FEDERAL COURT OF AUSTRALIA Aveo Group Limited v State Street Australia Ltd in its capacity as Custodian for Retail Employees Superannuation Pty Ltd (Trustee) [2016] FCAFC 81 Appeal from: Aveo Group Limited v State Street Australia Ltd in its capacity as custodian for the Retail Employees Superannuation Pty Limited as trustee of the Retail Employees Superannuation Trust [2015] FCA 1019 File number: VID 588 of 2015 Judges: ALLSOP CJ, FOSTER AND GLEESON JJ Date of judgment: 10 June 2016 Catchwords: CORPORATIONS –where declaratory relief is sought as to the invalidity of certain resolutions to be put at meetings– the management of stapled entities– where securityholders in a stapled investment seek to have the manager of the investment removed–where securityholders have power to pass subject resolutions–whether proposed resolutions interfere with the exercise of powers vested in the board–construction of a securityholders deed–termination of an advisory service deed–whether a super majority resolution would achieve the level required for a special resolution within the meaning of the Act Legislation: Corporations Act 2001 (Cth) ss 9, 249F, 249Q, 250R, 252D Cases cited: Australian Centre for Corporate Responsibility v Commonwealth Bank of Australia [2016] FCAFC 80 John Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113 Molopo Energy Ltd v Keybridge Capital Ltd [2014] NSWSC 1864; 104 ACSR 46 National Roads & Motorists' Association v Parker (1986) 6 NSWLR 517 Queensland Press Ltd v Academy Investments No 3 Pty Ltd [1988] 2 Qd R 575; 11 ACLR 419 Austin RP and Ramsay IM, Ford, Austin and Ramsay's Principles of Corporations Law (16th ed, LexisNexis Butterworths, 2015) Date of hearing: 10 February 2016 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 74 Counsel for the Appellants: Mr P D Crutchfield QC with Dr C G Button Solicitor for the Appellants: MinterEllison Counsel for the First and Second Respondents: Mr D J Batt QC with Mr C M Archibald Solicitor for the First and Second Respondents: Allens ORDERS VID 588 of 2015 BETWEEN: AVEO GROUP LIMITED ACN 010 729 950 First Appellant RETIREMENT VILLAGES GROUP MANAGEMENT PTY LTD ACN 119 974 819 Second Appellant AND: STATE STREET AUSTRALIA LTD ACN 002 965 200 IN ITS CAPACITY AS CUSTODIAN FOR THE RETAIL EMPLOYEES SUPERANNUATION TRUST First Respondent RETAIL EMPLOYEES SUPERANNUATION PTY LIMITED ACN 001 987 739 AS TRUSTEE OF RETAIL EMPLOYEES SUPERANNUATION TRUST Second Respondent RETIREMENT VILLAGES GROUP RE LIMITED ACN 119 974 597 IN ITS CAPACITY AS RESPONSIBLE ENTITY FOR THE RETIREMENT VILLAGES TRUST ARSN 127 682 811 Third Respondent RETIREMENT VILLAGES AUSTRALIA LIMITED ACN 119 264 872 Fourth Respondent RVNZ INVESTMENTS LIMITED ACN 604 453 545 Fifth Respondent JUDGES: ALLSOP CJ, FOSTER AND GLEESON JJ DATE OF ORDER: 10 June 2016 THE COURT ORDERS THAT: The appeal be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THE COURT: 1 By application dated 4 September 2015, the appellants (as applicants) sought declaratory relief as to the invalidity of certain resolutions proposed to be put at meetings on 10 September 2015. The matter was heard by the Corporations Duty Judge (the primary judge) on 9 September 2015, on which day orders were made dismissing the application. The primary judge delivered detailed reasons on 11 September 2015: Aveo Group Limited v State Street Australia Ltd in its capacity as custodian for the Retail Employees Superannuation Pty Limited as trustee of the Retail Employees Superannuation Trust [2015] FCA 1019. 2 The meetings took place and the resolutions were passed as "Super Majority Resolutions". Under the contractual arrangements among the relevant parties, certain resolutions (including this resolution) were required to be passed as a Super Majority Resolution, which was defined as a resolution that has been passed by at least 75% of the total votes that may be cast by the holders of the relevant securities entitled to vote on the resolution including those not present at the meeting in person or by proxy. The resolution here concerned the removal of the second appellant (RVGM) from its role under an Advisory Services Deed dated 28 September 2007 between RVGM and other parties to this appeal (the ASD) and the termination of RVGM as Advisor under the ASD. 3 For the reasons that follow, the appeal should be dismissed with costs. Background circumstances 4 The controversy concerns the management of a stapled investment known as the Retirement Villages Group (RVG) comprised of three entities: (i) Retirement Villages Australia Limited (RVAL), the fourth respondent; (ii) The Retirement Villages Trust (RVT), a managed investment scheme registered under Ch 5C of the Corporations Act 2001 (Cth) (the Act), the responsible entity of which is the third respondent, Retirement Villages Group R.E. Limited (RVGRE); and (iii) RVNZ Investments Limited (RVNZI), the fifth respondent. 5 The securities in each of the entities are linked so that no individual securities may be dealt with without also dealing with the others, and if they were to be quoted officially on a stock exchange, they would be recognised jointly. 6 The first and second respondents below and the first and second respondents on appeal (State Street Australia Limited and Retail Employees Superannuation Pty Limited) are the custodian and trustee, respectively, of the Retail Employees Superannuation Trust. We will refer to them collectively as REST. 7 The stapled investment is managed by RVGM. At the relevant times, the first appellant (Aveo) directly and indirectly owned 38.79% of the securities in the stapled investment, RVG, and controlled RVGM. 8 REST holds securities in the stapled investment. 