Determination
337There was no dispute, in this case, that the claims made by Mr Bull were justiciable. Presumably, this was because the parties recognised that, in Dixon v Australian Society of Accountants (1989) 95 FLR 231; 87 ACTR 1, it was held that the principles espoused by the High Court in Cameron v Hogan [1934] HCA 24; (1934) 51 CLR 358, at 370-371, do not apply to persons who become members of a company limited by guarantee. A similar view was expressed in Zusman v Royal Western Australian Bowling Association (Inc) [1999] WASC 86 at [7] - [9].
338The task involved in deciding this case, at least so far as it relates to the Constitution and the Regulations, is not just one of construction of each, in the sense of ascertaining the meaning of the relevant Article or Regulation, but also of deciding how each operates. It is the Constitution of The AQHA that confers power on the Board of Directors to make Rules and Regulations that are not inconsistent with the Constitution and which are binding on the members. It also permits the Board of Directors to make Rules and Regulations amending the existing Rules and Regulations.
339As stated, the objects of The AQHA stated in the Constitution include the promotion and encouragement of the breeding of quarter horses. Yet, nowhere expressly identified in the Constitution are what methods of "breeding" are to be promoted and encouraged. Furthermore, nowhere in the aims of The AQHA, or in the "Mission Statement" referred to in the Black Book, are the controls on the methods of breeding, instituted to preserve the pedigree, identified.
340I accept that, prima facie, it is arguable that cloning is replication of genes and not breeding. In this regard, reference has earlier been made to the definition in the Constitution and the Black Book of "Breeder". That definition refers to the owner or registered lessee of a dam at the time of "service", which suggests the foal that is bred is the product of conception.
341I have also read the suggestion that cloning does not improve the breed; it just makes a copy of the same horses and that, therefore, with clones, the breed does not move forward, it stays the same.
342However, the Black Book, before the disputed amendment to the cloning rule (such that "No cloned horse will be eligible for registration"), did identify what might be described as the methods of breeding. They are, it would appear, "live cover" (Regulation 19), "artificial breeding" (Regulation 21) and "Cloning" (Regulation 22). It follows that the court should construe the Constitution and the Black Book in a way that treats the methods of "breeding" that are to be promoted and encouraged to include the three methods to which the Black Book specifically referred.
343It is necessary, then, to consider what requirements there were for the registration, by The AQHA, of a quarter horse that was bred using one of the three methods. Relevantly, for this purpose, in this case, it is necessary to consider the requirements relating to the registration of a cloned horse. Because "Smart Little Lena-D" was imported from the United States, it is necessary, also, to consider the requirements relating to the registration of an imported quarter horse.
344The Black Book refers to quarter horses that may be imported to Australia without expressly identifying the method by which those imported horses had been bred. Again, a logical construction, prima facie, would include the methods of "breeding" to which reference was made in the Black Book.
345Even though there is a dispute as to when relevant amendments are said to have been made to the Regulations (whether before, or after, 3 April 2011), and a dispute about the validity of each of those purported amendments, it is appropriate, in my view, to determine, at the outset, whether "Smart Little Lena-D" could have been registered before any of the disputed amendments were made, that is, by reference to the Black Book as published in August 2010. Accordingly, I shall first consider the applicable registration requirements in relation to the Black Book before any amendment the subject of dispute in this case.
346Regulation 5.2 in the Black Book, as at August 2010, defined "Imported horses" as horses foaled outside the territorial limits of Australia. There is no dispute that "Smart Little Lena-D" falls within this definition.
347Regulation 5.2, however, did not specify different categories of imported horses, for example, being those registered elsewhere and those not so registered.
348As a result, one then considers Regulation 10. Regulation 10 provided that "The Official Stud Book of the Australian Quarter Horse Association shall consist of the following" and, thereafter, did identify certain categories of horses. Regulation 10.3 pertained to imported horses and comprised "[a]ny imported horse registered with an international Stud Book recognised by the Association". Even then, to be registered, the proviso required "all registration requirements outlined in the Association's rules" to be satisfied "which include Genetic testings as described in Rule 15.10 and 16."
