This dispute, which significantly narrowed at the hearing, largely concerns the entitlement of holders of debentures issued by Baikal Sports Club Incorporated ("Club") to vote at meetings of the Club and the status of resolutions passed at a special general meeting ("SGM") of the Club held on 26 March 2023. The Defendant, Mr Ovchinnikov, who was appointed as a representative of certain debenture holders of the Club, opposes the declaratory relief sought by the Club and seeks relief by way of an Interlocutory Process, by way of Cross-Claim, which I address below.
A degree of common ground between the parties emerges from the pleadings, affidavit evidence and documents. The Club is an incorporated association whose affairs are regulated by the Associations Incorporation Act 2009 (NSW) ("Associations Incorporation Act") (Statement of Claim ("SOC") [1], Defence [1]). From 25 August 1994, the Club was incorporated under the name Russian Sports Association Incorporated and was governed by rules contained in the document entitled "Rules for the Russian Sports Association Incorporated" ("1994 Constitution") (SOC [2], Defence [2]). It is common ground that Mr Ovchinnikov became a member of the Club on 21 March 1995 (SOC [8], Defence [8]).
Australian Federation of Islamic Councils Inc v United Moslems New South... [2024] NSWSC 5 | Case summary | Zoe
It is also common ground (SOC [10], Defence [10]) that, between August 1994 and January 1996, the Club issued Class "A" debentures with a total value of $133,000 to 61 then members of the Club, including Mr Ovchinnikov and to 6 proposed members of the Club, who did not subsequently become members of the Club.
An issue apparently arose as to whether debenture holders were required, in their capacity as members of the Club, to pay the Club's modest annual membership fee and, on 21 March 1996, the Club sent members a letter stating that "as a Debenture Holder, you are required to pay membership fees annually. Failure to do so will disentitle you to vote at meetings". That proposition is perhaps imprecise, since the Club's constitution, as it has stood throughout the relevant period, requires members to pay annual membership fees and conditions their voting rights and membership upon their doing so, and whether they are also debenture holders is not to the point in that regard.
On 4 November 1996, the Club issued a notice to members indicating that, at the annual general meeting ("AGM") scheduled for 1 December 1996 "all Class A Debenture Holders will receive their Certificates"; Mr Ovchinnikov collected his debenture certificate at that time; and, from December 1996, the Club maintained a list of the date of the collection of the debenture certificates and the signature of each debenture holder who collected their certificate. It is not necessary to decide a dispute concerning the collection of debenture certificates by debenture holders in order to determine the proceedings.
The Club contends (SOC [12]) and Mr Ovchinnikov does not admit (Defence [12]) that, between 30 June 1994 and 31 December 2022, 35 holders of Class "A" debentures issued by the Club ceased to be members of the Club by reason of their non-payment of annual membership fees. For the reasons noted below, I accept that follows on the proper construction of the Club's constitutions; however, debenture holders had a continuing right to notice of meetings and to vote at those meetings as debenture holders, under the terms of the debentures; but that continuing right had no practical utility, since their votes would not be counted in determining whether an ordinary or special resolution was passed for the purposes of the Associations Incorporation Act.
At an AGM in September 2006, members approved a change of name of the Club to "Russian Sports and Social Club Incorporated" and resolved to adopt a new constitution for the Russian Sports and Social Club Incorporated ("2008 Constitution"). After some delay, in February 2008, the Club received a letter from the Department of Fair Trading confirming that the 2008 Constitution was accepted for registration and took effect on and from 21 February 2008. The status of the 2008 Constitution was in issue in previous proceedings brought by Mr Ovchinnikov against the Club in this Court ("2011 proceedings") and, by his Amended Statement of Claim in those proceedings, Mr Ovchinnikov sought, inter alia, a declaration that the 2008 Constitution was "improperly and wrongfully created and brought into operation and that all of the decisions and resolutions purportedly made promulgating" the 2008 Constitution "were and are invalid and void" and "were ultra vires, invalid and of no effect". By his judgment delivered on 1 May 2013, Gzell J dismissed Mr Ovchinnikov's challenge to the validity of the 2008 Constitution in the 2011 proceedings. Mr Ovchinnikov rightly did not press an attempt to reagitate the issues in those proceedings in his Cross-Claim in these proceedings.
