ground 4: No authorisation for delegation by cl.11. The authorisation to act as attorney for a defaulting party is conferred by cl.11 and is limited by the terms of that clause. The clause authorises action to preserve the Consent Orders and rectify any default. Further the means for rectification are specified by cl. 11, namely to execute documents, to make payments and to deal with any matter in the ordinary course of business. The authorisation conferred is far narrower than usually found in a general power of attorney and is limited both to acts of the kinds designated and to acts performed for the purposes referred to. A strict approach is taken to the construction of powers of attorney; see Tobin v Broadbent [1947] HCA 46; (1947) 75 CLR 378 at 390-391 per Latham CJ.

28 Defendant's counsel contended that on the proper construction of the consent orders the only action which can be taken under cl.11 is action which would overcome the actual default; and that what Mrs Mancini did or purported to do could not constitute rectification action in relation to the defaults relied on. There was no suggestion in evidence of any means by which Mr Mancini's removal as a director could resolve any of those defaults.

29 In my opinion the acts performed by Mrs Mancini are outside the scope of the power conferred by cl 11; first because none of those acts namely, dismissal of Mr Mancini as a director, his or his attorney voting in favour of a resolution that he be dismissed, or his attorney attending a meeting of directors or receiving or waiving notice of such a meeting, could constitute rectification of any of the defaults; and secondly because none of those acts falls within the three classes of action authorised by cl11. I understood Mrs Mancini's counsel to have relied on the last class relating to the ordinary course of business but on no reasonable view could the removal of one of the two directors be so regarded. On this ground also Mr Mancini is entitled to succeed in the proceedings.

30 Ground 5: Incapacity of an attorney under power to act as a director. The office of a director is a personal responsibility, and can only be discharged by the person who holds the office. If there is any exception, it must be found in the constitution of the company and in some authorisation there found to act by an alternate or other substitute or delegate. The office of a director is not a property right capable of being exercised by an attorney or other substitute or delegate of the person holding the office; many rights as shareholder can be distinguished in this respect because they are rights of property.

31 The Articles of Wesco Quarry Products Pty Ltd and Wesco Ready Mixed Concrete Pty Ltd (Exhibits G and H) each incorporated Regulation 72 which in subregulation (1) enabled a director with the approval of the other directors to appoint an alternate director; and subregulation (6) prescribed the formal means of making such an appointment. These procedures were not followed and there was no purported appointment as an alternate director.

32 Defendant's counsel submitted that the power to appoint alternate directors in Regulation 72(1) is expressed in terms which show that the alternate is to be a person other than an existing director. There has been no express or purported appointment of Mr Azzopardi as an alternate director and in my opinion for none of the companies can provisions relating to alternate directors sustain his appointment. The form of the resolutions by which Mr Mancini was purportedly removed is altogether inconsistent with the concept that an alternate for him was appointed. In the Articles of Wesco Industries Pty Ltd Articles 96(r) enables a director subject to the approval for the other directors by writing under his hand to appoint qualified persons to act in his stead as director. This procedure too was not followed. The presence in the articles of each company of provisions regulating delegation of the office of director shows, in my opinion, the only means by which such a delegation can take place. On this ground also Mr Mancini is entitled to succeed.

33 Ground 6: Lack of a quorum. In Wesco Quarry Products Pty Ltd the quorum for a meeting of directors is two; see Regulation 73 in the Articles of that company and of Wesco Ready Mixed Concrete Pty Ltd and Article 88 of Wesco Industries Pty Ltd. This requirement cannot be satisfied by the presence of one person who is the delegate of two different directors, or who is a director and also the delegate of another director; see Windeyer J in Equity Nominees Limited v Tucker [1967] HCA 22; (1967) 116 CLR 518 at 526. Mrs Mancini's counsel contended that the observations of Windeyer J are limited to articles dealing with affixation of the seal. It is true that that was the subject under his Honour's consideration, but the expressions he used are of wider application and constitute a dictum which in view of his Honour's expressed reasoning has high persuasive force. Another view is supported a Scottish decision of the same year, Re Neil McLeod & Sons Ltd [1967] SLT 46 which Young J did not follow in AW & LM Forrest Pty Ltd v Beamish (Young J unreported 27 August 1998) at p.6. The reasoning expressed in the Scottish decision is I find quite unconvincing. Even if there had been some effective delegation, Mrs Mancini could not constitute a quorum by being present in two capacities. On this ground also Mr Mancini is entitled to succeed.

