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[2010] FCA 1342
Federal Court of Australia
2010-12-03
Streeton J
Original judgment source is linked above.
Counsel for the Plaintiffs: Mr C Gunst QC with Mr M Irving
IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 208 of 2010
BETWEEN: ANANDA MARGA PRACARAKA SAMGHA LTD (ACN 003 193 897)
JUDGE: DODDS-STREETON J DATE OF ORDER: 3 DECEMBER 2010 WHERE MADE: MELBOURNE
THE COURT ORDERS THAT:
IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 208 of 2010
BETWEEN: ANANDA MARGA PRACARAKA SAMGHA LTD (ACN 003 193 897)
JUDGE: DODDS-STREETON J DATE: 3 DECEMBER 2010 PLACE: MELBOURNE
introduction 1 The following related notices of motion were before the Court: (a) a notice of motion dated 16 November 2010, filed by the plaintiffs ("plaintiffs' notice of motion"); and (b) a notice of motion dated 22 November 2010, filed by the defendants ("defendants' notice of motion"). 2 The plaintiffs' notice of motion seeks the following relief: 1. An order that until the hearing of the application or further order the Defendants and each of them: (a) Shall not affix the company seal to any contract, instrument or document. (b) Shall deliver to the solicitors for the Plaintiffs any copy or original of the company seal that is in his or her custody or control by 20 November 2010. (c) Shall not make, or procure the making of, a copy or original of the company seal of the First Plaintiff. 2. An order that on or by 30 November 2010 the Defendants and each of them shall deliver to the solicitors for the Plaintiffs an affidavit listing all the contracts, instruments or other documents signed by that Defendant after 20 March 2010 to which the company seal has been affixed together with a copy of such contracts, instruments and documents if such are in the possession or control of the Defendant. 3. An order that until the hearing of the application or further order the Defendants and each of them: (a) Shall not collect the mail from the Post Office Box 231 at Katoomba. (b) Shall by 30 November 2010 deliver to the solicitors for the First Plaintiff any copy or original of any key to the Post Office Box 231 at Katoomba that is in that Defendant's custody or control. (c) Shall not make, or procure the making of, a copy of the key to the Post Office Box 231 at Katoomba. (d) Shall not seek the redirection of mail addressed to the company. (e) Shall, if so requested by the solicitors for the Plaintiffs, deliver within 7 days to the solicitors for the Plaintiffs an affidavit listing the names of all persons to whom the Defendant has given a copy or original of the key to the Post Office Box 231 at Katoomba. 4. Subject to complying with Order 8, an order that until the hearing of the application or further order the Defendants and each of them: (a) Shall not use the Ananda Mela Contact List, being the list identified in paragraph 21 of the affidavit of the Second Plaintiff sworn 15 November 2010 ("the Ananda Mela Contact List"). (b) Shall not make, or procure the making of, a copy of the Ananda Mela Contact List. 5. An order that until the hearing of the application or further order the First and Second Defendants and each of them: (a) Shall not enter into, or procure the making of, contracts with persons on the Ananda Mela Contact List concerning the attendance at or participation in a festival not conducted by the First Plaintiff in late December 2010 or early January 2011. (b) Shall not perform contracts with persons on the Ananda Mela Contact List concerning the conduct of a festival not conducted by the First Plaintiff in late December 2010 or early January 2011. 6. An order that on or by 30 November 2010 the Defendants and each of them shall deliver to the solicitors for the Plaintiffs: (a) Any copy or original of the Ananda Mela Contact List that is in his or her custody or control. (b) any copy or original of any list of persons created using the Ananda Mela Contact List. (c) an affidavit listing of all the letters, emails and other documents sent or received by the Defendant after 20 March 2010 to or from persons on the Ananda Mela Contact List and a copy of such letters, emails and other documents if such are in the possession or control of the Defendant. 7. An order that until the hearing of the application or further order the Defendants and each of them shall not use the Ananda Marga trademark or any trademark substantially identical or deceptively similar thereto, without the consent of the First Plaintiff. 8. An order that on or by 30 November 2010 the Second Defendant shall write a letter or send an email to each person on the Ananda Mela Contact List to the following effect: "On about 25 September 2009 I wrote to you promoting a New Year's Gathering 2011 to be held at the Maranatha Camp near Nambour in Queensland. The email suggested that the gathering was associated with Ananda Marga. I apologise for misleading you. The New Year's Gathering 2011 is not organised or promoted by Ananda Marga. There is an Ananda Mela organised by Ananda Marga that will be held at the property of Ananda Marga Pracaraka Sangha Ltd at Stanthorpe in Queensland between the dates 5th January 2011 and 11th January 2011. Details of that Ananda Mela can be found at www.anandamelafestival.org.au." 9. An order that on or by 30 November 2010 the Second and Sixth Defendants deliver to the solicitors for the First Plaintiff affidavits setting out the following details: (a) the correspondence sent by the Second or Sixth Defendants using the trademark of the First Plaintiff inviting people to attend the New Year's Gathering 2011 or otherwise promoting the New Year's Gathering 2011; (b) a statement of the funds received as a result of such invitations or promotions and a statement of by whom those funds are held; (c) the names and addresses of each person who has accepted an invitation to attend the New Year's Gathering 2011. 10. An order that until the hearing of the application or further order the Defendants and each of them: (a) shall not seek or procure the redirection of traffic from the websites at the addresses www.anandamela.com.au, www.anandamela.org.au and www.anandamelafestival.org.au; (b) Shall, if so requested by the solicitors for the Plaintiffs, deliver within 7 days to the solicitors for the Plaintiffs a signed letter stating that the defendant consents to the Second Plaintiff being nominated as the authorised administrator of the company's websites at the addresses www.anandamela.com.au, www.anandamela.org.au and www.anandamelafestival.org.au and the locking of those websites. 11. An order that until the hearing of the application or further order the register be amended to record that the Second and Third Plaintiffs are directors. 12. An order that until the hearing of the application or further order, the Defendants and each of them shall not: (a) Interfere with the conduct of the business of the First Plaintiff by the Second and Third Plaintiffs. (b) Make or vary contracts or arrangements on behalf of the First Plaintiff. (c) Represent to others that he or she has authority to make or vary contracts or arrangements on behalf of the First Plaintiff. 13. Costs. 14. Such other orders as the Court considers appropriate. 3 The plaintiffs' notice of motion is supported by: (a) The affidavit of Devendhran Vadiveloo Pillay sworn 15 November 2010 ("Mr Pillay's first affidavit"). (b) The affidavit of Devendhran Vadiveloo Pillay sworn 22 November 2010 ("Mr Pillay's second affidavit"). 4 The defendants' notice of motion seeks the following relief: 1. Paragraph 1 of the orders made on 31 March 2010 is revoked. 2. The Application purportedly filed on behalf of the first plaintiff Ananda Marga Pracaraka Samgha Ltd on 29 March 2010 and the Amended Application purportedly filed on behalf of the first plaintiff Ananda Marga Pracaraka Samgha Ltd on 7 April 2010 be struck out and removed from the Court file for this proceeding. 3. The second and third plaintiffs have leave to file a fresh Application in lieu of the documents struck out under order 2. 4. That all other documents purportedly filed on behalf of the first defendant in this proceeding be treated as though they were filed by the second and third plaintiffs. 5. That Ananda Marga Pracaraka Samgha Ltd be removed as a plaintiff from these proceedings under Order 6 Rule 9 of the Federal Court Rules 6. That Ananda Marga Pracaraka Samgha Ltd be added as the twelfth defendant to this application under Order 6 Rule 8 of the Federal Court Rules. 5 The affidavits in opposition to the plaintiffs' notice of motion and in support of the defendants' notice of motion were: (a) The affidavit of Claudia Sue Alister sworn 19 November 2010. (b) The affidavit of Dayashankar Tiwari sworn 19 November 2010. (c) The affidavit of Michael James May sworn 22 November 2010.
