plaintiff. Declarations made that the August Notice and the September Notice were invalid; declaration that RTHF's directors are not compelled to call the general meeting requisitioned by Mr Diamond; First...
Key principles
RTHF's constitution (in particular cl 13 and cl 20.4) confines the mechanism for appointment of 'Elected Directors' to the AGM; because the constitution excludes the replaceable...
A company's directors are not compelled under s 249D to call a general meeting to consider requisitioned resolutions which could not lawfully be effected by the company in...
A notice proposing combined removal-and-replacement resolutions (i.e. removing directors and appointing specific replacements at the same general meeting) is invalid where the...
Issues before the court
Whether members may appoint replacement 'Elected Directors' at a general meeting other than the AGM, given the constitution's provisions and the...
Whether a notice under s 249D requiring directors to call a general meeting is valid where the proposed resolutions could not lawfully be effectual...
Whether proposed amendments at a meeting (to remove appointment element, leaving removal-only resolutions) would be permissible and cure the...
Plain English Summary
RTHF's constitution says 'Elected Directors' must be nominated, vetted and elected at the annual general meeting; it excludes the Corporations Act replaceable rules that might otherwise allow members to appoint replacements at other meetings. A member requisitioned a general meeting to remove six directors and simultaneously appoint named replacements. The Court held those appointment elements could not lawfully be carried out at an extraordinary general meeting because they conflict with the constitution. Because the requisitioned resolutions could not lawfully be effective as drafted, the company's directors were not obliged under s 249D to call the meeting. Declarations were made that the notices were invalid and that RTHF's directors need not call the meeting; costs were awarded against the requisitioning member.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Cited legislation
1 cited instrument linked from this judgment.
Deep Dive
1,669 words · generated 05/09/2026
What happened
Railway & Transport Health Fund Ltd (RTHF) applied to the Supreme Court of New South Wales seeking declarations that two notices from Mr Mark Diamond were invalid: (a) an August 2020 notice under s 203D of the Corporations Act proposing six resolutions each removing a director and appointing a named replacement at a general meeting; and (b) a September 2020 requisition under s 249D requiring the company's directors to call a general meeting at which those six resolutions would be put. RTHF relied on the terms of its constitution, especially cl 13 (Elected Directors procedure) and cl 20.4 (exclusion of replaceable rules), to contend that the appointment aspect of the proposed resolutions could only validly occur at the AGM and by compliance with the constitution's detailed nomination and election procedures.
Black J found that the constitution confines appointment of 'Elected Directors' to the AGM, prescribes a detailed nomination, vetting and election regime culminating in election 'at the AGM', and explicitly excludes the replaceable rules in the Corporations Act. Because of that, the appointment element of the requisitioned combined removal-and-appointment resolutions could not lawfully be effected at an extraordinary general meeting. For that reason the Court declared the August and September notices invalid, and declared that the directors were not compelled under s 249D to call the meeting. The plaintiff succeeded and the first defendant was ordered to pay costs.
Why the court decided this way
Three linked legal themes led to the decision.
The constitution as the governing source of internal appointment procedures. Black J emphasised that RTHF's constitution must be read as a whole and given a commercially sensible construction. Clause 13 prescribes nomination and election steps culminating in election 'at the AGM', cl 13.2 ties the term of office to the conclusion of the AGM following election, cl 13.3 prescribes vetting and confirmation steps, and cl 20.4 excludes the replaceable rules. Reading those provisions together, it was commercially and structurally incoherent to treat the constitution as permitting appointment of Elected Directors at an extraordinary general meeting. For example, if election could occur at a general meeting other than the AGM, cl 13.2 would produce anomalous terms (a director elected at an extraordinary general meeting would not take office until the next AGM, or would have no specified maximum term). The judge therefore concluded that the constitution manifests an intention to confine Elected Director appointments to the AGM.
Displacement of common law or replaceable-rule appointment powers by express constitutional terms. Authorities show a company in general meeting has common law capacity to appoint directors, and s 201G (the replaceable rule) historically reflects that. But a constitution may restrict or exclude that capacity. Because RTHF's constitution expressly excluded replaceable rules (cl 20.4) and provided a comprehensive alternative mechanism limited to the AGM, there was no room for an implied or residual general-meeting appointment power while any director remained who could validly fill a casual vacancy. Black J drew on authority such as DVT Holdings and Link Agricultural to explain that constitutional language can displace common law rights; Link Agricultural was distinguished on the facts because the constitution in that case did not produce the same AGM-only regime and replaceable rules were not excluded in the same way.
