Solicitors:
N Bender SC and R Pietriche (Plaintiffs)
J Agius SC and S McCarthy (Defendant)
File Number(s): 2023/00363100
Publication restriction: Nil
[3]
JUDGMENT
This is an application by Summons filed on 15 November 2023 for urgent final declaratory relief that Additional By-laws made on 25 September 2023, as amended on 19 October 2023, by the Board of Directors of the defendant, Carlingford Bowling, Sports & Recreation Club (Club), are inconsistent with the Constitution of the Club and, accordingly, are invalid and of no effect.
The urgency of the matter arises from an election for vacant positions on the Club's Board, the results of which are to be announced at the Club's Annual General Meeting on 29 November 2023.
The plaintiffs, Robert Carabetta and Anthony French, are members of the Club. Their position is that, as the Additional By-laws are inconsistent with the Constitution and of no effect, the election held pursuant to them, and the appointment of directors at that election, will also be invalid.
The Club disputes this and says that the Additional By-laws are not inconsistent and, in any event, declaratory relief should be refused for discretionary reasons, including delay.
In support of their claims, the plaintiffs relied on affidavits from each of Mr Carabetta and Mr French. The Club relied on an affidavit from its solicitor, Karen McManus.
The facts are not in dispute and there was no cross-examination.
[4]
Factual background
The Club is a public company limited by guarantee, first registered on 7 October 1952, and is also a registered club under the Registered Clubs Act 1976 (NSW). It operates from its main bowling club premises at Pennant Hills Road, Carlingford NSW and Chatham Road, Denistone.
On 13 April 2017, the Club amalgamated with the Denistone Sports Club Ltd and, in March 2018, it amalgamated with the Brush Park Bowling Club. Upon amalgamation, all members of the Denistone and Brush Park Clubs became members of the Club and the Club assumed all the assets and liabilities of the Denistone and Brush Park Clubs.
[5]
Club Constitution
The Club is governed by the 2019 Constitution of Carlingford Bowling, Sports & Recreation Club Ltd (ACN 000 110 976) adopted on 28 November 2019 and amended on 28 November 2022 (Constitution).
The "Club" is defined by the Constitution to mean Carlingford Bowling, Sports & Recreation Club Ltd carrying on the business of a registered Club at 334 Pennant Hills Rd, Carlingford, 59 Chatham Rd, Denistone and at any other address that the Board may determine to be appropriate for carrying on the business of the registered Club.
Clause 3.1 provides:
3. Interpretation of Constitution
3.1 A decision of the Board on the construction or interpretation of the Constitution of the Club including these Rules, or any By-Laws of the Club made pursuant to this Constitution or on any matter arising there from, shall be conclusive and binding on all Members of the Club.
Clause 9 of the Constitution deals with membership.
Clause 9.4 provides that the membership of the Club shall be divided into nine classes, including "Life Members", "Bowling Members", "Social Members" as well as "The Members of the dissolved Club - Brush Park Members" and "The Members of the dissolved Club - Denistone Sports Members".
Clause 9.7 provides that Life Members, Bowling Members and Social Members are deemed to constitute "Full Membership" of the Club.
Clauses 10.1, 10.2 and 10.3 set out the rights of Life Members, Financial Bowling Members and Financial Social Members in relation to voting, eligibility for election to positions on the Board and meeting attendance as follows:
10. Rights of Members - voting, meeting attendance
10.1 Life Members:
i. May nominate persons for election to the Board of the Club
ii. May vote in an election for Members of the Board
iii. Are eligible to be elected to any position on the Board.
iv. Are entitled to attend any General Meeting of the Club and to vote on any resolution put to that meeting, including a Special Resolution to amend this Constitution.
v. Are not required to pay any subscription fee.
10.2 Financial Bowling Members:
i. May nominate persons for election to the Board of the Club
ii. May vote in an election for Members of the Board
iii. Are eligible to be elected to any position on the Board.