9 REST had become dissatisfied with the management of the investment and desired to have the manager, RVGM, removed. (The documentation to which we refer below refers to RVGM as the "Advisor". We will also use that terminology.) To this end, in August 2015, REST called the meetings of members of the companies, RVAL and RVNZI, and of the members of the managed investment scheme, RVT. The notices calling these meetings relied upon s 249F of the Act in respect of the meetings of RVAL and RVNZI and s 252D of the Act, in respect of the meeting of RVT. Each notice proposed an identical resolution as a "special resolution" under s 9 of the Act. 10 The terms of the resolution are of some importance: That Retirement Villages Group Management Pty Limited (ACN 119 974 819) (the Advisor) be removed, and the Advisor's appointment be terminated in accordance with clause 13.3(a)(vii) of the Advisory Services Deed between the Company, Retirement Villages Group R.E. Limited (ACN 119 974 597) in its capacity as responsible entity of Retirement Villages Trust (ARSN 127 682 811), RVNZ Investment Limited (ACN 604 453 545) and the Advisor dated 28 September 2007, as amended from time to time (the Advisory Services Deed). 11 As will be discussed later, it is not clear whether in substance there is one resolution concerned with removal of the Advisor or two resolutions concerned with removal of the Advisor and with the termination of its appointment. The significance of this question will be dealt with in due course. 12 The essence of the dispute is whether REST was lawfully entitled to call these meetings for the purpose of proposing this resolution at the meetings, or whether, as contended by the appellants, only the board of directors of the stapled entities could call meetings of securityholders for the purpose of considering this resolution. To answer that question, one needs to have regard to the constitutions of the three entities. We will address the issues on the appeal after setting out the provisions of relevant documents. The relevant documentation 13 The constitutions of the entities are, relevantly for this dispute, subject to the terms of a "Securityholders Deed" (SHD) dated 18 October 2007 to which Aveo, RVAL, RVNZI, RVGRE and RVGM were parties. It will be necessary to examine in some detail certain provisions of the SHD. The corporate constitutions of RVAL and RVNZI contain standard provisions concerned with general meetings and the powers of the directors. Clause 9 of the (illustrative) RVAL constitution concerned the convening of general meetings and provided as follows: 9.2 Convening general meeting The Directors may convene and arrange to hold a general meeting of the Company whenever they think fit and must do so if required to do so under the Corporations Act. 14 Clauses 12.1 and 12.2 of the RVAL constitution provided for the management of the company and specific powers of directors, as follows: 12.1 Directors to manage Company The business of the Company is to be managed by the Directors, who may exercise all such powers of the Company as are not, by the Corporations Act or by this Constitution, required to be exercised by the Company in general meeting. 12.2 Specific powers of Directors Without limiting the generality of clause 12.1 ("Directors to manage Company"), the Directors may exercise all the powers of the Company to borrow or raise money, to charge any property or business of the Company or all or any of its uncalled capital and to issue debentures or give any other security for a debt, liability or obligation of the Company or of any other person. 15 The SHD was entered into by the companies to which we have referred (Aveo, RVAL, RVNZI, RVGRE and RVGM) as well as Macquarie Investment Holdings No 2 Pty Ltd and RVG Saleco Pty Ltd. It is unnecessary to deal with these latter two companies. It only needs to be understood (as is revealed in the recitals to the SHD) that the investment (RVG) was established to acquire and hold interests in a diversified portfolio of retirement villages in Australia and New Zealand and that the stapled entities were established as the vehicle for investment by securityholders, who provided funding for the investment by taking up the stapled securities issued. The recitals recognised the existence of the ASD. Recital E sets out the purpose of the SHD as follows: The purpose of this deed is for the parties to record their agreement in relation to the acquisition by Applicants of Stapled Securities, the operation of the business to be carried on by RVG, the control and management of RVG and the Securityholders' rights and obligations as members of the Stapled Entities. 