FEDERAL COURT OF AUSTRALIA

Australian Olives Limited v Stout (No. 2) [2007] FCA 2090

CORPORATIONS LAW – consideration of an application by members of a managed investment scheme registered under the provisions of the Corporations Act 2001 (Cth) for Orders for the convening of a meeting of scheme members pursuant to s 252E(1) of the Act – consideration of whether a declaration ought to be made as to a chairman’s failure to put a motion to an earlier meeting of scheme members – consideration of whether an Order in relation to the earlier meeting ought to be made pursuant to s 1332 of the Act

Corporations Act 2001 (Cth), Chapter 5C, s 252D, s 252S, s 601FJ(1), s 601FJ(2), s 601FN, s 601FP, s 252E, s 1332(1), s 1332(2), s 1332(4), s 601FC(1)(c), s 601FD(1)(c), s 601FM(1), s 252B, s 252C(1), s 252F, s 252G(1), s 252J, s 252L(1), s 252M, s 252N, s 252P, s 252R(2), s 252R(3), s 253K(1), s 253K(2)(a), s 252J(1), s 253L(2), s 253L(3)

Australian Olives Limited v Stout [2007] FCA 1958 - noted

Corpique (No. 20) Pty Ltd v East Court Ltd (1989) 15 ACLR 586 - noted

Re Direct Acceptance Corporation Ltd (1987) 5 ACLC 1037 - quoted

McLean Bros & Rigg Ltd v Grice (1906) 4 (Pt 1) CLR 835 - quoted

Re Indian Zoedone Company (1884) 26 Ch. D 70 - noted

Re Triden Contractors Ltd (1992) 30 NSWLR 615 - noted

Byng v London Life Association Ltd [1990] Ch 170 - quoted

Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 K.B. 223 - noted

Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 - noted

AUSTRALIAN OLIVES PROJECT NO. 6 (ARSN 107 866 259), AUSTRALIAN OLIVES PROJECT NO. 4 (ARSN 096 215 342), AUSTRALIAN OLIVES PROJECT NO. 5 (ARSN 103 920 190) AND AUSTRALIAN OLIVES LIMITED (ACN 078 885 042) v ANNE STOUT & ORS

QUD355 OF 2007

GREENWOOD J

24 DECEMBER 2007

BRISBANE

THE COURT ORDERS THAT:

1.                  The amended application filed by the respondents as applicants amending on 10 December 2007 the application filed on 15 November 2007 is dismissed.

2.                  The applicant respondents shall pay the costs including reserved costs of the application and the amended application. 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The respondents in this proceeding are the applicants on an amended interlocutory application filed on 10 December 2007 by which they seek certain relief in relation to a meeting of members of a managed investment scheme described as Australian Olives Project No. 6 (‘Project 6’) registered by the Australian Securities and Investments Commission (‘ASIC’) for the purposes of Chapter 5C of the Corporations Act 2001 (Cth) (‘the Act’).  Australian Olives Limited (‘AOL’) is the responsible entity for the scheme.  This scheme is one of six managed investment olive schemes of which AOL is the responsible entity.  Issues in relation to Australian Olives Project No. 4 (‘Project 4’) and Australia Olives Project No. 5 (‘Project 5’) are the subject of orders and reasons for judgment in Australian Olives Limited v Stout [2007] FCA 1958. 

2                     Project 6, like Projects 4 and 5, was established to manage the cultivation of olive trees and in consequence olive production at Yallamundi, a property located in the Darling Downs region of south western Queensland.  Project 6 was established throughout 2004 and 2005.  The project involves an area under cultivation of 137.1 hectares; a tree density per hectare of 353 trees; an investment term of 19 years; and the production of nine olive varieties.  Project 6 has a Product Ruling from the Australian Taxation Office of PR2004/7. 

3                     Each project comprises a number of ‘groves’ and each grove represents one interest in the scheme.  There are 914 groves in Project 6.  The project is structured in this way.  Members in the project hold one or more interests in the project as well as a proportional share in the company which owns the land on which Project 6 operates, called Collective Olives Groves Limited (‘COGL’).  Each member enters into two agreements relating to the operation of Project 6, a Licence Agreement and a Management Agreement both of which are conditional upon each other being entered into.  The Licence Agreement is made between COGL and a member pursuant to which COGL grants a licence to each member to use and occupy a specific allotment of land for the purpose of growing olives for commercial gain.  The Management Agreement entered into between AOL and each member appoints AOL to manage each member’s olive growing activity on the licensed allotment.  AOL charges each member a management fee pursuant to the Management Agreement.  Some members of Project 6 have entered into loan agreements with a financier, Collinsville Finance Pty Limited (‘Collinsville Finance’) to assist members to pay monies owing by them to COGL and AOL. 