background 6 The present applications must be understood in the context of the developments in the proceeding since its commencement in March 2010. Some of the background is set out in my reasons for judgment dated 3 June 2010 (Ananda Marga Pracaraka Samgha Ltd v Tomar [2010] FCA 565) at [10]-[14] and [18]-[23]. 7 The first plaintiff, Ananda Marga Pracaraka Samgha Ltd ("the company"), is a company limited by guarantee which has, since its inception, operated as a vehicle for the operations and activities of adherents of the Ananda Marga religion. 8 The memorandum of the company originally stated that its objects include, inter alia: a. To propagate the ideals, the philosophy and practice of ANANDA MARGA. b. To carry out the objectives of the company through discourses, open addresses, personal contacts and through the medium of literature and such other means as may assist in the fulfilment of the objectives of the "the company". c. To work for the development of a universal society and the welfare of all human beings through: i. Social service. ii. Relief work among suffering humanity. iii. Primary, secondary and tertiary schools and pre-school facilities such as kindergartens and child-minding centres. iv. Encouraging literacy and artistic faculties. v. Homes for the aged and physically and mentally handicapped. vi. Hospitals and other medial services. vii. Spiritual, moral and cultural upliftment. viii. Development of integrated human personalities embracing all spheres of life, social, individual and married. ix. And such other means as may assist in the fulfilment of the above objectives. d. To exert and expend all its resources for the purpose of expansion of the company, social services, and universal and world unity. e. To provide all the above types of services without any form of discrimination based on race, religion or sex. 9 In 1992 the memorandum was amended to amend the objects as follows: 1. Clause 2(a) be amended by deleting the full stop after the words "Ananda Marga" and adding the words "which is an autonomous religion, faith and social system based upon the teachings of the Founder and Preceptor of Ananda Marga, Shri P.R. Sarkar, also known as Shrii Shrii Anandamurtii. The religious doctrine, faith, moral canons and creed of Ananda Marga being contained in the scriptures given by the Founder including but not limited to: The Supreme Command, Ananda Sutram, Guide to Human Conduct, Subhasita Samgraha and Ananda Marga Carva Carva I, II and III. The Articles of Faith, and religious doctrines of Ananda Marga are: i. The belief in One, Infinite, Supreme Entity which in the Sanskrit language is referred to as Parama Purusa. ii. The belief that through the twice daily practice of Ananda Marga meditation the Supreme, Infinite Being may be fully and personally realised by the individual. iii. Meditation and hence realisation of the Supreme, Infinite Being is dependent upon the proper application of cardinal moral principles (Yama and Niyama) in the individual's life. iv. It is a duty of the highest order to encourage all persons to practice Ananda Marga meditation and to follow a life of virtuous and righteous conduct. v. Engaging in selfless, humanitarian service dedicated to the relief of human suffering whether it be physical, mental, or spiritual is indispensable in the individual's progress toward the realisation of the Supreme, Infinite Entity," 2. Clause 2(c) be amended by deleting clause 2(c)(ix) and inserting after clause 2(c)(viii) the following words: "(ix) Conducting the religious functions of Ananda Marga including collective meditation services, marriages, baby namings, funerals, and religious holidays. (x) Providing for the training, ordination and ongoing maintenance of religious ministers of Ananda Marga for the purposes of instruction and guidance of members in the doctrines, faith, and practices of Ananda Marga. (xi) And such other means as may assist in the fulfillment of the above objectives." … 4. That clause 3 be amended by adding at the end of the clause after the words "any share of profits he/she may receive in respect of such payment." the following words: "Provided further that nothing herein shall prevent the company from fulfilling its fiduciary, equitable and legal duties and obligations in relation to property and any income therefrom that it holds as custodian trustee or otherwise on trust for any person, association, institution, venture or enterprise, whether incorporated or unincorporated." … 10 It was common ground that the company has substantial assets and an annual income approaching $1 million. It conducts a substantial business enterprise, including a number of schools. It is in receipt of government grants and has considerable outgoings, including the payment of teachers' salaries, workers compensation, public liability insurance and mortgage payments. 11 Immediately prior to 20 March 2010, the company had five directors (Mr Pillay, Mr Pillai, Ms Nayak, Ms Alister and Mr Tomar). (There had previously been seven directors, one of whom had died and one of whom had retired.) 12 At a general meeting on 20 March 2010, called by Mr Tomar, resolutions were passed to remove Messrs Pillay and Pillai as directors. The company and Messrs Pillay and Pillai issued this proceeding on 39 March 2010. They challenge the validity of removal from office of Messrs Pillay and Pillai on a number of bases, including short notice, exclusion from the meeting of persons validly entitled to vote, failure to comply with the articles' requirement that the President preside at the meeting, and the attendance at and voting on the resolutions by a number of persons who were not valid members of the company. Considerable material in support of Messrs Pillay and Pillay's contentions has been filed. 13 On 31 March 2010, recognising that there was a serious question to be tried and that the balance of convenience favoured the maintenance of the status quo, I injoined the defendants from, inter alia, calling meetings, operating company bank accounts and dealing with company properties. The plaintiffs, including the company, also undertook to observe a number of similar restrictions. 14 The orders made on 31 March 2010 relevantly provided: A. On the giving of the usual undertaking as to damages by the plaintiffs and upon the undertaking of the second and third plaintiffs (i) not to amend or purport to amend the articles of the first plaintiff (ii) not to deal with any of the properties listed in paragraph [3] of the affidavit of Devendhran Vadiveloo Pillay sworn 26 March 2010. (iii) not to cause the first plaintiff to expend any funds other than in the ordinary course of business. (iv) to notify the first and second defendants, on 24 hours notice in writing of any proposed expenditure in excess of $10,000. (v) On a fortnightly basis provide to the auditor of the first plaintiff an account of all expenses and to provide on request to the auditor such information as is necessary. THE COURT ORDERS THAT: 1. Until the hearing of the application or further order, the defendants and each of them shall not: (a) Alter, or seek to alter, the memorandum or articles of association of the first plaintiff. (b) Deal with any of the properties of the first plaintiff referred to in paragraph 3 of the affidavit of Devendharn Vadivelo Pillay sworn 26 March 2010. (c) Convene or call any meeting of members of the first plaintiff. (d) Convene or call any meeting of the committee of the first plaintiff. (e) Expend the funds of the first plaintiff. (f) Open, close or operate any bank account of the first plaintiff or deal or communicate with any bank of the first plaintiff concerning those accounts. … 15 Since those orders were made, a number of significant developments have occurred. 16 A mediation was conducted without resolving the dispute, although a further mediation is contemplated. 17 Pleadings were ordered and the parties' respective positions have crystallised. It is now apparent, from the pleadings and the further affidavits filed, that there is fundamental and farreaching dispute about the identity of the members and the directors of the company and the proper bases for determining those questions. 18 The plaintiffs contend that the current members of the company are: Mr Pillay Mr Pillai Ms Nayak Mr Tanner Mr Largey Mr Robins Mr Tomar Ms Alister 19 The plaintiffs contend that the current directors are: Mr Pillay Mr Pillai Ms Nayak Mr Tomar Ms Alister 20 The defendants contend that the members are: Mr Pfeiffer Mr Tiwari Mr Alister Mr Dambiec Mr Karlyle Mr Deacon Ms Deacon Mr Towsey Mr Parthy Mr Tomar Ms Alister 21 The defendants contend that the current directors are: Mr Tomar Ms Alister 22 The plaintiffs and defendants thus agree that Mr Tomar and Ms Alister are members of the company, but the identity of all other members of the company is a matter of dispute. 23 The parties also agree that Mr Tomar and Ms Alister are directors of the company. The plaintiffs contend that the there are currently five company directors: Mr Tomar, Ms Alister and Messrs Pillay, Pillai, and Ms Nayak. The defendants contend that Ms Nayak and Messrs Pillay and Pillai are neither members nor directors of the company. The defendants therefore contend that there are only two directors at present (Ms Alister and Mr Tomar). 24 The plaintiffs contend that membership of the company depends on compliance with the procedures specified in the provisions of the company's articles dealing with membership, which prescribe steps include making application (article 4), acceptance by the board (article 5) and payment of a subscription (articles 6, 7 and 8). 25 The plaintiffs submit that the persons they identify as members of the company have complied with the relevant requirements prescribed in the articles. They have filed affidavits to that effect. 26 The defendants contend that the acquisition or loss of company membership does not depend on the express provisions of the company's articles dealing with membership. They submit that rather, on proper construction, the articles include implied conditions, terms and requirements, necessary to give effect to unwritten conventions of the company according to which strict compliance with the membership provisions of the articles is not required. Rather, membership of the company is also conferred by belonging to various company subcommittees, as the persons the defendants identify as members had done. The defendants also relied, in that context, on estoppel by convention. 27 The defendants further submit that the articles, when properly construed in accordance with the company's objects, implicitly require all members, directors and the secretary to be practitioners of Ananda Marga in good standing, who are obedient to the directions of a specified central Ananda Marga religious authority based outside Australia. 28 On that basis, the defendants allege the plaintiffs' identified members are not members or have lost their status as such because, inter alia, they have disobeyed various "posting orders" (orders of the valid central authority based in India requiring them to transfer geographically). In consequence, the relevant members have lost their religious titles and good standing. The defendants have filed affidavits in support of their contentions. They concede, however, that the identity of the valid central authority is a matter of international dispute amongst Ananda Marga adherents. 29 While the identity of the directors of the company is in dispute, the identity of the members is the fundamental determinant of that question, as once the members are recognised, they may proceed to elect or remove the office bearers. 30 Under the articles, the power to manage the company resides with the board collectively: article 39. The board may decide issues by a majority vote: article 44. 31 In consequence, no single director would have power to manage the company's affairs or commit it to contracts, the incurring of liabilities or the disposition of property, unless such authority was delegated by the board: see Ford's Principles of Corporations Law at [13.080]. Mr Pillay was, prior to 20 March 2010, the sole executive director. 32 Since the making of the 31 March 2010 orders, the issues in dispute have multiplied. It was common ground that the 31 March 2010 orders are now inadequate for the effective management of the company and the preservation of its business pending the hearing and determination of the proceeding. 33 The present application was triggered by the activities of the second defendant, Ms Alister, and others, to which Mr Pillay deposed in detail and to which Ms Alister and Mr Tiwari have responded. In essence, as set out below, Mr Pillay deposed that Ms Alister, a director of the company, has, without the knowledge or concurrence of the board, taken steps to obtain a copy of the company seal, which she initially provided to Mr Tiwari (a disputed member), in order to divert mail directed to the company from the company's street address and registered P.O Box situated at its Registered Office; has caused the diversion of hits or visits directed to the company's websites to other websites; has falsely represented to the public and possible attendees of the company's midyear and annual festival that its midyear festival and 2011 festival had been cancelled, instead directing possible attendees to festivals she has organised; has retained, without the consent of and despite Mr Pillay's requests, the company's contact list built up over years, containing contact details for, inter alia, potential attendees at the company's festival, which produces income for the company; has executed a lease to Mr Tiwari on the company's behalf; and has used the company's trade mark, registered in respect of festivals, in respect of the alternative festival she has organised. 34 Ms Alister, while disputing some aspects of the allegations, does not deny that she has engaged in the activities, but denies that they were intended to compete with or injure the company. Ms Alister explained or justified her conduct by reference to her authority as a director and her opinion that, in the uncertainty posed by the current dispute, her actions were necessary for the company's benefit. Further, by the letter of the defendants' solicitor dated 23 November 2010, Ms Alister proffered some undertakings on behalf of all the defendants in relation to some of the above activities and produced a document described as the company's contact list. The plaintiffs dispute the adequacy of that document.