16 REST took up securities in RVG. There was no issue but that REST took rights, and was subjected to obligations, created by the SHD. 17 Clause 3 of the SHD deals with management, board appointments and governance of the stapled group. Clauses 3.1, 3.2 and 3.3 concern the appointment of independent directors. Clause 3.7 provides for a securityholders committee. This provision is lengthy and need not be set out in full. It provides for advice to, and consultation with, the securityholders in respect of the operational performance of RVG, annual budgets and other financial matters including quarterly updates of performance against budget. Importantly for the appellants' arguments, cl 3.7(n)(c) provides for consultation with representatives of securityholders about "Securityholder Reserved Matters". These were the matters in Sch 1 to the SHD which were required to be dealt with by resolution being a "super majority resolution", a "special resolution" and an "extraordinary resolution". The significance of these matters will become evident shortly. Clause 3.7(n)(c) which describes one of the matters that the SHD devolves upon the committee established under cl 3.7, is in the following terms: 3.7 Securityholders Committees (n) The Committee Matters are: … (c) consultation with Nominated Representatives and opportunity for them to provide feedback on Securityholder Reserved Matters prior to the relevant resolution being put to Securityholders in accordance with the Securityholders Deed; 18 Clause 4 of the SHD deals with securityholders' meetings. The heading of cl 5 was "Voting and calling meetings by Securityholders". These clauses and, in particular, cll 4.2, 5.1, 5.2 and 5.4, are central to the arguments of both sides. Clauses 4 and 5 are in the following terms: 4 Securityholders' meetings 4.1 Annual General Meeting Each Stapled Entity must hold a general meeting of holders of Securities in that Stapled Entity each year and must specify the meeting as an annual general meeting in the relevant notice of meeting. Subject to applicable Law, the notice requirements, general conduct of each annual general meeting of a Stapled Entity and the procedures to be adopted at that annual general meeting will be governed by the relevant Constituent Documents and the Law. 4.2 Securityholders' meetings The Board of a Stapled Entity may at any time call a meeting of holders of Securities in that Stapled Entity. Holders of Securities in a Stapled Entity may also request or call and arrange to hold general meetings in accordance with the requirements and procedures under any applicable Law. Subject to applicable Law, the general conduct of each general meeting of a Stapled Entity and the procedures to be adopted at that general meeting will be governed by the relevant Constituent Documents. 4.3 Board of each Stapled Entity to determine time and place Subject to this clause 4 and clause 5.4, the Board of a Stapled Entity may determine the time and place at which a meeting of holders of Securities in that Stapled Entity will be convened and in doing so will seek to make convenient arrangements after taking into account the circumstances of each holder of Securities in that Stapled Entity (including the time zone in which each holder is located). 5. Voting and calling meetings by Securityholders 5.1 Securityholder Reserved Matters Except as otherwise provided in this deed, any proposal by the Stapled Entities in respect of a Securityholder Reserved Matter must be approved by a resolution having the requisite majority for that Securityholder Reserved Matter as specified in Schedule 1, in each case in accordance with the Constituent Documents. 5.2 Other Securityholder resolutions Any matter which must be approved by holders of Securities in the relevant Stapled Entity but which is not a Securityholder Reserved Matter must be approved in accordance with the Constituent Documents. 5.3 Majorities in all Stapled Entities Unless otherwise specified or the context otherwise requires, any reference to a Securityholder resolution in this Deed is a reference to a resolution which has been passed by the requisite majority in each Stapled Entity. 5.4 Calling certain meetings Each Stapled Entity must call a meeting of holders of its Securities within 20 Business Days of the date of receipt of a request from holders with at least 5% of the votes that may be cast at a general meeting of the relevant Stapled Entity, to consider and, if thought fit, pass a resolution to terminate the Advisory Services Deed in accordance with clause 13.3(a)(vi) of the Advisory Services Deed, such meeting to be held no later than two months after it is called. 5.5 Who may vote Subject to: (a) clause 11.4; (b) the Excluded Securityholders not being entitled to vote: (i) as provided for in clause 13.3(a)(vii) of the Advisory Services Deed; (ii) in respect of a resolution to change the Investment Restrictions; or (iii) in respect of a resolution to authorise RVG to incur borrowings in excess of the Gearing limits set out in the Investment Restrictions; (c) the Constituent Documents; and (d) the Law, each holder of Securities in a Stapled Entity may vote on any resolution put at a meeting of Securityholders. 19 The SHD contains a definition and interpretation clause (cl 30), cl 30.3 of which provides that headings (which we would construe as including sub-headings) are inserted for convenience only "and do not affect the interpretation of this deed". 20 Schedule 1 to the SHD which set out the "Securityholder Reserved Matters" is in the following terms: Schedule 1 – Securityholder Reserved matters Super Majority Resolution A resolution in respect of the following matters must be passed by Securityholders as a Super Majority Resolution: (a) termination of the Advisory Services Deed; (b) appointment of a new advisor to provide management or advisory services to the Stapled Entities, following termination of the Advisory Services Deed; (c) conversion of RVG to a listed entity (other than on a Liquidity Review Date); (d) changes to the Investment Restrictions; (e) RVG incurring borrowings in excess of the Gearing limits set out in the Investment Restrictions; or (f) any changes to the number of Directors, and/or the proportion of independent directors to other directors, on the boards of the Stapled Entities. 