349Thus, it seems to me that Regulation 10, prior to any amendment, made clear that the Official Stud Book was to include only imported horses that were "registered with an international Stud Book recognised by the Association". Under this Regulation, there was no separate category of imported horse, not registered with an international Stud Book recognised by the Association, that The AQHA Stud Book could "consist of".
350"Smart Little Lena-D" was an imported horse but, at the time of the application for registration, was not an imported horse that is "registered with an international Stud Book recognised by" The AQHA. Accordingly, it follows that it could not then be registered in the Stud Book.
351To register "Smart Little Lena-D" as an imported horse would have resulted in the Stud Book of The AQHA "consisting of" an imported horse that was not registered with an international Stud Book recognised by The AQHA.
352It is to be noted, in relation to registration with an international Stud Book recognised by The AQHA being a requirement for imported horses, that Ms Ross was not challenged on her evidence that providing, to The AQHA, the Certificate of Registration provided to the owner by the Association of the country of origin, was a necessary step "because, if The AQHA is to protect the integrity of the quarter horse breed in Australia, it has to satisfy itself that imported horses are actually quarter horses of the breed and quality that the Australian industry will accept as contributing to the genetic base of our quarter horses".
353Nor was Ms Ross challenged on her evidence that "Without the Certificate, there is no established process whereby we could take the necessary steps to assign the pedigree and thus to place in the Stud Book the information that is invariably there in relation to all registered horses".
354As stated previously, one of the objects identified in the "Mission Statement" of the Black Book is "to record and preserve the pedigrees of the Australian Quarter Horse while maintaining the integrity of the breed" and one of the objects identified in the Constitution is the maintenance and publication of the Stud Book. In my view, the evidence given by Ms Ross regarding the necessity of providing a Certificate of Registration with a recognised international affiliate speaks to these objects.
355Then, it is necessary to refer to Regulation 18 in the Black Book as at August 2010, which sets out the requirements for registration of an imported horse. That Regulation, too, required the application to be accompanied by the "original Registration Certificate issued by the international Stud Book".
356The prelude to Regulation 18.1, which preceded, and was applicable to, all of the subsequent subsections, expressly applied only to "[a]ny imported horse registered in an international Stud Book recognised by the Association".
357I do not accept the submission made on behalf of Mr Bull that registration of an imported horse that did not have a Registration Certificate from an international Stud Book recognised by The AQHA could be achieved, pursuant to Regulation 18.1(d), simply by the payment of a fee. The subsection relied on cannot be read in isolation but must be read with the prelude to the Regulation in which it is found and in the context of the Regulations as a whole.
358Further, the submission, if accepted, would have the result of defeating the purpose of The AQHA in ensuring that the owner of an imported horse was able to establish the pedigree of the horse in order for it to be registered.
359Finally, I am of the view that, properly construed, and in reference to the terms of Annex A, which is identified in Regulation 18.1(d), the penalty fee applies only in respect of remedying non-compliance with the time limits imposed on making an application to register an imported horse with a Registration Certificate. It did not operate to enable an imported horse, without a Registration Certificate issued by an international Stud Book, to be registered.
360Thus, for the same reasons, reliance upon Regulation 18 would not provide an alternative basis for the registration of "Smart Little Lena-D".
361Similarly, a reading of Regulation 11, which referred to the Appendix Register of The AQHA and identified those quarter horses "eligible for registration" in the Appendix Register, does not assist Mr Bull. Regulation 11.2, which related to imported horses eligible for registration in the Appendix Register, was cast in the same terms as Regulation 10.3 and applied only to an imported horse "registered with an international Stud Book recognised by the Association". Even then, to be registered, the proviso required "all registration requirements outlined in the Association's rules, which includes Genetic testings" to be satisfied.
362Thus, Regulation 11, also, did not permit the Appendix Register to include an imported horse that was not "registered with an international Stud Book recognised by the Association".
363Regulation 15, in which conditions of entry into the Stud Book or Appendix Register are stated, does not assist Mr Bull either. A quarter horse must, first, be eligible for registration in the Stud Book or the Appendix Register in accordance with Regulation 10 or Regulation 11, as applicable.