34 Ground 7: Lack of good faith in exercising power under cl.11. Mr Mancini's counsel submitted that the manner in which Mrs Mancini proceeded showed that her purported exercise of power under cl.11 of the Consent Orders was not undertaken in good faith for the purpose for which the power was conferred but was in fraud of the power. In support of this counsel referred to the lack of connection between rectifying the nine defaults asserted in the default notice, only three of which were sought to be upheld in final submissions, and the nature of the measures taken by Mrs Mancini under colour of rectifying the defaults she purported to constitute a meeting of her own in two different capacities, without the presence of two persons who even arguably might be a director and a representative of the other director, there was no notice of the meeting to Mr Mancini although the means of telling him of the meeting in advance were readily available because of his attendances at the office; in substance notice of the meeting was deliberately withheld from him and it was done in secret and in concealment. Counsel also referred to Mrs Mancini's difficulties in explaining her chosen course in evidence; she was unable to give any explanation which could be thought of as credible, and even went to the extremity of claiming that she was acting for Mr Mancini's benefit. Counsel contended that Mrs Mancini's true purpose was not to compel rectification of the defaults referred to in the Default Notice, but to bring about an alteration the company structure and a pattern of share holding and office holding in which Mr Mancini would be got rid of as a person who shared control of the affairs of the companies. Counsel pointed to the sequence of events in which a letter from solicitors to Mrs Mancini dated 2 June discussing such a reorganisation became known to Mr Mancini on 3 June, when he wrote a letter of protest about it; after that the proceedings which ended in the endeavour to remove him as a director began and according to plaintiff's case began on 9 June. It was also contended that delivery of the notice of 9 June when it was known to Mrs Mancini that Mr Mancini planned to go on holidays the following day and to be absent from New South Wales for about a week supported finding that it was not her purpose to obtain rectification of the alleged defaults by giving him (as she claimed) a week's notice to rectify them at a time when he would be absent from New South Wales.

35 Cross-examination of Mrs Mancini about her purpose produced an unusual effusion of extraneous matter; however she did acknowledge that his discovery of the letter of 2 June brought things to a head and that she then decided that his continued interference in what she regarded as good governance of the companies was intolerable and that he had to be got rid of. As part of this chain of events it was suggested by the cross-examiner that the document of 9 June was not brought into existence until some date later than 9 June; however there is no evidence which would tend to establish this.

36 When I take the events which I have recited with the lack of connection between the acts purportedly done under cl.11 of the Consent Orders and any means of rectifying what were alleged to be defaults, it appears to me that this contention is correct. I find that the purported exercise of that power by Mrs Mancini on 29 June was not an exercise in good faith of the power for the purposes for which it was conferred. Mrs Mancini acted in fraud of that power, and her acts lacked their purported effect. For this reason Mr Mancini is entitled to succeed.

37 Ground 8: Lack of power to remove director. Mrs Mancini's counsel in his closing address conceded that for each company the provisions of the constitution relating to removal of directors did not authorise removal by a resolution of the directors and had not been complied with. In relation to Wesco Quarries Pty Ltd this appears from the constitution in Exhibit G Regulation 62 which confers the power of removal on the company and not on the directors. In the constitution of Wesco Ready Mixed Concrete Pty Ltd Exhibit H Regulation 62 of Table A was deleted by Article 10 but Article 9 provided for a substituted Regulation 61(2) by which "Any person so appointed shall hold office until removal by resolution of the company". No corresponding power was conferred on the directors. Counsel also contended that Regulation 57(2) as substituted by Article 9 governs removal from office but on the text of Regulation 57(2) this is not so. The constitution of Wesco Industries Pty Ltd Exhibit M clearly provides in Article 81 for removal by the company in general meeting by special resolution. There was no event which even in purport was a general meeting of members, or in the case of Wesco Industries Pty Ltd a special resolution. These provisions would of themselves, irrespective of the many other considerations on which I have adjudicated, establish the lack of effect of the purported removal of Mr Mancini from office, the lack of effect of the purported appointment of Mr Azzopardi as a director, and indeed the entire lack of effect of the meeting as a meeting of directors. On this ground Mr Mancini is entitled to succeed.

38 Ground 9: the defaults did not occur as claimed. In his closing address, after Mr Mancini's counsel had dealt in detail with several of the defaults alleged, Mrs Mancini's counsel told me that he did not wish to address in support of defaults other than numbers 1, 4 and 8. It appeared to me that given their nature and the state of evidence the other defaults could not have been supported.

39 Default 1 relates to a payment which it is said should be made to Wesco Industries Pty Ltd; this could not be a basis for any rectification action in relation to the other two companies. Default 8 in terms relates only to Wesco Ready Mixed Concrete Pty Ltd, and similarly could not be the basis for action in relation to the other two companies. Default 4 does not specify a particular company to which it is said to relate. The evidence of Mr Mancini (t42) shows that the mobile telephone which he used in, among other things, the Sinbad Promotions business, was paid for by companies in the Wesco Group. The evidence does not enable it to be known which of the six companies named in the Consent Orders if any paid the mobile telephone bills and whether any of the three subject of these proceedings did so.