10.3 Financial Social Members:
i. May nominate persons for election to the Board of the Club
ii. May vote in an election for Members of the Board
iii. Are eligible to be elected to any position on the Board, except that financial social Members are entitled to hold only up to two (2) positions on the Board.
iv. Are entitled to attend any General Meetings of the Club and (subject to the following subparagraph v.) to vote on any resolution put to that meeting except a Special Resolution to amend this Constitution.
v. A financial social member who is also a Director of the Club is entitled to vote at a General Meeting on any Special Resolution to amend this Constitution.
[6]
Introduction of Additional By-laws
On 25 September 2023, at a Club monthly meeting, the Board approved the adoption of three new By-laws, including two additional By-laws the subject of dispute in these proceedings, which provide as follows:
10. Rights of Members
…
f. Only a Social Member who has been elected as Social Member for a period of two years prior to the date at which an election is held for a member of the Board may vote at that election for a member of the Board.
…
18. Board of Directors
…
c. Limit on the Number of Directors from a Single Interest Group
i. Basic Limit.
a) No more than two members who are members of the same Single Interest Group may be on the Board at any time.
b) This is a continuing requirement that applies at all times.
c) At any time when there are already two members of a particular Single Interest Group on the Board, no other member of that particular Single Interest Group may become a director.
d) A person is a member of a Single Interest Group if they are a member, officer or employee of the Single Interest Group or they come within the specific definition of the class of persons that make up the particular Single Interest Group.
ii. Definition of a Single Interest Group
Single Interest Group includes a group made up of former members of all clubs which have amalgamated with the Club Ltd and includes any individual who has elected to be registered with Bowls NSW as a bowler with any club which has amalgamated with the Club Ltd.
iii. Exclusions
In the event that there are more than two members of the Board from a Single Interest Group as at the date of the adoption of this By-Law 18c, each of those members will be able to continue as a member of the Board until the expiration of their current term or until they leave the Board for any reason.
iv. Voting Procedures
At an election of the Board where more than two candidates come from the same Single Interest Group, only a maximum of two of those candidates can be elected. The basic limit in this By-Law applies and a candidate may not be elected in breach of that limit. The candidate or candidates elected to the Board from that Single Interest Group will be determined on the basis that the candidate from that Single Interest Group with the highest number of votes cast in his or her favour will be elected first and then the candidate from that Single Interest Group with the next highest number of votes cast in his or her favour will be elected second.
v. Information from Candidates
Any nomination form prescribed by the Board may provide for candidates to provide details of their memberships of any Single Interest Group. The form may also include provision for the candidate to verify the information provided by a statutory declaration.
vi. Operation of the restriction
This By-Law operates where there is a change in the circumstances of a particular director (the Affected director) that triggers a breach of the basic limit in By-Law 18c because that director becomes the third member of a particular Single Interest Group on the Board. In that case, it is the Affected director who becomes disqualified from continuing as a director.
[7]
Notice of AGM and Tri-Annual Elections
On 16 October 2023, a Notice of AGM and Tri-Annual Elections 2023 were posted on the Notice Board at the Club's premises at Carlingford. The Notice in relation to the Elections identified that nominations would open at 11.00am on 30 October 2023, close at 5.00pm on 8 November 2023 and that attendance voting would take place between 1.00pm and 6.00pm at the Club's premises at Denistone on 24 November 2023 and between 1.00pm and 6.00pm at the Club's premises at Carlingford on 25 and 26 November 2023, and the AGM would take place at 6.00pm on 29 November 2023. Those Notices were posted on the Notice Board at the Club's premises at Denistone on 18 October 2023.
On 19 October 2023, the Board approved an amendment to Additional By-law 18(c)(ii) in relation to the definition of a Single Interest Group as follows (amendments in italics):
ii. Definition of a Single Interest Group
Single Interest Group includes a group made up of former members of all clubs which have amalgamated with the Club Ltd and includes any individual who has elected to be registered with Bowls NSW as a bowler with any club which has amalgamated with the Club Ltd
On 20 October 2023, the solicitors for the plaintiffs (who were then acting for Mr French and other members of the Club) wrote to the Board of the Club in relation to the Additional By-laws and asserted that the Additional By-laws purported to limit the rights of Social Members to vote in the election by introducing a two year membership qualification period as a condition to place a limit on the number of directors from a "Special Interest Group" who may be elected to the Board was ultra vires and therefore invalid having regard to the power of the Board to make By-laws, referring to cll 19.2(b) and 18.11(iii). The letter demanded that the Board immediately rescind the Additional By-laws within seven days, failing which they reserved their rights to commence proceedings against the Club to seek, amongst other things, declaratory relief as to the invalidity of the Additional By-laws and that they would rely on the letter when seeking an order for costs.