4                     On 5 October 2007, a number of members of Project 6 caused a Notice of Meeting of Members to be issued to all members calling a meeting of project members for 10.00am on 30 October 2007 at a nominated address in Fremantle, Western Australia to conduct the following business:

Election of Chairperson

Pursuant to section 252S of the Corporations Act, 2001, the members present must elect a member present to chair the meeting.  Nominations will be accepted on the floor of the meeting and a member will be elected to chair the meeting from those nominations.  The Managing Director of Primary Securities Ltd will make himself available to chair the meeting if the members do not select any other chair. 

Extraordinary Resolution – Change of Responsible Entity

That subject to the variation to the Australian financial services licence No. 224107 of Primary Securities Limited ABN 96 089 812 635 to permit it to operate the project, the current responsible entity of the Project Australian Olives Limited ACN 078 885 042 be removed as responsible entity of the Project and that Primary Securities Limited be appointed as the new responsible entity of the project.  

5                     The Notice of Meeting attached a list of 18 members calling the meeting.  The notice recites that the attached list of members of Project 6 hold interests in the project constituting 639 groves out of a total of 914 groves representing 70% of the votes that may be cast at a meeting of the project’s members.  The notice also attached a document identifying three specific issues said to have been taken up with AOL, namely, a contended conflict of interest between the commercial interests of AOL and the interests of the members; a question concerning management fees payable by members under the prevailing arrangements governing Project 6; and a proposed restructure of the scheme. 

6                     During the course of October 2007, exchanges took place between AOL and the proposed new responsible entity, Pacific Securities Limited (‘PSL’) and between AOL and members.  In those exchanges, AOL contended that certain defects in the Notice of Meeting raised the question of whether the meeting could properly proceed.  On 25 October 2007, AOL commenced proceedings against those members of the Project 6 calling the meeting and sought a declaration that the Notice of Meeting did not comply with the Act in a number of respects and related relief.  That application was the subject of a number of Orders made on 29 October 2007 by which, upon the mutual undertakings of the parties to preserve the status quo with respect to voting rights, ownership of each member’s interest and other matters, the Application was adjourned to a date to be fixed.  Order 2 was in these terms:

2.         The meeting scheduled to occur at Fremantle on 30 October 2007 at 10.00am be adjourned until Wednesday 7 November 2007 at 10.00am at the offices of Piper Alderman, Level 23, Governor Macquarie Tower, 1 Farrar Place, Sydney in the State of New South Wales.

7                     Other Orders made on 29 October 2007 provided for the respondents to send a notice of the adjournment of the meeting to all investors in accordance with an annexure; AOL to despatch particular material by Wednesday, 31 October 2007 to members; the respondent members to distribute particular material by Thursday, 1 November 2007; communications between AOL and members of Project 6 and the respondent members of Project 6 be limited to the two particular letters mentioned in the Orders, the Notice of Meeting and any responses made to communications from third parties. 

8                     Those Orders made with the consent of the parties speak for themselves.  However, although there was no ‘hearing’ on 29 October 2007, the spirit of the Consent Orders seems to have been that material was to be exchanged within confined limits between AOL, members of Project 6 and the respondent members to the proceeding addressing commercial issues alive between the participants so as to inform consideration of the proposed resolutions with the meeting of members being adjourned to 10.00am on Wednesday, 7 November 2007. 

9                     That meeting took place on the nominated date and commenced at 10.30am.  Mr Anthony Johnston and Mr Blake Ammit, Directors of AOL attended the meeting.  Mr Robert Garton‑Smith the Managing Director of PSL also attended the meeting.  Mr Graham Steer, a Project 6 member, attended as did Mr Adam Stoker of Piper Alderman Solicitors, the solicitors for the respondent members and Mr Nathan Shaw, Solicitor, of McMahon Clarke Legal, the solicitors for AOL.  Mr Stoker in his affidavit filed 13 November 2007 deposes to the number of votes that were eligible to be cast at the meeting as 488 made up of 416 votes by proxy in favour of Mr Garton‑Smith in support of the resolution; nine votes by proxy in favour of the chairman of the meeting in support of the resolution; 21 votes by proxy in favour of the chairman of the meeting against the resolution and 42 votes against the resolution by members of Project 6 who were present and in person made up of five votes by Mr Steer and 37 votes held by Collinsville Finance. 

