FEDERAL COURT OF AUSTRALIA Australian Olives Limited v Stout [2007] FCA 1958 CORPORATIONS LAW – consideration of an application by a responsible entity of two registered managed investment schemes (among six schemes) for the propagation of olive trees and the production of olives, registered under the provisions of the Corporations Act 2001 (Cth) for an interim injunction to restrain the convening of a meeting of scheme members to consider extraordinary resolutions to remove the responsible entity CORPORATIONS LAW – consideration of Part 5C of the Corporations Act – consideration of those provisions relating to the methods of removing a responsible entity – consideration of the prohibitions upon an entity being chosen or appointed to act as a responsible entity of a registered managed investment scheme – consideration of the provisions relating to the appointment of a company to act as a responsible entity PRACTICE AND PROCEDURE – consideration of the extent of the prima facie case of a contravention of the Act and those factors influencing whether the discretion ought to be exercised in favour of granting an interim order Corporations Act 2001 (Cth), ss 9, 601EB, 601ED, Part 5C.3, Part 5C.4, ss 601FB(1), 601FA, 601FC(1), 601FD, 601FJ(2), 601FK, 601FM, 601FN, 601FP, 601PB(1), Part 5C.11, 913B, 914A(1), 914A(2), 912A(1)(b) Corporations Regulations 2001, Reg. 7.1.04A and Reg 7.1.04B Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 49 ACSR 369 Campomar Sociedad Limitada v Nike International Ltd (2000) 2002 CLR 45 Devereaux Holdings Pty Ltd v Pelsart Resources NL & Anor (1986) 4 ACLC 12 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 10 DECEMBER 2007 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QUD355 OF 2007 BETWEEN: 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) AUSTRALIAN OLIVES LIMITED (ACN 078 885 042) Applicant AND: ANNE STOUT & ORS Respondents JUDGE: GREENWOOD J DATE OF ORDER: 10 DECEMBER 2007 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application filed on 19 November 2007 is dismissed. 2. The applicant shall pay the costs of the respondents of and incidental to the application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QUD355 OF 2007 BETWEEN: 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) AUSTRALIAN OLIVES LIMITED (ACN 078 885 042) Applicant AND: ANNE STOUT & ORS Respondents JUDGE: GREENWOOD J DATE: 10 DECEMBER 2007 PLACE: BRISBANE REASONS FOR JUDGMENT 1 The applicant, Australian Olives Limited ('AOL'), is the responsible entity of a number of managed investment schemes registered by the Australian Securities and Investments Commission ('ASIC') for the purposes of Chapter 5C of the Corporations Act 2001 (Cth) ('the Act'). The two schemes of immediate relevance are schemes described as Australian Olives Project No. 4 ('Project 4') and Australian Olives Project No. 5 ('Project 5'). These two schemes are two of six managed investment olive schemes. Issues in relation to Australian Olives Project No. 6 ('Project 6') are the subject of separate proceedings between AOL and particular members of that scheme. 2 Projects 4 and 5 were 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 between 2001 and 2004. Project 4 involves an area under cultivation of 223 hectares; a tree density per hectare of 357 trees; an investment term of 22 years; and the production of 16 olive varieties. The project has a Product Ruling from the Australian Taxation Office ('ATO'), PR2001/66. Project 5 involves an area under cultivation of 181.8 hectares; a tree density per hectare of 353 trees; an investment term of 20 years; the production of nine different olive varieties and ATO Product Ruling PR2003/26. 3 On 2 November 2007, a number of members of Project 4 caused a Notice of Meeting of Members to be issued to all members calling a meeting of Project members for 11.00am on Monday, 26 November 2007 at the offices of Piper Alderman, Lawyers, in Sydney and on 1 November 2007 a number of members of Project 5 caused a Notice of Meeting of Members to be issued calling a meeting of members for 10.00am on 26 November 2007 at the same place so as to consider two proposed extraordinary resolutions in each project. As to Project 4, the resolutions are these: Resolution 1 Extraordinary Resolution – Change of Responsible Entity: Removal of Australian Olives Ltd (ACN 078 885 042) Subject to Extraordinary Resolution 2 being passed and subject to the variation to the Australian financial services licence No. 224107 of Primary Securities Limited ABN 96 089 812 635 being made 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. Resolution 2 Extraordinary Resolution – Change of Responsible Entity: Appointment of Primary Securities Limited (ABN 96 089 812 635) Subject to Extraordinary Resolution 1 being passed and subject to the variation to the Australian financial services licence No. 224107 of Primary Securities Limited ABN 96 089 812 635 being made to permit it to operate the Project, that Primary Securities Limited be appointed as the new responsible entity of the Project. 4 Like resolutions are proposed for Project 5. 5 On 19 November 2007, the applicant filed the present application by which it seeks a declaration that the Notice of Meeting in respect of both Projects 4 and 5 is invalid on grounds that each notice recites a list of members calling the meeting some or all of whom did not wish to call a meeting and each notice is misleading of members of each scheme as it incorrectly states that the members listed on the notice all support the resolutions proposed in each Notice when some of those members do not. The applicant seeks a final injunction restraining the respondent members of each Project from convening each meeting and an interim injunction restraining them from convening the meeting pending the final determination of the issues. The respondents to the application are most of those members recited in each Notice of Meeting. 