1875 Garden Gully United Quartz Mining Company v. McLister. J.C. rectors should not cease or be suspended so long as the board of directors should consist of a sufficient number of members to form a quorum. By rule 21 it was declared that three directors shall form a quorum, and shall have and exercise all the powers and authorities vested in the board of directors generally, as fully and effectually as if all the directors had concurred therein. By sect. 5, Act No. 228, it was enacted that the amount of calls unpaid upon any share should be deemed a debt due from the holder of the share to the company. 49] *By Nos. 29 and 30 of the company's rules it was declared that if any shareholder should neglect or refuse to pay any such call for the space of one month from the day appointed for the payment of the same, the directors should either proceed to enforce the payment thereof in manner prescribed by the Act 27 Vict. No. 228, or might proceed to declare the shares of such defaulting shareholder forfeited at any board meeting to be held after the expiration of six weeks from the day appointed for the payment of such call, and upon such declaration of forfeiture such defaulting shareholder should cease to be a shareholder in the company in respect of the shares so forfeited, and such shares and all benefit or emolument arising therefrom should vest in and become the property of the company absolutely. Provided that no such forfeiture should declared until seven days' notice of the intention of the directors to forfeit such shares should be given to the defaulting shareholder, by advertisement, to be inserted in three consecutive issues of one of the daily newspapers published in Sandhurst. On the 14th of January, 1867, a general meeting of shareholders which had been duly convened and at which the respondent was present, was held. At that meeting Messrs. Ladams, Bruce, Ashley, Hunter and Fernley were duly elected directors, Ashley, Hunter and Fernley being the three who received the lowest number of votes. Assuming rule 17 to be valid, notwithstanding sect. 39 of Act No. 228 expressly authorized the shareholders to make rules for the annual retirement of directors, and not for the quarterly retirement of some of them, Ashley, Hunter and Fernley ought to have retired at the next general quarterly meeting of shareholders held on the 11th of April, 1867. At that meeting, however, no retirement in express terms took place. All that is recorded is that Messrs. Hunter and J.C. 1875 Garden Gully United Quartz Mining Company v. McLister. McLevy were then nominated as directors, and no other candidates being proposed, were declared duly elected for the next six months. Nothing is recorded as to Ashley's having retired and been re-elected, but it was contended in argument that as no other candidates than Hunter and McLevy were proposed, it is to be assumed that Ashley virtually retired and was re-elected. *It is not very important, in the view which their [50 Lordships take of the case, whether Ashley legally continued to be a director after that meeting or not. It was held by the full bench of the Supreme Court that the company could not, under the provisions of sect. 39, Act No. 228, legally make a rule for the continuance of directors in office beyond the period of a year, as the act required an annual retirement. Mr. Justice Molesworth, however, appears to have entertained a different opinion in the case of rules made before incorporation. He says: "A question arose under sect. 39, Act 228, in Barfold Estate Gold Mining Company v. Klingender ('), as to the power of a company by rules before incorporation to enable their directors to hold office until their successors were appointed, although that time might exceed a year, and the court, having regard to the words of the section, 'rules for the election, removal, and annual retirement of some or all of the directors,' held that there was no such power. As to the Garden Gully Company, its rules were assented to before incorporation, and a reference to its rules was contained in the application for registration, so that, according to my opinion, a rule for the continuance of directors to hold office for more than a year, if no successors were appointed, would be valid; but I should consider myself bound by the case of Barfold Estate v. Klingender. It is unnecessary to discuss the points in which the full court differed from me as to the construction of the rules of the Garden Gully Company in Schmidt v. Garden Gully Company (3). Upon the following points we were agreed, that there must be properly appointed directors to make a call, and also to declare a forfeiture, and also that the election of five directors, a full board, at a quarterly meeting, April 14, 1869, was invalid under the rules. The rules contained no provision for their electing five; and I would say that those, if any, who legally held office before that election, taking as under the election, could not be deemed to act under their former title, but the full court said, as to the argument, that it was. competent to any general meeting to elect a full board if (1) 6 W. W. & A’B., 25. (2) 4 Australian Jurist, pp. 63, 137. 1875 Garden Gully United Quartz Mining Company v. McLister. J.C. there was no board in existence: 'We do not mean to say 51] that the general meeting in question could not have elected a full board if proper notice had been given of the intention to do so." Now in this case there is evidence which was not in Schmidt's Case, that an advertisement was inserted in the Bendigo Advertiser, 8th, 10th and 13th April, that the half-yearly general meeting of shareholders would be held at the office on the 14th, for the purpose of receiving report and balance sheet, electing a full board of directors, and for general business, and it has been argued that this might be a proper notice according to the view of the full court. I think that where all directors de facto are not legally appointed, there must be necessarily some way for a company to supply the defect, and that I think might be an extraordinary meeting convened under Act 228, sect. 23, that is, by fourteen days' notice, advertised in town and country newspapers, or by a quarterly meeting regularly convened, and having express notice of the object under the 8th rule of the company, which requires the giving of due notice under Act 228, that is, the same as is provided for an extraordinary