In October 2016, special resolutions were purportedly passed at a further AGM of the Club amending its constitution and changing its name to Baikal Sports Club Incorporated. There is a dispute as to these matters (SOC [4], Defence [4]). Also in October 2016, the Department of Fair Trading advised the Club that the new constitution adopted at that AGM ("2016 Constitution") was accepted for registration and took effect on and from 27 October 2016.
On 16 October 2022, the Club held an AGM, where a special resolution was proposed and purportedly passed to amend cl 46(4) of the 2016 Constitution dealing with the distribution of the Club's property on a winding up, and a resolution was also purportedly passed relating to the incorporation of a new entity named Baikal Youth Assistance Charity Fund Ltd (SOC [13]-[15], Defence [13]-[15]).
On 18 November 2022, the Club notified members of an SGM to be held on 11 December 2022. That notice was challenged by letter dated 8 December 2022 from solicitors for some of the debenture holders, including Mr Ovchinnikov, and that SGM did not proceed as the notice of the SGM had omitted to state the time of the SGM.
On 2 March 2023, the Club sent a notice advising of an SGM to be held on 26 March 2023 to members of the Club and debenture holders (SOC [16], not admitted Defence [16]). At the SGM held on 26 March 2023, special resolutions were purportedly passed concerning the winding up of the Club and ratifying the special resolution passed at the AGM on 16 October 2022 amending cl 46(4) of the Constitution (SOC [17]-[19], not admitted Defence [17]-[19]). At that SGM, 60 votes were purportedly returned for each of the three resolutions; 44 votes were returned in favour of each of the resolutions including 10 votes by debenture holders whose membership was recorded as lapsed; and 16 votes were returned against the resolutions, including 11 votes by debenture holders whose membership was recorded as lapsed (SOC [19]; not admitted Defence [19]).
[3]
Affidavit evidence
Turning now to the affidavit evidence, the Club reads the affidavit dated 13 September 2023 of Mr Lelekov, who has been the Club's treasurer since 1998. He refers to the history of the Club, which I have addressed above. He refers, in evidence admitted with a limiting order under s 136 of the Evidence Act 2005 (NSW) ("Evidence Act") as submission, to the Club's adoption of the 2008 Constitution and the 2016 Constitution. Mr Lelekov addressed, in evidence also admitted with a limiting order under s 136 of the Evidence Act as submission, the identity of active members of the Club and the identity of debenture holders, and he contends that 13 debenture holders are active members of the Club and 41 debenture holders are not members of the Club because they had not paid annual membership fees as required by the Club's constitution. Mr Lelekov outlines the process adopted at the AGM on 16 October 2022, refers to the SGM which did not proceed in December 2022 and to the SGM which proceeded in March 2023, to which I referred above.
By a second affidavit dated 15 November 2023, Mr Lelekov responded to Mr Ovchinnikov's first affidavit dated 30 October 2023. He also addressed the circumstances surrounding the issue of the class "A" debentures to 61 persons between August 1994 and January 1996, the management of the Club, membership of the Club, the adoption of the 2008 Constitution, Mr Ovchinnikov's challenge to that constitution in the 2011 proceedings, and the adoption of the 2016 Constitution. By a third affidavit dated 29 November 2023, Mr Lelekov responded to aspects of Mr Ovchinnikov's affidavit dated 24 November 2023 and addressed the Club's practice as to membership fees and, again, the AGM held in October 2022 and the SGM held on 26 March 2023.
The Club also reads the affidavit dated 15 November 2023 of its solicitor, Ms Kuznetsova, who refers to medical difficulties suffered by Mr Tonkikh, the current secretary of the Club, who was referred to in Mr Ovchinnikov's affidavit dated 30 October 2023 and who did not give evidence. By a second affidavit dated 20 November 2023, Ms Kuznetsova annexed further evidence as to Mr Tonkikh's medical condition. By a third affidavit dated 14 December 2023, Ms Kuznetsova led evidence as to the conduct of the 2011 proceedings, annexing documents extracted from the Court file in respect of those proceedings. That evidence is now of limited relevance where Mr Ovchinnikov narrowed his case so as to avoid seeking to reagitate the issues determined in those proceedings. By a fourth affidavit dated 15 December 2023, Ms Kuznetsova annexed further documents relating to the payment of membership fees in respect of Mr Ovchinnikov, Mr Kulikov and Ms Kislitsa.