10                  Although Mr Garton‑Smith held 416 votes by proxy which he sought to cast in electing the chairman of the meeting, s 252S(3) of the Act provides that the members present at a meeting called under s 252D must ‘elect a member present to chair the meeting’.  Mr Ammit, Mr Johnston and Mr Steer as members present resolved in favour of Mr Johnston chairing the meeting.  Paragraphs 53 to 67 of the affidavit of Mr Stoker describe the discussion that took place during the course of the meeting.  Mr Stoker says that as chairman of the meeting, Mr Johnston said he was ‘concerned that Primary Securities does not have a financial services licence authorising it to conduct this scheme.  I do not believe that the resolution can be put to the meeting.  Does Primary Securities have a licence?’  Mr Garton‑Smith said that ASIC does not generally grant a licence to operate a scheme until after the members have resolved the replacement of the responsible entity and that ASIC does not issue more than one licence authorisation for one scheme.  Mr Johnston said that the resolution could not be put to the meeting and that the resolution could not be passed as it was subject to PSL becoming appropriately licensed.  Mr Johnston said that he was concerned that because PSL did not have a licence, the scheme would be ‘left in limbo and that is not in the best interests of the members.  The resolution cannot be put to the meeting because it is subject to PSL having a licence’.  Mr Stoker says that debate took place between Mr Garton‑Smith and Mr Stoker about the construction and interpretation of the proposed resolution; the nature of PSL’s general licence; and ASIC’s attitude towards granting licences to a company to act as a responsible entity of a managed investment scheme.  At paras 59 and 60 of Mr Stoker’s affidavit, he describes these events.  Mr Garton‑Smith, notwithstanding the chairman’s refusal to put the resolution to the meeting, read the proposed resolution and said that he cast his 425 votes in favour of the resolution.  Mr Garton‑Smith called upon the chairman to put the resolution.  The chairman refused.  Mr Garton‑Smith moved a motion that the resolution be put.  The chairman refused and opened the meeting to further general discussion.  Mr Garton‑Smith then put the resolution to the meeting and said ‘I now vote upon that resolution and cast 425 votes in favour of the resolution.  I now declare that the resolution is carried’.  The chairman, Mr Johnston, said that Mr Garton‑Smith could not do that.  The chairman refused to recognise the casting of the votes as the resolution had not been put to the meeting.  Mr Johnston opened the meeting to further general discussion.  Mr Stoker says that Mr Johnston read s 601FJ(2) of the Act (prohibiting a change of the scheme’s responsible entity unless in accordance with Division 2 of Pt 5C.2) to the meeting and expressed the view that PSL could not become the responsible entity as it was not licensed to act as a responsible entity of Project 6 by ASIC.  Mr Garton‑Smith continued to call for the resolution to be put.  The chairman refused to do so and closed the meeting without adjourning the meeting to another date. 

11                  Mr Johnston in his affidavit sworn 20 November 2007 accepts aspects of Mr Stoker’s version of the conduct of the meeting, rejects aspects of the contended exchanges between Mr Johnson and Mr Garton‑Smith and deposes to additional contextual considerations he says he raised concerning PSL’s licence status.  Mr Johnston says his concern was to avoid a possible breach of the Act and contended that a meeting might be called once PSL secured a licence.  Mr Johnston says he observed ‘what possible downside is there in adjourning the meeting until such time as they have a licence, given that we have obligations to all projects and all members, I believe that on balance this is the most appropriate course’.  At para 18, Mr Johnston says that his refusal to put the proposed resolution to the meeting was based upon a concern that doing so would involve a contravention of ss 601FK and 601FA of the Act; the resolution if passed could not be effective having regard to its conditional nature; a resolution appointing an unlicensed responsible entity was inappropriate; and advice given to him during the course of the meeting by the two members present at the meeting.  Mr Johnston ultimately decided that there was ‘no real disadvantage to members’ in deciding that the resolution was unable to be put to the meeting. 