364In my view, upon a proper construction of the Regulations, without any amendment, any imported horse that was not registered with an international Stud Book recognised by the Association could not be included in the Stud Book, or in the Appendix Register, of The AQHA. It follows that "Smart Little Lena-D" was not a quarter horse entitled to be registered in either the Stud Book or the Appendix Register even before any amendments to the Regulations, the subject of dispute in the proceedings.
365But for Regulation 22 in the Black Book as at August 2010, one might have concluded that a "cloned" quarter horse, also, could not be registered in the Official Stud Book or the Appendix Register because it was not identified as a category of horse that each "shall consist of" pursuant to Regulations 10 and 11.
366However, by virtue of Regulation 22, as it was before any amendment, "horses produced by any cloning process are eligible for registration" in the Stud Book or the Appendix Register of The AQHA. The Regulation did not state that a cloned horse would, without more, be registered. Even then, that it was a cloned horse was to be stated in the application for registration and "all registration requirements" also were required to be met.
367What "registration requirements" had to be met, for the purposes of Regulation 22, were not identified in Regulation 22 itself. However, considering the Regulations without amendment, and noting that the Regulations are to be read together, as a whole, the relevant registration requirements to be met under Regulation 22 depended upon, and were referable to, the category into which the cloned horse fell under Regulation 10 or Regulation 11.
368I do not accept Mr Bull's submission that Regulation 22 "constituted a separate and distinct category" for cloned horses to be registered without reference to the other Rules and Regulations. That would require the Regulation to be read in isolation which, in my view, it should not be. It would also require the words "and that it meets all registration requirements" in the Regulation to be ignored.
369In my view, the applicant for registration of a cloned horse would have had to satisfy all (relevant) registration requirements. So, if a cloned horse were a horse born in Australia, it would be able to be registered only upon satisfying "Genetic testings as described in Rule 15.10 and 16": Regulation 10.2.
370Since "Smart Little Lena- D" is a cloned imported horse, to be registered in the Stud Book, or the Appendix Register, of The AQHA, before the disputed amendments, it would have to be "registered with an international Stud Book recognised by the Association": Regulation 10.3. There would also have to be "[c]ompliance with the Association's Rules and Regulations in relation to genetic testing": Regulation 18.1(b). Further, before a permanent registration number could be issued, the pedigree of the cloned imported horse would have to be verified by scientific testing (Regulation 18.2(a)), all relevant fees would have to be paid (Regulation 18.2(c)) and DNA markers for the horse would have to accompany the application (Regulation 18.2(d)).
371There was no dispute that "Smart Little Lena-D" was imported. In fact, the application made to The AQHA described "Smart Little Lena-D" as an imported cloned horse. One would not expect an imported cloned horse to be able to be registered more easily than any other imported horse. The statement, in Regulation 22, that "all registration requirements" were to be met demonstrates that this was not intended.
372Yet, the contrary result would follow if Mr Bull's submission that he was entitled to have "Smart Little Lena-D" registered under Regulation 22 alone and without all registration requirements being met was accepted.
373Regulation 22, in its unamended form, should not be construed in a manner that would permit the registration of a cloned imported horse to be achieved without meeting the requirements necessary to enable the registration of any other imported horse.
374Mr Bull's submissions require the acceptance of the proposition that, at the time of his application, because "Smart Little Lena-D" was a cloned horse, it did not have to meet the other requirements for imported horses prescribed by Regulation 10 and Regulation 18. Regulation 22 should not be construed as a stand-alone pathway to registration for a cloned imported horse without reference to any of the other Rules and Regulations of The AQHA.
375In addition, the aims of The AQHA in this regard must not be forgotten. I have earlier referred to the objects of The AQHA in Article 2 of the Constitution and to The AQHA "Mission Statement" in the Black Book. I also refer to Articles 14.5(d) and (e) of the Constitution which, relevantly, vested power in the Board to set the conditions for registration of quarter horses with The AQHA.
376One of the conditions that The AQHA considered necessary to include, in relation to imported horses, however bred, was a mandatory requirement that the horse be registered in the Stud Book of an international affiliate of The AQHA. This seems to be, from the evidence, premised on the value of consistency in the standards by which the pedigree of a quarter horse could be ascertained.