By his affidavit dated 30 October 2023, Mr Ovchinnikov addressed his involvement with the Club since 1994, the contributions which he has made to the Club and discussions concerning debentures issued by the Club. He referred to aspects of the Club's management and the position as to general meetings of the Club dating back to 1995, which it is not necessary for me to determine where they cannot impact on the relief sought in the proceedings. He also addressed the position in respect of the Club's purported adoption of the 2016 Constitution. By his second affidavit dated 24 November 2023, Mr Ovchinnikov took issue with aspects of Mr Lelekov's first affidavit and gave evidence, which was largely rejected for form, hearsay and under s 135 of the Evidence Act as to the views of numerous other persons. Mr Ovchinnikov gave further evidence as to the AGM held on 16 October 2022, the SGM proposed to proceed (but not held) in December 2022 and the SGM held in March 2023. By a third affidavit dated 29 November 2023, Mr Ovchinnikov further expanded on his evidence as to his contribution to the Club, and again addressed issues concerning the issue of debentures, the management of the Club, the adoption of the 2008 Constitution (the status of which was determined in the 2011 proceedings) and the adoption of the 2016 Constitution. Evidence given by Mr Ovchinnikov as to the views of other persons was again not admitted.
By an affidavit dated 24 November 2023, Mr Ovchinnikov's brother, Mr Ivan Ovchinnikov, also referred to the conduct of the AGM on 16 October 2022. Mr Ovchinnikov also read the affidavit dated 5 December 2023 of Ms Kislitsa, who is a holder of Class A debentures and addressed the position as to the conduct of several general meetings. By his affidavit dated 5 December 2023, Mr Kulikov addressed the issue of debentures, the management of the Club from 1998 and the purported adoption of the 2008 Constitution and the 2016 Constitution. By an affidavit dated 8 December 2023, Mr Paramonov addressed essentially the same matters.
[4]
The relief sought by the Club
By its Amended Originating Process filed on 4 October 2023, the Club seeks relief primarily directed to declarations as to voting rights of debenture holders who it contends have ceased to be members of the Club and the status of special resolutions passed at the SGM of the Club on 26 March 2023. The Defendant, Mr Ovchinnikov, who was appointed as a representative of debenture holders of the Club in an opposed interest, opposes that relief.
In addressing these issues, I proceed on the well-established basis that the ordinary rules of contractual construction apply in respect of the constitution of an incorporated association, although caution will be exercised in drawing inferences from surrounding circumstances or having regard to extraneous materials, where a constitution is a statutory contract that is a public document and may be relied on by third parties: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1; [2006] FCAFC 144 at [55]-[56], [124], [239]-[243]; Echunga Football Club Inc v Hills Football League Inc (2014) 121 SASR 449; [2014] SASC 201 at [18]-[21]; Australian Federation of Islamic Councils Inc v United Moslems New South Wales Inc [2021] NSWCA 311 at [64].
I should first address the parties' submissions, which are relevant to both the Club's claim and Mr Ovchinnikov's Cross-Claim, before turning to the specific relief that they respectively seek. Ms Aguinaldo, who appears for the Club, submits that it is necessary for the Court, first, to determine if the Club's constitution entitles debenture holders who have not paid membership fees to vote at general meetings at the Club. I accept that, as Ms Aguinaldo contends, the Club's constitution(s) condition both the right to vote and the continuance of membership on payment of membership fees. However, it does not follow that debenture holders do not have an independent right to vote at general meetings, arising from the terms and conditions of the debentures which bind the Club, and Ms Aguinaldo accepts that a second question arises as to whether debenture certificates allow a debenture holder who has not paid membership fees the right to vote.