The Parties' Submissions 35 The plaintiffs seek an interlocutory injunction restraining the defendants from certain activities and requiring a number of steps, including the return of the company seal, the sending of corrective letters, and the furnishing of affidavits and the company contact list. The principles relevant to the grant of an interlocutory injunction, which were not disputed, were conveniently set out in the plaintiffs' written submissions as follows: 2. The ordinary principles governing the grant or refusal of interlocutory injunctions have recently been confirmed in Australian Broadcasting Corporation v O'Neill (2006) 229 ALR 457 ('O'Neill'): "... in all applications for an interlocutory injunction, a court will ask 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." (footnotes omitted) 3. In O'Neill, Gummow and Hayne JJ stated: "The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries, and continued: 'The first is whether the Plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the Plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the Plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the Defendant would suffer if an injunction were granted.' By using the phrase "prima facie case", their Honours did not mean that the Plaintiff must show that it is more probable than not that at trial the Plaintiff will succeed; 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. ... With reference to the first inquiry, the court continued, in a statement of central importance for this appeal: 'How strong the probability needs to be depends, no doubt, upon the nature of the rights [the Plaintiff] asserts and the practical consequences likely to flow from the order he seeks.'" (footnotes omitted) 4. The two limbs of the test are interrelated: "…the two legs of the test need not be considered in isolation from each other. Thus an apparently strong claim may lead a court more readily to grant an injunction when the balance of convenience is fairly even. A more doubtful claim (which nevertheless raises 'a serious question to be tried') may still attract interlocutory relief if there is a marked balance of convenience in favour of it." 36 Some of the relief sought by the plaintiffs in the present case is mandatory in form, as it requires the relevant party to do specified acts, such as sending letters. Irrespective of whether that relief is also mandatory in substance, in my view and as Maxwell P and Charles JA stated in Bradto Pty Ltd v State Of Victoria (2006) 15 VR 65 at [35]: [W]hether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been 'wrong', in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial. 37 The plaintiffs submitted that the relief sought in their notice of motion was necessary because: 1. Ms Alister's activities are in breach of her duties as a director of the company under ss 181183 of the Corporations Act 2001 (Cth) ("the Act") and her general fiduciary duties. Ms Alister's conduct was also misleading and deceptive pursuant to, inter alia, s 52 of the Trade Practices Act 1974 (Cth), infringed the company's registered trade mark and contravened other statutory provisions. 2. The contact list withheld by Ms Alister is the company's confidential information akin to a customer list, which was obtained by Ms Alister in her capacity as a director. 3. Ms Alister has misused the contact list for her own, or another party's purposes, to divert the company's business opportunities to the company's detriment. 4. Ms Alister has caused "hits" on the company's website to be redirected to other websites, including a website operated by the sixth defendant ("Dambiec website") and an overseas website, on which a rival festival to that organised by the company was promoted, accompanied by false assertions that the company's annual and midyear festivals ("mela") had been cancelled. Ms Alister has also sent emails directing inquiries to the overseas website. 5. The company's trade mark "Ananda Marga", registered in relation to, inter alia, religious festivals, was infringed by Ms Alister's use of the trade mark to promote her competing festival. 6. Ms Alister ordered a copy of the company's seal, without authority and contrary to ss 123(2) and 123(3) of the Act. She sent the company seal to Mr Tiwari, whom the defendants claim to be a member of the company, but whose status as such the plaintiffs deny. Ms Alister and Mr Tiwari proffered no explanation for the ordering of the copy of company seal and had not satisfactorily accounted for any use made of it. 7. Ms Alister's admitted the redirection of the company's mail from its P.O Box at its registered office to another P.O Box accessed and controlled by Mr Tiwari was not only an improper use of her position as director to the company's detriment, but interference with contractual relationships between the company and Australia Post, in contravention of ss 85N and 85U of the Crimes Act 1914 (Cth). In consequence, from August 2010, virtually no mail had been received at the company's P.O Box or registered office and no mail had been forwarded by Ms Alister or Mr Tiwari to Messrs Pillay and Pillai or the auditor. 38 The plaintiffs submitted that although Ms Alister was the protagonist, the participation or assistance of other defendants could be inferred. Mr Dambiec (the sixth defendant) was the registered administrator of www.anandamela.net.au website, to which hits of the company's website were at one stage diverted, and had applied for a trade mark in opposition to the company, which suggested that he was associated with Ms Alister's competition with the company to subvert its business interests. Mr Tiwari and other identified persons had also played a role in relevant activities. Therefore, all the defendants should be injoined from the conduct of which the plaintiffs complained. 39 In summary, the plaintiffs submitted that there is a strong case that Ms Alister's activities (in which, by inference, others such as Mr Tiwari and Mr Dambiec assisted) were in breach of her director's duties and infringed or contravened other statutory provisions. Cumulatively, they competed with and potentially sabotaged the company's business and related interests. They also posed significant dangers to third parties and the public in the form, for example, of lapsed insurance and disconnection of utilities due to a failure to receive the relevant accounts. 40 The plaintiffs submitted that damages would be an inadequate remedy because it would be difficult to quantify the losses flowing from, inter alia, misuse of the trade mark, lack of access to the mail, the redirection of website 'hits' and the lack of access to, and misuse of, the Ananda Mela contact list. 41 The plaintiffs also submitted that: Further the company has been without access to the overwhelming majority of its mail for almost 3 months. Neither Mr Tiwari nor Ms Alister have forwarded to the company any mail in their possession addressed to the company. The company conducts a broad variety of operations that require correspondence with other companies, interested individuals. These operations include developing a community development program for an indigenous community in Western Australia, running the Vistara Primary School in Lismore in NSW and the Sunrise Preschool in North Fitzroy in Melbourne, the organisation of the Ananda Mela. Without access to regular correspondence the success of these programs will be hindered. Damages will also be an inadequate remedy in relation to the organisation of the Ananda Mela. The Ananda Mela contact list is the only source of contact details of potential attendees of the festival. The lack of access to the list has made the organisation of the Ananda Mela significantly more difficult. One of the purposes of the Ananda Mela is to encourage attendees to become regular followers, supporters and practitioners of Ananda Marga. They are thereby encouraged to participate in the faith. Damages will be an inadequate remedy if a successful festival properly promoted is unable to be held. 42 The defendants, in relation to the alleged breaches of duty and statute, and the relief sought, submitted that: 1. Ms Alister is a director of the company in the context of a dispute about identifying the valid members of the company and the persons entitled to control it. 2. The copying of the company seal posed no additional risk, as Ms Alister and Mr Tomar, as directors, could enter contracts on behalf of the company without signing or sealing documents. 3. Ms Alister had already provided, in her affidavit, an account of what use had been made of the company seal. 4. As a director, Ms Alister had the power to deputise Mr Tiwari to collect the mail. 5. The contact list was not confidential information analogous to a customer list. 6. The defendants were entitled to organise their own religious event. 7. The defendants should not be restrained from using the "Ananda Marga" trade mark in relation to an alternative festival, as such use would constitute a good faith use under s 122 of the Trade Marks Act 1995 (Cth). 8. In the context of the litigation, Ms Alister's continuing status as a director and the uncertainties under the 31 March 2010 orders, Ms Alister believed that she was entitled to take the relevant actions (which followed on from her previous corporate role of organising the melas and collecting the mail) and she had acted in good faith, intending to protect the company's interests. 43 The defendants, in support of orders 2 to 6 of their notice of motion, further submitted that: 1. The company's continued status as a plaintiff was oppressive, given the nature of the proceeding, which essentially concerned a membership dispute. The company should be a submitting defendant. 2. It was oppressive for the company's funds to be used in funding one side in litigation in a dispute over the status of members and directors and their corporate control. 3. In acting for all three plaintiffs, Holding Redlich had a conflict of interest. It could not properly continue to act for the company and the second and third plaintiffs. Holding Redlich had asserted Messrs Pillay's and Pillai's legal professional privilege to exclude other company directors from access to a Holding Redlich written legal advice, which demonstrated the conflict. 4. The company's objects included the promotion of the Ananda Marga religion, a hierarchical religion headed by a general secretary who did not support this proceeding. It was therefore contrary to the provisions of its memorandum for the company to expend funds in the litigation. 