2 Special Resolution A resolution in respect of the following matters must be passed by Securityholders as a Special Resolution: (a) any material changes to the terms and conditions the Advisory Services Deed in respect of the following matters: (i) any changes which increase the fees payable by the Stapled Entities to the Advisor; (ii) any changes which alter the termination provisions; or (iii) any changes which the Stapled Entities reasonably consider will have a material adverse impact on the Stapled Entities' ability to comply with their obligations under this deed, the Constituent Documents or the Law; (b) subject to clause 17.1(b), any issues of New Stapled Securities which are proposed to be made before the earlier of: (i) the second anniversary of the Initial Closing Date; and (ii) the date on which the aggregate amount of all Commitments has been called; (c) any alteration to rights attaching to the Stapled Securities; (d) any proposal to wind up or dissolve RVG. 3 Extraordinary Resolution A resolution in respect of the following matters must be passed by Securityholders as an Extraordinary Resolution: (a) approval of a Liquidity Resolution at a Liquidity Strategy Meeting; (b) any changes to the Investment Guidelines. 21 It is necessary to refer to parts of the ASD, which was referred to in the recitals to the SHD, and by the term defined in cl 30.1 of the SHD as "Advisory Services Deed": Advisory Services Deed means the deed of that name between RVGRE, RVAL, RVNZI and the Advisor to be dated in or around August 2007, as amended or novated from time to time. 22 Clause 13 of the ASD deals with termination. Relevantly, it provides as follows: 13.1 Term This Deed commences as of and from the date of this Deed and continues until the earlier of the date on which: (a) the Advisor is removed in accordance with clause 13.3; (b) the Advisor resigns pursuant to clause 13.2; or (c) the winding up of all of the Stapled Entities has been completed. … 13.3 Removal of the Advisor (a) The Advisor's appointment may only be terminated by the Stapled Entities if (provided that in the case of clause 13.3(a)(vi) the Stapled Entities must terminate the appointment of the Advisor if the relevant resolution has been passed by the required majority): (i) the Advisor ceases to carry on business; (ii) the Advisor ceases to hold any licence or authorisation necessary to lawfully perform its obligations under this Deed; (iii) the Advisor is placed in Liquidation; (iv) the Advisor commits a material breach of this Deed which is not rectified 60 days after a Stapled Entity provides the Advisor with written notice of that breach; (v) the Advisor acts with gross negligence or wilful misconduct in carrying out its obligations under this Deed or engages in fraudulent or dishonest acts, (vi) a resolution to remove the Advisor is passed in respect of all the Stapled Entities by at least 75% of the total votes that may be cast by all Securityholders entitled to vote on each of those resolutions, including Securityholders who are not present in person or by proxy and, subject to the Law, the Excluded Securityholders. (vii) The Stapled Entities are not Listed and: (A) as at a Performance Test Calculation Date: (I) the Performance Test Return for the 3 consecutive Performance Test Periods prior to and including the Performance Test Period ending on the Performance Test Calculation Date is less than the Performance Test Benchmark Return; and (II) the Cumulative Benchmark Index exceeds the Cumulative Property Index; and (B) within 3 months after that Performance Test Calculation Date, a resolution to remove the Advisor is passed in respect of all the Stapled Entities by at least 75% of the total votes that may be cast by all Securityholders entitled to vote on each of those resolutions, including Securityholders who are not present in person or by proxy but excluding the Excluded Securityholders. Each variable for the purposes of this clause 13.3(a)(vii) is to be calculated by the Advisor at the Performance Test Calculation Date and is conclusive, in the absence of manifest error. 23 The "Excluded Securityholders" are defined in cl 1.1 of the ASD to include RVGM and Aveo. 24 Clause 13.1(a) provides that the ASD will be terminated on the date when the Advisor is "removed" in accordance with cl 13.3. Thus, "removal" of the advisor under cl 13.3, in substance, has as an automatic consequence: the termination of the ASD. Linguistically, removal of the Advisor under cl 13.3 as referred to in cl 13.1(a) is essentially the same act as terminating the Advisor's appointment (as referred in to cl 13.3) of the ASD. 25 It is crucial to appreciate that the Advisor can be removed under cl 13.3(a)(vi) without cause by a super majority resolution, but only at meetings at which the Aveo interests can vote. If that super majority resolution is passed, the words in parenthesis in the chapeau to cl 13.3(a) make it clear that the appointment must be terminated. That is, even accepting the general management powers of the board, the directors must terminate the appointment. 