In Australasian Centre for Corporate Responsibility v Commonwealth Bank of Australia [2016] FCAFC 80 the Federal Court of Australia Full Court dismissed an appeal against the trial judge’s decision that two member resolutions proposed pursuant to section 249N of the Corporations Act 2001 were not resolutions that could validly be moved at an annual general meeting of CBA.
The appellant applied for a declaration that the proposed resolutions “could validly be moved” at an AGM. In effect it argued that the disputed resolutions should have been put to the meeting in the circumstances of this case. The appellant accepted that the proposed resolutions were not binding on the directors, and that the resolutions would have no legal effect.
The court rejected the argument and decided that:
“The appellant’s submission misunderstands the nature of the company as an entity distinct from its shareholders and directors. An act of the company (of which a resolution of its members is an example) must necessarily be an act which the company has the capacity or power to undertake. The legitimate interests of the various shareholders in the management of a company are distinct interests which cannot be aggregated to provide a justification for a resolution of the shareholders in general meeting, because the powers and capacities of the company arise from its constitution and statute and not from the legitimate interests of its shareholders…
we reject the submission that the resolutions could be put (or at least required to be put) to the meeting in the absence of a power vested in the shareholders in general meeting to pass the resolution as an act of the company…
We see nothing in the legal powers and capacities of an individual which would support the existence of a legal power or capacity in the company in general meeting to express an opinion, by resolution, on a matter concerning the company’s management. An individual’s expression of an opinion, even an opinion concerning him or herself, ordinarily does not involve the exercise of any legal power or capacity. The appellant’s submission confuses legal powers and capacities with physical powers (in this case, the power of speech). The shareholders of a company are, of course, free to express their opinions concerning the management of the company, individually and collectively.
We accept that the disputed resolutions do not, in terms, require the directors of the Bank to exercise the power of management in any particular way. However, that circumstance is not sufficient to make them resolutions that members are entitled to propose to the shareholders in general meeting. Once it is accepted that a resolution requires some constitutional or statutory basis, it is necessary to find a power that the shareholders may exercise to justify the resolution. The appellant failed to identify any aspect of any “plenary” or “reserve” power vested in the shareholders in general meeting to provide that justification.”
The Full Court also rejected the appellant’s argument that the Bank’s statement to members from the Board that the Board did not consider the resolution to be in the best interests of the company and recommending that shareholders vote against the resolution, with reasons for the Board’s recommendation went beyond the Bank’s powers. The Full Court agreed with the trial judge that the directors’ power to include the statement was derived from the Bank’s constitution and from the directors’ duty to provide such material as will fully and fairly inform shareholders of the matters to be considered at a meeting to enable them to make a properly informed decision.