Limits on directors' obligation to call a meeting under s 249D. Section 249D requires directors to call a meeting upon a valid requisition, but case law permits directors to refuse when a proposed resolution could not lawfully be effected by the company in general meeting. The Court found that the appointment part of the proposed resolutions could not lawfully be carried out at the requested general meeting given the constitution, and so the directors were not obliged to call the meeting in the form requisitioned.
Black J also addressed, obiter, contingency considerations: if removal of directors left RTHF with only one director in office, that remaining director could likely fill casual vacancies, and in extreme cases the Court could call a meeting under s 249G to reconstitute the board. The judge noted that there might be a very narrow residual power in the members in a case of necessity, but declined to decide that issue given the facts.
Before and after state of the law
Before this decision the relevant legal materials and prior cases established several related propositions:
Historically, courts and commentary recognised a common law power for members in general meeting to appoint directors (Worcester Corsetry; Grant; Link Agricultural). Section 201G in its replaceable-rule form reinforced that practical capacity.
Authorities such as DVT Holdings and other NSW Supreme Court decisions had accepted that a constitution may, by its language, displace an implied common law power. Those authorities also discussed directors' duties in relation to requisitions under s 249D and the limits on the requisition power where proposed resolutions cannot be lawfully effected.
This judgment applies those principles to a constitution that expressly excludes replaceable rules and contains a detailed AGM-only election mechanism. After this decision, the proposition is reinforced in practical terms: where a company's constitution prescribes a comprehensive, AGM-tied election regime and excludes replaceable rules, members cannot, through a s 249D requisition for an extraordinary general meeting, validly propose to appoint 'Elected Directors' at that meeting unless the constitution's AGM-linked procedures have been complied with. The decision thus clarifies and applies the displacement principle to a common corporate governance pattern: constitutions that create a particular electoral regime for directors and disapply replaceable rules will prevent general-meeting appointments outside the AGM.
Key passages with plain-English translation
Quotation (constitution clause): "An Elected Director shall hold office from the conclusion of the AGM following their election...", Black J relied on this to show the constitution ties the timing and term of office to the AGM. Plain-English: the constitution makes election an AGM-centric process; someone 'elected' under cl 13 is configured to take office only in relation to an AGM.
Court's operative conclusion: "The resolutions proposed by Mr Diamond could not properly be passed at a general meeting of RTHF, rather than an AGM, and the directors of RTHF are not bound to call the relevant meeting.", Plain-English: because the company's own rules require new Elected Directors to be nominated and elected at the AGM only, the company does not have to call a meeting to approve appointments at a different kind of meeting.
Obiter: "there may be some residual power in the members in a case of necessity to appoint new directors in general meeting.", Plain-English: the judge flagged that in an emergency where the company would otherwise be left directorless, a narrow power could exist to act, or the Court could step in, but that was not decided for these facts.
What fact patterns trigger this precedent
This judgment will be directly relevant where:
A company's constitution prescribes detailed nomination and election procedures for a class of directors (for example 'Elected Directors') that culminate expressly in election at the AGM, and it excludes replaceable rules (cl 20.4 style clause).
A member (or group of members meeting the statutory threshold) seeks to requisition a general meeting under s 249D to remove directors and simultaneously appoint specific replacements at that general meeting without having followed the constitution's AGM-linked procedures.
The company objectsto calling such a meeting on the basis that the appointment mechanism is constitutionally confined to the AGM.
In those circumstances, on the present authority, a court is likely to hold that the appointment element cannot lawfully be effected at an extraordinary general meeting and that directors need not call the meeting as requisitioned.
How later courts have treated it
This judgment is a Supreme Court of NSW decision at first instance. It draws on and distinguishes Victorian, NSW and Federal authorities such as Link Agricultural and DVT Holdings. Its treatment of the displacement of replaceable rules by a detailed AGM-only constitutional regime reinforces the approach in DVT Holdings (Windeyer J) that language in a constitution can exclude a general-meeting appointment power.
As of this decision, higher-court endorsement or disapproval is not recorded in the judgment. Practitioners should check subsequent authorities and appellate decisions for any further pronouncement or adoption of the particular interpretative approach adopted by Black J in similarly worded constitutions.