6 On 21 November 2007, directions were made by the Court that the application for interim relief be adjourned to Thursday, 6 December 2007; each meeting of members of Projects 4 and 5 to be held on Monday, 26 November 2007 be adjourned until 12.00pm Sydney time on Monday, 10 December 2007 at the offices of Piper Alderman, Level 23, Governor Macquarie Tower, 1 Farrer Place, Sydney; an amended application in the related proceedings concerning Project 6 be filed by Monday, 26 November 2007 and related orders. 7 The central contentions of the applicant in support of an interim injunction restraining the respondents from proceeding with the meeting are these which might usefully be illustrated primarily by reference to Project 4. 8 The Notice of Meeting for Project 4 recites that 'The attached list of members of … Project 4 … who hold interests in the Project, 496 groves out of a total of 1,117 groves, representing 44% of the votes that may be potentially eligible to vote at a meeting of the Project's members … give notice … that they have pursuant to section 252D of the Corporations Act 2001 called and arranged a meeting of members of the Project at the time, date and place listed below to consider and vote on the resolutions specified in this notice'. The notice attaches a list of 56 members of Project 4 and identifies the interest held by each member. Immediately under that introductory paragraph, the notice invites the addressee to consider an accompanying statement of important information, in these terms: Please refer to the Explanatory Memorandum that accompanies this Notice of Meeting for important information on the resolutions proposed. 9 The introductory part of the Explanatory Memorandum is in these terms. These notes explain the resolutions set out in the Notice of Meeting and should be read in conjunction with the notice. Your vote is important. Please ensure that if you cannot attend you send in a proxy indicating which way you want to vote. Resolution – Change of Responsible Entity The Members of the Project who have called this meeting consider that Member's interests will be better served by the removal of the current responsible entity Australian Olives Limited ACN … and the appointment of Primary Securities Limited ABN … as the replacement responsible entity. [The emphasis in [9] and [10] is that contained in each notice.] 10 Immediately under that paragraph reciting the considered view of those calling the meeting that member's interests are better served by removing AOL, the notice directs the addressee to the duties imposed upon a responsible entity by s 601FD(1) of the Act, in addition to other duties a responsible entity may have at law. The notice says that in particular a responsible entity of a registered scheme must exercise the degree of care and diligence a reasonable person in that position would exercise; act in the best interests of members and if there be a conflict between the interests of members and the entity, give priority to the member's interests; and treat members of the same class equally and those of different classes, fairly. The notice then says that if Primary Securities Limited ('PSL') is appointed as responsible entity it will conduct a review of management arrangements; review fees currently charged by AOL to members; conduct a review of frost damage to trees; and replace the auditors to the Project with others. The fair inference open from the conjunction of those observations with the statement of opinion of the members calling the meeting is that AOL has failed to discharge the identified duties which condition the view of those calling the meeting that the interests of members would be better served by removing AOL and replacing it with PSL. 11 The applicant contends that of the 56 members recited in the Notice of Meeting for Project 4, 24 of them consented to their name being endorsed on the notice, 4 of them did not agree and 21 of them provided no response to a request made of them that they consent to their name being included within the 56 nominated members. Therefore, the notice suggests, it is said, much broader support for the calling of a meeting than is the position and actively misstates consent from some members. Secondly, the consent given by 24 of those members was simply a consent to the convening of the meeting and not an expression of approval or support for the resolutions based on the identified opinion. Since the accompanying Explanatory Memorandum incorrectly recites that all 56 members recorded on the Notice of Meeting consider that member's interests will be better suited by the removal of AOL and the appointment of PSL, the notice is necessarily misleading or deceptive or likely to mislead or deceive members in relation to the Project in contravention of s 1041H of the Act thus enlivening the Court's power to make a remedial order under s 1324(1) of the Act including an interim order in aid of the final relief. Thirdly, the misleading quality or character of the notice is unable to be cured, it is said, because the notice invites recipients to respond by addressing a proxy form in favour of PSL either for or against the motions and members who have sent a proxy to PSL in reliance upon the Explanatory Memorandum have committed themselves to a position with the result that no statement made to the meeting will reach or influence those members who have given a proxy. In addition, consideration must be given to those members who may not attend the meeting but who have received the material and have acted one way or another, in reliance on it. 12 The evidence going to