meeting under it." If the decision of the full bench in the Barfold Estate Case was correct, the five directors appointed in January, 1867, ceased to exist in January, 1868, in which month they ought to have retired, and a new election to have taken place. But assuming, without expressing any opinion upon the subject, that rule 17 was valid, and that the company had power to provide for the retirement of some of the directors at the general meetings to be held in April and October respectively, and to declare that in the event of any general meetings not being held, the directors who ought to have retired at such meeting should continue in office, and in all respects be considered as re-elected; assuming, also, that by virtue of what took place at the meeting of the 11th of April, 1867, Messrs. Ladams, Bruce, Ashley, Hunter and McLevy then constituted a legal board of directors, the question is, Did Messrs. Hunter, Bruce and Ashley, who declared the forfeiture at the meeting held on the 18th of June, 1869, at that time constitute a valid board? Of those three, Hunter, it must be borne in mind, had been elected at the meeting of the 11th of April, 1867, expressly "for the next six months," and Ashley had continued 52] to act as director, *as already pointed out, without having expressly retired or been re-elected at the meeting of the 11th of April, 1867. J.C. Garden Gully United Quartz Mining Company v. McLister. 1875 No general meeting was held between the 11th of April, 1867, and the 14th of April, 1869. On the 8th, 10th and 13th days of April, 1869, an advertisement was published in the Bendigo Advertiser, stating that the half-yearly general meeting of shareholders would be held on Wednesday, the 14th of April, 1869, for the purpose of electing a full board of directors, and for general business; and at that meeting a full board, consisting of Messrs. Bruce, Glover, Hunter, Ashley and Wormald were elected. The entry is as follows: "Company's Office, 14th April, 1869. "General Meeting of Shareholders. "Present: Mr. Bruce in the chair, Messrs. Hunter, Ashley, Fernley, Philippi, Pay, Saunders and Schumacher. "The minutes of meetings of 14th January, 1867, 11th April, 1867, and of special meeting of 23d October, 1868, were read, and on the motion of Mr. Hunter, seconded by Mr. Ashley, were confirmed. "The meeting then proceeded to the election of a full board of directors, when the following gentlemen were nominated: Messrs. Bruce, Glover, Hunter, Ashley and Wormald. "There being no other candidate, it was moved by Mr. Connelly, seconded by Mr. Schumacher, that the abovenamed gentlemen be appointed directors. Carried. "The chairman then declared Messrs. Bruce, Glover, Hunter, Ashley and Wormald duly elected directors of the company. "Moved by Mr. Connelly, seconded by Mr. Schumacher, that the matter of forfeiture of shares be left in the hands of the directors to do as they may think fit. Carried. "That resolution was confirmed on the 14th October, 1869." It is clear that, according to rule 17, the election of a fresh board of directors was not the proper or ordinary business to be held at the general quarterly meetings in April or October. That was the proper business for the general meetings in January and July. The proper business for the April and October meetings was the retirement of the three directors who received the lowest number [53 of votes at the January and July meetings respectively, and the election of others in their place. If the five persons who were directors on the 11th of April, 1867, are to be deemed to have been re-elected prior to the meeting of the 14th of April, 1869, they must, according to rule 17, be deemed to have been re-elected at a general meeting in January, 1869, for they 1875 J.C. Garden Gully United Quartz Mining Company v. McLister. ought to have retired at that meeting if it had been held; and in that case, if they had been re-elected, the three who had received the lowest number of votes (and which were those three it is impossible to say) ought to have retired at the meeting of the 14th of April, 1869. It would be a strong measure under any circumstances to hold that Hunter, who in April, 1867, was in express terms elected for six months only, continued in office for two years. But the advertisement for the meeting in April, 1869, was express that the meeting would be held for the election of a full board of directors, and at that meeting a full board was elected. Their Lordships cannot treat the proceedings at the meeting of the 14th of April, 1869, as having any other operation than that of an election of a full board of five directors. They concur in the opinion expressed by Mr. Justice Molesworth, that those, if any, of the five directors who before that election legally held office, could not, after that election, act under their former title. The election of a full board necessarily involved the retirement of those, if any, who, up to that time, legally held the office of director. If the meeting of the 14th of April, 1869, is to be considered as an extraordinary meeting, fourteen days' notice of the meeting, and of the nature of the business to be transacted at it was necessary, and ought to have been published according to the provisions of section 23 of Act No. 228. If it is to be considered as the quarterly general meeting directed by rule 8 to be held in the month of April, a similar notice was necessary under the provisions of that rule and of section 23, Act No. 228 above quoted, especially as the business of electing a full board of directors was not any part of the business of a meeting held in the month of April. In any view, the meeting of the 14th of April, 1869, was held without due notice of the meeting and of the business to be transacted thereat; and their Lordships are of opinion that the election of a full board of directors at that meeting, 54] upon which the defendants relied in their answer, was invalid, and that the persons so elected had no power to declare a forfeiture. The forfeiture of the 18th of June, 1869, was consequently invalid, whether rule 17 was a valid rule or not; for if it was invalid, Hunter, Bruce and Ashley ceased to be directors after one year from the date of their appointments. Such forfeiture was, therefore, properly declared void by the decree of the 8th of October, 1874, from which this appeal is preferred. It was contended at the bar, on behalf of the appellants, |