The original question assumed that the shareholders wished to maintain the resolution as stated but that the board sought to go behind it to look at what had happened in the meeting. It seems unlikely, therefore, that rectification would loom large. The board, if it sought to rectify the document, would have no chance in circumstances where it is plain that the shareholder body considered that the resolution fairly reflected its ultimate intention.

Unless the motion was unanimous, I doubt whether records of the debate leading to the resolution would be terribly helpful in interpreting the resolution (except to the extent that it established the argot of the shareholders and therefore gave context to the language of the resolution). Using that material to contradict or modify the ordinary meaning (in context) of the language of the resolution would raise the same problem that references to parliamentary debates pose in statutory interpretation. I like this statement by Lord Steyn in the John Lehane Memorial Lecture 2002 (published at (2003) 25(1) Sydney Law Review 5):

It is sometimes meaningful and appropriate for a judge to refer to the intention of parliament in recognition of its supreme law-making power. It is also perfectly sensible to say that legislation as duly promulgated reflects the will of parliament. But it is quite a different matter to ascribe to a composite and artificial body such as a legislature a state of mind deduced from exchanges in debates. The law can ascribe to legal persons, such as companies and state agencies, an intention to commit particular acts. Rules of attribution have been developed to suit the demands of particular contexts. But the argument that a legislature, operating through two chambers, may have an intention revealed by statements in debates is altogether more ambitious. Until Pepper v Hart, under the common law, there was in England no rule of attribution, or rule of recognition, which treated statements of ministers as acts of parliament.

And, of course, Hansard will usually be a much more complete record than that made of any company meeting.

Cases like Byrnes v Kendle (2011) 243 CLR 523 show that rules excluding extrinsic evidence except for particular purposes apply as much to trust deeds as they do to memoranda of contracts; the common thread being the fact that the instrument records a consensus. I think the analogy will probably extend to the language of a shareholder resolution.

I would say that the answer lies in the area of company law and meeting procedure. If the written resolution is an accurate record of what was put to the members and what they voted on, then the fact that other points have been discussed is not at all relevant and there is no question of rectification. If the resolution was not well drafted so it did not achieve the result that whoever drafted it wanted, they're stuck with the answer but can put it to a new meeting. As with any text, there might be some ability to shift meaning through a process of interpretation but with a less liberal approach than might be taken with a contract because it has a semi-public flavour with the potential to impact on third parties.

On the other hand, if an element of the matter put to the meeting was agreed upon and not recorded properly in the resolution, then the "resolution" is not reflecting the results of the vote and does not meet the statutory test for a resolution. I here assume that most jurisdictions have something simiilar to s 105 of the NZ Companies Act 1993 (since we borrowed it from elsewhere) which says that a resolution is one approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question. So if the directors are acting in accordance with such a vote, the fact the "resolution" is not an accurate record will not stand in their way.

Barry Allan

Dear Colleagues:

 

A student posed an interesting question today:

 

Assume shareholders passed a resolution, (to reallocate shares or change share classes). Assume that the board then did something else on the grounds that this other thing was discussed but not included in the actual resolution. I.e., this is what we really meant...

 

Can the shareholders rely on the parol evidence rule to keep out evidence of these other discussions and enforce the resolution as written?

 

In short, would the parol evidence rule apply to a shareholder resolution or does it apply only to traditional contracts?

 

I want to say yes but don’t have any case for saying so.

 

Am I right?

 

Any thoughts greatly appreciated.

 

Thanks

Matt

 

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Matthew P Harrington
Professeur
Faculté de droit
Université de Montréal
www.commonlaw.umontreal.ca
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