26 The wording of cl 13.3(a)(vii) is different. That subclause addresses termination for cause. It has two preconditions. The first, in (vii)(A), is the cause – the failure of a benchmark test i.e. the Performance Test Return for three consecutive Performance Test Periods (which happened here); the second in (vii)(B) is procedural – within a certain period, the passing by a super majority resolution (but at meetings at which the Aveo interests cannot vote) of a resolution to remove the Advisor in respect of all three stapled entities. Unlike the resolution to which reference is made in cl 13.3(a)(vi), the resolution to which reference is made in cl 13.3(a)(vii)(B) does not bind the directors. It is for the board of directors, in exercise of the directors' powers of management, to make a decision whether or not to terminate the appointment of the Advisor. 27 The resolutions here were put forward as justified by cl 13.3(a)(vii), not by (a)(vi). The statutory background 28 The validity or otherwise of the calling of the meetings and of the proposed resolutions is to be understood against the statutory and company law backgrounds. 29 Section 9 of the Act defines a "special resolution" in relation to a registered scheme to mean, relevantly, a resolution that has been passed by at least 75% of the votes cast by members entitled to vote on the resolution. 30 Section 249F of the Act provides: (1) Members with at least 5% of the votes that may be cast at a general meeting of the company may call, and arrange to hold, a general meeting. The members calling the meeting must pay the expenses of calling and holding the meeting. (2) The meeting must be called in the same way--so far as is possible--in which general meetings of the company may be called. (3) The percentage of votes that members have is to be worked out as at the midnight before the meeting is called. 31 Section 252D provides: (1) 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 resolution or a proposed extraordinary resolution. The members calling the meeting must pay the expenses of calling and holding the meeting. (2) The meeting must be called in the same way--so far as is possible--in which meetings of the scheme's members may be called by the responsible entity. (3) The percentage of the votes carried by interests that members hold is to be worked out as at the midnight before the meeting is called. 32 Section 249Q (restating the general law) provides: A meeting of a company's members must be held for a proper purpose. The issues before the primary judge and on appeal 33 The arguments of the appellants were essentially as put before the primary judge. The appellants focused on the express power (recognised in cl 5.4 of the SHD) in securityholders to requisition for a general meeting at which a resolution contemplated by cl 13.3(a)(vi) is to be put and the absence of any equivalent provision for cl 13.3(a)(vii). They also focused upon cll 5.1 and 5.2 which, in the use of the words "be approved", imply that only the board can institute or call for a resolution (other than one pursuant to cl 13.3(a)(vi)) for the removal of the Advisor and thus the termination of its appointment. Clause 5 was said to be a code by reference to which meetings for securityholder resolutions are called. 34 In any event, whether or not the above argument be correct, it was argued that s 252D provided for a special or extraordinary resolution and the resolutions here were super majority resolutions (which were neither special nor extraordinary resolutions). Thus, there is no power in the securityholders, it was argued, to call a meeting to pass a super majority resolution. 35 REST's riposte was simple: clause 4.2 contained the source of the power of the securityholders to call a meeting of securityholders to consider passing one or more resolutions which constituted a lawful exercise of power by those securityholders. Here, the resolution to be placed before the meeting was one which was lawful; it was not one which interfered with the powers of management of the board; nor was it advisory; nor was it futile. The resolution merely supplied the second precondition in cl 13.3(a)(vii)(B), the first (in (vii)(A)) being in existence already. As a matter of language of cl 13.3(a)(vii) and of logic, the preconditions set out therein ((A) and (B)) must be satisfied before the Board can act to terminate the Advisor's appointment. 36 Secondly, REST pointed out that the definition of "special resolution" in s 9 of the Act was expressed in the past tense: …that (a resolution) has been passed by at least 75% of the votes cast by members entitled to vote on the resolution. 37 It was argued that a super majority resolution was a species of special resolution because, if passed, it must be that the vote was sufficient to satisfy the definition of a special resolution. 38 In answer to this reliance by REST upon cl 4.2, the appellants argued that the proper construction of cll 4 and 5 of the SHD required the conclusion that the board of directors of each of the stapled entities was the only organ of those entities authorised by the constituent documents of the entities (including the SHD) to initiate the process of putting to the securityholders a resolution for the removal of RVGM as the Advisor under the ASD as required by cl 13.3(a)(vii)(B) of the ASD and that cl 4.2 could not be read as qualifying that necessary first step of the directors calling the meeting when the resolution was pursuant to cl 13.3(a)(vii), and not cl 13.3(a)(vi), the latter being able to be initiated by the members, as recognised by cl 5.4. 39 The primary judge, in essence, accepted the arguments advanced by REST. 40 Thus, the issues on the appeal were essentially: (1) whether REST could call a meeting to propose the resolution; and (2) whether a super majority resolution was a special resolution. 