• Aveo Group Ltd v State Street Australia Ltd [2016] NSWSC 916 | Case summary

Supreme Court of NSW|2016-06-29|Before: Black J

Solicitors: Colin Biggers & Paisley (Plaintiff) Bowen Legal (Second Defendant) Hicksons (Third Defendant) File Number(s): 2016/138184

Judgment

By Amended Originating Process filed by leave, the Plaintiff, Mr Gregory Russell as deed administrator of Ryde Ex-Services Memorial and Community Club Ltd (subject to deed of company arrangement) ("Club") seeks orders under ss 447A and 447D of the Corporations Act 2001 (Cth) and certain declarations. Several parties with an interest in the relevant issues have been joined as defendants, namely Ryde District RSL Sub-Branch ("Sub-Branch") (which is an unincorporated association, although no party took any point as to its joinder on that basis), The Returned and Services League of Australia (New South Wales Branch) ("RSL NSW") and 28 individuals who fall within particular categories affected by the declarations sought. The Sub-Branch, RSL NSW and one of those individuals, Ms Erickson, appeared at the hearing.
I should briefly refer to the principles applicable to the giving of a direction under s 447D of the Corporations Act, since I will give several directions below as to matters which do not seem to me to be appropriate for declaratory relief. That section provides that, relevantly, the administrator of a deed of company arrangement may apply to the Court for directions about a matter arising in connection with the performance or exercise of its functions and powers, or in connection with the operation of, or giving effect to the deed. A deed administrator's power to approach the Court for directions under this section is designed to facilitate his or her functions and should be interpreted widely to give effect to that intention, and the Court may give directions to provide guidance on matters of law or to protect the deed administrator against accusations that it has acted unreasonably: Re One.Tel Networks Holdings Pty Ltd [2001] NSWSC 1065; (2001) 40 ACSR 83 at [27]ff; Re Green (as voluntary administrators of Bevillesta Pty Ltd) [2011] NSWSC 417; (2011) 254 FLR 324; 84 ACSR 215 at [10]. The principles applicable to a deed administrator's application for directions broadly correspond to those applicable to a liquidator's application for a direction in relation to a matter arising under a winding up under s 479(3) of the Corporations Act. The effect of such a direction is to protect a deed administrator who acts in accordance with it, provided relevant matters have been disclosed to the Court. Several issues arising in this application involve questions of construction, which are potentially controversial, and it seems to me that the deed administrator could well be exposed to an allegation that he acted unreasonably in that regard. I am satisfied that this is a proper case for directions to be given to the deed administrator as set out below.
By way of background, the Club has in excess of 4,000 members and owns valuable land at Ryde. Notwithstanding the value of its assets, the Club developed liquidity issues and Mr Russell was appointed as its voluntary administrator on 21 January 2015, and its creditors resolved that it enter into a deed of company arrangement with Mr Russell as deed administrator on 26 February 2015. The deed of company arrangement contemplated that the Club would seek a refinancing which, it was hoped, would result in payment of all unsecured creditors in full. Mr Russell has now secured a loan from a third party which will allow the Club to pay all of its debts and provide working capital for a period, which must be repaid within 18 months.
This application is brought because there must shortly be an election of directors of the Club at an annual general meeting. Pursuant to s 1322 of the Corporations Act, the time to convene and hold that annual general meeting has been extended to 19 August 2016. There have previously been disputes in respect of the conduct of general meetings of the Club and a dispute as to one such meeting was determined by Lindsay J in Re Ryde Ex-Services Memorial and Community Club Ltd (admin apptd) [2015] NSWSC 226; leave to appeal from that decision was refused ([2015] NSWCA 184). Mr Russell, reasonably enough, seeks to minimise the risk of further controversy in respect of an annual general meeting that is to be convened and conducted prior to his retirement as administrator. The determination of the issues raised in this application will clarify matters which may arise in respect of the next annual general meeting.