Still-open questions
Necessity residual power: Black J observed there "may be" a residual power for members to appoint where necessary (for example, if all directors are removed and no remaining director can fill vacancies), but did not decide that point. That leaves open the precise boundaries of any necessity-based residual power to appoint directors despite constitutional restrictions.
Particular constitutional drafting variations: This decision turned on the specific language of cl 13 and cl 20.4. Different drafting, for example, constitutions that silence but do not comprehensively replace replaceable rules, or that allow appointment by members in broader terms, may lead to different results. The line between constitutions that merely supplement a general-meeting power and those that extinguish it may require further litigation.
Permissible amendments at a meeting: The judge expressed real doubt whether deleting the appointment element at the meeting would be an allowable amendment without fresh notice. The precise test for when a purported amendment at a meeting changes the nature of the resolution enough to require new notice remains fact-sensitive and may be litigated further.
Interaction with s 249G (Court-ordered meeting): The judge noted the Court's s 249G power as an alternative remedy to reconstitute a board in extremis, but did not explore procedural or evidentiary thresholds for the Court to exercise that power in such scenarios. Further guidance would be useful.
This analysis summarises and explains the reasoning in the judgment of Black J in Railway & Transport Health Fund Ltd v Diamond (superseding the August and September notices). It is legal information, not legal advice, and may contain mistakes. Before relying on this material, or using any draft or argument based on it, get a qualified Australian lawyer to check it.
Catchwords
[2001] NSWSC 437
- Donaldson v Natural Springs Australia Ltd [2015] FCA 498
- DVT Holdings Ltd v Bigshop.com.au (2002) 42 ACSR 378[2002] NSWSC 571
- Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1[1950] ALR 1046
- Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466(1998) 28 ACSR 498[1998] VSCA 3
- Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1[2006] FCAFC 144
- National Roads & Motorists Association Ltd (NRMA) v Bradley (2002) 42 ACSR 616[2002] NSWSC 788
- Oil Basins Ltd v Bass Strait Oil Company (2012) 297 ALR 261[2012] FCA 1122
- State Street Australia Ltd (Trustee) v Retirement Village Group Management Pty Ltd (2016) 113 ACSR 483
Judgment (6 paragraphs)
[1]
Solicitors:
Jones Day (Plaintiff)
Slater & Gordon (First Defendant)
File Number(s): 2020/276531
[2]
Nature of the application and evidence
By Originating Process filed on 23 September 2020, Railway & Transport Health Fund Ltd ("RTHF") seeks a declaration that a notice provided to it by the First Defendant, Mr Mark Diamond, on 5 August 2020 under s 203D of the Corporations Act 2001 ("August Notice") is invalid. RTHF also seeks a declaration that a notice provided to it by Mr Diamond on 11 September 2020 under s 249D of the Act ("September Notice") is invalid. I will refer to the content and statutory basis of these notices below. RTHF also seeks a declaration that, by reason of the invalidity of the September Notice, its directors are not compelled, under s 249D of the Corporations Act, to call a general meeting of RTHF.
The application is supported by an affidavit dated 23 September 2020 of Mr Matthew Latham, the solicitor for RTHF. Mr Latham refers to RTHF's receipt of the August Notice and then the September Notice from Mr Diamond and to the terms of RTHF's constitution. Mr Latham also referred to the terms of the nomination procedure for "Elected Directors" (as defined) set out in cl 13.3 of RTHF's constitution and the exclusion of the replaceable rules in the Corporations Act by cl 20.4 of RTHF's constitution, to which I refer below; and noted that the latest date on which RTHF's annual general meeting can be held is 30 January 2021, in accordance with a no action statement made by the Australian Securities and Investments Commission in May 2020 in respect of the coronavirus pandemic, and the last date that can be set for nominations and ancillary steps relating to the appointment of directors, under cl 13.3 of RTHF's constitution, is 1 November 2020. Mr Latham's evidence is that the procedures contemplated by RTHF's constitution for the appointment of Elected Directors (as defined) were not complied with in respect of the August Notice or the September Notice, and at least the September Notice contemplated the appointment of Elected Directors at an extraordinary general meeting rather than an annual general meeting of RTHF. Mr Latham also addressed the time within which a meeting must be called by RTHF's directors under s 249D of the Act if the September Notice is valid, which has since been extended by the Court. There was no contest as to the applicable facts.