41 Before turning to a consideration of the governing principles and resolving the arguments of the parties, something more should be said about the resolution in question. 42 The resolution is in two parts: the first is that the Advisor "be removed". This tracks the language of cl 13.3(a)(vii)(B). It then goes on: "…and the Advisor's appointment be terminated in accordance with cl 13.3(a)(vii)". Clause 13.3(a)(vii) itself does not expressly deal with termination of the Advisor's appointment. That is a matter, when 13.3(a)(vii) is invoked, for the board of directors to decide as the organ of the relevant company (as to which, see the chapeau to cl 13.3(a)). On one view, the reference to "be terminated" can be seen as tautologically meaning "be removed". On this view, there is but one resolution that is substantially recognisable as the resolution which is the precondition to the board's exercise of power to terminate the Advisor's appointment required to be satisfied when the termination is for cause under cl 13.3(a)(vii). This was the primary judge's view at [65] of his reasons. On another view, the resolution is, in form, one resolution, but in substance, two resolutions – one that is in terms a resolution being the precondition in cl 13.3(a)(vii)(B); and the other being a resolution that in terms seeks to effect the termination of the appointment (that being a matter for the directors to decide upon). It might also be seen as either advice to the board from the securityholders or a statement to the board of the view of the securityholders. 43 We are of the view that the first is the better view, as the primary judge found. 44 If the second of those views of the resolution be correct (that it is two resolutions), for the reasons given below, the second resolution would be bad. That, however, would not make the meeting invalidly called if the first resolution (that the Advisor "be removed") is valid. For the reasons we express below, this first resolution was valid and the meeting was validly called. 45 This particular question was not addressed by the parties. The view of the primary judge was not challenged on the appeal. Rather, the substance of the question was addressed – could the securityholders convene meetings under ss 249F and 252D using cl 4.2 as authority to call for a super majority resolution that the Advisor "be removed". The relevant principles 46 Companies have two primary organs: the members in general meeting and the board of directors. The typical constitutional balance of powers between these organs sees management power vested exclusively in the directors, with specific powers conferred on the members: Austin RP and Ramsay IM, Ford, Austin and Ramsay's Principles of Corporations Law (16th ed, LexisNexis Butterworths, 2015) at 240 [7.070]. That balance of powers is, however, always subject to the precise terms of the relevant constitution, and any relevant statute. 47 These themes are anchored in a substantial body of law. As was stated in John Shaw & Sons (Salford) Ltd v Shaw [1935] 2 KB 113 at 134 each organ is sovereign in its sphere, and the balance can only be changed by altering the company's constitution: If powers of management are vested in the directors, they and they alone can exercise these powers. The only way in which the general body of shareholders can control the exercise of powers vested by the articles in the directors is by altering their articles, or, if opportunity arises under the articles, by refusing to re-elect the directors of whose actions they disapprove. They cannot themselves usurp the powers which by the articles are vested in the directors any more than the directors can usurp the powers vested by the articles in the general body of shareholders. 48 In Australian Centre for Corporate Responsibility v Commonwealth Bank of Australia [2016] FCAFC 80, we considered the case law which establishes the basic proposition that the members of a corporate entity may only act pursuant to such powers as are conferred upon them by the constitution of the entity, or by statute. It is the vesting of power in the shareholders by the Act or constitution which provides the necessary foundation for a resolution by shareholders in respect of a particular matter. The shareholders may pass a resolution which expresses an opinion or an intention, provided that the resolution is authorised by the company's constitution (or by statute). 49 Thus, in Molopo Energy Ltd v Keybridge Capital Ltd [2014] NSWSC 1864; 104 ACSR 46, White J held that the shareholders in general meeting had the function of approving, but not putting into effect, a reduction in capital. Accordingly, the directors were not required to convene a general meeting in response to a requisition proposing a resolution of shareholders to effect a substantial reduction of the company's capital. In Queensland Press Ltd v Academy Investments No 3 Pty Ltd [1988] 2 Qd R 575; 11 ACLR 419, Ryan J held that the shareholders in general meeting did not have power to approve of or ratify a disposal of shares held by the company, which was a matter solely within the authority of the directors. 