12                  The interlocutory application filed by the respondents in the proceeding on 15 November 2007 was amended on 10 December 2007.  The applicant respondents initially sought an Order pursuant to s 601FN and s 601FP of the Act that AOL be removed as the responsible entity of Project 6; an Order pursuant to s 601FP of the Act that PSL be appointed as the new responsible entity of Project 6; an Order pursuant to s 601FN and s 601FP of the Act that PSL be appointed a temporary responsible entity of Project 6 for a period of three months within which PSL would continue to prosecute its application for a licence to act as the responsible entity of Project 6; and in the alternative an Order pursuant to s 252E of the Act for the convening of a meeting of scheme members of Project 6 on 29 November 2007 to vote upon resolutions to remove AOL and appoint PSL with notices exchanged with relevant participants by particular dates. 

13                  The applicant respondents abandoned the application for those Orders and by their amended application, they seek, among other Orders, the following Orders:

1.         A declaration that at the meeting of the members of the managed investment scheme known as Australian Olives Project No. 6 … held 7 November 2007, the chairman failed to put and adjourn the motion.

2.         Pursuant to s 1322 of the Corporations Act 2001, the court make an order confirming the passing of the resolutions moved through Mr Rob Garton‑Smith at the meeting of members held 7 November 2007. 

3.         Alternatively, pursuant to s 252E(1) of the Corporations Act 2001, meetings of the members of Australian Olives Project No. 6 … be held on the                         day of December 2007 at the offices of Frenkel Partners, Level 18, 500 Collins Street, Melbourne at 12 noon at which time and place the following resolutions will be voted upon by the meeting: 

            a          Pursuant to s 601FM(1) of the Corporations Act 2001, Australian Olives Limited … be removed as the responsible entity of the managed investment scheme Australian Olives Project No. 6 …

b          Pursuant to s 601FM(1) of the Corporations Act 2001, Primary Securities Limited … be appointed as the new responsible entity of the managed investment scheme Australian Olives Project No. 6 …

4.         Pursuant to s 1319 of the Corporations Act 2001:

a          AOL shall forthwith send a Notice of the meeting to each member of the scheme … Project No. 6 … including a copy of these orders and the period of notice fixed by Section 252F of the … Act … shall to that extent be abridged.

b.         The members present at the meeting shall elect a member present to chair the meeting.

c.         Nominations for the Chair shall be accepted at the meeting from members present on the floor of the meeting.

d.         The Chair will be elected from those nominations by a majority vote of the members present.

14                  As to para 1, AOL accepts that Mr Johnston did not put the proposed resolution to the meeting and closed the meeting rather than adjourn it.  AOL says the essence of its position is that it was proper to do so.  There is no utility or purpose served in making a declaration as to that matter which, in any event, is not in controversy between the parties. 

15                  As to para 2, the applicant respondents in written submissions gave immediate emphasis to that part of the Application seeking an Order pursuant to s 252E(1) to convene a meeting of scheme members.  That emphasis suggested that Order 2 was no longer pressed.  However, after a brief adjournment to take instructions, counsel for the applicant respondents pressed Order 2 relying upon ss 1332(1), 1332(2) and 1332(4) to support the Order.  The contention is this.  AOL has an interest in maintaining its position as a responsible entity of Project 6 thus preserving its management revenue.  That interest is in conflict with the interests of members who by reference to lodged proxies, sought to remove AOL.  The conduct of Mr Johnston at the meeting on 7 November 2007, as a director of AOL, in acting as chairman of the meeting and refusing to put the motion to the meeting was the expression of that conflict.  The conduct of Mr Ammit, as a director of AOL, advising Mr Johnston in that course was the expression of a conflict on his part.  Such conduct, so the argument goes, is a contravention of s 601FC(1)(c) on the part of AOL and s 601FD(1)(c) on the part of Johnston and Ammit.  Mr Garton‑Smith’s election to put the motion to the meeting, cast the votes and pass the resolution was an attempt to remedy or cure the breach of duty by AOL and its directors.  In substance and effect, it is said, the resolution was put and properly voted upon resulting in the removal of AOL and the appointment of PSL.  Accordingly, the applicant respondents seek an Order pursuant to s 1332 of the Act confirming the passage of the resolutions. 

16                  The immediate difficulty is this. 

17                  Substantially into the course of his argument, counsel for the applicant respondents said that PSL no longer consents to act as responsible entity for Project 6.  The company now proposed as the new responsible entity should AOL be removed, is Huntley Management Limited (‘Huntley’).  There is simply no purpose to be served in making an Order or a declaration to the effect that the events of 7 November 2007 resulted in the passing of a resolution to remove AOL and conditionally appoint a company to act as responsible entity that will not act as responsible entity.  That result is further compounded by recognising that pursuant to s 601FM(2) of the Act, AOL in such a case, would be required within two business days to notify ASIC of the resolution and request ASIC to record PSL as the new responsible entity notwithstanding that it refuses to accept the appointment. 