By way of background, RTHF is a public company limited by guarantee and is a registered private health insurer. RTHF's constitution relevantly provides, in cl 5.2, that RTHF must hold an AGM (as defined) in accordance with the Corporations Act and the AGM is to be held in addition to any other General Meetings held by RTHF in each financial year. The term "AGM" is defined in cl 20.1 as RTHF's annual general meeting. Clauses 11.1 and 11.2(a) provide that the board must have a minimum of six and a maximum of nine directors, of which there must be at least three Elected Directors (as defined) and there may be up to six Appointed Directors (as defined). The term "Elected Director" is defined, in cl 20.1, as a
"Member of the Company elected by the Members of the Company at a meeting called for that purpose".
Clause 11.2(b) provides for a change in the number of directors and, if that occurs, contemplates an election "at the next AGM" for such number of Elected Directors as to the board determines, or otherwise the appointment of persons as Appointed Directors (as defined).
Clause 12.2 of RTHF's constitution sets out eligibility criteria for the election or appointment of persons as a director of RTHF, including in respect of age, capacity, and satisfaction of guidelines or criteria for suitability for appointment as a director under the Private Health Legislation (as defined). Clause 12.5 provides for the removal of a director, as follows:
"Whether or not a Director's appointment was expressed to be for a specified period, the Members may by ordinary resolution in a General Meeting remove a Director from office. The power to remove a Director under this Article is in addition to section 203D of the Corporations Act."
Pausing there, there is no doubt that Mr Diamond (and sufficient other persons to satisfy the requirements of s 249D of the Act) could validly have required RTHF to call a meeting of its members that simply sought to remove specified persons as directors of RTHF, as distinct from seeking to replace those persons at the same meeting without compliance with cll 12.2 and 13 of RTHF's constitution, to which I refer below. Clause 12.7 provides that the board may appoint a person to a casual vacancy in the position of a director in specified circumstances, including if the number of directors is less than the maximum or minimum number of directors contemplated by clauses 11.1 and 11.2 of RTHF's constitution.
Clause 13 of RTHF's constitution deals with Elected Directors (as defined) and cl 13.1 authorises the board to adopt eligibility requirements additional to those specified in cl 12.2 which any candidate for any forthcoming election for an Elected Director position must satisfy. Clause 13.2(a), importantly, provides that an Elected Director shall hold office from the conclusion of the AGM following their election for a period not exceeding the conclusion of the third AGM thereafter. Clause 13.3 sets out a detailed nomination procedure for Elected Directors, requiring nomination by at least two members of RTHF, the provision of certain information as to qualifications and eligibility of the nominee following his or her nomination and the provision of a written consent to act as an Elected Director, signed by the nominee. That clause also sets out steps which must be taken by the Returning Officer (as defined) in respect of the election to available Elected Directors' positions, including permitting the Returning Officer to require candidates to undergo checks set out in the RTHF's "Fit and Proper Person" policy and to provide further information or attend interviews conducted by the Remuneration and Nominations Committee to determine his or her eligibility or ability to complement existing skills, experience and qualifications of the board, and provides that a failure or refusal of a candidate to reasonably cooperate disqualifies that person from the election or filling a casual vacancy of an Elected Director position. Clause 13.4 in turn sets out an election procedure to be followed "at the AGM". Clause 20.4 provides that the replaceable rules in the Corporations Act do not apply.
By the August Notice (Latham 23.9.20, Annexure MGL-1), Mr Diamond gave notice of his intention to move six successive resolutions at a general meeting of RTHF each taking the form:
"THAT with effect from the end of this meeting [named person] be removed as a director of the company and [another named person] be appointed as a director of the company in [his or her] place."
One of RTHF's seven directors would not have been removed by those resolutions. The August Notice relied on s 203D of the Act which relevantly provides that, notwithstanding anything in its constitution or any agreement between a director and RTHF or any of its shareholders, a public company may remove a director by ordinary resolution. The effect of passage of one or more of those resolutions was that one or more of the seven existing directors of RTHF would be removed, and, depending on who was removed, another person would be appointed.
