YOWIE GROUP LTD AND BOLTON V KEYBRIDGE CAPITAL LTD (NO 3) [2025] NSWCA 168
Overview
This is a case which has been heard urgently in the NSW Court of Appeal following an expedited hearing in the Corporations List. Keybridge Capital Ltd (KCL) is a majority shareholder in Yowie Group Ltd (YGL) and this case addresses whether KCL exercised its rights lawfully under the Corporations Act 2001 (Cth) (Corporations Act) regarding the calling of a directors meeting and subsequently whether KCL’s proceedings were permitted in the Court’s jurisdiction.
Facts
Between 1 and 9 April 2025, KCL issued notices of its intention to call a general meeting of shareholders to remove and replace some YGL directors, pursuant to s 249F of the Corporations Act. The meeting was originally scheduled for 27 June 2025, but YGL tried to postpone it to 14 July 2025. KCL sought urgent relief to ensure the meeting went ahead on the original date. The Court agreed with KCL and ruled that all the required notices from KCL were valid, meaning the meeting on 27 June could proceed. However, YGL and Bolton (former YGL director) appealed this decision. The background of the relationship between KCL and YGL is that they entered into loan agreements. YGL relied on this information to assert that KCL had an improper purpose in seeking to replace its directors, given KCL owed $4.4 million to YGL.
Prior Proceedings
On 12 May 2025, KCL commenced proceedings against YGL seeking an order that YGL provide a copy of its register of shareholder members. YGL responded by announcing to resolve issue of new shares, where the share placement would reduce KCL’s voting power.
On 19 May 2025, YGL proposed to deny that it had received notice of KCL taking steps to effect such a removal in its communication with ASX. YGL denied to the ASX that the company or its directors had been made aware that a person or persons holding more than 50% of its ordinary shares intended to call, or requested the directors to call, a general meeting to appoint or remove directors of YGL. The denial was later found by the ASX to be plainly false or at best highly misleading.
Relevant Rules
s 249F of the Corporations Act provides that members with at least 5% of the votes may call, and arrange to hold, a general meeting.
Cl 13.3 of YGL’s Constitution specifies that the Company may elect a person as a Director by resolution passed in general meeting.
Cl 13.5 stipulates that the Company may by resolution remove any Director before the expiration of his period of office, and may by resolution appoint another person in his place.
Issues
There were two key issues the Court was required to assess:
1. Whether KCL’s proceedings against YGL commenced contrary to s 659B of the Corporations Act. That is, was it within KCL’s power to commence proceedings in relation to a takeover bid? Or, should proceedings have been stayed under s 659B(2), contrary to the primary judge’s finding?
This issue requires an assessment of whether KCL were within the scope of s 659B(1) to ‘commence court proceedings in relation to a takeover bid’.
2. Whether KCL’s notices to remove and nominate / elect directors were valid and therefore whether KCL’s call for a general meeting per s 249F was valid. In other words, did KCL’s proposed resolutions for the election of directors permit the giving of a financial benefit to KCL, thus operating to exclude their right to vote?
This issue requires consideration to be given to cls 13.3 and 13.5 of YGL’s Constitution. In particular, whether cl 13.3 operated to exclude KCL’s right to vote.
Judgment
In relation to the first issue, this is a matter of statutory construction. To construe the meaning of s 659B and whether KCL failed to comply with this provision, the Court applied the well-established principles set out in Lionsgate Australia Pty Ltd v Macquarie Private Portfolio Management Ltd. Bell CJ in a joint judgment with Payne and Stern JJA, found that unless the statutory words clearly and unambiguously apply, the Court should not hold that s 659B prevents the commencement of proceedings by a party. If the proceedings do not fall within the definition in s 659B(4), there is no restriction on a party commencing or continuing with the proceedings. Essentially, the text, context, and purpose do not support an expansive meaning that would in effect limit the number of proceedings in this Court. Instead, it supports a construction that limits the exclusion of the Court’s jurisdiction to proceedings in relation to a takeover, which either concern the takeover offer or impact the progress or outcome of the bid. As a result, KCL lawfully commenced proceedings against YGL.
Regarding the second issue, the Court held that a resolution to appoint a director to a public company does not, of itself, confer or permit any financial benefit to be given to another company. This means that KCL’s intention to move a resolution for the removal of directors at YGL’s general meeting was valid in accordance with cl 13.5 of the Constitution. In addition, KCL were not gaining a financial benefit by proposing directors, pursuant to cl 13.3. Hence, the clauses did not operate to exclude KCL of this power of removal and KCL were entitled to vote its interests as majority shareholder.
The appeal was dismissed in favour of KCL’s position.
Impact
This decision reinforces that the Court’s power to grant a stay under s 659B(2) is discretionary. It does not follow that a contravention of the provision would result in the setting aside of the primary judge’s order. It is important to recognise that Courts retain jurisdiction over cases that are critical to the bid itself, such as in this case where the bid’s outcome could potentially be affected. Ultimately, the Court should not hold the jurisdictional prohibition in s 659B applicable unless the statutory language expressly supports that conclusion.