5. The commencement of the proceeding was not validly authorised, as the company's resolution of 23 March 2010 was not sufficiently clear to authorise the spending, even if Messrs Pillay and Pillai were still directors. It was therefore doubtful whether Holding Redlich was validly retained by the company in the proceeding. 44 Counsel for the defendants also submitted that the restraints imposed on the defendants by the 31 March 2010 orders should be revoked, as sought by order 1 of the defendants' notice of motion. Counsel submitted that the 31 March 2010 orders effectively excluded the defendants' directors from participation in the company's affairs, as they could neither call any meetings themselves nor oblige the other directors or members to call meetings. No meetings had in fact been called. Further, they were unable to operate company bank accounts or expend company funds. 45 Counsel for the defendants further submitted that the preservation of the pre20 March 2010 status quo unfairly advantaged the Messrs Pillay and Pillai, who consequently were, with the support of Ms Nayak, in control of the company. They therefore had little incentive to conclude a mediated settlement, as the interlocutory orders maintained, from their perspective, a situation possibly preferable to judgment in the proceeding. Further, the Messrs Pillay and Pillai benefited unfairly from having the company as a "prop" in the form of their coplaintiff, when it should not be an active protagonist and when, as individuals, the second and third plaintiffs would be unable to support any undertakings as to damages. 46 Correspondence passing between the parties' solicitors, exhibited to Mr May's affidavit, indicated that prior to the present applications, the plaintiffs' position was that although the company should be a party to the proceeding bound by the determinations, it should play no active part. Further, Holding Redlich would not seek that the company pay the fees for its work done following the board meeting on 23 March 2010 until the hearing and determination of the proceeding. 47 At the hearing of the notices of motion, counsel for the plaintiffs informed the Court that company funds had not been and would not be applied to payment of Holding Redlich's fees. The litigation on behalf of the plaintiffs was being funded by the individual plaintiffs, one of whom was in regular employment. Further, counsel submitted that there was merely a difference in, rather than a conflict of, interest between the company and the second and third plaintiffs. 48 Counsel also submitted that while the company should not play an active role in litigation involving only a dispute between members, the recent developments indicated that a more active role may be necessary, as the company was the only proper plaintiff in relation to the breaches now alleged against Ms Alister and possibly other defendants.
Defendants' open letter 49 The open letter of the defendants' solicitor dated 23 November 2010 advised that Ms Alister and the other defendants would undertake: (a) to provide Mr Pillay with a copy of all mail relating to the company which is being received at a new PO Box (having been diverted from the company's PO Box); (b) not to seek a change in control over the domain names of the company's two websites: (i) www.anandamela.org.au; and (ii) www.anandamelafestival.org.au; (c) to use their best endeavours to stop diverting the company websites to www.anandamela.com.au; and (d) not to restore the www.anandamela.net.au site (of which Mr Dambiec was the registered administrator) prior to the resolution of these proceedings. 50 A document described as the company's contact list was also provided to the plaintiffs under cover of the letter. 51 The plaintiffs submitted that the undertakings were proffered only by the defendants' solicitor and were otherwise inadequate. The company required the diversion of its mail to cease absolutely, rather than an undertaking to provide copies, and the document described as the company's contact list did not constitute the full list of contacts which properly belonged to the company.
Company Seal 52 In his affidavit of 15 November 2010, Mr Pillay deposed that in early October 2010, he was informed by an employee of Federal Rubber Stamps in midOctober that Mr Tiwari had engaged Federal Rubber Stamps to create a copy of the company's seal. Mr Pillay requested the employee to provide a copy of the invoice issued to Mr Tiwari, which he annexed to his affidavit. The invoice is dated 6 September 2010. 53 On 3 November 2010, Mr Pillay requested to Mr Tiwari to deliver up or destroy the seal, to undertake not to use the seal and to provide a list of the contracts to which he had affixed the seal. On 3 November 2010, Mr Pillay also sent letters to Mr Tomar, Mr Dambiec and Ms Alister, asking them to agree not to use the seal and to provide a list of contracts to which they had affixed the seal. Mr Pillay deposed that he had received no response. 54 In his affidavit, Mr Tiwari deposed that he did not order a copy of the company seal but collected it from the Katoomba PO Box 425 and returned it to Ms Alister at Malany P.O Box 177 on or around 18 October 2010. Mr Tiwari deposed that he did not use the seal. 55 Ms Alister deposed that she ordered the company seal from Federal Rubber Stamps Pty Ltd on 3 September 2010, and directed it to be delivered to Mr Tiwari. Ms Alister obtained possession of the seal on or around 18 October 2010 and currently retained it. Ms Alister deposed that she had not used the seal and stated "I do not intend to use I other than in accordance with clause 55 of the Constitution of [the company]".
Diversion of company's mail 56 Mr Pillay deposed that the registered office of the company is a secure room in premises situated at 19 Lovel Street, Katoomba, New South Wales ("Lovel Street premises"). The company leases P.O Box 231, Katoomba from Australia Post, a postal address which appears on the company letterhead. 57 Karl Robins was the company office manager until early March 2010. His role was then assumed by Colin Largey, who currently resides at the Lovel Street premises together with the third defendant, Dayashankar Tiwari and, from time to time, other Ananda Marga monks and nuns. 58 Prior to March 2010, there were two keys to the company post box. One was held by Mr Robins and one by Mr Tiwari. Mr Pillay was informed by Mr Robins that Mr Tiwari was requested to return the key and instructed not to collect mail from the P.O Box, but Mr Tiwari refused to return the key. Following an incident at the Lovel Street premises on 10 August 2010, when Mr Tiwari threatened to break the office door and the police attended, Mr Pillay arranged for a change of the locks on the company P.O Box. In August 2010, two new keys were issued to Mr Largey and Mr Robins. 59 On 3 September 2010, Mr Pillay revoked Mr Tiwari's licence to reside at the Lovel Street premises, but Mr Tiwari refused to leave. 60 Mr Largey noted that from late August, the mail coming to the company's P.O Box had plummeted. On 14 October 2010, the company's telephone services were suspended because the company had not received or paid the relevant bill. 61 Mr Largey's investigations with Australia Post revealed that the names of persons authorised to deal with the company's P.O Box had been altered and he was no longer authorised to deal with mail. 62 On 23 October 2010, Mr Largey discovered that the company's correspondence was now being forwarded to another P.O Box, No. 425, which was neither leased nor owned by the company. Mr Pillay deposed: I am concerned that there are bills that have been sent to the company that have not been received by the company. I believe that Mr Tiwari has removed mail and continues to remove mail that is directed to the company from PO Box 231 and has organised for the redirection of the company's mail to PO Box 425. I do not presently know who leases PO Box 425 Katoomba. I am informed by Oliver Froböse, a solicitor engaged by Holding Redlich, and believe that the solicitors for the Plaintiffs have sought to issue a summons directed to Australia Post to obtain that information. I am further informed by Oliver Froböse and believe that Christine McShane, the manager of the Katoomba Post Office, has informed him that they have placed a 30 day hold on the delivery of further mail to the company which shall expire on 20 November 2010. 63 Ms Alister deposed that Mr Tiwari occupied the Lovel Street premises and, on 27 March 2010, in her capacity as a director of the company, she executed a tenancy agreement which formalised the arrangement. 64 She conceded that there had been a physical altercation involving Mr Tiwari. 65 Ms Alister deposed that on 8 November 2010, she requested the company's mail be diverted from P.O Box 231 and the Lovel Street premises to P.O Box 425. She deposed that she and Mr Tiwari intended to forward any company bills they received to the company auditor and Mr Pillay. 66 Although Ms Alister deposed that she requested the redirection of mail in November 2010, a letter on the company letterhead to Australia Post dated 25 August 2010 and apparently signed by Ms Alister, produced on subpoena by Australia Post, requested that Australia Post "change the 'Authorised Person' for PO Box 231 … to Mr Dilip Kumar Chodhury". The letter stated that "We have instructed him [Mr Chodhury] to arrange temporary mail forwarding from this box to PO Box 425 Katoomba". 67 In his affidavit, Mr Tiwari acknowledged that he refused to return the key to the P.O Box, as it prevented him from carrying out his functions. When the locks were changed, Ms Alister arranged for the company's mail to be redirected to P.O Box 425, to which Mr Tiwari has access. 68 Mr Tiwari deposed that he had experienced problems in occupying the Lovel Street premises where he had, from 25 August 2010, been denied facilities, power and utilities, and was involved in an incident which resulted in an attendance by police. Ms Alister and Mr Tomar had, however, confirmed his entitlement to reside at the Lovel Street premises and gave him a tenancy agreement dated 26 March 2010. 69 The tenancy agreement exhibited by Mr Tiwari is between the company and Mr Tiwari for a 12 month term. The rent is $10 monthly. It is signed on behalf of the company by C. Alister and Sunil Tomar.