The September Notice (Latham 23.9.20, Annexure MGL-2) in turn sought to require RTHF's directors, under s 249D of the Act, to call and arrange to hold a general meeting of RTHF at which the same six resolutions would be put to members. That section requires a company's directors to call a general meeting at the request of members who hold at least 5% of the votes that may be cast at that general meeting. It is common ground that sufficient members of RTHF signed such a request to satisfy the requirements of s 249D of the Act. However, directors may decline to call a under this section if the proposed resolution could not be lawfully effected by the company in general meeting, and the requisitionists could not then call a meeting relying upon any failure of the company to do so: DVT Holdings Ltd v Bigshop.com.au Ltd (2002) 42 ACSR 378; [2002] NSWSC 571 ("DVT Holdings") at [9]; National Roads & Motorists Association Ltd (NRMA) v Bradley (2002) 42 ACSR 616; [2002] NSWSC 788 at [8]. If parts of a requisition for a general meeting under this section are valid and parts are not, directors must convene the meeting in respect of the valid parts of that requisition, as long as those valid resolutions can be separated from the invalid resolutions: Totally and Permanently Incapacitated Veterans' Association of NSW Ltd v Gadd (1998) 146 FLR 161; 28 ACSR 549.
[3]
The case law and the parties' submissions
The parties referred to case law which addresses similar issues to those which arise here. It appears to have been recognised in Worcester Corsetry Ltd v Witting [1936] Ch 640 and by Latham J in Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1 at 22; [1950] ALR 1046 that a constitutional provision that confers a power upon the directors to appoint a director in certain cases does not deprive a company of its inherent power to nominate and appoint its own directors in general meeting. That proposition does not address the position where a company's constitution specifically confines or delimits the scope of the company's power to appoint directors in general meeting.
In Link Agricultural Pty Ltd v Shanahan [1999] 1 VR 466; (1998) 28 ACSR 498; [1998] VSCA 3 ("Link Agricultural"), Kenny JA (with whom Batt and Buchanan JJA agreed) observed (at [52]) that s 227 of the Corporations Law, as it then stood, conferred not only a right on a public company, constituted by the members in general meeting, to remove a director by ordinary resolution, but also a power for members who removed a director in general meeting to appoint a replacement in the same meeting. Her Honour observed (at [54]) that "[t]his reflects the position at common law that the company, constituted by the members in general meeting, retains an inherent power to appoint a director by ordinary resolution" and referred to Worcester Corsetry Ltd v Witting above; Barron v Potter [1914] 1 Ch 895 and Grant v John Grant & Sons Pty Ltd above. Her Honour there rejected a submission that the articles of association of that company provided exhaustively for the appointment of a replacement director in place of one removed and excluded the general law position. However, that decision is distinguishable, first, because the power to appoint director in general meeting, when a director is removed, is now contained in a replaceable rule in s 201G of the Act, and that replaceable rule has been excluded from RTHF's constitution; and, second, because the constitution of RTHF contains a comprehensive mechanism for appointment of directors, which is incapable of applying other than at the AGM and which would not be complied with, so far as the qualifications of directors were concerned, by appointment other than following the process specified in respect of the AGM.
In CIC Insurance Ltd v Hannan & Co Pty Ltd (2001) 38 ACSR 245 at 247; [2001] NSWSC 437 ("CIC Insurance"), Barrett J in turn referred to Link Agricultural as authority that:
"There is a residual common law power for the members in general meeting to appoint directors … where members act to remove all directors, they have it in their own hands to rectify the resultant breach of the statutory requirement and clearly should do so."
[4]
Mr Diamond's alternative approach
Mr Newlinds submits that if, as I have found, there is no power for members to appoint replacement directors at a general meeting other than the AGM, then Mr Diamond should be given an opportunity to seek amendment of the six proposed resolutions of which he has given notice at the general meeting to delete the second clause of each resolution referring to the appointment of new directors and, if those amendments were passed, there could be no question as to the validity of the proposed resolution.
Mr Hutley responds that the amended form of resolution which Mr Diamond contemplates would be put at the meeting is very different from that which the requisitionists have supported and that there is a real question whether the amendment would comply with the requirement that it did not alter the nature of the resolution, so as to fall outside the notice given of the meeting: Totally and Permanently Incapacitated Veterans' Association of NSW v Gadd above at 165. Mr Hutley submits, with considerable force, that the result of the amendment, being the dismissal of six elected directors without appointment of replacements, would be qualitatively and significantly different from the resolutions of which members would be notified, when the meeting was called.