377That this objective was, and remains, important to The AQHA is also supported by reference to the Regulations concerning, for example, the importation of semen to Australia. Regulation 21.1 provided that a donor stallion from which semen was extracted, "prior to the first collection", and, self-evidently, prior to the semen being imported to Australia, "must be registered with the Association". A "copy of the stallion's International Registration Certificate" was to be provided to The AQHA. There must also be compliance with the Official Rule Books of The AQHA and of The AmQHA.
378The need to forward a "copy of the stallion's International Registration Certificate", in my view, confirms that the Regulations of The AQHA were framed in a way considered necessary to ensure that the objectives of the Association, including protecting and maintaining the integrity of the quarter horse breed, were met.
379I turn, now, to two alternative grounds upon which Mr Bull contends "Smart Little Lena-D" was eligible for registration with The AQHA prior to any amendment of the 2010 Regulations.
380Firstly, whilst I accept that there is no evidence that "Smart Little Lena-D" possessed any disqualifying characteristics of the kind contemplated by Regulation 24, that, in itself, does not automatically mean that a horse will be eligible for registration by The AQHA. Regulation 24 confers a discretionary power to refuse to register a horse on the basis of disqualifying attributes. That power does not, in any relevant respect, limit the application of the other Regulations of The AQHA in relation to registration requirements, including, in this case, the need for "Smart Little Lena-D" to comply with Regulation 10 and Regulation 18.
381Secondly, whilst it may have been open to The AQHA to register "Smart Little Lena-D" under Regulation 35 (the Hardship Rule), there does not appear to be any evidence that Mr Bull actually made an application to The AQHA to apply that Regulation. Nor is there any evidence that he paid any hardship fee as contemplated by Regulation 35. It follows that I need not deal with the submission in more detail.
382It follows from the above that, even without amendments to any of the Regulations, at the time Mr Bull lodged the application for registration of "Smart Little Lena-D", The AQHA was entitled to refuse registration under the Regulations because "Smart Little Lena-D" was not registered in the Stud Book of its country of origin, the United States or in any other international Stud Book recognized by the AQHA. Whilst, in the unamended form, the Black Book permitted the registration of a cloned horse, as an imported horse, "Smart Little Lena-D" was still required to be "registered with an international Stud Book recognised by the Association".
383In this case, any sympathy for Mr Bull cannot obscure the fact that The AQHA was required, by its Mission Statement, to promote the best interests of the quarter horse breed and that it was empowered to determine which horses should be entitled to be registered in the Stud Book and Appendix Register kept by it. It was upon this basis that The AQHA chose to incorporate and upon which Mr Bull chose to become a member.
384In the circumstances, Mr Bull has not established that The AQHA was required to register "Smart Little Lena-D" under the 2010 Regulations before the purported amendments that are said to be null, void and invalid.
385The submissions of Mr Bull, in my view, elide his disappointed expectation with the assertions he makes regarding the alleged breaches by The AQHA.
386As the court finds "on the rules as they were, without any amendments that the horse could not be registered", the relief sought by Mr Bull in the further amended Summons cannot be granted.
387It is not, then, strictly necessary to deal with the other matters in the further amended Summons. However, because so much time was spent on the topic of the amendments, I shall set out, in a summary way, the conclusions to which I have come.
388In this case, the first question relates to the validity of the amendments made to Regulation 22 (the cloned horse rule) whether by the meeting of 18 - 19 December 2009 (the First Resolution) or by the meeting of 3 April 2010 (the Second Resolution and the Third Resolution).
389I have set out the Minutes of the meetings of both the Stud Book Committee and the Board and expressed the view that the Defendants have not satisfied me that proper notice of the intention to amend Regulation 22 was given in accordance with Article 14.5.2 of The AQHA Constitution. In particular, I am not satisfied that a notice of intention to move the resolution, or one substantially similar, was lodged with the Secretary at least 21 days before the day on which the meeting was convened, and that such notice was included by the Secretary in the notice convening the meeting.