That day, the Notice of AGM was also posted on the Club's website.
On 30 October 2023, nominations for candidates for the Elections opened.
On 31 October 2023, the General Manager of the Club responded to the solicitor's letter advising that the Club has had the benefit of advice from Senior Counsel and the Board had decided that it would not rescind the Additional By-laws.
[8]
Consideration and determination
The plaintiffs' Summons, as filed, seeks declarations that Additional By-laws 10(f) and 18(c) are inconsistent with the Club's Constitution and are accordingly invalid.
At the commencement of the hearing, the plaintiffs applied to amend to seek by way of final relief, in addition to the declarations, an injunction restraining the voting for the elections that were scheduled to commence at 1.00pm that day and the announcement of the outcome of the elections at the AGM on 29 November 2023. The application was made because the Club's written submissions that had been served the previous day indicated (somewhat surprisingly to the plaintiffs) that, whatever declarations were made by the Court, the election would go ahead and the votes would be counted, such that the Club would "effectively ignore declarations of the Court".
After some debate about the nature of the injunction sought by the amendment, the hearing was adjourned to enable the Club's legal representatives to obtain instructions on an issue raised by the Court about the scope of the dispute and for the parties to have some discussions.
Following the adjournment, the Club proffered an undertaking to the Court, on a without prejudice and no admissions basis, in the following terms:
If the Court grants the declarations sought in prayers 5 or 6 of the summons filed 15 November 2023, the defendant undertakes to the Court:
1. not to declare the result of, or otherwise give effect to, the election notified by the notice entitled "Carlingford Bowling Sports and Recreation Club Tri-Annual Elections 2023" unless and until the declarations sought in prayers 5 and 6 are discharged by the Court of Appeal;
2. if:
(a) within 21 days of the delivery of judgement in relation to prayers 5 and 6 of the summons, the defendant has not commenced appeal proceedings; or
(b) any appeal proceedings are dismissed,
to take all steps necessary to initiate the re-holding of the current ballot with fresh nominations and a declaration of the result of the ballot for the purpose of electing the 4 vacancies due to be filled at the AGM presently scheduled for 29 November 2023, such initiation to be commenced within:
(c) if no appeal proceedings have been commenced, 28 days after judgment; or
(d) if appeal proceedings have been commenced, 7 days of the dismissal of any appeal proceedings; and
3. to seek expedition of any appeal proceedings.
[9]
Are the Additional By-laws inconsistent with the Constitution?
The question at [45(a)] above requires consideration of the construction of the Constitution and the By-laws, and the meaning of inconsistency in that context.
The legal principles were not in dispute.
The general principles applicable to the interpretation of commercial documents apply to the proper construction of the Constitution. The Court should have due regard to the special characteristics of a constitution, including its underlying purpose and objects, and the 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) 156 FCR 1; (2006) 236 ALR 561; [2006] FCAFC 144 (Lion Nathan) at [123]-[124] (Kenny J) and [225]-[226] (Lander J); and Oil Basins Ltd v Bass Strait Oil Co (2012) 297 ALR 261; [2012] FCA 1122 at [32].