50 In National Roads & Motorists' Association v Parker (1986) 6 NSWLR 517, McLelland J held that the directors of the company were entitled to disregard requisitions which called for a general meeting to consider resolutions expressing opinions as to how powers vested exclusively in some other body or person ought to be exercised. His Honour noted that the only power vested in a general meeting of members which might have been available to attain the object set out in the requisitions would have been the passing of a special resolution altering the articles of association. That power was not available having regard to the form of the proposed resolutions. The resolution of the appeal First issue: Could the meetings be called for the proposal of the resolutions in question? (grounds 1-4 of the notice of appeal) 51 The appellants contended that: (1) The initiation of processes to terminate RVGM's appointment under the ASD by reason of the poor performance of RVGM is quintessentially a management function, vested exclusively in the boards of the three stapled entities. (2) The fact that securityholders' approval is required before the boards can proceed to invoke the contractual right to terminate RVGM's appointment under the ASD did not give securityholders any constitutional foundation upon which to propose resolutions for termination of that appointment. (3) The primary judge erred in approaching the question of the securityholders' power to propose the resolutions by looking for an express "restriction" or "prohibition" on the securityholders taking such a course. (4) The primary judge erred by conflating the bare power to convene meetings with the power to move resolutions (at [79]). 52 The appellants did not contend that the securityholders had no power to pass the proposed resolutions per se. As appears above, Sch 1 to the SHD explicitly provided for securityholders to pass resolutions in respect of the termination of the ASD. Further, cl 5.5 of the SHD refers explicitly to the entitlement of securityholders to vote "on any resolution put at a meeting of Securityholders" subject to, relevantly, the excluded securityholders not being entitled to vote as provided for in cl 13.3(a)(vii) of the ASD. 53 Thus, this case is distinguishable from Molopo, Queensland Press and NRMA v Parker in which the members did not have power to pass the subject resolutions. 54 The appellants' first contention is concerned only with the power of the securityholders to initiate processes for termination under cl 13.3(a)(vii). It was based on the argument that cl 5 of the SHD provides a code for the calling of meetings of securityholders by the board of directors. 55 We do not accept the appellants' contention that section 5 of the SHD is a code. In particular, cll 5.1 and 5.2 are directed to matters which require securityholder approval. The scope of cl 5.1 and 5.2 extends beyond termination of the ASD to include the other matters listed in Sch 1 as well as matters which require securityholder approval but which are not "Securityholder Reserved Matters". Clause 5.4 is a specific source of power for securityholders to require each stapled entity to call a meeting of securityholders provided certain preconditions referred to in cl 5.4 are satisfied. 56 Clauses 5.1 and 5.2 do not constitute a source of power for the calling of meetings by securityholders. It is clear, however, from cl 4.2 that the power to call and arrange to hold general meetings is not a power exclusively vested in the directors. Under cl 4.2 "Holders of Securities" in each stapled entity are authorised to requisition or request the entity to call a meeting of securityholders or to "call and arrange general meetings in accordance with the requirements and procedures under any applicable law". There is no reason why cll 5.1 and 5.2 should detract from the right of securityholders to propose resolutions within the scope of their powers. 57 The express power in cl 4.2 of the SHD, to call and arrange to hold general meetings in accordance with the requirements and procedures under any applicable law, permitted REST to call and arrange meetings to consider a resolution of a kind that was within the power of the securityholders to pass. It did not, however, permit REST to call meetings to consider resolutions that were not within the power of the members to put. This is to state no more than is contained within s 249Q of the Act. 58 The power in cl 4.2 is limited to meetings to consider proposed resolutions which do not interfere with the exercise of powers vested exclusively in the directors or which are not merely advisory or which are not futile (unless otherwise sourced in the constitution or statute e.g. s 250R(2) of the Act). We do not, however, consider the proposed resolution amounts to such an interference. The proposed resolution does not purport to usurp the directors' power to remove RVGM under the ASD and thus to terminate RVGM's appointment under that Deed, and the appellants did not suggest that they had this effect. Nor are they advisory or futile. To the contrary, the resolutions, if passed, add to the directors' powers by empowering them, if they see fit, to terminate RVGM's appointment under the ASD. They fulfil the precondition in cl 13.3(a)(vii)(B) and permit the board to consider the termination of the Advisor knowing they can act, should they consider it to be in the interests of the company. 59 Importantly, the power in cl 4.2 does not permit a meeting to propose resolutions which would be ineffective; but that is not this case here. The proposed resolutions, if passed, had efficacy, by reason of cl 13.3(a)(vii). The power in cl 4.2 could not be exercised to propose an advisory resolution concerning any matter within Sch 1 to the SHD; it would be necessary to identify a function allocated to shareholders by which the proposed resolution would have efficacy. 