A recent decision of the New South Wales Supreme Court, Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287, has highlighted, among other issues, the importance of properly attending to minutes.

Facts

The board of directors of James Hardie Industries Limited (Company) met on 15 February 2001.

The minutes of the Board meeting contained an entry to the effect that the Company explained the impact of the resolution passed at the meeting to approve an ASX announcement and to execute the ASX announcement and send it to the ASX.

The minutes of the meeting were signed by the chairman at the next Board meeting held on 4 April 2001.

On 7 April 2001, the minutes of the meeting on 15 February 2001 were sent to the secretary of the Company. Therefore, this was the earliest date at which it would have been possible for the minutes of the meeting held on 15 February 2001 to have been included in the minute books.

Arguments

Australian Securities and Investment Commission (ASIC) argued the following:

1. That under section 251A(6) of the Corporations Act (Act) a minute has the benefit of a statutory presumption that a minute is evidence of the proceeding or resolution to which it relates, unless the contrary is proved.
   Therefore the defendants must prove the contrary of the stated fact that the ASX announcement was approved by the board of the Company.
2. That under a general provision of the Act (section 1305) the draft minute document, as a book required by a body corporate to be kept under the Act, is admissible in evidence and is prima facie evidence of the matters stated or recorded in them.
   This is a presumption which can be rebutted if there is no requirement of the corporations legislation for such a document to be kept by a body corporate.

Held

Section 251A(6) of the Act requires documents which are accorded evidentiary value to be “so recorded and signed”.

As the minutes of the meeting on 15 February 2001 were not recorded in a minute book, within one month, section 251A(6) of the Act was not engaged and the minutes had no special evidentiary value.

Gzell J. applied the observations of Wilcox J in Claremont Petroleum NL v Cummings (1992) 110 ALR 239 that if a minute is to be regarded as prima facie evidence of the proceedings at a meeting, then the condition that a minute be entered within one month of the relevant meeting should be strictly applied.

If a minute is to be given evidentiary value, it ought to be a contemporaneous document, as it will be more likely to be an accurate reflection of the proceedings at a meeting rather than a reconstruction of them.

Lessons from Overseas

A decision from the Supreme Court of Delaware, in the case of Walt Disney Company Derivative Litigation 906 A.2D 27 (Del. 2006), emphasizes the need for sufficiently detailed minutes to avoid costly and time consuming litigation, stating that:

1. minutes should be prepared while fresh in the minds of the directors;
2. materials presented to the board in meetings should be attached as exhibits (or referenced so that they are ascertainable);
3. written records should be sufficiently detailed to explain all that occurred during the course of the meeting; and
4. discussions with directors should be included (e.g. stating discussion ensued may not be adequate).

Significance

In order for parties to be able to rely on minutes, the minutes must be accorded evidentiary value the following must be observed.

1. They must be signed within a reasonable time after:
   (a) the meeting, by either the chair of the meeting or the chair of the next meeting;
   (b) the resolution is passed, by a director, where no meeting is held; or
   (c) the declaration is made, by the director, where the company is a proprietary company with only one director.
2. Recorded in a minute book within one month of a meeting.
3. Sufficiently detailed.
4. A minute signed and recorded, as described above, will be evidence as to the events of the meeting, unless the contrary is proved, to be determined by weighing up the evidence for and against the happening of events recorded in a minute.

It is important to note that there is no reversal of the onus of proof as to whether minutes will be evidence of proceedings, resolutions or declarations to which it relates.

If you would like more information please contact David Grace on (07) 3231 2421.