Due regard is to be had to the text, context and purpose of the Constitution, as well as the principle that the construction adopted should avoid the Constitution making commercial nonsense or working commercial inconvenience: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; (2015) 325 ALR 188; [2015] HCA 37 at [46]-[51] (French CJ, Nettle and Gordon JJ); and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; (2017) 343 ALR 58; [2017] HCA 12 at [17] (Kiefel J, as her Honour then was, Bell and Gordon JJ). Moreover, the Constitution should be read and construed as a whole, should not be construed narrowly or pedantically, the words used should usually be given their natural and ordinary meaning, and a construction which gives a provision a congruent operation with other applicable provisions should be preferred to one that does not: Donaldson v Natural Springs Australia Ltd [2015] FCA 498 at [148]; and Ryde Ex-Services Memorial v Community Club Ltd [2016] NSWSC 916 at [12].
Because of the public nature of the rules of organisations such as the Club, great emphasis is to be placed on the text of the rules and the ambit of the surrounding circumstances to which the Court may have regard may be constrained: Lion Nathan at [124] (Kenny J); and Bejawn v Sikh Association of Western Australia Inc [2023] WASC 152 at [24].
The parties' submissions referred to the ordinary dictionary meaning of "inconsistency" as including "lacking in harmony between the different parts or elements; self contradictory" or "lacking agreement, as one thing with another, or two or more things in relation to each other, at variance", referring to Burwood Council v Ralan Burwood Pty Ltd (No 3) [2014] NSWCA 404 at [147] (Sackville AJA with whom McColl and Barrett JJA agreed) and Scentre Management Ltd v ACT Planning and Land Authority [2021] ACTSC 171 at [253].
[10]
Should declaratory relief be granted?
As already noted, the Club did not dispute that if the Court finds that the Additional By-laws are inconsistent with the Constitution then they are beyond power and the election undertaken pursuant to those By-laws would be invalid.
However, the Club submitted that the Court should exercise its discretion and refuse to grant the declaratory relief sought by the plaintiffs for three reasons. First, the application was not urgent; second, the plaintiffs delayed in commencing proceedings; and third, the plaintiffs brought proceedings that did not seek any urgent injunctive or interlocutory relief to preserve the status quo but elected, instead, to seek final declaratory relief and allow the election and the AGM to continue as planned.
I am not persuaded by the Club's submission. I am satisfied that it is appropriate to grant declaratory relief in this case.
While delay is a relevant discretionary factor, I do not consider that the time taken by the plaintiffs to commence proceedings was such as to weigh against the exercise of the Court's discretion to grant relief in this case. Unlike the periods of delay in cases such as Rivers v Bondi Junction-Waverley RSL Sub-Branch Ltd (1986) 5 NSWLR 362 (where there was a delay of six months in bringing proceedings), the plaintiffs in this case commenced proceedings within seven weeks after the Additional By-laws were made on 25 September 2023, prior to the election taking place and two weeks after the Club confirmed that it would not rescind the Additional By-laws.
In my view, the delay between the date on which the By-laws were made and the solicitor's letter was sent on 20 October 2023 is explicable as time needed for individual members to understand the effect of the Additional By-laws, retain solicitors and obtain advice, noting that there is no evidence of when the plaintiffs actually became aware of the Additional By-laws. The plaintiffs' delay in commencing proceedings is also mitigated by the fact that the Club was on notice of the plaintiffs' claims of inconsistency and invalidity from 20 October 2023 (as detailed in the solicitor's letter sent that day) but proceeded to press ahead with the steps relating to the election notwithstanding: Andrews v Queensland Racing Ltd [2009] QSC 338.
As to the plaintiffs' failure to bring an application for urgent injunctive or interlocutory relief to preserve the status quo and the election and the AGM continuing as planned, as Senior Counsel for the Club accepted at the hearing, there is no evidence the Club would have undertaken the election process differently if the plaintiffs had threatened to bring an application for injunctive relief and he could not identify any specific prejudice caused by that matter or by the plaintiffs' delay.
[11]
Costs and orders
Given the outcome, I see no reason why costs should not follow the event and will order that the defendant pay the plaintiffs' costs of the proceedings.
For these reasons, the Court makes the following orders:
1. Declare that Additional By-Law 10(f) made by the Board of Directors of the Defendant (the Club) on 25 September 2023 is inconsistent with the Constitution of the Club adopted on 28 November 2019 (as amended on 28 November 2022) (Constitution) and is accordingly invalid and of no effect.