18                  There are two further matters. 

19                  First, the Order sought by para 2 is not one falling within the scope of ss 1332(1), 1332(2).  The matter sought to be remedied by the Order is not a procedural irregularity for the purposes of ss 1332(1) and (2).  Secondly, AOL contends that the meeting on 7 November 2007 was properly convened; the members present, properly elected Mr Johnston as chairman; the conduct of the meeting fell within the authority and control of the chairman of the meeting and Mr Johnston was entitled to decide that the motion ought not to be put to the meeting.  AOL relies upon a number of authorities for the proposition that the question of whether a motion ought to be put to the meeting is one for the chairman to decide and the Court will not readily intervene in a supervisory review of the exercise of the chairman’s discretion unless the Court is satisfied that the discretion was exercised in bad faith.  The relevant principles are these.  The acts of the chairman must be demonstrated to be other than bona fide or at least neglectful.  (Corpique (No. 20) Pty Ltd v East Court Ltd (1989) 15 ACLR 586 per Cohen J).  The chairman ‘as a matter of law has a wide discretion with which the Court will not interfere unless the exercise of the discretion can be shown to be invalid, e.g. on the ground that it was exercised in bad faith’ (Re Direct Acceptance Corporation Ltd (1987) 5 ACLC 1037, per McLelland J, at 1041).  Some questions must be determined by the chairman that are characterised as ‘emergent questions’, ie, ‘questions of fact which have to be decided then and there and as to which there is the general presumption, in the absence of fraud, that they were duly and properly decided.  It rests, therefore, upon the side impeaching such a decision to overturn it by evidence showing that it was without foundation, that the fact was wrongly decided, or that there was some legal requisite not observed’ (McLean Bros & Rigg Ltd v Grice (1906) 4 (Pt 1) CLR 835 at 860 and 861, per Barton J; Re Indian Zoedone Company (1884) 26 Ch. D 70 at p 77, per the Earl of Selbourne LC).  The chairman must act in good faith, in accordance with any relevant law, and on reasonable grounds.  If there is insufficient material available to the chairman to enable him or her properly to make such a determination in a particular case, the chairman should not purport to do so.  However, if the chairman does do so the Court will treat the determination as correct unless it is shown that it was not made in good faith or that there were no reasonable grounds to support it or that on the evidence before the Court the determination was incorrect in point of substance (see Re Triden Contractors Ltd (1992) 30 NSWLR 615 at pp 616 and 617 per McLelland J). 

20                  In Byng v London Life Association Ltd [1990] Ch 170, a decision of the English Court of Appeal, the Vice‑Chancellor suggested at 189 that a broader test might apply observing that ‘the chairman’s decision will not be declared invalid unless on the facts which he knew or ought to have known he failed to take into account all the relevant factors, took into account irrelevant factors or reached a conclusion which no reasonable chairman, properly directing himself to his duties, could have reached, i.e. the test is the same as that applicable on judicial review in accordance with the principles of Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 K.B. 223’.  Woolf LJ seemed to adopt a similar approach in Byng at p 194 and Mustill LJ did not differ in his reasons as to those matters.  The Court of Appeal of Victoria in Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466 per Kenny JA with whom Batt and Buchanan JJ.A agreed, elected not to decide the question of whether the formulation of the test in Byng is precisely the proper formulation for Australian Courts.  In Link,the validity of the chairman’s ruling depended upon whether the ruling facilitated the purpose of the power pursuant to which it was made.  In this case, the applicant respondents assert as a ground of invalidity, a want of good faith on the part of the chairman.  That want of good faith is also said to be an expression of a conflict of interest for the purposes of ss 601FC(1)(c) and 601FD(1)(c).  The applicant respondents seek to remedy the invalidity of Mr Garton‑Smith putting the resolution to the meeting, passing it and declaring it carried (rather than the chairman putting the resolution to the meeting) on the ground that the Court under s 1332(4) of the Act may make an Order ‘declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution or the corporation’. 