Affidavit evidence

Mr Russell relied on his affidavit dated 5 May 2016 which referred to the circumstances of his appointment as administrator; the disputes that had previously arisen in respect of a development proposal for the Club's property and the annual general meeting of the Club held in November 2014, prior to his appointment as administrator and then deed administrator; the steps which he has taken as deed administrator to consult with a committee of members of the Club; developments in respect of the alternative funding proposal for the Club; and the issues with the Articles of the Club and membership categories which have brought about this application. Mr Russell expresses his views as to the way in which the relevant provisions in the Articles should be interpreted, although those are ultimately matters of construction which I will address below. Mr Russell also refers to a review which he and his staff have undertaken of the Club's membership and to several anomalies in the Club's membership register, which he seeks to have corrected in this application.
Mr Russell also relied on his further affidavit dated 23 May 2016, which referred to the timetable for calling an annual general meeting, which has been addressed by an order extending the time to convene that meeting. Mr Russell also relied on an affidavit of his solicitor, Ms Collins, dated 29 June 2016, which refers to correspondence sent to all of the defendants named in the Amended Originating Process serving that Amended Originating Process and Mr Russell's first affidavit without exhibits. Ms Collins refers to two letters which were returned to sender, in circumstances that it appears that two of the defendants, Ms Muir and Mr Barnes were deceased, and to a strong protest received from the son of one elderly member as to the proposed change of his father's membership as recorded on the Club's register from an RSL member to a social member, and to other correspondence in respect of the application.
Mr Cox, who is the President of the Sub-Branch, was granted leave to appear on its behalf and tendered the minutes of a meeting of the Sub-Branch held on October 2015 which contained a resolution (admitted subject to a limiting order under s 136 of the Evidence Act 1995 (NSW) as recording the position adopted by the general meeting to be communicated to Mr Russell) that only Financial Full or Associate Members of the Sub-Branch are to be directors or representatives on any committee elected to advise the deed administrator. Mr Cox also made submissions which addressed some matters of evidence and indicated some areas of disagreement with Ms Erickson's affidavit evidence. With no disrespect to Mr Cox or Ms Erickson, those factual disputes are ultimately not material to the matters I need to determine in this application.
The Second Defendant, RSL NSW, relied on the affidavit of its State Secretary, Mr Kolomeitz dated 29 June 2016. Mr Kolomeitz referred to the history of RSL NSW and to its role and objects, and the arrangements which are in place for its management and administration, and to the role of RSL NSW sub-branches in particular areas. His evidence is that the Sub-Branch appears to have been formed in January 1937, and that sub-branches are unincorporated associations and are bound by the RSL NSW's constitution, do not have constitutions separate from those of RSL NSW, and that RSL NSW's by-laws are also applicable to sub-branches. Mr Kolomeitz also refers to changes made to RSL NSW's constitution in May 2012 to introduce a category of Affiliate membership, so that there are now three types of RSL members, namely Service Members, who are returned and ex-service men and women, National Members who are admitted as members of RSL National, and Affiliate Members who have an association with the RSL, for example family members of ex-service people. Mr Kolomeitz also notes that the Ryde District RSL Sub-Branch passed a resolution to adopt Affiliate membership in about October 2013. His evidence is that RSL NSW considers Affiliate members to be full members of the RSL, albeit with limited restrictions on their voting rights on constitutional issues and the positions they can hold on sub-branch committees. While I note his understanding of that matter, this application raises a question of construction as to the Club's Articles and RSL NSW's constitution and by-laws and will need to be determined on that basis. Mr Kolomeitz also leads evidence as to the historical relationship between clubs and sub-branches of RSL NSW, and notes that RSL clubs were originally formed by sub-branches and that legislative amendments in the early 1970's required the separation of the sub-branches from the clubs.
Ms Erickson relied on her affidavit dated 20 June 2016, some parts of which were admitted with limiting orders under s 136 of the Evidence Act as submissions. Ms Erickson refers to the roles which she has held with the Club and the Sub-Branch over the years. By that affidavit, Ms Erickson acknowledges that there are "anomalies and inconsistencies" between the constitutions of the Club and the Sub-Branch and says, in evidence admitted as a submission, that there is no specific definition stating one way or the other whether an "Affiliate member" of the Sub-Branch is an RSL member or a Financial Full or Associate Member of the Sub-Branch for the purposes of clause 41A(b)(i) of the Club's constitution and that there is "nothing specifically disqualifying" an Affiliate member of the Sub-Branch from being included in the definition of an RSL member or a Financial Full or Associate Member of the Sub-Branch (Erickson 22.6.16 [8]). Ms Erickson also refers to debate and disagreement between members of the Club and members of the Sub-Branch as to the question whether or not Affiliate members of the Sub-Branch were entitled to be nominated or hold office as directors of the Club, and refers to at least one occasion where a person who appears to have been an Affiliate member of the Sub-Branch was elected as a director of the Club. There is no suggestion that that matter is capable of giving rise to an estoppel, whether as a conventional estoppel or otherwise, particularly where it appears, on Ms Erickson's evidence, that there has been longstanding dispute as to the issue. As I noted above, it is therefore not necessary to determine that matter to resolve this application.
Ms Erickson also indicates, in evidence admitted as a submission, a concern that, if orders are not made to treat Affiliate members as eligible as board directors of the Club: "there may be doubt or uncertainty cast upon the validity and efficacy of previous boards and decisions and actions taken by those boards which have been constituted by Affiliate members of the [Sub-Branch]." It seems to me that any concern as to that issue can readily be addressed, if necessary, by orders under s 1322 of the Corporations Act to validate any act, matter or thing purporting to have been done, or proceedings purporting to have been instituted or taken, under the Corporations Act or in relation to a corporation. Ms Erickson also referred to her wish to see the Club pass out of deed administration, but it appears to be common ground between the parties that that should occur shortly after the next annual general meeting of the Club is held.