2. Declare that Additional By-Law 18(c) made by the Board of Directors of the Club on 25 September 2023 (as amended on 19 October 2023) is inconsistent with the Constitution of the Club and is accordingly invalid and of no effect.
3. Order the defendant to pay the plaintiffs' costs of these proceedings.
[12]
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: 28 November 2023
There are also restrictions on the eligibility to vote or be elected as a member of the Board. Employees of the Club are not eligible to vote at any meeting (cl 10.4), members whose membership have been suspended are not entitled to attend or vote at any General Meeting or in the election of the Board (cl 10.6) and non-financial members of the Club (other than a Life Member) are not entitled to vote or be elected as a member of the Board or to any other office in the Club (cl 10.7).
Clause 18.1 provides that the Board shall consist of nine directors comprising:
1. the Chairperson, Senior Vice Chairperson, Junior Vice Chairman and four additional directors, all of whom must be Life Members or Bowling Members; and
2. two further directors, each of whom may be Life Members, Bowling Members or Social Members.
Clause 18.2 provides that, to be eligible to be elected as a director, a member must have been a Financial Member of the Club for a period of at least 24 months immediately prior to nominating for election as a director.
Clause 18.3 provides that a member who is currently under suspension by the Board in accordance with the Constitution is not eligible "to nominate, stand for or be elected or appointed to the Board".
Clause 18.7 provides that a member who is also an employee of the Club is not eligible to "nominate, stand for or be elected or appointed to the Board".
Clause 18.11(ii) provides that the election of Directors must be conducted at the Annual General Meeting (AGM) in the manner as the Board directs provided that, if the By-laws so provide, a ballot for election of Directors may be held during the seven day period immediately preceding the date of the AGM and the result of such ballot must be declared at the AGM.
Clause 18.11(iii) provides as follows:
iii. The Board has the power to make By-Laws regulating all matters in connection with the election of the Board not otherwise provided for by this Constitution.
The powers of the Board are regulated by cll 19.1 and 19.2 of the Constitution. Relevant to these proceedings, cl 19.2(b) provides:
19.2 … the Board shall have power from time to time:
…
b. To make such By-Laws not inconsistent with the Constitution of the Club as in the opinion of the Board are necessary or desirable for the proper control, administration and management of the Club's finances, affairs, interests, effects, and property and for the convenience, comfort, and well-being of the members of the Club and to amend or rescind from time to time any such By-Laws and without limiting the generality thereof.
It is common ground that a "Single Interest Group" is defined by reference to former members of the clubs amalgamated with the Club, namely, former members of the Denistone and Brush Park Clubs, as well as individuals who have only ever been members of the Club but have elected to be registered with Bowls NSW as a bowler with any of the amalgamated clubs.
On 26 September 2023, the September By-laws were posted to the Club's Notice Board. The following day, they were posted to the Notice Board at the Club's premises at Denistone.
Sometime between 1 and 3 November 2023, Mr Carabetta was nominated to stand for election to the Board and, if elected, to hold the office of Senior Vice Chairperson. At that time, Mr Carabetta was a Bowling Member of the Club, having joined in or around January 2019. He was also registered with Bowls NSW to bowl for Denistone Men's Bowling Club.
On 3 November 2023, the Club sent an electronic data message showing the Notice of AGM to the email address of all members who had provided one.
On 8 November 2023, the nominations for election to the Board of the Club closed.
On 15 November 2023, the General Manager of the Club sent an email to Mr Carabetta advising that his name would not be included on the ballot paper for election to the position of Senior Vice President, stating:
You are a member of a Single Interest Group - By-Law 18 c ii, definition of a Single Interest Group. There are already two members of the Board of Directors who are members of that same Single Interest Group. You are not able to become a member of the Board - By-Law 18 c i (c).
Later that day, the plaintiffs commenced these proceedings on an urgent ex parte basis before the Equity Duty Judge, with the Summons returnable at 2.00pm the following day. On that occasion, orders were made by consent for the Club to serve any evidence upon which it intended to rely, for the parties to file and serve written submissions and for the proceedings to be fixed for hearing on 24 November 2023.