these contentions is this. 13 The procedural steps and general arrangements for convening the meeting of members and formulating and issuing the Notices of Meeting 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 the meetings for each Project. Mr Livadaras says that he received a number of consents from members of Project 4 to call a meeting and he subsequently caused the Notice of Meeting to be sent. Exhibit 'SL2' to the affidavit of Mr Livadaras sworn 30 November 2007 attaches copies of emails and correspondence evidencing the consents for Project 4. Those attachments demonstrate that an electronic or written consent was received by Mr Livadaras from 24 of the 56 members mostly after the date of issue of the notice. There is no electronic or written consent forming part of Exhibit 'SL2' from 21 of those 56 members. The applicant says the request made of each member is illustrated by an email sent by Leonie Ladgrove of Stantins on behalf of Mr Livadaras to a member, Ms Crystal Cree, in these terms: You have previously been in email contact with my business partner Spiros Livadaras. We are in the process of preparing to call meetings for the projects in which our clients have invested. If we can get the numbers we will arrange this for all six projects. As we require at least 5% of paid up members to call a meeting would you please confirm the following: 1. Are all of your management fees up to date with AOL? 2. Would you agree to us using your name to call the meeting? If you have any further queries, please call me on 03 99475020. 14 The applicant says that what was being asked of members (subject to any telephone discussion) was whether the member would agree to Mr Livadaras using the member's name to call the meeting (by means of the Notice of Meeting). The electronic and written consents are therefore simply a consent to the use of the member's name to call the meeting and not a consent or acceptance of the statement that the member considers that members' interests would be better served by the removal of AOL. The applicant says an examination of the consents comprising Exhibit 'SL2' reveal that in each case but one, the member has consented to being listed as a member for the calling of a meeting and no more. One response, an email response from 'Greg' is, critical of the 'abysmal performance' of the investment and the performance of AOL. 15 The applicant relies upon the affidavit of John James Whelan sworn 19 November 2007. Mr Whelan says that he is a member of Project 4 and Project 5 holding five and 10 interests respectively in those projects. He says that on 24 October 2007 he received an email from Leonie Ladgrove of Stantins requesting his approval to incorporate his name within the group of members calling a meeting of members for each project. Mr Whelan says he did not respond to that request and subsequently received Notices of Meeting for both projects and noticed that his name was included on both notices as a member calling each meeting. Mr Whelan says that he has not provided his consent to any person to use his name for the purpose of calling a meeting of members of either project. Mr Whelan says that on 10 September 2007 he received an email from Tanya Kruppa of Stantins in which Ms Kruppa identified herself as a grower in Project 5 and an Accountant with Stantins; refers to independent research conducted by 'Adviser Edge' on behalf of Stantins concerning Australian Olive Projects with particular focus upon Projects 4, 5 and 6; refers to site inspections of the trees conducted by Adviser Edge; and refers to four issues to be addressed in relation to Projects including Projects 4 and 5, namely, a consideration of an alternative structure for management fees in respect of each project under the current structure, a restructure of the schemes, the question of a conflict of interest between AOL and the plantation manager and details of the extent of frost affect upon trees under management in each Project. On 11 September 2007, Mr Whelan responded to Mr Livadaras (copy to Ms Kruppa) in these terms: Thank you for your email. Like you, I have been concerned about a few issues, mainly related to the drought, but also to some of the structural and conflict issues. I am a grower in Projects 4, 5 and 6 but understand the difficulties any project manager must face in times of drought – although it may be said that the lagoon was promoted as a drought‑proofing measure. Since the Federal Government has lowered the boom on anything not timber, now is a good time to look at the financial and legal structure of the projects, and I would be interested in becoming involved if any further input is warranted or needed. Regards, John Whelan Company Secretary/Australian Group Council Hardy Wine Company Limited 16 On 24 October 2007, Mr Whelan received an email from Leonie Ladgrove in these terms: We are proceeding with calling the AOLP5 Meeting but need to list as many P5 Members as we can on the Notice of Meeting so as to ensure that the Resolutions carry and to further ensure that AOL have a limited chance of success in seeking any type of injunction. We would like to list your name and request you confirm that you are willing to proceed to call the meeting. 17 Mr Whelan did not respond to that email and upon receipt of the Notices of Meeting, Mr Whelan sent Mr Livadaras an email in these terms: I am one of the wrongly listed growers stated in your notices of meeting for Projects 4 & 5 to have supported them. I received a request from Leonie Ladgrove on 24 October to support this action, but I've never responded to it directly. I did, however, notify Suzanne Aznavorian of your office on 1 November in relation to Project 6 that I was voting against your proposal. I also informed her I was a member of Projects 4 and 5 as well. I am most unhappy to have been attributed publicly as having supported these proposals and request that you notify all concerned just as publicly of your error. I am told there are others on your list in a similar position. Whilst I do support a rational examination of the operations of these MIS ventures to improve prospects, I do not support radical change such as you advocate. 