Eligibility for election as directors - Affiliate Members

It will be convenient first to refer to the declaratory relief sought by Mr Russell, on which Mr Harris, who appears for Mr Russell, properly placed primary emphasis. By paragraph 2A of the Amended Originating Process, Mr Russell seeks a declaration that, on the true construction of Articles 41A(b)(i) and 17(a) of the Club's Articles of Association ("Articles"), only current Service Members, National Members and Associate Members of the Sub-Branch and Life Members of RSL NSW who are also members of the Club are entitled to be elected as directors of the Club in the category set out in Article 41A(b)(i) of the Club's Articles. The issue raised by that declaration is, in substance, whether Affiliate Members of the Sub-Branch are eligible for election as directors of the Club.
All parties recognised that the drafting of the Club's Articles, RSL NSW's constitution and the by-laws applicable to the Sub-Branch, at least when read together, gave rise to potential inconsistencies and issues of construction. Mr Harris submits that the general principles governing the construction of commercial documents apply to the construction of the Club's constitution, with due regard to be had to the special characteristics of a constitution, including its underlying purpose and object, and extrinsic circumstances known to the parties at the time of its creation, with the objective of giving a businesslike interpretation to the language used: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 156 FCR 1; Oil Basins Ltd v Bass Strait Oil Company [2012] FCA 1122; (2012) 297 ALR 261 at [32]. In Donaldson v Natural Springs Australia Ltd [2015] FCA 498 at [148], Beach J observed that a constitution should be read and construed as a whole; general principles of construction of commercial contracts are applicable to a constitution, and the commerciality of a particular construction may tip the balance in its favour where it is implausible that the parties could be taken to have intended otherwise; a constitution should not be construed narrowly or pedantically; words used should be given their natural and ordinary meaning; a construction of a provision which gives a congruent operation of the various applicable provisions of a constitution should be preferred to another construction which does not; and extrinsic evidence may be adduced as an aid to construction, subject to a qualification that restraint should be exercised in having regard to surrounding circumstances: That approach was also taken in the further decision of Beach J in Aveo Group Ltd v State Street Australia Ltd [2015] FCA 1019 at [59]. I do not understand there to be any contest as to these principles.
I turn first to the provisions which are relevant to the entitlement to appoint directors of the Club, which were a primary focus of the dispute. Article 41 of the Club's Articles provides that, subject to Articles 41A and 41B, the Club's board shall consist of a President who shall be an RSL member, two Vice-Presidents, one of whom shall be an RSL member, and six other board members, no more than three of whom may be Social Members. Article 41A provides that, as and from the conclusion of the annual general meeting of the Club held in 2011, and for the purposes of the election of the board held in 2011, the board shall consist of seven directors comprising a President, a Vic-President and five Ordinary directors. Mr Harris pointed to a potential inconsistency between those two clauses, which is not raised in the Amended Originating Process. It does not seem to me that those clauses are inconsistent, since the words "subject to Article 41A" in Article 41 are sufficient to have the effect that Article 41 operates up to the point of the annual general meeting of the Club and election of a board held in 2011, and Article 41A operates as and from the conclusion of that annual general meeting. Those different provisions therefore simply operate in different time periods. I will give a direction to Mr Russell below that he is justified in acting on that basis.
Article 41A(b), which is in issue, provides that: "Subject to Article 41B: (i) four (4) directors must be RSL members; and (ii) three (3) directors must be Social members."
It is necessary, in order to give effect to that provision, to have regard to the concepts of "RSL members" and "Social members". Article 17 of the Club's Articles provides that: "The requirements for eligibility of persons for election to the following classes of membership shall be: (a) R.S.L. Members Persons who are: (i) Financial Full or Associate Members of the Ryde R.S.L. Sub-branch; (ii) Life members of the R.S.L. (b) Social Members Persons who have made application and who are elected by the Board to Social Membership of the Club."