It is common ground that, on 24 to 26 November 2023, the attendance voting is to take place at the Denistone and Carlingford premises of the Club and the Club's AGM is scheduled to be convened on 29 November 2023 at which time the results of the election will be announced.
The plaintiffs' amendment application was not pressed in light of the undertaking.
At the hearing, the Club accepted that if the Additional By-laws were found to be inconsistent with the Constitution then they were made beyond power and the election would be invalid. There was also no issue that the current dispute was justiciable, although the Club contends that the Court would refuse to grant declaratory relief as a matter of discretion even if the Additional By-laws are found to be inconsistent with the Constitution. The Club did not press its written submission that the present case fell within the category described by the High Court of Australia in Cameron v Hogan (1934) 51 CLR 358; [1934] ALR 298; [1934] HCA 24 as it accepted that the Constitution operated as a contract between the Club and its members and the plaintiffs had standing.
Thus, the issues for determination are whether:
1. Additional By-laws 10(f) and 18(c) are inconsistent with the Club's Constitution; and
2. if so, whether as a matter of discretion the Court should grant declaratory relief in the terms sought by the plaintiffs.
The parties' submissions did not refer to authorities that have considered the concept of inconsistency in other contexts. These contexts include the resolution of inconsistency for the purpose of s 109 of the Commonwealth Constitution, which recognises two types of inconsistency: first, direct inconsistency where the State law would, if valid, alter, impair or detract from the operation of the Commonwealth law; and, secondly, indirect inconsistency where it appears from the terms of the Commonwealth law, its nature or subject matter that it was intended as a complete statement of the law governing a particular matter or set of rights and duties: Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508; (2011) 280 ALR 206; [2011] HCA 33 at [39].
Another context is the resolution of inconsistency in a contract, and the case law on dealing with the construction of a contract that contains inconsistent provisions having regard to the nature and the cause of the inconsistency: see, for example, the principles and cases referred to in P Herzfeld and T Prince, Interpretation (Lawbook Co., 2nd edition, 2020) (Interpretation) at [22.80]-[22.120].
The cases in the contractual context recognise that provisions in a contract are inconsistent where one provision contradicts another or is in conflict with it, such that effect cannot fairly be given to both, and that clauses within a contract may not be inconsistent merely because one qualifies or modifies the effect of the other: Pagnan SpA v Tradax Ocean Transportation SA [1987] 3 All ER 565 at 575, cited in Leonie's Travel Pty Ltd v International Air Transport Association (2009) 255 ALR 89; [2009] FCA 280 at [57] (reversed in Leonie's Travel Pty Ltd v Qantas Airways Ltd (2010) 183 FCR 246; (2010) 265 ALR 727; FCAFC 37 without reference to this point).
In this case, the Constitution takes effect as a statutory contract between the Club and each member by virtue of s 140 of the Corporations Act 2001 (Cth). Thus, the Constitution is to be construed according to the rules of construction applicable to contracts generally, which includes the presumptions that specific provisions prevail over inconsistent general provisions and terms expressly agreed by the parties prevail over incorporated terms, and the principle that clauses are not inconsistent merely because one qualifies or modifies the effect of the other: Interpretation at [22.100]-[22.110].
Ordinarily, by-laws do not form part of the statutory contract even though they may, in certain circumstances, be enforced by legal action by members: Wilcox v Kogarah Golf Club Ltd (1995) 14 ACLC 421, referring to Scandrett v Dowling (Women's Ordination case) (1992) 27 NSWLR 483.
By-laws, of their nature, are of subsidiary or secondary importance to a constitution: Rush v WA Amateur Football League (Inc) (2007) 35 WAR 101; [2007] WASCA 190 at [99] (Buss JA).
A by-law passed by a board that is inconsistent with the provisions of a constitution is invalid to the extent of the inconsistency: McMillan v Coolah Home Base Pty Ltd (No 4) [2022] NSWSC 584 at [146]; and Goodwin v Vietnam Veterans Motor Cycle Club Australia NSW Chapter Inc (2008) 72 NSWLR 224; [2008] NSWSC 154 at [9].