18 On 13 November 2007, Mr Livadaras sent an email to Mr Whelan saying 'with regards to your email to me dated 12 instant, I will respond to the issues that you raised via email tomorrow; I note with interest however your change in position from your email to me dated 11 September 2007!'. Mr Livadaras then drew Mr Whelan's attention to the proxy section of each Notice of Meeting and that part of the notice advising where proxies could be sent. Mr Whelan responded by email on 13 November 2007 and observed: '… And I have not changed my position as you can see from the text below of my email to you of 11 September [quoting the earlier email]. Please don't try to misrepresent what I have said – you have not then said anything about sacking the Responsible Entity … your response of the same date did not indicate, except in a veiled way, the action now taken. In particular, the excellent report of Adviser Edge you included with that email did not envisage it either, although it did suggest restructuring was needed. Our differences relate more to the way you want to proceed. It is very dangerous to mess with tax‑approved schemes and I think it should always be as a last resort, not one of the first avenues explored. I remain interested in becoming involved in any review. 19 The applicant also relies upon the affidavit of Nathan John Shaw a solicitor in the employ of McMahon Clarke Legal, the Solicitors for the applicant. Mr Shaw says that on or about 4 December 2007 he was informed by Mr Peter Bysouth, a member of Projects 4 and 5 that he did not call either of the meetings of members for those Projects and that his name was included on the Notices of Meeting without his consent. Mr Shaw says that Bysouth advised him that he was willing to swear an affidavit to that effect. Mr Shaw also says that Bysouth provided him with a copy of an email sent to him by Mr Livadaras and an email sent by Bysouth to Ms Aznavorian. The applicant says the email from Mr Livadaras of 24 October 2007 reveals the frame of reference by which Mr Bysouth's involvement was sought. It provides: We are proceeding with calling the AOLP5 Meeting but need to list as many P5 Members as we can on the Notice of Meeting so as to ensure that the Resolutions carry and to further ensure that AOL have limited chance of success in seeking any type of injunction. Would you like to list your name and request you confirm that you are willing to proceed to call a meeting. 20 Mr Bysouth responded on 7 November 2007 by saying, 'Please withdraw my name from the list thank you and regards'. 21 The applicant says there are two other examples of members whose names have been included amongst those calling the meeting who did not provide their consent. Mr Shaw in his affidavit sworn 20 November 2007 refers to a conversation he had with Mr Jose Valles a member who holds 12 interests in Project 6 and 10 interests in Project 5. Mr Shaw put to Mr Valles that he had been personally listed as one of the people convening a meeting. Mr Valles said that he had been 'given a different story to that'. Mr Shaw deposes to his impression that Mr Valles seemed surprised that a meeting had been called and 'certainly seemed to be surprised at any suggestion that he was an instigator of the meeting'. Mr Shaw says that on 9 November 2007 he spoke to Dr Christopher Mack a member who holds 20 interests in Project 4 and 20 interests in Project 5. Mr Shaw says that Dr Mack told him that he did not consent to his name being used to call a meeting and he has 'not called any meetings of members for any of the Australian Projects and is willing to swear an affidavit to that effect'. Mr Shaw says that he spoke with Dr Mack on 16 November 2007, prepared a draft affidavit, spoke to Dr Mack about the affidavit and sent the affidavit to him. No affidavit from Dr Mack has been filed. 22 In relation to the consents obtained by Mr Livadaras from members of Project 4 endorsed on the Notice of Meeting, many of the consents are dated well after the date of receipt by members of the notice on or about 2 November 2007. The consents are dated 29 November 2007, 19 of them are dated 21 November 2007, two of them are dated 26 November 2007 and two others are dated 28 November 2007. Others are dated 31 October, 24 October, 20 September, 2 November and 21 September 2007. Two observations can be made about the consents. First, since a large number of the electronic or written consents are dated well after the receipt by members of the Notice of Meeting for Project 4 an inference is open that those members consent to the document as received by them which includes a clear statement of the resolutions and the memorandum explanatory of those proposed resolutions incorporating the contextual matters set out in that part of the document [10]. Secondly, since the affidavit material does not disclose any step taken by 21 of the members recited in the notice as those calling the meeting, to object to the issue of the notice, the material contained within it or the proposed resolutions, an inference is open that those members support the calling of the meeting and do so in the context of having received the notice and the Explanatory Memorandum and thus act on an informed basis as to the content of each notice. 