Do you have a right to protect yourself by recording meetings you attend?

Not according to the South Australian Supreme Court. It has just held that the Chairman of a meeting and the meeting itself can prohibit the use of recording devices at the meeting.

If the wannabe recorder indicates that he still intends to record the meeting, the Chairman can adjourn the meeting.

Background

Alliance and Quasar formed a joint venture, governed by a management committee. Alliance had 25% of the votes on the management committee; Quasar had 75%.

At one of the meetings, Alliance produced recording equipment and announced its intention to record the meeting. The Chairman ruled that the meeting couldn't be recorded. He also put the matter to a vote, and Quasar voted its 75% against recording.

Alliance tried to record a subsequent meeting. Quasar said that it didn't want to continue the meeting. The Chairman adjourned the meeting.

Alliance took the matter to Court.

The Court began by dismissing an argument that the recording of the meeting was prohibited by the SA Listening Devices Act. It went on to consider the power of the Chairman and the meeting in relation to recording.

Did the Chairman and the meeting have the power to ban recording?

Alliance argued that banning recording did not fall within a Chairman's powers, because those powers only cover the procedure of a meeting - maintaining order and facilitating the transaction of business at the meeting. A member, it was argued, has a right to record meetings, and that right is not a merely procedural matter.

The Court held that a person at a meeting does not have an inherent right to record it. It then considered the extent of a Chairman's powers.

It agreed with Alliance that a Chairman's powers are purely procedural.

However, it took the view that "procedural matters" means anything at the meeting that is not a part of the "matters of substance discussed at the meeting". For example, if a Chairman were to prevent a member at the meeting from raising substantive issues about a relevant topic, then that would be more than just a procedural matter.

On that basis, a ruling, made in good faith, to prevent a meeting's being recorded was a procedural matter and therefore within the scope of the Chairman’s powers.

Once Alliance had indicated its intention to ignore the ruling (over Quasar's opposition), the Chairman was entitled to adjourn the meeting.

The Court also held that the management committee was empowered to vote against the recording of its meetings.

Implications

The first thing to note is that the JV agreement in this case didn't say anything about recording of meetings.

The Court held that, in the absence of an express provision in the JV agreement, the management meeting had the inherent power to make a majority ruling on matters incidental to the manner in which meetings were conducted (including recording).

Interestingly, the Court did not comment on what would have happened if the positions had been reversed. If a majority stakeholder announced its intention to record management meetings, where would that leave a minority stakeholder?

On one view, the minority stakeholder would have no alternative but to accept the decision or leave the meeting if it didn't want it to be recorded. However, things would be more complicated if the joint venture agreement required the minority stakeholder's presence for quorum. The Chairman of the meeting would then be on the horns of a dilemma: the majority would be exercising its right to make decisions on procedural matters, but that could make the meeting unworkable. In that situation, the Chairman would probably first have to rule against allowing the recording and, if the majority shareholder insisted on recording, adjourn the meeting.

The next interesting issue is whether this court ruling would apply to general meetings and board meetings of companies.

If a company’s constitution said nothing about recording, the court's decision could apply to general meetings of shareholders. However, there is an important relevant difference between general meetings and board meetings.

It is well recognised that shareholders are generally entitled to act in their own interests. Therefore, there is no reason why a general meeting shouldn't make a decision about recording based on what the majority thinks is in its own interests (provided that the minority shareholder wasn't being oppressed).

Directors are in a different position. They owe duties to the company, and so are not free to vote in their own self-interest. Unless allowed by the company's constitution, even nominee directors are not allowed to vote in the interests of the individual shareholders they represent. Accordingly, the decision whether or not to record board meetings has to be made on the basis of what's best for the company. In theory, a vote to record or not to record a board meeting could be overturned by a Court it was proved that the decision was not in the best interests of the company.

Conclusion

In an age in which many handheld devices can be used to make sound recordings, it is surprising that these issues have not previously come up in Court. Even after this case, it is clear that there is no simple rule to govern the use of recording devices in meetings.

Another interesting and complicating factor is the effect of State and Federal privacy and recording legislation. This decision was against a backdrop of South Australian legislation. The laws on recording of conversations differ from State to State, and the comments of the Court need to be considered in the context of jurisdiction. Federal telecommunications recording legislation would also be a relevant factor if some of the members of the meeting were participating by phone.

As a result, any proposal to record a meeting should ideally be flagged before the meeting, so that the practical and legal issues can be discussed and, where possible, resolved before the meeting begins. The alternative could be a breakdown of the meeting and an expensive visit to court.