It does not seem to me that this submission assists Mr Diamond. For the reasons put by Mr Hutley in reply, there is a real doubt as to whether the amendment proposed by Mr Diamond would have been open, if RTHF had wished to call the general meeting requisitioned by Mr Diamond on the basis that the resolutions could then be put before members in an amended form. It seems to me that the proposed amendments would arguably substantively alter the effect of the resolutions, since their result would be that, rather than six identified persons chosen by members being appointed as directors of RTHF at the general meeting, the remaining director(s) of RTHF would have the opportunity to appoint such directors as he or she saw fit, in order to fill a casual vacancy. The notice of meeting in its present form and the information which Mr Diamond contends should be sent to members of RTHF, would not fairly disclose that possibility to members.
In any event, it is plain enough that RTHF does not wish to call that general meeting and the effect of the findings that I have reached is that it is not bound to do so, and Mr Diamond is not entitled to do so upon its failure to do so, where the resolutions take their present form. It is not to the point that, if RTHF had chosen to do what it is not bound to do, then the resolutions could potentially be amended at the meeting.
[5]
Orders
For these reasons, I am satisfied that declarations should be made in the form sought in paragraphs 1 - 3 of the Originating Process and, in the ordinary course, costs would follow the event. I direct the parties to bring in short minutes of order, within two business days, to give effect to this judgment.
[6]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 20 October 2020
Declarations made that the August Notice and the September Notice were invalid; declaration that RTHF's directors are not compelled to call the general meeting requisitioned by Mr Diamond; First Defendant (Mr Diamond) to pay costs; parties to bring in short minutes of order to give effect to judgment.
In DVT Holdings, Windeyer J noted (at [10]) the defendant's argument, also put by Mr Newlinds in this case, that there is an inherent power at common law for a general meeting to appoint directors by ordinary resolution, which can only be displaced by clear language evidencing an intention to do so and that the language of cl 14.2 of the company's articles in that case (which permitted the company to appoint a person to be a director, by ordinary resolution at an AGM) did not show an intention to exclude that power. His Honour there found (at [11]) that the provision for members at the annual general meeting to appoint directors excluded that common law power, with the possible exception of specified circumstances, and also relied on the exclusion of the replaceable rule in that case for that proposition. His Honour noted that the decision in Link Agricultural was not authority that the provisions of the constitution could not take away a common law right to appoint directors in general meeting.
His Honour also there also noted that the one director who continued in office after the removal of all other directors would have the power to take immediate action to appoint directors to casual vacancies to make up the minimum number, and also noted (at [17]), referring to CIC Insurance that.
"Although I do not think it is necessary to decide this for the purpose of this case, it is also possible that notwithstanding the provisions of cl 14 of the constitution there may be some residual power in the members in a case of necessity to appoint new directors in general meeting. I would be more inclined to consider this a residual power rather than some inherent power. I do not consider that a company is necessarily stultified and unable to act at all if the number of its directors is reduced below the statutory number and if any remaining director refuses to act to fill any casual vacancy."
His Honour also there observed (at [18]) that the Court should assume that a director who would remain in office if all the removal resolutions succeeded would carry out his statutory obligations, presumably, including the exercise of the power to appoint other directors to fill any casual vacancies that arose.
I also bear in mind the principles applicable to the construction of a company's constitution and, in particular, that the constitution should be read and construed as a whole; general principles of construction of commercial contracts are applicable to a constitution, and the commerciality of a particular construction may tip the balance in its favour where it is implausible that the parties could be taken to have intended otherwise; a constitution should not be construed narrowly or pedantically; words used should be given their natural and ordinary meaning; and a construction of a provision which gives a congruent operation of the various applicable provisions of a constitution should be preferred to another construction which does not: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; [2006] FCAFC 144; Oil Basins Ltd v Bass Strait Oil Company (2012) 297 ALR 261; [2012] FCA 1122 at [32]; Donaldson v Natural Springs Australia Ltd [2015] FCA 498 at [148]; Aveo Group Ltd v State Street Australia Ltd [2015] FCA 1019 at [59].
Mr Hutley, with whom Mr Kirby appears for RTHF, submits that RTHF's constitution provides that the exclusive forum for members to appoint Elected Directors is the AGM; provides, in cl 13.3 (to which I have referred above) for a nomination, declaration and voting procedure for Elected Directors which culminates in election of a director at the AGM, and which Mr Diamond and the proposed directors he has nominated have not complied with; and displaces the replaceable rule in s 201G of the Act, which would otherwise allow the members in general meeting to appoint a director. Mr Hutley submits that the proposed resolutions are incapable of being validly passed by members in general meeting rather than the AGM.