It will immediately be noted that the reference to "RSL members" and Social members" in Article 41A is inconsistent, in capitalisation and punctuation, with the reference to "R.S.L. Members" and "Social Members" in Article 17. Mr Harris submitted that the reference to "RSL members" and "Social members" in Article 41A referred to the terms defined in Article 17. Mr Kirby, who appears for Ms Erickson, accepted the force of that submission, and recognised that several matters suggested that the inconsistent capitalisation in the reference to "RSL members" in Articles 17 and 41(a) is insignificant. These included the similarly inconsistent capitalisation in the reference to "Social members" in those articles, where Mr Kirby accepts that it was unlikely that the latter term refers to a concept in general usage rather than the defined term in Article 17 (T27). Mr Kirby also recognised that there are other variations involving other punctuation and other capitalisation in the Articles, including a usage of "R.S.L member" and a reference to "Life members" in Article 17(d)(ii). That suggests that inconsistencies of capitalisation and punctuation are not matters of substance, but simply reflect lack of precision in drafting. Mr Kirby identified a contrary argument that different terms should not be given the same definition unless there was an obvious error or unless giving them different meanings would lead to absurdity, repugnance or inconsistency. While I recognise that argument, it seems to me that the different capitalisation and punctuation in "RSL members" in Article 41A and "R.S.L. Members" in Article 17(a) are immaterial, including for the reasons that Mr Kirby noted, and that the references to those two concepts in Article 41A refer to the two parallel concepts as defined in Article 17. To put that proposition another way, an objective construction of the Articles would not sensibly treat "R.S.L Member" and "RSL members" as referring to different things.
Mr Harris also submits, and I accept, that the reference in Article 17(a)(ii) of the Club's constitution to "Life members of the R.S.L." is to Life Members of RSL NSW as provided by, for example, clause 5.2 of RSL NSW's constitution, as distinct from Life members of the Club as defined in Article 17(d) of the Club's constitution. I will make a direction to that effect below.
A third issue arising in respect of the definition of "R.S.L. Members" in Article 17 is that there is no entity known as the "Ryde R.S.L. Sub-branch" referred to in Article 17(a)(i). All parties accepted, and I also accept, that the reference to that sub-branch is to the Ryde District RSL Sub-Branch.
A fourth issue, which causes greater difficulty, is the reference to "Financial Full … Members" of the Sub-Branch in Article 17(a)(i). The term "Financial" is not defined in the Club's Articles, although it is used elsewhere in the Articles (including, for example, in Article 15). It seems to me that term, in Article 17(a)(i), refers to persons who have paid subscriptions, fees, charges or levies due to the Sub-Branch. Although there was reference to amounts due to the Club in the course of submissions, that question cannot arise in respect of Article 17, which deals with eligibility for election to membership, presumably before liability for such amounts arises. Draft orders provided by Mr Russell referred to subscriptions to the Sub-Branch, consistent with that reading of the Article.
The term "Full Member" is in turn defined in the Club's Articles, but by reference to membership of the Club and not by reference to membership of the Sub-Branch, to which cl 17(a)(i) of the Articles is directed. That definition provides that "Full Member" means a person who is an Ordinary member or a Life member of the Club. The term "Ordinary Member" is in turn defined, again with different capitalisation, in terms that: "Ordinary Member" means a member of the Club other than a Life, Honorary or Temporary member of the Club." The term "Full members", again capitalised differently, is used elsewhere in the Club's Articles. For example, Article 14 provides that: "The Full members of the Club entitled to vote at the annual election of the Board of the Club shall at all times comprise a majority of the Full Members of the Club."
The term "Full Member" is not used in RSL NSW's constitution. Clause 3.1 of that constitution provides that a person may become a "Member" by being admitted as a Service Member, a National Member or an Affiliate Member. Clause 3.2 provides that Service Members and National Members have equal status in RSL NSW as set out in the constitution and Affiliate Members have conditions placed on their membership as detailed in the By-Laws. By-Laws 2.56-2.70 of the RSL NSW By-Laws, as applicable to the Sub-Branch, in turn deal with Affiliate Members. By-Law 2.57 provides that Affiliate Members shall carry out and further the RSL NSW's Objects in the same manner as a Service Member. By-Law 2.60 provides for eligibility to be admitted as an Affiliate Member. By-Laws 2.63-2.66 impose certain restrictions in Affiliate Members who, broadly, may not be elected as President or Vice-President of a sub-branch or a District Council, may not together be more than a specified percentage of a sub-branch committee, are not eligible to hold any office on District Council or State Council or to be a delegate to District Council or the Annual State Congress, and may not vote on matters relating to alterations or amendments to the RSL NSW or national constitutions, By-Laws and regulations. The By-Laws applicable to the Sub-Branch also refer, in By-Law 2.2, to an additional category of members of the Sub-Branch, being an "associate" who is a member of another sub-branch. It is plain that the reference to "Associate Members" in Article 17(a) of the Club's Articles is to that concept.
