392. Irregularities Flashcards
- Irregularities
General overview
[392.01] Section 392 is often used to validate the acts or proceedings of a meeting wherein there is any defect or irregularity in the procedures leading up to the completion of the act or convening and conduct of the meetings. Board meetings and annual general meetings would qualify as “proceeding” under s 392(2)
“procedural irregularity”
[392.02] Subsection (1) defines “procedural irregularity” as including an absence of a quorum at the relevant meeting, and a defect, irregularity or deficiency of notice or time. Examples of procedural irregularities are lack of quorum at a meeting as stipulated by the Act or constitution, shorter notice period as stipulated by the Act or constitution, notice of meetings sent to the wrong address, etc. A director was not served the notice which proposed to remove him as a director pursuant to article 88(c) of the articles of association. The company sought to rely on s 392(2) to validate the board resolution passed at the meeting to remove him as director. The court held that to determine whether a non-compliance was of a procedural or substantive nature, one had to assiduously examine the aim or object of the requirement which was not complied with. The failure to serve upon the director concerned a notice to resign, as required by article 88(c), was certainly not of the same genre as those irregularities listed in s 392(1). It denied him the choices of whether to resign voluntarily or to lodge an appeal to his co-directors. The non-compliance was certainly not of a procedural nature and, therefore, s 392(2) could not apply to validate the board resolution
Substantial injustice
[392.03] Section 392(2) provides that a proceeding under the Act is not invalidated by reason of any procedural irregularity unless the court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the court and by order declares the proceeding to be invalid. In Thio Keng Poon v Thio Syn Pyn & Ors and Another Appeal [2010] 3 SLR 143; [2010] SGCA 16, CA , the court held that in deciding the meaning of substantial injustice, the following principles were pertinent: (a) there had to be a direct link between the procedural irregularity in question and the injustice suffered; (b) the injustice had to be of a “substantial” nature. In essence, what this means is that the injustice had to be real, rather than theoretical or fanciful; and (c) the aggrieved party had to show that there might or could have been a different result, if not for the occurrence of the procedural irregularity.
Burden of proof
[392.04] Case law from Australia (e.g. Re Waldcourt Investment Co Pty Ltd [1988] WAR 1 ; and Australian Hydrocarbons NL v Green (1985) 10 ACLR 72 ) would suggest that the onus of satisfying the court that a procedural irregularity has caused or is likely to cause substantial and irremediable injustice rests upon the person challenging the validity of the proceeding (see further, Ford, Principles of Corporations Law (2000, Butterworths) para 7.581). But the threshold burden of showing that the irregularity in question is of a procedural nature rests on the party seeking to uphold the proceeding. Unless this threshold requirement is met, s 392(2) can have no application
Intentional acts vis-à-vis inadvertence
[392.05] Subsection (3) provides that a meeting, or notice of a meeting or any proceeding at such a meeting shall not be invalidated by reason only of the accidental omission to give notice of the meeting or the non-receipt by any person of the notice of the meeting, unless the court declares the meeting to be void. Subsection (2) is often read with subsection (3). Re Pembury (1991) 9 ACLC 937 held that s 1322(2) of the Corporations Act 2001 (Australia) (the equivalent of s 392(2) of the Act) is not restricted to instances where the non-compliance is inadvertent or accidental. In the circumstances, the legislative intent is for s 1322(2) to be extended to deliberate non-compliance as well. Re Pembury (above) was followed in subsequent cases, e.g. Greig & Anor as Liquidators of Australian Building Industries Pty Ltd (in liquidation) v Australian Building Industries Pty Ltd [2002] QSC 138 ; and in Golden Harvest Films Distribution (Pte) Ltd v Golden Village Multiplex Pte Ltd [2007] 1 SLR(R) 940; [2006] SGCA 44, CA. Contra Re PW Saddington & Sons Pty Ltd (1990) 2 ASCR 158 where Young J held that a deliberate choice to convene an invalid meeting was not a “procedural irregularity” within the meaning of the New South Wales equivalent of our s 392(2).
Application by “interested person” under subsection (4)
[392.06] Any interested person may apply under s 392(4) for an order relating to the acts, matters or things purporting to be done as stated in subsections (4)(a)–(d). However, an application under subsection (4) is subject to subsection (6), which provides that no order shall be made under subsection (4)(a) unless the act, matter, thing or proceeding is of a procedural nature; that the person(s) who contravened or failed to act had acted honestly; or it is in the public interest that the order be made; in relation to subsection (4)(c), that the person subject to civil liability acted honestly; and in every case, no substantial injustice has been or is likely to be caused to any person. A plain reading of s 392(4)(d) of the Act would suggest that it had a rather broad remit. As long as the act in respect of which an extension of time was sought was “in relation to a corporation”, the court would be able to grant an extension of time if it deemed it fit to do so. A scheme of arrangement and an application for an extension of time to file a proof of debt was thus a step directly “in relation to a corporation” for the purposes of s 392(4)(d) of the Act. There was thus no reason why this subsection could not, in principle, apply to the filing of a proof of debt in this case, subject to the caveat in s 392(6)(c) that no substantial injustice would be caused to any party by the making of an order under s 392(4)(d). Substantial injustice in s 392(6)(c) amounted to something greater than just ordinary prejudice, but it did not follow that a party who failed to obtain an extension of time under the Rules of Court could, in contrast, do so under s 392(4)(d) if, say, it was shown that some prejudice might be caused to a relevant party, but the prejudice did not amount to substantial injustice. The power conferred on the court by s 392(4) is discretionary, and notwithstanding that the court was satisfied that no substantial injustice would be caused to any party if an order was made under s 392(4)(d), the court could decline to make the order, having regard to the entire circumstances of the case. The same considerations that a court took into account in deciding if an extension of time should be granted under the Rules of Court should equally apply for the purposes of deciding if an extension of time should be granted under s 392(4)(d): The Oriental Insurance Co Ltd v Reliance National Asia Re Pte Ltd [2008] 3 SLR(R) 121; [2008] SGCA 18, CA. Whether s 392(4)(d) can operate to extend the time period stipulated for the carrying out of any acts will depend upon the particular statutory context