Mela attendance and contact list 70 Mr Pillay deposed that the company had conducted an annual "Ananda Mela" festival every January for the last 28 years and had conducted a smaller midyear festival since 2008 ("a Mini Mela"), which were held at a company property in Stanthorpe, Queensland. The company organised and paid for the insurance, promoted the events on its websites and paid the funds received from attendees into its accounts. The last Ananda Mela resulted in income of $23,000 to the company. 71 Mr Pillay deposed that from the mid1990s, an electronic contact list of attendees was compiled from the attendees' registration forms. Between 2001 and 2004, Mr Pillay was in charge of organising the festival and had possession of the contact list. Ms Alister took over in 2006. From that date, she also managed the Mini Mela registration forms, and updated the electronic Ananda Mela contact list (which also included the company's service providers and members of the public who had attended company events). 72 Mr Pillay deposed that the information in the contact list was both valuable and confidential to the company. The responsibility for controlling and updating the contact list had rested with a company director since the mid1990s. Without the contact list, the company was, Mr Pillay deposed, significantly disadvantaged, because it was the only centralised list of company contacts and the 2011 Ananda Mela could not be organised effectively without it. 73 Mr Pillay described the company's procedures and steps for organising and promoting Melas, which were implemented by an organising committee chaired by Ms Shamila Ajodha, who, from 2004 to 2010, was assisted by Ms Alister as well as other persons. Each September and October, the organisers would send flyers and invitations to the Mela and at the end of the Mela they would use the attendees' registration forms to update the contact list. 74 Mr Pillay deposed that he had requested Ms Alister to provide a copy of the contact list, but Ms Alister, who has the sole copy, had not responded. 75 Mr Pillay deposed that on 15 May 2010, Mr Tiwari (the fourth defendant), Ms Alister (the second defendant), Richard Pfeiffer (the third defendant) and two of their supporters organised a new "Mini Mela" committee and, despite Mr Pillay's protests, on 7 June 2010 Ms Alister advised prospective attendees of the company's Mini Mela that it was cancelled, and instead, a different mini festival would occur in Maleney on 12 June 2010. 76 Mr Pillay deposed that, contrary to Ms Alister's representations, the company's Mini Mela had not been cancelled. It went ahead, but only four people (other than monks) attended and the receipts dropped by 95% when compared with 2008 and 2009, while Ms Alister's rival event proceeded. Mr Pillay deposed: This was misleading information. The Mid Year Mini Mela organised by the company went ahead as scheduled. In 2008 and 2009 about 35 to 40 attended the Mini Mela (excluding members of the monastic order). In 2010 only 4 people attended (excluding members of the monastic order). The receipts received by the company from paying attendees decreased by about 95% in 2010 compared with the receipts received in 2008 and 2009. The alternative event Ms Alister had organised in Maleny was not organised or conducted by the company and the registration and attendance fees from the alternative festival were not paid into company accounts. The email address and phone number mentioned in the email above were those of Ms Alister. Attached to this affidavit and marked "DVP-12" is a copy of the email sent by Mr Tiwari of 15 May 2010, a copy of the letter I sent on 1 June 2010 to the First to Fourth Defendants, and a copy of the email from Ms Alister that stated the company's Mini Mela was cancelled. 77 In her affidavit, Ms Alister deposed that initially she had not been trying to organise a new Ananda Mela but because the property on which it was usually held was "under dispute", "they" chose a new venue to avoid disruption. She stated that Mr Pillay was "threatening to take us to court if we used the name "Ananda Mela", so "we" organised a different event with a different name. 78 Ms Alister acknowledged that she used the name "Ananda Marga" stating it was not practical to describe the event in any other way. She deposed that she was intending to hold a public festival like the Mela preceded by a conference, which over 150 people were expected to attend, in Nambour from 27 December 2010 to 2 January 2011. 79 Ms Alister deposed that Mr Pillay only publicised "his" event a month after Ms Alister had publicised hers. She stated that Mr Pillay was inexperienced in the organisation of events and an inferior event would adversely affect the company's reputation. 80 Ms Alister conceded that she received a contact list in the form of an excel document from Mr Pillay in 2004 and updated it on her home computer, to which her house guests have access. The contact list included 275 names and Ms Alister stated "[m]y estimate is that not more than 130 of the names are people I have met at Ananda Mela". 81 Ms Alister deposed that there was now a new organising committee for the Mini Mela, with Mr Tiwari in charge. Ms Alister initially organised the usual Mini Mela but acknowledged that she informed registered attendees that it had been cancelled, as it was clear from May to June 2010 that Mr Pillay, Ms Ajodha, Mr Largey and Ms Nayak would claim to be in charge. Ms Alister deposed that she did not put on a rival Mini Mela, but rather, a small seminar for 30 people without fee. The donations received only covered food and travel expenses.
Website 82 Mr Pillay deposed that in September 2010, Ms Alister established, or was associated with, a website the domain name of which was registered to Dieter Dambiec (the sixth defendant). 83 The Dambiec website, on 9 September 2010, announced a 2011 Ananda Mela on 4 January 2011, ending on 10 January 2011. It invited donations to a trust which was not associated with the company and requested that correspondence be sent to a P.O Box not associated with the company. 84 On 25 September 2010, Ms Alister sent two emails to the people on the company's contact list, stating that "we won't be doing the usual Ananda Mela this year", inviting them to a "retreat which incorporates the Ananda Mela 2011" and stating that "we warmly invite you to Ananda Mela New Years gathering". 85 Mr Pillay deposed that, contrary to Ms Alister's email, the company's Ananda Mela for 2011 was proceeding and is being advertised and promoted. Although, the conference and gathering advertised by Ms Alister and others were not associated with the company, Ms Alister's email referred to a "kiirtan" chant "as we've been doing over the last 3 years at the Ananda Mela", thus suggesting an association with the previous company melas. 86 The Dambiec website used the term "Ananda Marga" on each page, although the company was the owner of the trade mark "Ananda Marga" in relation to: Each page of the website uses the term "Ananda Marga". The company is the owner of the trademark "Ananda Marga". It has not authorised the use of the trade mark in relation to events that are not promoted or run by the company in Australia. Attached to this affidavit and marked "DVP-19" is a copy of that register concerning that trade mark. The trademark is registered under the provision of the Commonwealth Trade Marks Act 1995 in Classes 16, 41 and 42. In particular the trade mark is registered in relation to the classes: (a) Religious and spiritual teaching, courses in yoga and meditation (Class 41); (b) Organising of festivals, in particular in relation to religious and spiritual issues (Class 41); (c) Providing, conducting and arranging religious and spiritual services and ceremonies (Class 42). 87 Mr Pillay deposed that the company has three websites, but from June 2010 to November 2010, Ms Alister and Mr Dambiec had taken steps to redirect traffic from the company websites in order to promote Ms Alister's alternative festival. 88 On 20 August 2010, Mr Pillay was advised by the domain registrar of one of the company's websites that Ms Alister, using the company letterhead, had requested transfer to her of control of the website. 89 In late August 2010, the domain registration of another of the company's websites received a similar request, subsequently revealed to be from Ms Alister. 90 Holding Redlich requested the return of control of the company websites to Mr Pillay but the Australian Domain Name Administrator advised that it would not do so without a court order. The company, nevertheless, regained control of the relevant website on 5 October 2010, but by midOctober 2010, inquiries to the company's websites were again being automatically diverted. When a user clicked onto one of the company's three websites, the visitor was diverted to an overseas site. 91 Although the evidence in relation to the various websites was complicated, involving a number of different domain names, counsel for the plaintiffs stated from the bar table (and it was not disputed) that, as at the date of the hearing, hits on at least one of the company's websites were diverted to an international website. Although the owner of the international website was unknown, a connection with Ms Alister could be inferred because it advertised Ms Alister's festival. Further, Ms Alister's emails referred people to the website and described it as "our website". 92 Mr Pillay deposed that on 20 June 2010, the sixth defendant, Mr Dambiec applied to register as a trade mark the phrase "Ananda Marga Pracaraka Samgha" and when Mr Pillay complained in September 2010, Mr Dambiec changed the name of the applicant to a company he controls, Seva Sharma Mission (Australia). 93 Mr Pillay deposed: 58. The conduct engaged in by Ms Alister and Mr Dambiec referred to above is causing considerable inconvenience and loss to the company. The lack of access to the Ananda Mela Contact list has made the organisation of the annual Mela significantly more difficult. The use of the company's list to inform previous Mela attendees that the usual Ananda Mela shall not be conducted, or has been incorporated into a festival that is not conducted by the company, also causes damage to the company. The use of the company's trade mark is also liable to mislead previous Mela attendees about the festival Ms Alister is organising and is causing loss to the company. The experience with the mid year Mini Mela was that the activities of Ms Alister caused a reduction in revenue of 95% to the company. I am concerned that her activities will have a similar effect to the annual Ananda Mela. 59. The Annual Mela is an important platform for the propagation of the Ananda Marga faith. It is one of the principal means by which non Ananda Marga followers are encouraged to participate in the faith. An unsuccessful Ananda Mela has a significant effect on the ongoing operations of the company. If an injunction is not granted an award of damages would not adequately compensate the company.