Mr Harris submits that, in effect, the reference to "Full" in Article 17(a)(i) has a qualitative operation by reference to membership of the Sub-Branch, rather than referring to the defined term "Full Member" of the Club, and that Affiliate Members of the Sub-Branch are not "Full" members of the Sub-Branch, since their rights are restricted by the By-Laws to which I have referred above.
Mr Bell, who appeared for RSL NSW, took a somewhat different approach to that of Mr Harris. Mr Bell submitted that Article 17(a) of the Club's Articles was intended to reflect the concept of "Full Member" of the Club as contained in the Club's Articles (T37). Mr Bell accepted, in the course of oral submissions, that if that approach was adopted then a "Full Member" would be an "Ordinary member" of the Club who was a member of the Sub-Branch, but would not include Social Members of the Club because the Sub-Branch does not have that category of membership. That submission had the considerable attraction that it would treat the Club's constitution as using definitional provisions in an orthodox way, but I am ultimately unable to accept it. A first difficulty with that submission is that the concept is used in that article by reference to the Sub-Branch rather than by reference to the Club, and it is unlikely that a definition of "Full Member" of the Club would be applied to determine who is a "Full Member" of a different body, the Sub-Branch. That submission also seems to me to result in a circularity, since the definition of "Full Member" in the Club's Articles would then lead to the definition of "Ordinary member", which would lead to the concept of "Ordinary Membership" in Article 13 of the Club's Articles, which in turn refers to the definition of "R.S.L Members", leading back to Article 17(a) so as to determine who is an R.S.L. member. Mr Bell also submits that Affiliate Members of RSL NSW, and the Sub-Branch, are not "any less a member" but are merely a class of member subject to specified conditions and that, as a matter of construction, the reference to "Financial Full Members" in Article 17(a) of the Club's Articles is to members as defined in cl 3.1 of RSL NSW's Constitution, which would therefore include Affiliate Members.
In written and oral submissions, Mr Kirby advanced three arguments, namely that the reference to "Full" in the term "Full Member" is surplusage, possibly reflecting a confusion with the reference to a "Full Member" of the Club in the Articles; that the reference to "Full Member" was to distinguish between members and Associate Members of the Sub-Branch; and, third, if the word "Full" was used qualitatively, then an Affiliate Member of the Sub-Branch was no less a full member than other members of the sub-branch.
I do not accept Mr Kirby's submission that the reference to "Full" in Article 17(a) of the Club's Articles is surplusage, since it seems to me that effect should be given to all words in Article 17(a), if it is possible to do so, and the reference to "Full" must be intended to have had a meaning. That concept can be given meaning as anticipating the possibility that lesser categories of membership of the Sub-Branch might exist, such as, for example, temporary or probationary membership. I also do not accept Mr Kirby's submission that Article 17(a) refers to "Full Members" of the Sub-Branch in contradiction to "Associate" members of the Sub-Branch, at a time that there was no concept of "Affiliate" members of the Sub-Branch. It does not seem to me that the Article was intending to distinguish "Full" and "Associate" members of the Sub-Branch, where there was no reason to do so where Article 17(a)(i) referred to both categories of membership, and could have simply referred to "members" of the Sub-Branch if that had been the intention.
Mr Kirby also submits that a construction should not be adopted that, if there are several categories of membership of the Sub-Branch, only the "top" category is a "full" member and other categories are something less than "full" members. That submission seems to assume a hierarchy of membership categories, and it is not apparent to me that either RSL NSW's Constitution or the By-Laws create such a hierarchy. Mr Kirby also submits that an Affiliate Member is no less than a "Member" of RSL NSW than a person falling within other categories of membership, and that result is consistent with both cl 3.1 of RSL NSW's Constitution and with the fact that an Affiliate Member is equally obliged to carry out and further the Objects of the RSL under By-Law 2.57 and to pay the same annual subscription as a Service Member under By-Law 2.67.
Mr Cox, in making submissions for the Sub-Branch, in turn took issue in submissions with various aspects of Ms Erickson's evidence. I do not consider it necessary to address those submissions, since it does not seem to me that any practice of the Sub-Branch, whether consistent or inconsistent with the Club's constitution, would advance the issues of construction which I am required to determine. Mr Cox also emphasises the restrictions on rights of Affiliate Members in respect of the Sub-Branch, to which Mr Harris also referred in submissions.