Mr Newlinds, with whom Mr Lang appears for Mr Diamond, in turn point to the recognition in professional commentary, including Ford, Austin & Ramsay's Principles of Corporations Law, [7.230.21] and [7.370] and Australian Corporations Law Principles and Practice, [3.2.0210], of a power of a company in general meeting to appoint a director, including by filling a resulting vacancy where a director is removed under s 203D of the Corporations Act. Mr Newlinds also refers to Grant v John Grant & Sons Pty Ltd above and Link Agricultural above. Mr Hutley submits, in reply, that the case law on which the learned authors of Ford rely for the proposition that a general meeting can replace the directors does not support that proposition, and that the statement in Ford that a vacancy may be filled in a general meeting is a correct but incomplete statement of the relevant law, since the authors also recognise that the constitution may give the power to fill a casual vacancy to directors, as occurs here or, implicitly, otherwise confine the power to replace directors.
In reply, Mr Hutley submits that no implied or residual power can exist in the face of contrary provisions of the Act or RTHF's constitution, and he points to s 125 of the Act which recognises that a company's constitution may restrict or prohibit the exercise of its powers. He submits that there is no room for any implied or residual power to appoint directors in general meeting where RTHF's constitution has displaced the replaceable rule in s 201G, which would allow such an appointment, and provided for an elaborate regime for the annual election of directors at the AGM. He points out that that result also is consistent with that reached by Windeyer J in DVT Holdings, where the relevant article was of a somewhat simpler character.
Mr Newlinds also submits that, if six directors of RTHF are removed at a general meeting and the meeting does not have power to appoint their replacements, then RTHF would be left with one director in breach of s 201A(2) of the Act and that RTHF's submissions, if accepted, would deprive members from deciding who RTHF's directors ought be going forward. Mr Hutley responds that the members themselves have specified the process by which they may elect directors in cl 13 of the constitution, and that the members are not deprived of the ability to appoint directors, which they may do at the next AGM.
It seems to me that RTHF's submissions do not have the consequence which Mr Newlinds attributes to them. Those submissions would have the consequence that the resolutions could not be passed in the form that Mr Diamond has proposed; however, if resolutions for removal of the six directors were put before a general meeting, the directors could be removed and the remaining director would have the power to fill a casual vacancy; if all directors were removed, the general meeting would arguably have a residual power, of necessity, to appoint the remaining directors and, alternatively, the Court would have a power to call a general meeting under s 249G of the Act in order to allow the board to be reconstituted; and RTHF's members could in any event elect RTGF's directors at an AGM. The members of RTHF are also not deprived of the opportunity to remove directors, which remains available to them under s 203D of the Act.
In my view, cl 13.2 of RTHF's constitution is also incapable of applying sensibly, in respect of the appointment of a director other than at the AGM. If the concept of "Elected Director" is sufficiently wide to permit the election of a director at a general meeting other than the AGM, then, as Mr Hutley pointed out, that article has the result that such a director would only hold office from the conclusion of the AGM following their election, not from the end of the general meeting at which he or she was purportedly appointed. Conversely, if the concept of "Elected Director" does not include a director elected in that way, then, as Mr Hutley pointed out, that clause would not specify a maximum period for that director's appointment, by contrast with the three year period specified by that clause where a director is elected at an AGM. RTHF's constitution would plainly not have a sensible operation where a director could be elected at a general meeting, but not take office until an AGM potentially some considerable time thereafter, and those directors who were appointed at an AGM would have a three year term and those directors appointed at another general meeting would arguably have an unlimited term.
It seems to me that, in the present case, members of RTHF have restricted their ability to appoint directors, or at least the means by which they can do so, so that it can only occur in a particular manner, which involves verification of the directors' qualifications, and on a particular occasion, the AGM, where such verification can occur. It seems to me that the terms of RTHF's constitution therefore exclude any implied power or residual power of members to appoint a director other than at an AGM, at least while RTHF has any remaining director who can appoint other directors to fill a casual vacancy. The resolutions proposed by Mr Diamond could not properly be passed at a general meeting of RTHF, rather than an AGM, and the directors of RTHF are not bound to call the relevant meeting.