21                  As to s 1332(4), in order to exercise the power conferred by that section to cure the invalidity as contended, the Court would need to be satisfied that an invalidity arose by reason of the chairman’s refusal to put the resolution to the meeting.  It seems to me that the meeting of 7 November 2007 might properly have considered the proposed resolution.  Had the resolution been carried, the question would inevitably have arisen as to whether PSL’s appointment as responsible entity was made in contravention of Chapter 5C of the Act. 

22                  I do not propose to consider in any further detail the scope of the authority, powers or discretion conferred upon the chairman of the meeting or the principles upon which a Court will review the exercise of the chairman’s discretion as it seems to me that there is no purpose served by making any Order in terms of Order 2 especially as an expression of declaratory relief having regard to the position that PSL will simply not act and does not seek to act as a responsible entity for Project 6.  The applicant respondents now concede that approach to be appropriate.

23                  As to para 3, counsel for the applicant respondents now seeks an Order that a meeting of members of Project 6 be held on 28 February 2008 at the offices of Frenkel Partners in Melbourne at 12 noon on that date to vote upon a resolution that AOL be removed and Huntley be appointed as responsible entity.  The applicant respondents say that the intervention of the Court is necessary in order to ensure that a meeting is convened and that the proposed resolutions are put to the meeting and voted upon.  The applicant respondents say that in the absence of an Order of the Court, a meeting might be convened by members pursuant to s 601FM(1) consistent with action taken under Division 1 of Pt 2G.4 of the Act, however, there is a real possibility, it is said, that AOL will take steps to ensure that the proposed resolutions are not put to the meeting.  In other words, the members will again be deprived of an opportunity to actually vote on the proposed resolutions notwithstanding that 70% of the members of Project 6 support by proxy the proposed resolutions.  Counsel for the applicant respondents says that the conduct of officers of AOL in acting in a conflict of interest and in causing Collinsville Finance to write letters to members asserting that a vote in favour of the resolution to remove AOL would place members so voting in breach of the terms of financing agreements between members and the company, all give rise to an inference that AOL, by its officers, will seek to obfuscate the orderly resolution of the matter and prevent the putting of the proposed resolutions to any meeting.  Accordingly, the applicant respondents seek the supervisory intervention of the Court in making an Order for the convening of the meeting and the putting of the resolutions.  The Order is said to be necessary to protect the interests of the members of Project 6. 

24                  Counsel for the applicant respondents initially suggested that the meeting would not necessarily consider and does not need to consider an Order for the appointment of a new responsible entity and may simply seek to confine the proposed resolution to the removal of AOL.  Accordingly, counsel suggested that the applicant respondents would not press para 3(b) of the amended application which provides that any meeting convened pursuant to the Order consider a resolution to appoint a new responsible entity.  Counsel for the applicant respondents says that a resolution limited to the removal of AOL would not create any hiatus in the affairs of Project 6 because s 601FJ(1) of the Act provides that even if AOL is removed as responsible entity by resolution, AOL would continue to be the registered responsible entity for Project 6 until the registration details maintained by ASIC are altered to reflect the appointment of a new responsible entity.  Those details would be changed promptly upon the appointment of a new responsible entity.  However, in the course of further argument, counsel for the applicant respondents continued to press for an Order convening a meeting to consider both a resolution to remove AOL as responsible entity and a resolution to appoint Huntley as the new responsible entity. 

25                  Counsel for the applicant respondents presses the elements of para 3 on the footing that the conduct of AOL and its officers gives rise to real apprehension that any meeting convened by the members would miscarry.  Therefore, an Order of the Court together with the intervention of the Court’s supervision in convening the meeting and making Orders that the resolution be put, will enable the members to properly consider and vote upon the proposed resolutions. 

26                  The difficulty is this. 

27                  Section 252E(1) of the Act is in these terms. 

252E(1)           [Court may order meeting]  The Court may order a meeting of a registered scheme’s members to be called to consider and vote on a proposed special or extraordinary resolution if it is impracticable to call the meeting in any other way. 