Ms Aguinaldo recognises that the definitions of "debenture" and "debenture holder" in cl 1 of the Club's constitution (at least in the 2016 Constitution) refer to debenture holders as members of the Club. However, those provisions seem to me to be descriptive in character, rather than operative provisions conferring independent rights upon debenture holders, and reflect the fact that debenture holders were required to be members of the Club at the time that debentures were issued to them. Ms Aguinaldo recognises that several provisions of the Club's constitution (at least in the 2016 Constitution) refer to debenture holders, including cll 15(1) and 16(7) which provide that the committee of the Club is to consist of at least six members who are debenture holders and five other members; cl 16(8) provides for a vote of a "fully paid up member debenture or ordinary" to elect members to the committee of the Club; cl 17(1) permits the president of the Club to be elected from either debenture holder members or ordinary members who have been elected to the committee; and cl 29(2) requires five debenture holders to be present to establish a quorum at a general meeting. These provisions do not displace any requirement for debenture holders who are members of the Club to pay membership fees, since they could readily apply to debenture holders who pay their membership fees and remain members of the Club.
Ms Aguinaldo also refers to cl 28 of the Club's constitution, which provides for notices of general meetings to only be sent to members and submits that it would be "unworkable" if persons who had not paid membership fees are afforded a vote at a general meeting, but not given the right to be notified of a general meeting. That consequence does not arise where a right to notice would be implied by a right to vote arising under the terms of the debentures. Ms Aguinaldo also points out that Part 2 of the Club's constitution (at least in the 2016 Constitution) provides membership of the Club is lost in specified circumstances, including if a person does not pay the annual member's subscription fee by 31 December of the applicable year. I accept that provision can have the consequence that a debenture holder who is a member of the Club loses his or her membership by not paying the relevant subscription fee by that date, although that would not deprive him or her of any entitlement to vote that arises under the terms of the debentures.
Ms Aguinaldo points out that cl 34(1) of the 2016 Constitution refers to a member having one vote only and does not refer to debenture holders; that, however, says nothing as to the position of a debenture holder who has ceased to be a member of the Club, because his or her membership has lapsed by non-payment of membership fees. Clause 34(4) of the 2016 Constitution in turn provides that a member or proxy is not entitled to vote at a general meeting unless all money due and payable by the member or proxy to the Club has been paid. It is not clear that clause now has any practical operation, if the membership fee is not due until 31 December in a year, and a member loses his or her right to membership on non-payment of that fee by that date. Ms Aguinaldo also points out that cl 35(1) of the 2016 Constitution in turn refers to circumstances in which a debenture holder can appoint a proxy.
Ms Aguinaldo also submits, as a matter of construction, that the debenture terms do not confer voting rights on non-member debenture holders, and seeks to read cl 7 of those terms providing for debenture holders to have the votes laid down in the rules. For the reasons set out below, I do not read that clause in that manner. For completeness, Ms Aguinaldo addresses the proposition that Mr Ovchinnikov has ceased to be a member of the Club and there appears to be no contest as to that question, which is not determinative of any entitlement to notice of meetings of the Club or to vote arising from his status as a debenture holder.
Ms Aguinaldo also draws attention to ss 38 and 39 of the Associations Incorporation Act which relevantly provide that:
"38 Voting generally
(1) A resolution is passed by an association as an "ordinary resolution" --
(a) at a general meeting of the association, or
(b) in a postal or electronic ballot conducted by the association,
if it is supported by more than half of the votes cast by members of the association who, under the association's constitution, are entitled to vote on the proposed resolution.
(2) A postal or electronic ballot referred to in subsection (1)(b) must be conducted in accordance with the regulations.
39 Voting on special resolutions
(1) A resolution is passed by an association as a "special resolution" --
(a) at a meeting of the association of which notice has been given to its members no later than 21 days before the date on which the meeting is held, or
(b) in a postal or electronic ballot conducted by the association, or
(c) in such other manner as the Secretary may direct,
if it is supported by at least three-quarters of the votes cast by members of the association who, under the association's constitution, are entitled to vote on the proposed resolution.
(2) A notice referred to in subsection (1)(a) must include the terms of the resolution and a statement to the effect that the resolution is intended to be passed as a special resolution. …"
Ms Aguinaldo submits that:
"Critically, sections 38 and 39 of the [Associations Incorporation Act] provide that a resolution is passed by an association if it is supported by more than half (in the case of an ordinary resolution), or more than three-quarters (in the case of a special resolution) of "the votes cast by members of the association who, under the association's constitution, are entitled to vote on the proposed resolution (emphasis added)."
I will return to the significance of those provisions below.