On balance, it seems to me that the concept of "Full Member" of the Sub-Branch is intended to have a qualitative element, and the capitalisation of the terms may reflect no more than the indifference to whether terms are capitalised or not that is demonstrated throughout the Club's Articles. While that approach is consistent with the approach for which Mr Harris contends, I am not persuaded that Affiliate Members of the Sub-Branch are not "full" members of the Sub-Branch for that purpose. Clause 3.1 of RSL NSW's Constitution provides, as noted above, that the "Members" of RSL NSW include "Affiliate Members". While cl 3.2 of RSL NSW's Constitution refers to the imposition of conditions on Affiliate Members' membership, and Mr Harris has drawn attention to the limitations contained in clauses 2.63-2.66 of the By-Laws applicable to the Sub-Branch, to which I have referred above, it does not seem to me that those limitations have the result that Affiliate membership of the Sub-Branch is a lesser or incomplete category of membership, as distinct from imposing specific restrictions on the exercise of certain powers by Affiliate Members in respect of the Sub-Branch. I will make declarations below on that basis, amended from the relief sought by Mr Russell, and consistent with the relief sought by Ms Erickson.
I note, for completeness, that Mr Harris also drew attention to s 30(1)(b) of the Registered Clubs Act 1976 (NSW) which provides that a person shall not hold office as a member of the governing body of a club unless the person is a full member of the club. Section 30(1)(b1) provides an exception as prescribed by regulations, which are not presently in effect. However, it is helpful to note that the term "full member" is defined in that section as a person who is an "ordinary member" or a "life member" of a club. The term "ordinary member" of a club means a person who is elected to membership of the club in accordance with a rule referred to in s 30(1)(g) of the Registered Clubs Act, which provides for election of persons to membership, other than in specified categories, at meetings of the full members of the club or its governing body or an election committee. The parties did not rely on that definition, although it is consistent with the view which I have taken above on other grounds, so far as it treats persons as being "full members" where they are admitted to membership in the specified manner, even if their rights in respect of particular matters may be restricted.
Mr Russell alternatively sought an order, under s 447D of the Corporations Act, that he would be justified in acting on the basis that the four directors referred to in Article 41A(b)(i) of the Articles must be either Service Members, National Members or Associate Members of the Sub-Branch of the RSL or Life Members of the RSL, or an order under s 447A of the Corporations Act that Part 5.3A of the Act is to operate as though Article 41A provided to that effect. Mr Harris accepted, in written submissions, that it was ultimately not necessary to pursue the relief sought under s 447A and s 447D of the Corporations Act, having regard to the issue as to construction which had been addressed by the parties. Assuming, without deciding, that the Court has jurisdiction under s 447A of the Corporations Act to modify the operation of a company's constitution, there would be strong discretionary reasons not to do so, where such a modification could only apply during the course of the administration or deed administration, and the constitution would then return to operation in accordance with its terms after the administration or deed administration ended. In any event, there seems to be no basis to make such a direction where I have not accepted that construction of Article 41A(b)(i), and no reason has been shown why the Court should modify the operation of the Articles on their proper construction, even if it were open to it to do so.
By Amended Notice of Motion filed at the hearing on 29 June 2016, Ms Erickson, who is an Affiliate Member of the Sub-Branch, sought a declaration or order that Mr Russell would be justified in acting on the basis that the four directors referred to in Article 41A(b)(i) of the Articles and for the purposes of Article 17(a)(i) of the Articles must be a Financial Full or Associate Member of the Sub-Branch or a Life Member of the RSL. The formulation of that declaration is clumsy although it raises, as a matter of substance, the question whether a different construction of the Articles from those for which Mr Russell contended should be adopted, which I have addressed above. Ms Erickson also sought a declaration or order that Mr Russell would be justified in acting on the basis that, for the purposes of those provisions, a member of the Sub-Branch who was described as an "Affiliate" is a "Financial Full Member of the Sub-Branch (ie an 'RSL Member') eligible to stand and (if elected) fulfil the functions and duties as a director of the Club. I have addressed that issue above.