[the emphasis given to impracticable and any is added]

28                  Part 2G.4 of the Act (by Divisions 1 to 6) provides a procedural mechanism for the convening of meetings of members of registered managed investment schemes.  Division 1 provides for the calling of a meeting of scheme members by the responsible entity.  Section 252B provides that a responsible entity must call and arrange to hold a meeting of scheme members to consider and vote on a proposed special or extraordinary resolution on the request of members with at least 5% of the votes that may be cast on the resolution or at least 100 members who are entitled to vote on the resolution.  Section 252C(1) provides that ‘members with more than 50% of the votes carried by interests held by the members who make a request under s 252B may call and arrange to hold a meeting of the scheme’s members if the responsible entity does not do so within 21 days after the request is given to the responsible entity’.  Section 252D provides a mechanism by which members may call a meeting.  It provides that members of a registered scheme who hold interests carrying at least 5% of the votes that may be cast at a meeting of the scheme’s members may call and arrange to hold a meeting of the scheme’s members to consider and vote on a proposed special or extraordinary resolution and the members calling the meeting must pay the expenses of calling and holding the meeting.  Division 2 deals with the procedural mechanism by which a meeting might be called.  At least 21 days notice must be given of a meeting subject to the scheme’s constitution (s 252F).  Written notice of a meeting must be given to each member of the scheme entitled to vote at the meeting, each director of the responsible entity, the auditor of the scheme and the auditor of the scheme compliance plan (s 252G(1)).  A Notice of Meeting must set out the place, date and time for the meeting; state the general nature of the meeting’s business; if a special or extraordinary resolution is to be proposed at the meeting, set out an intention to propose the resolution; and, the notice must contain a statement informing each member of a right to appoint a proxy; advise the member that the proxy need not be in favour of a member of the scheme; and advise that if a member appoints two proxies the member may specify the proportion or number of votes the proxy is appointed to exercise (s 252J). 

29                  Members reflecting a threshold of 5% of the votes that may be cast on the resolution (or at least 100 members entitled to vote at a meeting) may give the responsible entity notice of a resolution that they propose to move at a meeting of the scheme members (s 252L(1)).  Sections 252M and 252N set out responsibilities cast upon the responsible entity once notice is given pursuant to s 252L.  As to the meeting itself, it must be held at a reasonable time and place (s 252P).  A quorum for a meeting is two members and the quorum must be present at all times during the meeting (s 252R(2)).  Proxies are to be taken into account for determining a quorum (s 252R(3)).  If the meeting is convened by members under s 252D of the Act, the members present must elect a member present to chair the meeting (s 252S(3)).  This provision does not apply if the meeting is convened by order of the Court under s 252E and the Court has directed otherwise under s 1319 of the Act.  The auditor of a registered scheme and the auditor of the compliance plan are entitled to attend any meeting of the scheme’s members.  Division 5 deals with the appointment of a person to act as a proxy for a member to attend and vote at a meeting, the rights of proxies, the mechanism for appointing a proxy, dealing with proxy documents, the validity of a proxy vote and the appointment by a body corporate of an individual to act as its representative at a meeting of scheme members.  Division 6 deals with voting at meetings of members.

30                  Section 253K(1) of the Act provides that a poll may be demanded on any resolution although the registered scheme’s constitution may provide that a poll cannot be demanded on any resolution concerning the election of the chair of a meeting (s 253K(2)(a)).  An extraordinary resolution put to a vote at a meeting of scheme members must be decided on a poll (s 253J(1)).  At a meeting of scheme members, a poll may be demanded by at least five members present entitled to vote on the resolution or by members present with at least 5% of the votes that may be cast on the resolution of a poll, or by the chair of the meeting (s 253L).  The scheme’s constitution may provide that fewer members or members with a lesser percentage of votes may demand a poll (s 253L(2)).  A poll may be demanded before a vote is taken, or before the voting results on a show of hands are declared, or immediately after the voting results are declared on a show of hands (s 253L(3)). 

31                  Accordingly, there is nothing in the material that suggests that it would not be possible or practicable for members of the scheme who hold interests carrying at least 5% of the vote that may be cast at a meeting of the scheme’s members to call and arrange to hold a meeting of scheme members to consider and vote on a proposed special or extraordinary resolution, pursuant to s 252D(1), in accordance with the method set out in Division 2 of Pt 2G.4 of the Act.  Alternatively, members with at least 5% of the votes that may be cast on a proposed resolution or at least 100 members who are entitled to vote on the resolution may request the responsible entity to call and arrange to hold a meeting and upon such request the responsible entity must do so pursuant to s 252B of the Act.  The material demonstrates that the procedural steps and general arrangements for convening the meetings of members and formulating and issuing the Notices of Meetings in relation to a number of the schemes including Project 6 have been undertaken by Stantins Accountants and advisers of Hawthorn in Victoria.  Mr Spyridon Livadaras is a partner in Stantins and says that he is personally the adviser to a number of the respondent members convening meetings for each project.  Mr Livadaras has taken steps to obtain consents from members seeking to issue Notices of Meetings including the meeting of Project 6.  It seems that Mr Livadaras is intimately familiar with each of the registered olive schemes and is familiar with the requirements of the Act in order to convene a meeting. 