390I am similarly not satisfied that a notice of intention to move the resolution, or one substantially similar, was lodged with the Secretary at least 21 days before the day on which the meeting was convened, and that such notice was included by the Secretary in the notice convening the meeting in respect of the meeting held on 3 April 2011. However, I note Mr Bellden's evidence that he considered that the Board, in April 2011, had sufficient notice of the intention to put a motion to change Regulation 22 even though there was no written notice of that proposal.
391The lack of satisfaction about these matters does not, however, mean that the resolution, or resolutions, passed at each meeting is invalid if the court is satisfied that each resolution should be validated pursuant to s 1322(4)(a) of the Corporations Act.
392In this regard, I consider that the court is entitled to have regard to the fact that the subject matter of the resolution had been on the agenda of The AQHA since August 2009 and had been discussed on a number of different occasions at both Stud Book Sub-Committee meetings and at the meetings of the Board. Also, each of the resolutions could readily have been and, bearing in mind what occurred, would have been, passed, but for the lack of notice. None of the directors has asserted that he, or she, would have taken a different course had the requisite notice been given.
393Also, by defending the proceedings in the manner that the Board has, the court is entitled to assume that it has not been suggested, by any member of the Board, that the result would have been different had the requisite notice been given. Nor was it suggested to any director who was cross-examined, that the resolution would not have been passed had the requisite notice been given.
394It was not suggested by Mr Bull that any person involved in having failed to give the notice required by Article 14.5.2 had not acted honestly. There is simply no evidence that would support a finding had that been put. That would be sufficient, in itself, to warrant an order for validation provided that the requirement in s 1322(6)(c) was established, namely that no substantial injustice is caused to any person.
395The detriment, or injustice, to Mr Bull, if an order were made under s 1322(4)(a), does not rationally affect the registration of "Smart Little Lena-D" since registration was not possible in any event for the reasons previously given. It cannot, in those circumstances, be said to be a substantial injustice of the type contemplated by s 1322(6)(c) to have ordered the validation of the Regulations that were amended without notice.
396I am of the view, in relation to the validity of the amendments made to Regulation 22, the passing of the Second Resolution and the Third Resolution at the April 2011 meeting superseded the First Resolution made at the December 2010 meeting. This may explain why the relief claimed in the Cross-Summons was limited in the way that it was. In relation to each of the Second Resolution and the Third Resolution, I am satisfied that there was, in fact, a procedural irregularity regarding notice but that each resolution is not invalid by reason of the absence of proper notice, pursuant to s 1322 of the Corporations Act.
397Therefore, an order, pursuant to s 1322(4) of the Corporations Act, that each of the Second Resolution and the Third Resolution made by the first Defendant at the meeting on 3 April 2010 was not an invalid resolution of the first Defendant by reason of any contravention of the Constitution of The AQHA should be included in Short Minutes of Order to be prepared by the parties.
398In relation to the amendments to Regulation 18 (the imported horse rule), I am of the view that any resolution, said to have been passed at the December 2010 meeting (the Fourth Resolution), would have been superseded by a resolution, in identical terms, said to be passed at the April 2011 meeting (the Fifth Resolution).
399I am also of the view that the notice requirements in The AQHA Constitution were not complied with in relation to any resolution pertaining to Regulation 18 (whether in December 2010 or in April 2011). In addition, I accept Mr Bull's submission that the wording of the amended Regulation 18, as published on The AQHA website, does not match the text of any wording in the Minutes of the April 2011 Meeting (or the Minutes of the December 2010 Meeting).
400I am of the view that the absence of notice and the issue regarding wording is each a procedural irregularity pursuant to s 1322 of the Corporations Act. However, in circumstances where no relief is sought by the Defendants, in the Cross-Summons, in relation to either the Fourth Resolution of the Fifth Resolution (or any amendment to Regulation 18), I do not propose to make any order in relation to either the Fourth Resolution of the Fifth Resolution.
401In relation to the Sixth Resolution, I have earlier referred to the amendment carried by the motion at the December 2010 meeting which amended Rule 10.5. I am of the view that the Sixth Resolution is not relevant to the application to register "Smart Little Lena-D", "Smart Little Lena-D" not being a horse "not born in Australia and residing outside of Australia". In any event, in circumstances where no relief is sought by the Defendants in the Cross-Summons in relation to the Sixth Resolution, I do not propose to make any order in relation to the Sixth Resolution.