The plaintiffs submitted that Additional By-laws 10(f) and 18(c) are inconsistent with the Constitution because each of them purports to remove or limit the rights conferred on members under the Constitution to vote and stand for election.
They submitted that By-law 10(f) is inconsistent with the general and expansive right to vote conferred on a Social Member which vests under cl 10.3 upon election to membership because it adds a limitation regarding length of membership that operates to exclude the right of Social Members who have less than two years standing as a member of the Club to vote at elections, such as Mr French who was first elected as a Social Member of the Club on 3 August 2023.
As for By-law 18(c), the plaintiffs submitted that it is inconsistent with the express right to stand for election to the Board conferred in cll 10.1, 10.2 and 10.3 because it imposes additional eligibility requirements upon a member's right by limiting the number of members from the same Single Interest Group who may sit on the Board at any given point in time, thus rendering certain members, such as Mr Carabetta, ineligible to stand for election by reason of their membership of a Single Interest Group.
The Club submitted that the Additional By-laws are not inconsistent with the Constitution because:
1. By-law 10(f), which provides that a Social Member's eligibility to vote is contingent upon them having social membership for two years, could be seen as a caveat or proviso on the right to vote conferred by cl 10.3 of the Constitution, with the Financial Social Member remaining eligible to vote but not for two years and, to the extent that any immediate right to vote is implied by cl 10.3, By-law 10(f) clarifies an issue on which the Constitution is silent, that is, a prerequisite time period of membership required to vote; and
2. By-law 18(c), which the Club described as placing a limit on the number of members from a Single Interest Group (as defined) who may be elected to the Board, merely acts as a caveat or proviso in addition to the rules set out at cl 18.1 of the Constitution as it does not completely prevent members of a Single Interest Group from being nominated for Board positions but only seeks to regulate the number of Board positions available to such members.
The Club also submitted that there was no relevant inconsistency between the Constitution and By-law 18(c) as the Constitution does not deal with the category of members of the Club who were previously members of the amalgamated clubs and it does not proscribe who, in terms of the individual members, may make up the directors' positions on the Board. As was put, the By-law does not remove a right but creates a new category of members that the Constitution does not deal with and, as such, is not inconsistent or incompatible with the Constitution.
I am not persuaded by the Club's contentions. I accept the plaintiffs' submission that, on the proper construction of the Constitution, the Additional By-laws 10(f) and 18(c) are inconsistent with the Constitution. This is primarily on the basis that inconsistency in By-laws is expressly prohibited by the Constitution and the nature of the By-laws as a lesser instrument, and the Additional By-laws abrogate and impose limits on rights conferred by the Constitution on members in a manner that is incompatible and in conflict with those rights, such that effect cannot be fairly given to both.
Clause 19.2(b) is an express constraint on the power of the Board to make By-laws; the By-laws made are not to be inconsistent with the Constitution. Nor is the Board empowered to make By-laws that regulate matters otherwise provided for by the Constitution: cl 18.11(iii).
The By-laws may be expressed "to be read in conjunction with the Constitution" but they are subordinate to the Constitution and do not prevail over members' rights that are entrenched in the Constitution. As such, the established and commonly applied presumptions for resolving inconsistent provisions in a contract, and the principle that a clause that merely qualifies or modifies the effect of another clause is not necessarily inconsistent with it (as referred to at [55] above), do not apply as between the Constitution and the By-laws. Having regard to the context and purpose of the Constitution as a statutory contract that sets out the rights of members to vote and stand for election, the "not inconsistent with" requirement in cl 19.2(b) of the Constitution and the subordinate and subsidiary nature of the By-laws, a By-law that purports to impose an additional condition, qualification or limit that has the effect of removing a right to vote or seek election conferred by the Constitution on members, or derogates from that right in a not insignificant way, gives rise to an inconsistency for the purposes of cl 19.2(b). In my view, the Club's position gives no real work to the prohibition contained in cl 19.2(b).
