Australasian Centre for Corporate Responsibility v Commonwealth Bank of Australia

COURT OR TRIBUNAL

Federal Court of Australia

DATE FILED (OR FIRST HEARING DATE)

14/10/2014

LITIGATION TYPE

Corporate Accountability

SUBJECT MATTER

Transparency and disclosure

REVIEW TYPE

Judicial review

SUMMARY

Australasian Centre for Corporate Responsibility (“ACCR”) brought the case on behalf of 100 Commonwealth Bank of Australia ("CBA") shareholders. The principle question for determination by the Court was whether two resolutions proposed by the ACCR, pursuant to s 249N of the Corporations Act 2001(“the Act”), were resolutions that could validly be moved at an annual general meeting (“AGM”) of CBA. The first resolution related to requesting that the CBA provide to shareholders a report outlining the quantum of GHG emissions that the company is responsible for financing and the approach the company is taking to manage those risks. The second expressed concern that the company had not adequately addressed the risks posed by the CBA financing projects with a high GHG footprint in the annual directors report. A third alternative resolution requested that a special resolution be passed to ask that the Directors report to the shareholders at the time of the Annual Report, the quantum of greenhouse gases the company is responsible for financing. ACCR sought declarations that each of the three proposed resolutions could validly be moved at an AGM of CBA. Judge Davies rejected all three resolutions on the basis that under the Corporations Act, shareholders do not have the authority to propose resolutions that relate to the management of the company, unless a company’s constitution expressly gives them the right to do so. Her Honour upheld the long standing “division of powers” doctrine between the board and the general meeting and upheld the reasoning in the case of National Roads & Motorists’ Association v Parker (1986) 6 NSWLR 517. The CBA constitution vested all powers relating to the business of the bank in the board. The Judge dismissed the distinction that ACCR attempted to draw between resolutions requiring the company to act and “non-binding resolutions which express an opinion”. The Judge held that the shareholders did not have any power vested in them by the company’s constitution or the Act to move advisory resolutions concerning the way in which directors should exercise their management powers.

ACCR appealed Justice Davies’ decision to the Full Court. ACCR’s main argument was that shareholders did not require a power to propose resolutions if those resolutions were advisory in nature. It argued, in the alternative, that if such a power were required, it could be derived either from an inherent plenary power of shareholders to propose resolutions to be decided at an AGM or a power to be implied in CBA's constitution. However, the Full Court held that advisory resolutions which are not grounded in powers granted by statute or the company's constitution are legally ineffective and do not have to be put to shareholders at a general meeting. The Full Court (Chief Justice Allsop and Justices Foster and Gleeson) dismissed the appeal (with costs) and upheld the reasoning of Justice Davies.

CASE DOCUMENTS

Australasian Centre for Corporate Responsibility v Commonwealth Bank of Australia [2015] FCA 785; 325 ALR 736
Australasian Centre for Corporate Responsibility v Commonwealth Bank of Australia [2016] FCAFC 80; 248 FCR 280; 337 ALR 558; 113 ACSR 600