31 March 2010 orders 94 It was common ground that the 31 March 2010 orders did not provide an adequate regime for the interim management of the company. Ms Alister deposed to difficulties posed by the 31 March 2010 orders as follows: 1. She had little information regarding the company's financial position although she was still a director. The auditor's fortnightly reports were incomplete. 2. Mr Tiwari's ability to work was hampered, because he was denied access to a car, telephone and other utilities. 3. A company farm property in Stanthorpe, Queensland was operated by Richard Pfeiffer but its bank account had two other signatories. Mr Pfeiffer, could not pay the bills independently, and after paying them from his own funds when unable to obtain counter signatures, had experienced difficulty in securing reimbursement. 4. Ms Alister lacked access to company bank accounts. 5. Some monks and nuns were not getting missionary support benefit which others had received from company accounts. 6. It had been difficult for Ms Alister to organise the Melas. 7. Although Mr Pillay complained that Ms Alister had not responded to his inquiries and complaints, the defendants' lawyer had responded. 95 Mr Pillay, however, responded that: 1. Neither Ms Alister nor Mr Tomar had asked for any further information, and information had not been denied. 2. Although Ms Alister has been a member of the company's committee ("board") since 2001, she was a nonexecutive director and had not, during the last seven years, been involved in its day to day running. Mr Pillay is a full time executive director who had been the sole or joint company secretary for some years. 3. Ms Alister had not organised the Mela for the last seven years. A committee of four to seven persons chaired by Ms Ajodha, an Ananda Marga nun, did so. Ms Ajodha's committee had met on seven to eight occasions in order to organise the Mela, but it lacked access to the company's contact list. 4. Mr Tiwari was not the company's office secretary. Nor was he employed by the company or authorised to do any work on its behalf. He had no authorised access to the registered company office, telephone or facsimile machine. Mr Tiwari had been denied access to utilities because he refused to pay for them. 5. Mr Pillay had not been alerted to any difficulties regarding Mr Pfeiffer's reimbursement for company accounts he had paid. Mr Pfeiffer was not, however, in charge of the relevant farm property and had previously incurred some unauthorised expenses. He had since been requested to conform to a specified system. 6. The company's yoga classes continued to be conducted by a member of the monastic order, but of the defendants, only Mr Tomar (and perhaps Mr Tiwari) were monks. 7. Mission support payments had been paid when requested to monks and nuns. Mr Tomar and Mr Tiwari had not requested any payments. 8. Although the company conducted many operations throughout Australia, its correspondence, bills and bank statements were all required to be sent to its head office. Since late August, however, virtually no mail addressed to the company had been received at the company P.O Box. Further, no mail had been forwarded to Mr Pillay the other directors or the auditor for ten weeks, contrary to Ms Alister's assertions that she and Mr Tiwari would forward any bills. 9. Neither Ms Alister nor Mr Tomar were authorised by the company to enter into the lease with Mr Tiwari, of which Mr Pillay and other directors had no knowledge until the present application. 10. Ms Alister diverted registration funds paid for the company's 11 to 14 June festival to her own account and told potential attendees of her own event which was, contrary to her assertions, "a rival Mela". 11. Ms Alister had no authority to enter contracts on company's behalf. 96 Mr Pillay also deposed that the following problems had arisen under the 31 March 2010 orders: 1. One of the company's properties in Adelaide is subject to a mortgage to Westpac Banking Corporation and $10,000 is owed to a builder for renovations to the property. It is proposed to extend the mortgage on the property by $10,000 in order to pay the builder, but that is currently precluded by Mr Pillay's undertaking to the Court on 31 March 2010 that he would not "deal with any of the properties of the first plaintiff", which includes this property in Adelaide. 2. Messrs Pillai and Pillay are currently not listed on the ASIC Register as directors of the company, which has caused delay in dealing with other parties (including banks). Mr Pillay has found it necessary to show the Court orders to third parties on "at least 15 occasions over the last 6 months to show that I have authority to deal with matters on behalf of the company". Mr Pillai has had to show the Court orders to third parties "on at least 20 occasions over the last 6 months to show that he has authority to deal with matters on behalf of the company". Mr Pillay also anticipates significant problems in extending the mortgage over the Adelaide property while the ASIC Register did not reflect his and Mr Pillai's directorships.
Injunctive relief and interim management 97 Ms Alister's alleged activities, if established (and many are not, in terms denied), raise serious questions of breach of director's duties and other statutory contraventions. Even if such conduct were not intended to benefit Ms Alister personally, and irrespective of the orders made on 31 March 2010, it is well established that a director is not entitled to exploit or use the company's property, contacts, clients or business opportunities, including opportunities encountered in the capacity as a company officer, in order to compete with the company, or to the company's detriment or another's benefit: see Ford's Principles of Corporations Law at [9.220]. 98 It is not to the point that the orders made on 31 March 2010 do not, in terms, prohibit the conduct alleged. It is prohibited by the general law principles and statutory provisions applicable to fiduciaries generally and to company directors in particular and, if established, would constitute a breach of a director's obligations and a contravention of some other statutory provisions. Ms Alister's assumption, expressed in her affidavit, that a director is entitled to act unilaterally because there is a dispute over the identity of the members and directors, misapprehends the usually limited authority of a single director in a company where, as in this case, the management power vests in the board collectively. It also overlooks the strict prohibition on exploiting opportunities which, on a proper analysis, belong to the company. Such conduct poses a serious threat to the company's business enterprises and its continuing existence as a commercial entity. Further, the alleged conduct by Ms Alister and others indicates that the orders of 31 March 2010 must be revised to prohibit unilateral activities on the part of Ms Alister, or indeed any other single director, and to put in place a holding regime for the governance of the company and the preservation of its business pending the final determination of the issues in dispute. 99 The plaintiffs contended that the orders made on 31 March 2010 should be revised by prohibiting any alteration of company membership, the directors and the articles and constitution, pending the hearing and determination of the proceeding, and by making clear that the management of the company remains vested in the five directors as at 20 March 2010. That would not entail a deadlock and the drastic step of appointing a provisional liquidator, receiver or other administrator, could be avoided. 100 Counsel for the defendants acknowledged that the principal relief sought in their notice of motion (of simply removing the restraints on the defendants in order 1) would be a recipe for chaos and a spate of renewed applications to the court. Counsel for the defendants nevertheless invited the court to revoke order 1 and sought that an external administrator be appointed to the company if the relief sought by the defendants were refused. 101 The plaintiffs opposed the appointment of an external administrator. They submitted, correctly, that such relief was not sought in the defendants' notice of motion. Further, the plaintiffs submitted that such an appointment would be costly and was a drastic remedy of last resort, posing particular problems in a company whose objectives included the propagation of a religious faith. 102 The plaintiffs submitted that it was unnecessary to appoint an external administrator in order to avoid deadlock, as the company would not be deadlocked if managed by the existing board. Further, the appointment of a receiver or other external administrator could constitute an event of default under the company's mortgages and facilities and could jeopardise its entitlement to government grants. 103 Although the elements of the dispute have altered in some respects since the commencement of the proceeding, I remain of the view that there is a serious question to be tried that Mr Pillay and Mr Pillai remain directors of the company and that the members identified by the plaintiffs are valid members. Further, despite the widening of the dispute, the balance of convenience still favours the maintenance of the pre20 March 2010 status quo in terms of the then recognised members of the company and the then existing board. 104 The plaintiffs now also raise a strong case, many aspects of which were admitted, that Ms Alister, assisted by others, has taken unauthorised action which constitutes misfeasance, breach of duty and a contravention of statutory provisions, to the company's actual or potential detriment and to the benefit of other parties. The balance of convenience supports orders which will, to the extent possible, rectify the consequences of such activities and prevent their recurrence. 105 As the defendants submitted, the preservation of the pre20 March 2010 status quo advantages, to some extent, the "camp" of the Messrs Pillay and Pillai because it represented a majority on the board before that date. It is clear that the only alternative to an external administrator is for decision making power to remain with a majority of the board, as effective interim management would otherwise be impossible. The defendants contend that an external administrator would be even handed and therefore preferable. 