Eligibility for election as directors - Social Members

By paragraph 2B of the Amended Originating Process, Mr Russell sought a declaration that, on the true construction of Articles 41A(b)(i) and 17(a) of the Articles, only Social Members of the Club are entitled to be elected as directors of the Club in the category set out in Article 41A(b)(ii) of the Articles. Mr Harris submits, and I accept, that the reference to "Social members" in Article 41A(b)(ii) is to "Social Members" as defined in Article 17(b). By her Notice of Motion dated 22 June 2016, Ms Erickson sought a declaration or order to the same effect. I will make a declaration to that effect below.
Mr Russell alternatively sought an order, under s 447D of the Corporations Act, that he would be justified in acting on the basis that the three directors referred to in Article 41A(b)(ii) must be Social Members of the Club as defined in Article 17(b), or an order under s 447A of the Corporations Act that Part 5.3A of the Act is to operate as though Article 41A of the Club's constitution provided to that effect. Mr Harris did not press such orders where declaratory relief was made, and there is no need to make such orders where a declaration should be made to that effect.

Entitlement to vote at annual general meetings and general meetings

By paragraph 4A of the Amended Originating Process, Mr Russell seeks a declaration that the only persons entitled, under Article 15 of the Club's Articles, to vote at annual general meetings or general meetings of members of the Club are members of the Sub-Branch who are members of the Club; Social Members of the Club, as defined in Article 17(b); and Life Members of the Club as defined in Article 17(d). Mr Russell also points to the relevance of payment of any monies owing by a member to the Club under Articles 31-34 of the Club's constitution. By paragraph 4 of her Notice of Motion filed 22 June 2016, Ms Erickson seeks a declaration or order to similar effect, with the qualification that a "member" of the Sub-Branch includes an Affiliate Member of the Sub-Branch. An issue exists between the parties as to that question.
Article 15 of the Club's Articles relevantly provides that: "Subject to Article 8(a) and 17(d), Financial Ordinary members and Life Members shall be the only members of the Club entitled to attend and to vote at Annual General Meetings or General Meetings of members." As stated above, Article 1(a) of the Club's Articles of Association defines the term "Ordinary Member", again with different capitalisation, as a member of the Club other than a Life, Honorary or Temporary member of the Club. Article 13 provides that, unless and until otherwise determined by the board, "Ordinary Membership" of the Club shall consist of "R.S.L. Members", "Social Members" and "Junior Sports Members". It seems plain enough that the term "Ordinary members" refers to "R.S.L. Members" as defined in Article 17(a), Social Members as defined in Article 17(b) and Junior Sports Members, subject to a restriction on voting contained in Article 17(c)(i) on persons within that category, and the reference to "Life Members" in that clause is to those persons as defined in Article 17(d) as Life Members of the Club.
The reference to "Financial" here, by contrast with Article 17, plainly refers to financial obligations owed to the Club in respect of membership such as subscriptions, fees, charges or levies referred to in Articles 31-34. Mr Harris submits that the persons entitled to vote at meetings under Article 15 are members of the Sub-Branch, other than Affiliate Members (reflecting the issue addressed above); Life Members of the State branch of the RSL (who fall within the definition of "R.S.L. Members" in Article 17(a) and within the definition of "Ordinary Membership" in Article 13); and the Club's Social Members (who also fall within the definition of "Ordinary Membership" in Article 13) and its Life Members (who are specifically included by Article 17). Mr Harris in turn submits that, because the concept of "Financial Ordinary members" in Article 15 depends upon the concept of "Ordinary Membership" in Article 13, that is in turn limited to "R.S.L Members" as defined in Article 17(a) and excludes Affiliate Members of the Sub-Branch. I do not accept that submission, since I have held above that the concept of "R.S.L Members" in Article 17(a) is properly understood to include Affiliate Members. There is also a restriction as to the persons who may vote on alterations or amendments to the Club's Memorandum and Articles, to "R.S.L. Members" (as defined in Article 17) which is recognised in the further declaration sought below.
Mr Russell also sought an order, under s 447D of the Corporations Act, that he would be justified in acting on the basis contemplated by the declaration sought in paragraph 4A. Alternatively, by paragraph 4 of the Amended Originating Process, Mr Russell sought an order under s 447A of the Corporations Act that Part 5.3 of the Corporations Act is to operate in that manner. These orders were not pressed where declaratory relief was given.

Entitlement to vote on resolutions to alter or amend the Club's memorandum of association or Articles

By paragraph 6A of the Amended Originating Process, Mr Russell sought a declaration that, on the true construction of Articles 13, 15 and 17-24 of the Club's Constitution, the only persons entitled under Articles 15 and 17(d)(ii) to vote on any resolution to alter or amend the Club's memorandum of association or Articles are Life Members of the Club; current Service Members, National Members and Associate Members of the Sub-Branch; and Life Members of RSL NSW, who are members of the Club and have paid all monies owing by them to the Club under Articles 31-34. By paragraph 5 of her Notice of Motion filed 22 June 2016, Ms Erickson sought a declaration or order in accordance with paragraph 6A of the Amended Originating Process, with the qualification that a member of the Sub-Branch described as an "Affiliate" member is to be treated as a member within paragraph 6A(b) of the Amended Originating Process. This declaration follows from the analysis of Article 15 set out in paragraph 36 above, and the concept of "Ordinary member" and "R.S.L. member" in that article each include Affiliate Members of the Sub-Branch for the reasons noted above.
Alternatively, Mr Russell sought an order, under s 447D of the Corporations Act, that he would be justified in acting in the manner contemplated by the declaration sought in paragraph 6. Alternatively, Mr Russell sought an order under s 447A of the Corporations Act that Part 5.3A of the Corporations Act is to operate in that manner. These orders were not pressed where declaratory relief is given.