40 Mrs Mancini's counsel contended in support of Default 4 that it was a breach of the Consent Orders and a breach of duties of good faith for Mr Mancini to carry on the business of Sinbad Promotions. It was something of an overstatement to say that Mr Mancini uses the Wesco Group address to operate the business; he operates the business wherever he is, using his mobile phone and vehicle; he does not quote the company address as the address of Sinbad Promotions, but he does give the telephone number of the mobile telephone for which the Wesco Group pays. It was contended that it was a breach of a duty of good faith and loyalty to the companies for him to give any of his time to Simbad Promotions. In the absence of any special contractual arrangement it is not the duty of a director to give his undivided time to the company of which he is director, and it is not his duty to have no other business. However a part of Default 4 is arguably a breach of some (unidentified) clause of the Consent Orders in that he has used the mobile telephone which is paid for by an unidentified company in the Wesco Group for other business.

41 Mr Mancini is probably accountable to whichever Wesco company has incurred liability to Telstra for mobile phone charges for a proper proportion of the mobile phone charges. However there could not be any occasion for the exercise of the powers asserted as a means of rectifying default in accounting for the telephone charge.

42 Mr Mancini's counsel sought to defend his position in respect of Defaults 1 and 8 on a number of bases including contentions that the obligations of the Consent Orders do not relate to events earlier than their date and that the effect of cl.10 is that there is no continuing obligation. It is not necessary to resolve these issues, and they may well be taken up at some future time on the part of the two companies concerned.

43 The question whether the sum of $50,000 referred to in Default 1 was received by Mr Mancini in circumstances in which he is accountable for it to the company is an elaborate one, and the further question whether not accounting for it after 29 March is a default is also elaborate. It is not necessary to answer these questions, and I leave them unresolved. I take a similar view of the alleged Default 8. Nor do I think it appropriate to adjudicate on the contentions of Mr Mancini's counsel to the effect that cl.10 of the Consent Orders declares the rights of the parties in such a way as to prevent Mrs Mancini from raising contentions such as those in cll.1 and 8 arising out of transactions earlier than the Consent Orders. It is not necessary for the disposition of the Cross-claim that I make any adjudication on whether Mr Mancini was in breach of the Consent Orders in any of the ways alleged and I come to no conclusion about that.

44 Reliance on Defaults 1, 4 and 8 only has implications for the decisions recorded in the Minutes of 29 June 1999. For Wesco Quarry Products Pty Ltd the Minute records that "Mrs Mancini informed the meeting that default by Mr Mancini as detailed in the Notice at paras 3, 5 and 9 had not been rectified by Mr Mancini". That is, none of the defaults which are now sought to be upheld was there expressly relied on. In the minutes relating to Wesco Ready Mixed Concrete Pty Ltd several defaults were named, but Default 8 was the only one there named and now relied on, while In the minutes of Wesco Industries Ltd several grounds were named but Defaults 1 and 4 were the only grounds there named and now relied on. However I would think that consideration of the validity of the resolution is not limited to defaults expressly referred to. Mr Mancini who bears the onus of proof has not excluded any of the companies from the possible view that he is in default in respect of protecting and preserving its assets in not paying whatever part of the telephone account is attributable to Simbad Promotions. However it is in my view clear that defaults in paying $50,000 to Wesco Industries (Default 1) in paying $6,372 to Wesco Ready Mixed Concrete Pty Ltd and in paying whatever should be paid on the telephone account to whichever company ought to receive it (Default 4) could not on any view be thought of as rectified by resigning office or being removed from office as a director, or by receiving or waiving a notice of a director's meeting; and those in substance are the rectifying acts which are said to have been done under the power of attorney. If the defaults happened, they were just as unrectified after those events as before them. The defaults could not form a basis for the actions which have purportedly been carried out.

45 In my opinion Defaults 1, 4 and 8, if they were defaults, which I do not decide, could not be the basis of rectifying action such as is alleged. On this ground also Mr Mancini is entitled to succeed.

Orders:

(1) Order that the Notice of Motion filed on 20 July 1999 be amended so as to designate the document a Cross-claim and to designate the defendant as cross-claimant and the plaintiff as cross-defendant.

(2) Declarations as claimed in claims 2, 3, 4 and 5 in the cross-claim.

(3) Order that the cross-defendant pay the cross-claimant's costs of the Cross-claim.

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LAST UPDATED: 06/08/1999