Supreme Court invalidates inquorate meeting despite Corporations Act saving provision
Kelly & Anor v Lask Nominees Pty Limited & Anor [2026] TASSC 43 | Supreme Court of Tasmania | 8 July 2026
On 8 July 2026, the Supreme Court of Tasmania delivered an important decision for private companies and shareholders in Kelly & Anor v Lask Nominees Pty Limited & Anor [2026] TASSC 43. The case provides guidance on the interaction between company constitutions and shareholder agreements, the operation of quorum requirements, and the limits of the validating provisions contained in s 1322 of the Corporations Act 2001 (Cth).
Background
The dispute concerned Evolution Hardware Pty Ltd, a company involved in the importation and distribution of Evo Stone products. At the relevant time, the company’s shareholders were divided into two competing groups. One group comprised Marcus Kelly, Belinda Hingston and Cameron Brooke, who together held a slight majority of shares. The opposing group comprised Nathan Newman and Lask Nominees Pty Ltd.
In August 2025, a notice was issued calling a shareholders meeting to consider, among other matters, removing Mr Kelly as managing director and secretary and appointing new management. The majority shareholders challenged the validity of the meeting and advised that they would not attend.
The meeting nevertheless proceeded with only two shareholders present. Resolutions were passed purporting to remove Mr Kelly and appoint new directors, and ASIC was subsequently notified of the changes. The applicants sought declarations that the meeting and the resolutions passed at it were invalid.
Constitution versus shareholder agreement
A central issue was whether the meeting had the necessary quorum. The company’s constitution provided that the quorum for a members’ meeting was two members. However, the shareholder agreement contained a different requirement: the quorum had to represent at least 50% of the company’s shareholding.
The shareholder agreement expressly stated that it would prevail over the constitution in the event of inconsistency. It also included provisions by which all shareholders agreed to vary the constitution where necessary.
Justice Brett held that the shareholder agreement prevailed. Applying ordinary principles of contractual interpretation, the Court found that the shareholders had clearly intended the agreement to take precedence over the constitution. As a result, the applicable quorum requirement was the 50% shareholding threshold in the shareholder agreement.
| Because only shareholders representing 8,333 shares attended, and the company had 16,668 shares on issue, the required quorum was not achieved. The meeting was therefore inquorate. |
Can section 1322 save an inquorate meeting?
The respondents argued that even if the meeting lacked a quorum, it was validated by s 1322 of the Corporations Act. Section 1322 is designed to prevent proceedings from being invalidated merely because of procedural irregularities. The legislation expressly includes the absence of a quorum within the definition of a procedural irregularity.
The applicants contended that the defect should be treated as substantive rather than procedural because the resolutions purported to remove the managing director of the company.
The Court rejected that argument. Following earlier Tasmanian authority, including Whitehouse v Capital Radio Network Pty Ltd, Justice Brett confirmed that the absence of a quorum is a procedural irregularity for the purposes of s 1322, even where those involved knowingly proceed with a meeting despite understanding that no quorum exists.
Why the meeting was still invalid
The more difficult question was whether the irregularity caused “substantial injustice”. If substantial injustice is established, s 1322 does not automatically validate the proceeding.
The Court found that substantial injustice existed. The shareholder agreement was structured around the principle that the managing director would be the person supported by a majority of shareholders. The majority shareholders had made their opposition to the proposed resolutions clear and had expressly indicated that they would not attend the meeting.
Despite that knowledge, the minority shareholders proceeded to hold the meeting and purported to remove the managing director in circumstances where the agreed quorum requirement had not been satisfied. The Court concluded that allowing the resolutions to stand would undermine the framework the shareholders had agreed upon for the governance of the company.
Accordingly, the Court declared both the meeting and all resolutions passed at the meeting invalid and of no legal force or effect.
Key takeaways for business owners
| No. | Lesson | Practical point |
| 1 | Shareholder agreements can be decisive. | Where shareholders clearly agree that a shareholder agreement prevails over the constitution, courts may give effect to that bargain. |
| 2 | Quorum requirements matter. | Even where a meeting is convened, resolutions can be set aside if the applicable quorum requirement is not met. |
| 3 | Section 1322 is not a cure-all. | The Corporations Act may save procedural defects, but not where the irregularity causes substantial injustice. |
| 4 | Governance documents should be reviewed regularly. | Companies with both constitutions and shareholder agreements should ensure those documents operate consistently and clearly. |
Final thoughts
The decision reinforces the importance of carefully drafted shareholder agreements and the need for shareholders to comply with agreed governance mechanisms. While the Corporations Act contains provisions designed to prevent technical defects from derailing corporate decision-making, those protections will not extend to conduct that causes substantial injustice or undermines the governance framework agreed upon by shareholders.
For businesses, directors and shareholders involved in governance disputes, the decision is a timely reminder that procedural requirements are often more than mere technicalities. They are safeguards designed to protect the rights and expectations of stakeholders.
This article is intended as general information only and should not be relied upon as legal advice. If you require advice about a shareholder, director or corporate governance dispute, you should seek advice about your specific circumstances.