Mr Maroya, who appears for Mr Ovchinnikov, initially addressed a wider range of issues in submissions, prior to the narrowing of Mr Ovchinnikov's case at the hearing. As to the matters that remain in issue, Mr Maroya submitted that the debenture holders' entitlement to vote was initially co-extensive with their right to do so as members, where an applicant for debentures was required to be a member of the Club. Mr Maroya raised a question whether a late payment of a membership fee or a missed payment because (hypothetically) a debenture holder did not receive a reminder notice, evinced a sufficient intention for a debenture holder to abandon his or her membership of the Club. It seems to me that question does not arise in any general form, where the Club's constitution provides that non-payment of membership fees by a member brings about the termination of membership, possibly subject to any relief that may be available to a member by statute or at general law in his or her particular circumstances. I do not accept Mr Maroya's further submission that the issue of debentures operates as some form of "fetter" on the Club's ability to determine a member's membership, where that occurs without a further decision by the Club under the terms of the Club's constitution. It also seems to me that the case law to which Mr Maroya refers, including Redhead Grange Inc v Davidson (2002) 55 NSWLR 14 at [7], is of no assistance where the termination of a debenture holder's membership arises by express provision of the Club's constitution on the failure to pay membership fees. It is not to the point then to inquire whether, at general law and in the absence of a provision that the constitution contains, the non-payment of membership fees would have brought about the cessation of a debenture holder's membership. However, that does not exclude the possibility that a debenture holder has a right to vote arising from his or her status as a debenture holder, rather than from their status as a member of the Club.
Mr Maroya submits that a debenture holder remains a member of the Club, by his or her continuing status as a debenture holder, relying on the definition of the term "debenture holder" in cl 1 of the Club's constitution. I do not accept that submission. As I noted above, a debenture holder will inevitably have been a member of the Club when he or she was issued with a debenture, where membership of the Club was a requirement for that issue to take place. As I noted above, it seems to me that definition is descriptive in character, and does not confer an operative right to a debenture holder to continuing membership of the Club where he or she would otherwise lose his or her membership of the Club under the operative provisions of the Club's constitution. Even if I were incorrect in that view, a debenture holder who had not paid his or membership fees, but remained a member, would lose his or her entitlement to vote under cl 34(4) of the 2016 Constitution, to which I referred above.
Turning now to the relief sought by the Club, the first order that it seeks is a declaration that only members of the Club are entitled to vote at general meetings of the Club, implicitly to the exclusion of those A class debenture holders who it contends have ceased to be members of the Club. The Club pleads (SOC [21]-[23], not admitted Defence [21]-[23]) that only members of the Club are entitled to vote at general meetings of the Club; holders of Class "A" debentures issued by the Club who never became members of the Club or ceased to be members of the Club before 26 March 2023 were not entitled to vote at the SGM on 26 March 2023; and the votes returned at the SGM on 26 March 2023 by any holders of Class "A" debentures issued by the Club who never became members of the Club or ceased to be members of the Club before 26 March 2023 are properly excluded.
The Club contends (SOC [5]; not admitted Defence [5]) and I accept that, by clauses 6, 28, 34(1) of each of the 1994 Constitution, the 2008 Constitution and the 2016 Constitution, each member of the Club has been entitled to receive a notice of general meetings of the Club; each member of the Club has been entitled to one vote upon any question arising at a General Meeting of the Club; each member's right to vote was not able to be transferred or transmitted to another person; and a member's right to vote terminated upon cessation of his or her membership. The Club also contends (SOC [6]; admitted Defence [6]) and I also accept that, by cll 5(d) and 9(2) of the 1994 Constitution, which had effect between 25 August 1994 and 21 February 2008, each member of the Club was required to pay annual membership fees to the Club by 31 August each year and a member of the Club who failed to pay the annual membership fee to the Club by that date ceased to be a member. The Club contends (SOC [7]; not admitted Defence [7]) that by cll 5(d) and 9(2) of each of the 2008 Constitution and the 2016 Constitution, each member of the Club has been required to pay annual membership fees to the Club by 31 December each year and each member of the Club who failed to pay an annual membership fee to the Club by that date ceased to be a member.