106 The defendants had not, however, given notice that they would seek the appointment of an external administrator as an alternative to the relief sought in their notice of motion. It was a proposal made in the course of argument. No person willing to act as administrator was identified and the question was not the subject of full argument. Any application for such an appointment should be formally made on proper material. An appointment, given its potentially injurious effects on the preservation of the company as an entity and the effective maintenance of its business and operations, should not be ordered if less drastic options to provide for the effective interim management and preservation of the company are workable, and would appear premature at this stage. The defendants' counsel frankly conceded that the relief they sought would result in chaos, but proposed no alternative, save for the generalised suggestion of an external administrator. 107 In the circumstances, I propose to make orders broadly in terms of those sought in the plaintiffs' notice of motion. Further, subject to any further submissions on the precise form of orders, I propose to put in place an interim regime for corporate governance whereby, until further order or the hearing and determination of the proceeding: 1. No alteration to the directors, members or constitution as existing immediately prior to 20 March 2010 should be attempted or made, and no meetings in relation to any such alteration should be called or held. 2. The directors holding office immediately prior to 20 March 2010, that is, Mr Pillay, M Pillai, Ms Nayak, Mr Tomar and Ms Alister shall be taken to remain, and shall be registered as, the directors of the company. 3. Subject to the orders made and undertakings given on 31 March 2010 and other relevant orders, a majority of the directors shall have power to manage the company. No single director shall have authority to exercise the management power unless it is delegated by a majority of the directors. (So to order is, broadly speaking, to restate the ultimate effect of the articles. Given the five current directors and their allegiances, Mr Pillay, Mr Pillai and their supporter, Ms Nayak, are likely to constitute the majority who will command the management power). 108 Ordinarily, all directors, including the defendant directors, would be entitled to receive information and have the opportunity to participate in management and the company's decision making process, including by calling and attending meetings. The 31 March 2010 orders restrain the defendant directors from expending company funds, dealing with company bank accounts and convening meetings of members and directors. All parties are restrained, whether by undertaking or order, from dealing with properties amending the constitution or expending company funds other than in the ordinary course of business. 109 The 31 March 2010 orders do not prohibit the defendant directors from receiving corporate information, consulting or from attending or voting at meetings of directors or members which persons other than the defendants might call. While some degree of continuing participation by the defendant directors may be feasible under the interim regime, the level of personal division and allegations of breach of duty by Ms Alister may render it futile or imprudent. I shall invite submissions on that question.
Company's status as plaintiff 110 It was common ground that the present proceeding primarily concerns a membership dispute and, as acknowledged in the correspondence between the parties, the company should, in the context of such litigation, be a party to the proceeding but not an active proponent. Nor should the company fund the case of any particular group of disputants in the litigation to the exclusion of others. The defendants contended that the company should be a submitting defendant, while the plaintiffs' position was that the 'label' is relatively unimportant if it be recognised that the company will play no active part and will not fund a particular camp in the litigation. 111 The plaintiffs nevertheless contended that the company is the proper plaintiff to sue for relief for the recently alleged breaches. The questions arise whether the allegations against Ms Alister and other defendants require the company as an active plaintiff in this litigation, and if so, whether, it should be represented separately from the other plaintiffs. 112 It is well established that in the context of oppression proceedings and derivative actions primarily involving a dispute between members inter se, the company's funds should not be applied in the litigation save to the extent necessary to protect its own valid interests. The outcome of the litigation could, however, ultimately entitle particular members to an indemnity from the company for their costs. 113 In Re DG Brims and Sons Pty Ltd (1995) 16 ACSR 559, which concerned a claim of oppression in a closely held company, the company paid the costs of the action on behalf of the majority shareholders. Byrne J stated (at 591): Misuse of company funds Many thousands of dollars of company funds have been spent on lawyers, accountants and valuers in defending these proceedings on behalf of the majority shareholders. This is unfair and infringes the basal principle that "the powers, and the funds, of a company may be used only for the purposes of the company". No doubt a small part of the expenditure was justifiable; for example, in discovery, and in resisting such orders as that the company purchase the shares or pay a dividend for 1991. Expenditure to protect its discrete interests or for other proper purposes of the company may be made from company resources. The essential dispute here, however, is between the shareholders; and company funds should not have been used to defend the majority shareholders. The company was not separately represented. After the case concludes, in accordance with a December 1993 board resolution, the other respondents were to be asked to pay any costs of representing them beyond those incurred for the company. This inverts the proper approach, which in this case required that the majority shareholders meet the great bulk of the costs of representing all the respondents. This unfair conduct, in which all respondents joined, is discriminatory. (footnotes omitted) 114 In Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60 (another oppression case), von Doussa J stated (at 94): The propriety of debiting the legal fees incurred by the respondents in this case to Dynasty turns substantially upon the outcome of the case. Dynasty itself has been joined as a party to be bound by the result, and a small proportion of the respondents' costs could legitimately be charged to the company for that reason. However if it is held that the other respondents have been guilty of acts or omissions, or of conducting the affairs of the company in a manner which renders Mr Coombs an oppressed member I do not consider they are entitled to be indemnified by Dynasty for their costs. 115 In Power v Ekstein (2010) 77 ACSR 302 at 331, Austin J observed that the principles in Re DG Brims and Sons Pty Ltd had been approved in the following Australian cases: Young J in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 at 733 ; [1998] NSWSC 413; BC9804582, and by White J in Cassegrain v CTK Engineering Pty Ltd (2005) 54 ACSR 249 ; [2005] NSWSC 495 at [90]-[91]; see also Metropolitan Petar v Mitreski [2008] NSWSC 243; Grace v Grace [2007] NSWSC 6; compare Sellar v Lasotav Pty Ltd [2008] FCA 1766 (Sellar). 116 His Honour did not consider that there was a blanket prohibition on active participation and expenditure by a company in litigation involving a shareholder dispute. His Honour noted (at 331) that predominant English and Australian authority reflected the conclusions of Lindsay J in Re A Company (No 001126 of 1992) [1994] 2 BCLC 146 that: there is no rule that necessarily and in all cases active participation and expenditure is improper; the test of whether the company's participation and expenditure is proper is whether it is necessary or expedient in the interests of the company as a whole; in considering that test the court's starting point is a sort of rebuttable distaste for such participation and expenditure, and initial scepticism as to its necessity or expediency, and so a company that has actively participated bears a heavy onus. 117 Austin J followed the approach of Lindsay J. 118 In Sellar v Lasotav Pty Ltd [2008] FCA 1766 ("Sellar"), Foster J expressed a somewhat different view. His Honour considered it would be very rare, at the interlocutory stage, to interfere with the payment of legal fees and expenses unless there is good reason to do so. 119 In Sellar, the plaintiffs in an oppression proceeding sought interlocutory relief restraining a company from paying all the legal expenses of the other defendants. Foster J considered the principles governing interlocutory relief in respect of payment of legal fees of one of the disputing parties in an oppression suit. His Honour stated (at [30]) that although there was a serious question to be tried: … that is not the end of the matter. None of the authorities to which I have been referred involved an application for interlocutory relief founded upon the same ground as the ground relied upon by the plaintiffs in the present application. Further, some of those authorities support the proposition that, because it may be difficult to determine on an interlocutory basis which costs may be regarded as the legitimate responsibility of the corporate defendants over which the oppression suit is being fought, courts are reluctant to make a determination in advance, ie, at an interlocutory stage (Fexuto 28 ACSR 688 at 733; 20-28; Re A Company (No 001126 of 1992) [1994] 2 BCLC 146 at 155-156; Grace 25 ACLC 141; [2007] NSWSC 6 at [49] to [52] and at [59] to [61]). This latter point may not be a very strong point in favour of the first, second, fourth and fifth defendants in the present case but is one that nonetheless needs to be weighed in the balance. It seems to me that the Court is generally reluctant to interfere at the interlocutory stage with the payment of legal fees and expenses unless there is good reason to do so. 120 In Power v Ekstein, Austin J considered that Sellar did not reflect the weight of authority, but in Sandalciyan v International Development & Construction Pty Ltd (2010) 80 ACSR 31 at [81], Foster J recently affirmed his approach in Sellar. 