23 The evidence that Mr Livadaras issued the Notice of Meeting for Projects 4 and 5 without the consent of a member and without support for the proposition that a member held the view that AOL ought to be replaced, is that of Mr Whelan and evidence on information and belief by Mr Shaw as to the position of Dr Mack and Mr Bysouth. The evidence in relation to Mr Valles is at best a statement of impression on the part of Mr Shaw. The evidence in relation to Dr Mack is more precise. Mr Blake Ammit in his affidavit sworn 20 November 2007 explains that AOL has attempted to contact numerous members listed in the notices for Projects 4 and 5 'but due to time constraints has been unable to speak to most of the members in question'. Mr Ammit says that representatives of AOL in speaking with some of those members who called the meetings have been advised that the members 'do not understand why meetings have been called in respect of the projects'. There are no affidavits from members in either group referred to by Mr Ammit (except perhaps Mr Whelan). 24 I accept that there is evidence which establishes that Mr Whelan did not give his consent to the use of his name for inclusion in notices to convene meetings of members of Projects 4 or 5 and I accept that Mr Whelan's evidence is that he did not communicate to Mr Livadaras nor does he hold a view that AOL ought to be replaced as the responsible entity for Projects 4 and 5. I also accept that there is evidence on information and belief that Dr Mack and Mr Bysouth did not consent to the use of their names for inclusion in notices convening meetings of members for the Projects. However, it seems to me that the vast majority of the 24 members providing electronic or written consents have done so in circumstances where they accept their subscription to the Notice of Meeting for Project 4 informed by its contents including the formulation of the resolutions, the Explanatory Memorandum contextualising the resolutions sought to be put to the meeting and the proxy arrangements. Moreover, an inference ought properly be drawn that those 21 members of Project 4 who failed to respond by providing a consent to Mr Livadaras represent individuals or investors that raise no objection to the use of their name in the document as sent to them. No material has been filed by the applicant arising out of Mr Ammit's discussions with members or other discussions between representatives of AOL and members. 25 In relation to Project 5, 54 members are listed on the notice. Approximately 30 of those members have provided a consent to Mr Livadaras and the applicant contends that eight members have not provided a consent. The position of Dr Mack and Mr Whelan is reflected in the affidavits of Mr Shaw and Mr Whelan. The position of Mr Bysouth is reflected in Mr Shaw's affidavit. As to the other five, there is no evidence. An examination of the consents for Project 5 attached to Exhibit 'SL4' to the affidavit of Mr Livadaras reveals a similar position to that of Exhibit 'SL2' in which the vast majority of those providing their consent have done so during November and on or about 21 November 2007 and must be taken to have consented to the Notice of Meeting in the sense that they agree to the issue of the Notice of Meeting in their name in the form as issued including the Explanatory Memorandum and contextual statements. 26 Accordingly, subject to what follows, to the extent that conduct has occurred which is misleading or deceptive or likely to mislead or deceive a recipient of the notice, it is confined to conduct in relation to the asserted position of Mr John Whelan, Dr Mack and Mr Bysouth. However, the applicant has not demonstrated a nexus between the conduct of incorrectly including Whelan, Mack and Bysouth in the notices and a misleading effect or likely misleading effect upon recipient members (or a substantial proportion of them) of each scheme. The applicant says Whelan is representative or emblematic of a reasonable member of the class of addressee in question and the sufficiency of the nexus between the conduct and misleading scheme members or deception or likelihood of misleading or deceiving scheme members 'is to be approached at a level of abstraction' not present in cases where a misrepresentation is made only to particular identified individuals (National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 49 ACSR 369 [18] per Dowsett J). However, in order to establish that the conduct in question is or is likely to mislead or deceive scheme members, as a defined group of identified addressees, the applicant must show, beyond an abstraction, that a significant proportion of those members (that is, more than simply a few) were misled by relying upon the statement that Whelan, Mack and Bysouth called the meeting when they did not and that Whelan, Mack and Bysouth held the view explanatory of the resolutions, when they did not (Campomar Sociedad Limitada v Nike International Ltd (2000) 2002 CLR 45; National Exchange (supra) [20] ‑ [28]). The applicant also relies upon the observations of Young J in Devereaux Holdings Pty Ltd v Pelsart Resources NL & Anor (1986) 4 ACLC 12 at 14 concerning an allotment of shares consequent upon a resolution made at a meeting based upon a notice issued by directors supported by an explanatory memorandum said to contain incorrect and misleading information. His Honour accepted that the test to be applied was whether any reasonable ground existed for supposing that such imperfections as may be found in the circular, had the result that the majority (who approved the proposal placed before them) did so under some serious misapprehension of the position. That test is not inconsistent with the above observations which seem to me to govern the position here. Moreover, the duties upon directors are not those of members seeking to convene a meeting. Nevertheless, an applicant would, on either view, need to establish that a significant proportion of those voting did so under some serious misapprehension. In other words, a clear nexus would need to be demonstrated. 