It is also common ground (SOC [11, admitted Defence [11]) at least that the terms, rights and conditions of the Class "A" debentures issued by the Club are contained in the debenture certificates. There is a dispute which I need not resolve as to whether all debenture holders received such certificates. Clauses 5, 6, 7, 8, 9, 10, 11 of the Terms and Conditions to the debentures relevantly provide that only members of the Club can apply for Class "A" debentures; Class "A" debentures are issued for a fixed period of 10 years from the date of issue, unless a written request is given to the Treasurer of the Club within 12 months of expiry that the holder wishes to rollover the debenture for a further 10 years; a holder of Class "A" debentures is not entitled to payment of any interest or to participate in the surplus of any profits of the Club; a holder of Class "A" debentures is entitled to one vote only on a poll or any other vote when called for as laid down in the Club's rules or constitution irrespective of the number of debentures held or total value of debentures held; a holder of Class "A" debentures may only sell, transfer or assign their debenture on first obtaining the written permission of the committee of the Club; upon the death of a holder of a Class "A" debenture the debenture will transfer or pass in accordance with their will or to the beneficiary of the estate of the holder; and, if the Club is liquidated or wound up, holders of Class "A" debentures are entitled to a repayment not exceeding the principal sum of the debenture only after payment of all creditors of the Club.
Both Mr Ovchinnikov and the Club placed primary weight on cl 7 of the debenture certificates, which provides that:
"Class 'A' Debenture Holders are entitled to one vote only on a poll or any other vote when called for as laid down in the Associations Rules irrespective of the number of debentures held or total value of debentures held. Debentures held jointly will entitle only one of the holders thereof to a single vote irrespective of the number of joint holders and it will be necessary for the orders thereof to appoint their representative. Any member holding debentures in their own name and/or jointly with other members will only be entitled to a single vote irrespective of the number and/or value of debentures held."
The Club contends that this clause does not assign the right to vote to debenture holders who are not members of the Club. I do not accept that submission. It seems to me that the first sentence of that clause confers a right to vote on debenture holders, irrespective of whether they remain members of the Club, and the language "as laid down in the Associations Rules" does not restrict the right to vote to persons who remain members of the Club, but is directed to identifying the poll or other occasion at which that vote may be exercised. While the terms of the debentures do not expressly require that notice of relevant meetings to be provided to debenture holders, it seems to me that is implicit in conferring the right to vote upon them.
I am not able to make the first declaration sought by the Club, where it seems to me that the terms and conditions of the debentures confer a right to vote on class A debenture holders, in that capacity, irrespective of whether they remain members of the Club. That right exists, irrespective of whether their votes will be recognised by the Club's constitution or under s 39 of the Associations Incorporation Act, a matter to which I return below.
The second order sought by the Club is a declaration that the several special resolutions relating to the proposed winding up of the Club were validly passed at the general meeting of members of the Club held on 26 March 2023. I am satisfied that I should make that declaration, where notice was given to debenture holders of this meeting and they had the opportunity to attend and vote at it, although their votes cannot be counted in determining whether the resolutions were passed under the Club's constitution or, importantly, s 39 of the Associations Incorporation Act. The result reflects a focus upon the votes of members of the association, to the exclusion of persons such as debenture holders, in decision-making in an incorporated association and displaces the practical effect of the terms of the debentures in that regard.
[5]
Mr Ovchinnikov's Cross-Claim
By a First Cross-Claim filed on 18 October 2023, and narrowed in the course of the hearing, Mr Ovchinnikov now seeks a declaration that the 2016 Constitution was invalid and a declaration as to the requirements to hold AGMs and SGMs of the Club.
By his Statement of Cross-Claim dated 18 October 2023, as narrowed by a document marked MFI1 ("SOCC"), Mr Ovchinnikov sought to agitate (SOCC [5]) a suggested failure to issue debenture certificates to all debenture holders, apparently taking place from 1994. The Club responds (Defence to SOCC [5]), and I accept, that debenture certificates were prepared in respect of debentures and were made available for collection by debenture holders. In any event, it is not necessary to determine this matter in order to determine the relief sought.