Clarification of membership

Mr Russell also sought an order, under s 175 of the Corporations Act, that the memberships of the Third-Sixth and Eighth-Thirty-First Defendants, set out in column A of the table in Schedule 2, be corrected so as to conform to column B of that schedule. Section 175 of the Corporations Act provides, relevantly, that a company or a person aggrieved may apply to the court to have a register kept by a company corrected. That section operates in parallel to, and arguably assumes the existence of, the court's equitable jurisdiction to rectify a register: Grant v John Grant & Sons Pty Ltd [1950] HCA 54; (1950) 82 CLR 1 at 51; Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1996) 20 ACSR 553 at 558-559.
Mr Russell contends that certain persons who are presently described as "RSL Members" should be described as Social Members, one person who is described as an RSL Associate Member should be recorded as a Social Member, two persons who are described as "Social Members" should be recorded as RSL Members and one person who is described as a 25 Years Social Member should be recorded as a Social Member. The premise of that order, in respect of several persons, was that Mr Russell was correct in his view of the treatment of Affiliate Members of the Club, and I have not accepted that premise above.
Mr Russell relied, in this respect, on the oral evidence of his employee, Ms Furlong, relating to the investigations undertaken by Mr Russell and his firm to identify the discrepancies which are the subject of the rectification application. Ms Furlong's evidence (T20) was that Ms McLellan, who is currently recorded as a Social Member, does not appear on the register of members of the Sub-Branch. However, there appears to be some uncertainty as to the factual correctness or at least the currency of Ms Furlong's evidence in that respect, and the contrary was put by Mr Kirby, on instruction, from the bar table. Ms Furlong's evidence was that some other persons (including Ms Snedden) contained in the schedule are not currently members of the Sub-Branch in any capacity, and the rectification of the register to record those persons as social members would be justified. It seems to me preferable that the identity of those persons be confirmed before orders are made based on Ms Furlong's recollection, in oral evidence, of the inquiries she had made. It does not seem to me that rectification should be ordered in respect of Mr Fletcher and Mr Allred, who may be entitled to be registered as RSL Members of the Club, where they do not appear to have sought a change in their capacity and there is no obvious reason why a person who could be registered as an RSL Member of the Club could not choose to be a Social Member of the Club if he or she wished to do so. An order for rectification should be made in respect of Mr Outridge, because the category of "25 Years Social", which may be an honorific description, is not recognised in the Club's Articles.
I also note, for completeness, that one of the defendants, Mr Spartalis, has written to Mr Russell's firm accepting that he is only a social member of the Club and that he is not an associate or affiliate member and would not have been able to seek election to the board of directors. There was some evidence, in the course of the hearing, that Mr Spartalis was in fact an Affiliate Member of the Sub-Branch, and the view which he takes in that respect appears to be inconsistent with the view that I have taken above.
Ms Erickson sought a declaration or order that her membership and the membership of several other persons be corrected from the category of "Social" or "25 Years Social" Member to be recorded as "RSL Member". One of those persons, Mr Kennedy, has not been joined as defendant to the proceedings and no such declaration or order can be made in respect of him. I am not satisfied that I should make such a declaration in respect of persons other than Ms Erickson where the factual position in respect of their memberships has not been established by the evidence. Such a declaration should be made in respect of Ms Erickson given the findings that I have reached above. By an Amended Notice of Motion filed, by leave, in the course of the hearing on 29 June 2016, Ms Erickson also sought an order under s 175 of the Corporations Act that the Club's membership register be corrected to record her as an RSL Member. I am satisfied that such an order should be made given the views that I have reached above.

Orders and costs

Subject to hearing from the parties, I propose to make the following orders, including declarations as to matters which were in issue between the interested parties and directions under s 447D of the Corporations Act as to several matters that were addressed in submissions but where all interested parties were not before the Court: The Court declares that:
On the proper construction of Articles 41 and 41A of the Constitution of the Ryde Ex-Services Memorial & Community Club Limited (the Club), the Board of Directors of the Club shall consist of 7 directors comprising a President, a Vice President and 5 Ordinary directors.
On the proper construction of Article 17(a)(i) of the Articles of Association ("Articles") of the Club, the persons who are eligible for election to membership of the Club as "R.S.L. Members" under that provision are limited to (i) "Service Members", "National Members", "Affiliate Members" and "Associate Members" of the Ryde District RSL Sub-Branch (the Sub-Branch) (ii) who have paid all subscriptions, fees and levies due to the Sub-Branch.
On the proper construction of Article 41A(b)(i) of the Articles, the persons who are eligible for election as directors of the Club as "RSL members" under that provision are limited to those persons who are eligible for election to membership of the Club as "R.S.L. Members" as determined in declaration 2 above.
On the proper construction of Article 15 of the Articles, the persons who are eligible to vote on any Resolution relating to alterations or amendments to the Memorandum of Association or Articles of the Club as "R.S.L. Members" under that provision are limited to those persons who are eligible for election to membership of the Club as "R.S.L. Members" as determined in declaration 2 above.
On the proper construction of Article 41A(b)(ii) of the Constitution of the Club, the persons who are eligible for election as directors of the Club as "Social members" under that provision are those persons defined as "Social Members" in Article 17(b) of the Constitution. The Court directs, under s 447D of the Corporations Act 2001 (Cth), that the Plaintiff as Deed Administrator of the Club would be justified in proceeding on the basis that:
On the proper construction of Article 17(a)(ii) of the Articles, the persons who are eligible for election as directors of the Club as "RSL members" under that provision are limited to those persons who are "Life Members" of the Second Defendant or The Returned & Services League of Australia Limited.
On the proper construction of Articles 15 and 17(c)(i) of the Constitution of the Club, and notwithstanding Article 13(c), "Junior Sports Members" are not entitled to vote at Annual General Meetings or General Meetings of members of the Club.
On the proper construction of Article 15 of the Constitution of the Club, "Life Members" entitled to vote at Annual General Meetings or General Meetings of members of the Club are those persons who are "Life Members" of the Club pursuant to Article 17(d). The Court orders that:
Under s 175 of the Corporations Act (Cth) 2001, the register of members of the Club be corrected so that the Third Defendant be recorded as an "R.S.L. Member" and Mr John Victor Outridge be recorded as a "Social" member.
The Plaintiff's and the Third Defendant's costs be costs in the deed administration.

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: 04 July 2016

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