402I turn, now, to the claims based on oppression under s 232 and s 233 of the Corporations Act. Again, my conclusions will be brief. I note that Mr Bull's claims regarding oppressive conduct did not extend to an allegation of oppression on the part of The AQHA were the court to find that The AQHA properly applied the Regulations contained in the August 2010 Black Book and, in so doing, validly refused to register "Smart Little Lena-D".
403In reality, the Board of The AQHA is confronted with a conflict between the rights of Mr Bull, on the one hand, and the rights of The AQHA, as a whole, on the other. The exercise of the powers conferred by the Constitution, in the circumstances of this case, necessarily results in what appears to be prejudice to Mr Bull as the owner of a cloned imported horse.
404However, the bona fide, and proper, exercise of the powers conferred on the Board in pursuit of the objects for which they were conferred, and the caution which a court must exercise in determining an application under s 232 of the Corporations Act in order to avoid an unwarranted assumption of the responsibility for the management of a corporation, results in Mr Bull facing a difficult task in seeking to prove that the passing of the resolutions, the result of which was said to be the decision to not register "Smart Little Lena-D", was unfairly prejudicial to him and, therefore, not in the overall interests of the members of The AQHA as a whole.
405I am not satisfied that the decision made by the Board of The AQHA was such that no Board, acting reasonably, could have made it. The effect on Mr Bull of the passing of the resolutions may be considered by him to be harsh. It has not, however, been shown that it was oppressive, or unfairly prejudicial, or discriminatory, or that its effect is such as to warrant the conclusion that the affairs of The AQHA were, or are, being conducted in a manner that was, or is, oppressive or unfairly prejudicial in the manner prescribed by the legislation.
406I also bear in mind my conclusion that, prior to the resolutions being passed, "Smart Little Lena-D" would not have been able to be registered. That being so, Mr Bull has failed to make good his submissions.
407The court should not assume, particularly in a case where a lack of probity or want of good faith is not alleged or established, that substituting its own assessment for that of directors, who can be expected to have a much greater knowledge and more time and expertise at their disposal to evaluate the best interests of the members of The AQHA as a whole, and to determine how the objects of The AQHA would best be met, is the way to proceed.
408Even if I considered the decision to not register "Smart Little Lena-D" a harsh one, so far as Mr Bull is concerned (and I am not expressing the view that it was), that is not sufficient to cause the decision actually made to be an unreasonable or irrational decision of the kind which would require judicial interference. This is heightened because of the earlier conclusion that the application to register "Smart Little Lena-D" was validly refused even before the resolutions, the subject of the claim for oppression, were passed.
409It is not possible to conclude, in this case, that the directors did not weigh the furthering of The AQHA's objects against the disadvantage that the passing of the resolutions and the decision would impose upon Mr Bull, and address their minds to the question whether what was proposed was unfair.
410Finally, it is also important to note that The AQHA does not prevent the cloning of quarter horses, or the sale and purchase of a cloned quarter horse from occurring. Mr Bull, and any other breeder of quarter horses, may continue to buy, and import, a cloned quarter horse. Each is simply not entitled to have the cloned quarter horse that is bought and imported, registered in the Stud Book or Appendix Register of The AQHA.
411The claims based on s 232 and s 233 of the Corporations Act, therefore, fail.
412Finally, I bear in mind that Mr Bull accepted that, if the passing of the resolutions was found to be oppressive (which, in the events that have happened, is not the case), the least intrusive remedy would be to remit the application to register "Smart Little Lena-D" to the Board of The AQHA for reconsideration in accordance with the Regulations before any amendment. To do so, for the reasons given, would not alter the result of the application.
413Subject to any argument on costs, I am of the view that the Plaintiff should pay the costs of the Defendants of these proceedings.
414In the circumstances, I direct the parties to bring in Short Minutes of Order reflecting these reasons for judgment within 7 days. The orders should include an order for the return of the exhibits and the Court Books.
415I shall stand over the proceedings to deal with any outstanding argument on the form of the Short Minutes of Order and costs to a date to be agreed.