In this case, the Supreme Court of New South Wales construed the meaning of “persons eligible to vote” for the purposes of a special majority shareholder approval requirement to mean a special majority of those present at the meeting, and not all shareholders technically eligible to vote. The Court held that by declining to attend a meeting, a shareholder submits to the majority of the people present to make the relevant decision.
Approval of the merger of an accountancy business which was operated via a unit trust required a “special majority” which was defined under the Unitholders Deed (Deed) to mean “a vote of a majority (in number and not equity) of the persons eligible to vote in respect of” a particular resolution.
The question before Young AJA in the Supreme Court of New South Wales was whether, in the circumstances, “special majority” meant:
- two thirds of the total number of unitholders; or
- two thirds of the unitholders present and voting at the meeting.
Young AJA rejected the argument that the reference to “persons eligible” meant that what was required was a majority of all unitholder (and not just those at the meeting) because all unitholders were eligible to vote.
Instead, Young AJA held that eligibility to vote must be determined in accordance with the Deed and a unitholder who declines to attend the meeting (voluntarily or involuntarily) has submitted to the parts of the Deed which require a quorum and entitle a majority of those who are present and voting to make the decision.