121 The difference between the two approaches may be more apparent than real, as Foster J's observations were particularly directed at the difficulties springing from the interlocutory stage of an application. Any difference in approach is, in any event, immaterial to the present case, given the assurances of the second and third plaintiffs that the company funds neither have nor will be used. 122 In Power v Ekstein the plaintiff, Mrs Power (who was a shareholder of certain defendant companies in an existing proceeding), by interlocutory process, sought leave under s 237 of the Act to proceed against certain individual defendants who in practice controlled the defendant companies. 123 Ms Power sought orders restraining, inter alia, the solicitor of one of the individual defendants from acting for the companies and restraining the companies' controllers from using company funds for their defence. She asserted the principle that companies should not take an active role in shareholder disputes. 124 Ms Power principally sought relief against the individual defendants for oppressive conduct and breach of their fiduciary duty as directors of the companies. She also contended that the individual defendants wrongly claimed to be members of some of the companies. 125 Austin J observed that there was some evidence that company's resources had been used in conducting an active defence of the proceedings. His Honour noted that the complex litigation involved both equity issues and company law issues, and as the companies had no interest in the equity issues, a substantial part of the final hearing would not affect them. His Honour stated (at 332): [118] I make the broad distinction between the equity issues and the company law issues because it seems to me that the Companies have no interest in the equity issues, and so a substantial part of the final hearing will not affect them. They should not be active participants in that part of the case and their funds should not be used to conduct that part of the litigation - subject to an exception to allow them to meet their discovery obligations as parties to the proceedings. [119] The company law issues are partly in a different category. To the extent that company law claims will be asserted derivatively on their behalf, the Companies need not have any active involvement and under my orders, they will be indemnified by the plaintiff in respect of costs. What remains, broadly speaking, are the oppression claims and the claims about constitutional non-compliance. As I understand the oppression claims, relief is sought against each company except Elysee for an order, inter alia, for compulsory purchase of shares. It seems to me that an application for a compulsory purchase order against a corporate defendant brings the company's interests into play and it can no longer be said that the dispute is purely between shareholders. The company (that is, the body of members as a whole) has an interest in resisting a compulsory purchase order; ensuring that the burden of the order, if made, falls fairly on all relevant defendants; and making sure that the terms of any such order as to matters such as valuation of the shares are fair in the company's interests. Therefore it would be wrong to restrain the company from participating actively in the litigation, so far as it relates to an application against the company (or defendants including the company) for compulsory purchase of the plaintiff's shares. [120] It also seems to me that a company has a legitimate interest in responding to a challenge to the validity of its decision-making, and hence the Companies should be permitted to respond to the plaintiff's allegations about failure to comply with constitutional provisions about rotation of directors leading to an absence of directors. That argument does not just affect the directors; it affects the integrity of the company and the interests of its members as a whole, by challenging the validity of its corporate actions. 126 His Honour, on receipt of the plaintiff's usual undertaking as to damages, made interlocutory orders, restraining those in control of the companies from them to take any steps in the proceedings, and from applying any company funds to the defence or conduct of the proceedings, except, in the case of any company (at [121]): (a) to the extent that the plaintiff in the proceedings seeks a compulsory purchase order against that Company or seeks relief challenging the validity of corporate actions; (b) for the purpose of complying with obligations in respect of discovery; (c) for any purpose agreed by the plaintiff's solicitor in writing; or (d) with the prior leave of the court. 127 In Metyor Inc v Queensland Electronic Switching Pty Ltd (2002) 42 ACSR 398 ("Metyor"), McPherson JA (with whom Williams JA and Wilson J agreed) stated at 403: [15] Joining the company as defendant was always the procedure adopted in actions for fraud on the minority under the general law, and its use was recently sanctioned by Santow J in granting leave under s 237 of the Act in Keyrate Pty Ltd v Hamarc Pty Ltd (2001) 38 ACSR 396 at 398-400. 128 In Power v Ekstein, Austin J agreed. His Honour referred to Metyor and stated (at 306): As his Honour there pointed out, it has the advantage previously noticed of producing a judgment that is binding on the company. I would respectfully adopt his Honour's reasoning, and, if the plaintiffs are otherwise entitled to succeed on this application, they should be at liberty to take proceedings on behalf of JV Co by joining it as co-defendant in the action rather than as co-plaintiff. The practice, as Mr Bathurst QC suggested in his submissions for the plaintiffs, is analogous to the procedure by which a beneficiary may bring proceedings in his own name for administration of a trust upon his joining the trustee as a party to proceedings: see Ramage v Waclaw (1988) 12 NSWLR 84 at 91, where the principles are discussed. There is no reason why it should not apply to proceedings under ss 236 and 237 of the Act, which are not in terms confined to authorising proceedings to be brought on behalf of the company as plaintiff. Indeed s 236(1)(a) enables a person to 'intervene' in proceedings on behalf of a company, which is an expression that is capable of referring to an appearance on either side of the record. 129 In Power v Ekstein, Austin J considered that the companies should be joined as a codefendant, in a context where the company was already a defendant and the derivative claims were to be added. His Honour stated (at 315): [33] The plaintiff is shareholder of each of the five Companies and as such she has standing to apply the leave of s 236(1). The respondents submitted that if leave is granted, s 236(2) will require the proceedings to be brought in the name of the relevant company, and therefore the plaintiff will be left in the position of both is suing and sitting on behalf of the same companies in the same proceedings. But that is not so. When proceedings are already constituted and the company is a defendant, and derivative claims are to be added to the proceedings, the weight of authority indicates that the company may remain as a defendant. In Gerard Cassegrain & Co Pty Ltd v Cassegrain [2010] NSWSC 91 (Gerard Cassegrain) I considered a similar argument and said (at [120]-[121]): [120] Section 236(2) says that proceedings brought on behalf of a company must be brought in the company's name. But s 236(1) applies not only to a case where a person wishes to bring proceedings on behalf of a company, but also where the person wishes to intervene in proceedings in which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings. Here Denis does not seek leave to bring proceedings on behalf of the Company, because the oppression proceedings are already under way. Being already the plaintiff in the oppression proceedings, in which the Company is a party, he seeks to make a further intervention for the purpose of taking responsibility on behalf of the Company for certain particular steps, namely those concerning bringing and prosecuting the derivative claims. Since this is not a case where leave is sought to bring proceedings on behalf of the company, s 236(2) does not apply to require the Company to become a plaintiff. 130 The present proceeding commenced as a dispute over the removal of directors but subsequently grew into a wider dispute about membership. While both parties recognise that it is primarily a membership dispute (in which a company would most appropriately be a defendant) it did not begin as, and does not remain, solely a membership dispute. 131 Austin J in Power v Ekstein, recognised that a company has a legitimate interest in responding to the validity of its decision making. Therefore, I am not persuaded that the company has no interest at all in the present proceedings or that it was wrongly included as a coplaintiff at the outset. 132 Nevertheless, as the parties recognise, the membership dispute is the kernel of the proceeding, and the second and third plaintiffs have correctly acknowledged that, essentially, the company should neither play an active role nor fund the carriage of the second and third plaintiffs' case. In my view, it is of little moment whether, in that context, the company is an inactive defendant or an inactive plaintiff. 133 While the recent allegations of misconduct in relation to which the company is the proper plaintiff may ultimately justify an active role and expenditure by the company, the allegations have arisen as subsidiary or consequential to the primary issues in dispute. (I observe that the issuing of or intervening in a proceeding in relation to the impugned conduct would not require leave under s 237(1), as Ms Alister and her supporters currently do not control the board). 134 If a revised regime for the interim management of the company succeeds in preventing a recurrence of such conduct or other alleged wrongs to the company, the company, although a plaintiff, may remain an inactive party which does not fund the proceeding. 135 Should subsequent developments require the company to assume an active role in the litigation, it will be necessary to consider whether it should be represented separately from the second and third plaintiffs. In my opinion, however, there are presently no sufficient grounds for granting the relief sought in the defendants' notice of motion.
conclusion 136 In my opinion, the relief sought in the plaintiffs' notice of motion should be granted. 137 The relief sought in the defendants' notice of motion should be refused. I certify that the preceding one hundred and thirty-seven (137) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice DoddsStreeton.
Ananda Marga Pracaraka Samgha Ltd
Tomar
[1998] NSWSC 413
(2006) 15 VR 65
(2006) 229 ALR 457
(1968) 118 CLR 618
(1988) 12 NSWLR 84