27 Mr Livadaras deposes to the receipt of proxies from members of Projects 4 and 5. Mr Livadaras says that approximately 45% of members of Project 4 have forwarded completed proxy forms casting their votes in favour of the resolutions and 70% of members of Project 5 have forwarded completed proxy forms casting their votes in favour of the resolutions. 28 The 'organising principles' governing the grant of an interlocutory injunction are those identified at [19] of the joint judgment of Gleeson CJ and Crennan J in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 and the explanation of those principles is set out in the reasons of Gummow and Hayne JJ at [65]–[72] of O'Neill. At [19], Gleeson CJ and Crennan J said this: As Doyle CJ said in [Jacudo Pty Ltd v South Australian Telecasters Ltd (1997) 69 SASR 440 at 442‑443], in all applications for an interlocutory injunction, a court will ask itself whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff's entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction. These are the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed. We agree with the explanation of these organising principles in the reasons of Gummow and Hayne JJ and their reiteration that the doctrine of the court established in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 should be followed. 29 In assessing whether the applicant has made out a prima facie case in the sense contemplated in Beecham, 'it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial' O'Neill, [65] per Gummow and Hayne JJ. That test might be described by the use of the phrase 'serious question' to which there is no objection if it is understood 'as conveying the notion that the seriousness of the question, like the strength of the probability referred to in Beecham, depends upon the considerations expressed in Beecham'. Those considerations are set out in the well known passage from Beecham at p 622, per Kitto, Taylor, Menzies and Owen JJ. 30 The applicant seeks a declaration that each notice is invalid (and therefore cannot support a call for a meeting) by reason of the inclusion of some members who did not wish to call a meeting and the inclusion in each notice of incorrect and misleading statements that all members calling the meeting support the proposed resolutions. The interim injunction is sought in aid of the final relief and is pressed on the ground of a prima facie case of a contravention of s 1041H of the Act. The applicant seeks to restrain all of the respondents from convening the meetings and voting on the resolutions. However, the evidence of a contended contravention extends only to the circumstances of Mr Whelan by direct evidence and Dr Mack and Mr Bysouth by evidence on information and belief. The evidence does not demonstrate that the Notice of Meeting was misleading of members on the footing that the remaining respondents did not support the call for a meeting and do not support a call on the basis of the notice as despatched or that members were misled. 31 Let it be assumed, however, that a prima facie case of a contravention is made out in respect of the circumstances of at least one member and possibly three members, two further matters are said to go to the exercise of discretion. First, what are the conditions of a valid notice and secondly, can the members lawfully convene and vote on the proposed extraordinary resolutions if the proposed resolution to appoint PSL is prohibited by the Act. In addition, the proposed resolutions are inter‑dependent in the sense that the resolution to remove AOL is conditioned upon the appointment of PSL as the new responsible entity and PSL securing a variation to its financial services licence under the Act. The Statutory Environment 32 Projects 4 and 5 are managed investment schemes under the Act (s 9) registered by ASIC (s 601EB). Each scheme involves the contribution of consideration by investors (members) to acquire rights (interests) to benefits produced by the use of those contributions for the scheme purpose in circumstances where the members do not have day‑to‑day control over the operation of the scheme (s 9). Such a scheme must be registered under the Act by ASIC, subject to s 601EB(1), if it has, as here, more than 20 members (s 601ED(1)). Each scheme must have a constitution (Part 5C.3) and a compliance plan (Part 5C.4). Each registered scheme must identify a company (the responsible entity) to operate the scheme and perform the functions conferred on it by the scheme constitution (s 601FB(1)). The responsible entity of a registered scheme 'must be a public company that holds an Australian financial services licence authorising it to operate a managed investment scheme' (s 601FA). PSL is said not to have such a licence. The statutory duties to be discharged by the responsible entity are set out at s 601FC(1) and those of officers, at s 601FD. 33 Division 2 of Part 5C.2 deals with the methods of changing the responsible entity of a scheme. A purported change of the scheme's responsible entity is 'ineffective unless it is in accordance with this Division' (s 601FJ(2)) and 'a company cannot be chosen or appointed as the responsible entity or temporary responsible entity of a registered scheme unless it meets the requirements of section 601FA' (s 601FK). However, ASIC or a member of the registered scheme may apply to the Court for the appointment of a temporary responsible entity of the scheme if the scheme does not have a responsible entity that meets the requirements of s 601FA (s 601FN) and the Court may make that order if it is satisfied that the appointment is 'in the interests of the members' (s 601FP). ASIC may deregister a scheme if the scheme does not have a responsible entity that meets the requirements of s 601FA (s 601PB(1)). In addition, ASIC has power to grant exceptions and modifications to Chapter 5C by force of Part 5C.11. In order to maintain continuity for those persons dealing with the register, a company recorded by ASIC as a responsible entity of a registered scheme remains the responsible entity until the record is altered to name the new entity, notwithstanding anything in Division 2. 