Second, Mr Ovchinnikov contends (SOCC [7]) that cl 7 of the debenture certificates stipulate that each debenture holder is entitled to "one vote only on a poll or any other vote when called for as laid down in the Association Rules…". I have determined the construction of that clause in dealing with the Club's claim for declaratory relief above. Third, Mr Ovchinnikov contends (SOCC [8]) that notices of the October 2016 meeting was not issued to any of the debenture holders, and the Club admits (Defence to SOCC [8]) that is the case in respect of debenture holders who were not members of the Club, but contends that notices of general meetings were only required to be issued to members of the Club by virtue of cl 28 of the 1994 Constitution and cl 28 of the 2008 Constitution. I accept that submission, so far as the requirements of the Club's constitutions are concerned. While I have found that a separate requirement of notice is implicit in debenture holders' right to vote under the terms of the debentures, there is no basis to find that the failure to give notice to debenture holders who were no longer members of the Club invalidated the 2016 meeting, as distinct from amounting to a breach of the debenture contract, where that notice was not required by the Club's constitution and their votes would not have been counted in determining the outcome of the meeting under s 39 of the Associations Incorporation Act; compare Re Lesso Building Material Trading (Sydney) Pty Ltd (Admins Apptd) [2018] NSWSC 1486 at [20]-[23].
Fourth, Mr Ovchinnikov contends (SOCC [9]) that, by reason of the failure to give such notice, and in breach of s 39 of the Associations Incorporation Act, debenture holders were denied the opportunity to vote on the resolutions proposing the adoption of the revisions to the constitution tabled at the October 2016 meeting. I accept that non-member debenture holders were denied the opportunity to vote at that meeting, which the terms and conditions of the debentures contemplated. However, that plainly did not contravene s 39 of the Associations Incorporation Act, where that section provides that a resolution is passed as a special resolution where it is supported by at least three quarters of the votes cast by "members of the association who, under the association's constitution, are entitled to vote on the proposed resolution." That section does not give effect to any entitlement of debenture holders to vote, arising as a matter of contract under the terms and conditions of the debenture and not the Club's constitution, and the votes of debenture holders would not have affected the outcome of the resolution.
Fifth, Mr Ovchinnikov contends (SOCC [10]) that, in order for such constitutions to have been validly adopted, compliance was required with the Club's rules as in place on the registration of the Club as the Russian Sports Association Incorporated on 25 August 1994. That contention is no longer open to him where he has abandoned his attempt to reagitate the validity of the amendments to the Club's constitution made in 2008 which were determined by the 2011 proceedings. Sixth, Mr Ovchinnikov contends (SOCC [11]) that, by reason of these matters, the special resolution purporting to adopt the constitution of 16 October 2016 was invalid and of no effect. I do not accept that contention, where that resolution satisfied the requirements of the Club's 2008 Constitution and s 39 of the Associations Incorporation Act, which do not recognise the requirements of the terms and conditions of the debentures. The Club raises (Defence to SOCC [13], [14]) alternative defences of abuse of process, laches and/or acquiescence, which it is not necessary to address given the findings that I have reached on other grounds above.
The first order sought by Mr Ovchinnikov was a declaration that the constitution purportedly adopted by the Club on 27 October 2016 is invalid and without legal effect. I cannot make that declaration where, for the reasons noted above, a failure to give notice to debenture holders and permit them to vote, in breach of the terms of the debenture, did not affect the outcome of the relevant meeting under the Club's 2008 Constitution or s 39 of the Associations Incorporation Act, which had the consequence that the resolution would be passed where the requisite percentage of members, as distinct from debenture holders, voted in favour of it.
Second, Mr Ovchinnikov seeks a declaration that, in the case of all AGMs and SGMs of the Club, at least 5 debenture holders be present; all debenture holders be provided with at least 21 days' notice of such meetings; and that the debenture holders be entitled to vote at such meetings. This declaration may reflect Mr Ovchinnikov's challenge to the 2008 Constitution, which failed in the 2011 proceedings and which he rightly did not seek to reagitate in these proceedings. If so, there is no basis for making that order. In any event, there would be no utility in making that declaration where a debenture holder's vote, if he or she was permitted to vote, would be disregarded in determining the outcome of a resolution under ss 38 and 39 of the Associations Incorporation Act.
[6]
Orders
For these reasons, the Club has established its entitlement to order 2 sought in its Amended Originating Process. The proceedings, including Mr Ovchinnikov's Interlocutory Process seeking relief by way of Cross-Claim, should otherwise be dismissed. I direct the parties to bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 7 business days or, if there is no agreement between them, their respective draft orders and submissions not exceeding 5 pages in Arial font 12, one and a half spacing, as to the differences between them.
[7]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 17 January 2024