60 Clause 5.4 provides an additional pathway to cl 4.2 for invoking cl 13.3(a)(vi). There is nothing in the language of cl 5.4 which limits the scope of cl 4.2. 61 The appellants submitted that the mere existence of a power to convene a meeting does not suffice to provide a constitutional basis for a shareholders' resolution. That proposition may be accepted. However, in this case, it was part of the function of the securityholders reposed in them by the ASD to pass a resolution to remove the Advisor in accordance with cl 13.3(a)(vii) of the ASD. Clause 5.5 of the SHD explicitly adverted to that part of the securityholders' function. Once that function is accepted, the primary judge was correct to consider whether there was any restriction or prohibition on the apparent breadth of cl 4.2 which might have affected REST's power to propose the disputed resolutions. 62 This analysis does not involve treating the ASD as one of the constituent documents of the stapled entities. The references to the ASD in the SHD and, in particular, the reference to cl 13.3(a)(vii) in the recitals to, and in cl 5.5 of, the SHD make it necessary to have regard to the ASD for the purpose of construing the SHD. 63 Finally, the primary judge did not conflate the bare power to convene meetings with the power to move resolutions (at [79]). Rather, having identified the securityholders' power to pass the resolutions, he concluded that it was supported by the power in cl 4.2 of the SHD. 64 Accordingly, the appeal fails on the first issue. Second issue: Was the proposed resolution a "special resolution" within the meaning of s 9 of the Corporations Act? (grounds 5 & 6 of the notice of appeal) 65 The appellants noted that the constitutions of the stapled entities draw a deliberate distinction between "special" and "super majority" resolutions. Accordingly, they contended, it was not open to the primary judge to find that the s 252D machinery was available to REST to propose a "super majority" resolution, simply because the resolution may, when passed, meet the description of a "special resolution" within the meaning of the Act. 66 Under the Act, a "special resolution" is not defined by reference to the content of the resolution. Relevantly, it is simply a resolution of which notice has been given in accordance with the Act and that has been passed by at least 75% of the votes cast by members entitled to vote on the resolution. 67 In our view, this issue is resolved by the form of the relevant notice. The notice for the meeting of unitholders of RVT provided that the business of the meeting was to consider and, if thought fit, to pass the specified resolution "as a special resolution". There is no reason to doubt the intention of REST that the resolution be proposed "as a special resolution" within the meaning of the Act, accepting that, in order to be effective for the purposes of cl 13.3(a)(vii), it was necessary for the resolution to be passed "by at least 75% of the total votes that may be cast by all Securityholders entitled to vote on each of (the) resolutions, including Securityholders who are not present in person or by proxy but excluding the Excluded Securityholders". As a matter of mathematics, a resolution which was passed as a "super majority" resolution would also achieve the level required for a special resolution within the meaning of the Act. 68 In our view, s 252D provides for a meeting to consider and vote on a proposed special resolution, where the constitution of the registered scheme requires, for the resolution to be passed, a higher threshold than that which is required for a special resolution. Section 252D is directed to the requirements for members to call a meeting of members. There is nothing in the language or purpose of s 252D which suggests that the particular constitutional requirements of a scheme qualify members' rights to call a meeting in accordance with s 252D. 69 Accordingly, the appeal fails on the second issue. Other matters 70 Grounds 7 and 8 of the notice of appeal challenged the primary judge's findings at [34] of his reasons that all three RVNZI directors are Aveo appointees, and that Aveo enjoys a special ability to influence the decision-making of the boards of the stapled entities. Mr Crutchfield QC pointed to evidence that, for RVNZI, two of the three directors are required to meet independence criteria and that, in the case of each of RVAL and RVGRE, the boards are composed of three independent directors and two Aveo appointees. 71 Mr Crutchfield QC accepted that these factual errors were of no significance on the appeal, and they were not addressed by Mr Batt QC. 72 Accordingly, we uphold ground 7 (which challenges the primary judge's factual findings) but not ground 8 (which contends that the primary judge should have made alternative findings). 73 Success on ground 7, however, does not lead to success in the appeal. In particular, the factual errors demonstrated in the argument in support of ground 7 do not warrant the Court's interference in the primary judge's ultimate conclusion that the application should be dismissed with costs. Orders 74 Notwithstanding the conclusion about ground 7, the appropriate orders are that the appeal should be dismissed with costs. I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop and Justices Foster and Gleeson. Associate: Dated: 10 June 2016