34 A responsible entity might retire or be removed by members. Section 601FM(1) is in these terms: If members of a registered scheme want to remove the responsible entity, they may take action under Division 1 of Part 2G.4 for the calling of a members' meeting to consider and vote on a resolution that the current responsible entity should be removed and a resolution choosing a company to be the new responsible entity. The resolutions must be extraordinary resolutions if the scheme is not listed. 35 Neither scheme is listed (that is, neither scheme is included in the official list of a prescribed financial market (s 9)). Because the register must be kept current, s 601FM(2) provides that if the members vote to remove a responsible entity and at the same meeting choose a company to be the new responsible entity (that consents in writing), the pre‑resolution responsible entity must within two business days lodge a notice with ASIC asking it to alter the record of the scheme's registration to name the new responsible entity and ASIC must comply with the notice when lodged (s 601FM(2)(a) and (c)). 36 Section 252D of Part 2G.4 of the Act 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. An extraordinary resolution in relation to a registered scheme means, among other things, a resolution 'that has been passed by at least 50% of the total votes that may be cast by members entitled to vote on the resolution (including members who are not present in person or by proxy)' (s 9). Since the Notice of Meeting for each scheme recites members calling and arranging to hold a meeting representing 44% (Project 4) and 65% (Project 5) of members, the incorrect inclusion of Whelan, Mack and Bysouth does not reduce the notices to a call for a meeting by members holding interests carrying less than 5% of the votes that may be cast at the meeting. The notices are otherwise valid as they are supported by members representing a substantial percentage of interests entitled to vote. It seems to me that the reference in the email from Leonie Ladgrove of 24 October 2007 to Mr Whelan and the email to Mr Bysouth which make reference to the need to list as many members as possible so as to avoid AOL seeking and obtaining an injunction to restrain the meeting is simply a reference to a desire on the part of those organising the call for a meeting to secure the support of a proportion of the members well beyond the 5% threshold. 37 The more difficult question is the licence status of PSL and the extent to which that consideration should be weighed in the exercise of discretion assuming a prima facie case of a contravention of the Act in respect of at least one and arguably three members. The applicant says that in exercising the discretion, the Court should weigh in the balance in favour of granting interim relief, a recognition that the meeting is seeking to pass a resolution (inter‑dependent with the removal of AOL) to appoint a responsible entity to each scheme that is prohibited from so acting by ss 601FK and 601FA and such a resolution is rendered ineffective by s 601FJ(2). The respondent scheme members say the meeting should proceed to determine the matter because: it is called lawfully; members are entitled to consider the resolutions and if thought fit pass or reject the resolutions; no question of a prohibition upon PSL being chosen or appointed to act as responsible entity arises unless and until the meeting passes a resolution purporting to choose or appoint PSL; and, in any event, PSL's Australian financial services licence issued by ASIC authorises it to operate 'a managed investment scheme' and it is not a requirement of s 601FA that PSL be licensed to operate 'the managed investment scheme'. 38 As to the last point, PSL holds an Australian financial services licence (No. 224017) under s 913B of the Act. The affidavit of Anthony Johnston sworn 20 November 2007 exhibits ('AJ1') a copy of the PSL licence obtained upon conducting a search of the ASIC register. The licence records that PSL 'shall continue to be licensed … subject to the conditions and restrictions, and to the conditions contained in this licence and attached schedules'. The licence 'authorises' PSL, among other things, to: (c) operate the following kinds of registered managed investment schemes (including the holding of any incidental property) in its capacity as responsible entity. 39 The 'Authorisation' section of the licence then recites seven registered managed investment schemes. They are a horticulture scheme called 'Cool Climate Apricot Project'; a forestry scheme 'NTT Mahogany Project'; a further forestry scheme 'NTT Mahogany Project 2006‑2008'; a further forestry scheme 'WRF Kangaroo Island Plantations 2002'; a horticulture scheme 'Moora Citrus Project'; a timber scheme 'Australian Hardwood Investment Scheme' and a property scheme 'Compass Hotel Group Trust'. Mr Robert Garton Smith, the Managing Director of PSL, in his affidavit sworn 5 December 2007 says that PSL has applied for and been granted approximately 20 licence variations almost all for agricultural schemes of different varieties and that PSL currently holds or oversees 12 managed investment schemes. 