32                  I am not satisfied on the material that it is impracticable to call a meeting of scheme members for Project 6 by 28 February 2008 which is over two months away, in any way other than by means of a Court Order for the calling of a meeting. 

33                  The applicant respondents say, in effect, that impracticability for the purposes of s 252E of the Act must be determined having regard to all the circumstances including the contentions going to the conduct of Johnston and Ammit and through them AOL arising out of the refusal to put the resolution at the 7 November 2007 meeting; the conduct of Johnston in seeking advice at the meeting from persons said to have a conflict of interest with the members’ interests; the conduct of Collinsville Finance in threatening to call up loans made to members should they vote in favour of the resolutions (on the basis of a contended breach of the loan agreements in so doing); the failure to honour the Order of the Court made on 29 October 2007 adjourning the meeting called for 30 October 2007 to 7 November 2007; and the likelihood, it is said, that another meeting convened by the members in accordance with Pt 2G.4 will produce the same result as that which occurred at the meeting on 7 November 2007.  For all these reasons, it is impracticable, it is said, to call the meeting other than by Court Order to enable the members to consider and vote on the proposed extraordinary resolution. 

34                  The applicant respondents propose a meeting for 28 February 2008.  That meeting would be a new meeting to be convened in a way which would give proper notice of the business to be conducted, the resolutions and information going to those resolutions.  The proposed Order would direct the meeting convened on 28 February 2008 to consider and vote upon the proposed resolutions to remove AOL and appoint Huntley.  Steps can be taken by those seeking to call a meeting supported by Mr Livadaras and his staff at Stantins in sufficient time to convene a meeting for 28 February 2008 in any event.  The provisions of Pt 2G.4 are clear.  Those members concerned to call a meeting will no doubt take steps to inform other members of their concerns and encourage members to attend in person or by proxy.  No doubt those members calling the meeting will take steps to ensure that a sufficient number of like‑minded members are present to consider and vote upon a resolution to appoint a chairman of the meeting.  Having regard to the provisions of the Act discussed at [28] to [30] and the material filed by the applicant respondents upon which they rely, I am not satisfied that it is impracticable to call a meeting in any way other than by Order of the Court. 

35                  The particular consideration which warrants close attention is the conduct of Mr Johnston in refusing to put the proposed resolution to the meeting having regard to the Order of the Court made on 29 October 2007.  That Order ([6] of these reasons) provided for the adjournment of the meeting from Fremantle on 30 October 2007 to premises in Sydney on 7 November 2007.  The consequential Orders provided for exchanges of material.  A textual examination of the Orders, as I have indicated, seems to suggest that the spirit of the consent Orders seems to have been that material would be exchanged, within limits, so as to enable members to consider the proposed resolutions and vote upon them.  The Order of 29 October 2007 was not made after any deliberative process on the part of the Court.  In textual terms, the Order provides for an adjournment of the meeting.  The Order did not make provision for any supervisory conduct of the meeting or direct the putting of motions or proposed resolutions to the meeting.  The conduct of the meeting so adjourned fell, consistent with orthodoxy, to the chairman of the meeting elected by members present consistent with the provisions of the Act.  In textual terms, there was no failure to comply with the Order.  I am not satisfied that a failure to realise the expectation underlying the consent Order (if it be so) is a matter which renders the convening of a meeting in 65 days time by members, impracticable by any means other than by Order of the Court.  At that meeting, the members can consider the proposed resolutions to be put to the meeting.  Those resolutions might reflect both resolutions identified by the applicant respondents in this application, ie the removal of AOL and the appointment of Huntley or variations upon those proposed resolutions supported by relevant information. 

36                  By Order 4, the applicant respondents seek matters consequential upon the making of an Order pursuant to s 252E(1) of the Act.  Those matters are strictly in terms of aspects of s 1319 in any event.  However, I am not satisfied that an Order ought to be made for the convening of a meeting and accordingly no Order ought to be made pursuant to para 4 of the Amended Application. 

37                  Having regard to all of these matters, the Amended Application is to be dismissed with costs including reserved costs. 

Associate:

Dated:         24 December 2007