40 The term 'Australian financial services licence' bears the same meaning in Part 5C as it does in Part 7 of the Act which provides for the regulation of such licences. Part 7 provides that ASIC must grant a licence if the requirements of s 913B are satisfied and ASIC may at any time 'impose conditions or additional conditions on the licence and vary conditions' (s 914A(1)). It may do so on its own initiative or on the application of the licensee (s 914A(2)). A licensee must comply with the conditions (s 912A(1)(b)). The scope of the 'Authorisation' conferred by the licence granted to PSL is not limited (so far as operating a registered managed investment scheme is concerned) to operating the identified schemes but extends to operating schemes of the kind identified. Horticulture schemes for the propagation of olive trees and the production of olives may be schemes of the kind described as the apricot or citrus horticulture schemes recited in the licence. There is no evidence on those matters. Those schemes may exhibit an entirely different organisational structure, call for different levels of horticultural expertise and may be differentiated by reason of a range of other factors. The Corporations Regulations 2001 (Reg. 7.1.04A and Reg. 7.1.04B) identify for the purposes of s 761CA of the Act those things that constitute a kind or class of financial service for the purposes of Part 7. Those Regulations although confined to an explanation of the meaning of 'custodial arrangement' in s 1012 IA of the Act and variations to financial products' for the purposes of s 1017F(4), may give some indication of the meaning of a kind of financial product or class of financial product. As to kind, 'each of the following is a kind of financial product (a) for interests in a managed investment scheme, all the interests in that managed investment scheme' (Reg. 7.1.04A(2)) and as to class, 'an interest in a managed investment scheme is in the same class as another interest in a managed investment scheme if they are both interests in the same managed investment scheme' (Reg. 7.1.04B(2)). To the extent that these terms provide any analogue for the purposes of Part 5C of the Act, they indicate a limited meaning to the terms 'kinds' or 'classes'. Mr Smith exhibits to his affidavit a copy of a letter to PSL from ASIC dated 3 December 2007 ('RGS1') in response to PSL's application to vary the licence to expressly authorise it to operate the six registered olive schemes as responsible entity. That letter identifies a range of information ASIC requires for consideration in dealing with the variation application. The ASIC letter seems consistent with a position taken by PSL that a variation to its licence is necessary to enable it to operate the six olive schemes either because the authority conferred by the licence is limited to the nominated schemes or, alternatively, those nominated schemes are not of the kind represented by the olive schemes. 41 Section 601FA is not satisfied by holding a licence to conduct any registered managed investment scheme. The section contemplates a licence authorising, according to its terms and conditions, a company to operate the managed investment scheme in question. That licence, however, might do so because the particular registered managed investment scheme falls within the scope of the existing licence as, for example, a scheme of the kind already licensed. For the purposes of this application only, I proceed on the footing that PSL does not hold a licence to operate Projects 4 or 5. The question however of PSL's licence or the circumstances relevant to whether PSL requires (or might obtain) a variation to its licence to act as a responsible entity of the olive schemes are matters the meeting of members might properly consider. The possibility or prospect that the meeting might pass inter‑dependent resolutions that result in a contended appointment of a responsible entity other than in conformity of Part 5C of the Act is not a proper basis for exercising the discretion in favour of restraining the respondent members from holding a meeting of scheme members. If the meeting resolves in a way which is thought to be inconsistent with the statutory provisions, that resolution will give rise to other considerations. Those considerations may never arise. 42 I am not satisfied that a prima facie contravention of the Act in respect of the use of the names of Mr Whelan, Dr Mack or Mr Bysouth is made out as the applicant has failed to demonstrate a nexus between the conduct and scheme members being misled by reason of it. Nor has a proper basis for restraining the respondent scheme members from convening the scheme meetings been made out. I am not satisfied that the notices are rendered invalid by the use of the names of those three members. I am not satisfied that a proper basis arises for the exercise of the discretion to grant interim relief restraining members from holding the meetings and voting upon the resolutions. If I was otherwise satisfied that a prima facie case had been made out, I would not regard the possibility or prospect that the members might pass a resolution resulting in a contended appointment of a responsible entity other than in conformity with Part 5C of the Act, as a matter influencing the exercise of the discretion to grant interim relief to prevent the meetings from taking place. 43 As a result, the application is dismissed with costs. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate: Dated: 10 December 2007 Counsel for the Applicant: Mr Wilson Solicitor for the Applicant: McMahon Clarke Legal Counsel for the Respondent: Mr Pirrie Solicitor for the Respondent: Frenkel Partners Date of Hearing: 6 December 2007 Date of Judgment: 10 December 2007