Clause 10.3(ii) of the Constitution provides that a Financial Social Member may vote in an election for members of the Board. As the plaintiffs submitted, that right to vote is conferred from the date of membership and is not contingent upon holding membership status as a Financial Social Member of the Club for any period of time, with the only limitations contained in the Constitution expressed as being:
1. the requirement that the Social Member be "Financial", with cl 2.2(vi) providing the circumstances in which a member will not be financial and cl 10.7 providing that a Social Member may not vote at any meeting of the Club if they are a non-financial member of the Club;
2. a prohibition upon members voting where their membership has been suspended under cl 15: cl 10.6; and
3. a prohibition upon members voting where they are also an employee of the Club: cl 10.4.
By its terms, By-law 10(f) seeks to impose a further restriction on a Social Member's right to vote by requiring them to have held membership for a period of two years prior to the date of the election of the Board. In other words, the Financial Social Member's right to vote in their first two years of membership is removed entirely by the By-law. In my view, the imposition of the two year membership eligibility requirement is in direct conflict and incompatible with the right under cl 10.3(ii) for a Social Member to vote which is unconstrained by a time limit. It follows that I do not accept the Club's submission that By-law 10(f) merely clarifies an issue on which the Constitution is currently silent, namely a prerequisite time period of membership required to vote, or that it operates as a qualification and not an inconsistency.
For similar reasons, I am not persuaded by the Club's submission that By-law 18(c) is not inconsistent because it operates as a caveat or proviso in addition to the rules in the Constitution. I also do not accept the Club's submission that By-law 18(c) is not inconsistent because there is no other provision, other than cl 18.1, that proscribes who, in terms of the individual members, may make up the directors' positions on the Board and the Constitution is currently silent as to the rights of members who were former members of a club which amalgamated with the Club or individuals who have elected to be registered with Bowls NSW.
The Constitution sets out what persons the Board shall consist of (cl 18.1) and confers express rights upon certain classes of members to nominate and be elected to a position on the Board, subject to express limitations specified by the Constitution, as follows:
1. cll 10.1(iii), 10.2(iii) and 10.3(iii) provide that Life Members, Financial Bowling Members and Financial Social Members respectively "[a]re eligible to be elected to any position on the Board", with the only qualification upon that right being with respect to Financial Social Members, only two of whom may occupy a seat on the Board;
2. cl 18.2 provides that, to be eligible to be elected as a director, a member must have been a Financial Member of the Club for a period of at least 24 months immediately prior to nominating for election as a director;
3. cl 18.3 provides that a member who is currently under suspension by the Board in accordance with the Constitution will not be eligible to "nominate, stand for or be elected or appointed to the Board"; and
4. cl 18.7 provides that a member who is also an employee of the Club shall not be eligible to "nominate, stand for or be elected or appointed to the Board".
As the Club's submissions acknowledged, By-law 18(c) places a limit upon the number of persons from a given Single Interest Group (as defined) who may be elected to the Board. The imposition of that additional limitation is, in my view, in direct conflict and incompatible with the rights provided for in cll 10.1, 10.2 and 10.3 (subject to the qualifications of eligibility expressly specified by the Constitution) as it renders members who otherwise have rights and would be eligible to stand for and be elected to the Board by the terms of the Constitution ineligible by reason of their membership of a Single Interest Group in circumstances where there are already two existing members of the same Single Interest Group on the Board or where three members of a Single Interest Group seek to stand for election for three vacant positions such that only two with the highest number of votes would be entitled to fill the position.
The absence of an express reference in cll 10 and 18 to members who were former members of an amalgamated club or who have elected to be registered with Bowls NSW as a bowler of an amalgamated club (amalgamated club members) does not, in my view, mean that the Constitution is silent about and does not deal with their rights to stand for election. As members of the Club, the rights of amalgamated club members to be eligible to be elected to any position on the Board are dealt with by the provisions of the Constitution that relate to Life Members, Financial Bowling Members and Financial Social Members, noting that amalgamated club members were automatically deemed to be admitted to membership of the Club and bound by the Constitution: By-laws 9(viii) and (ix).
By-law 18(c) purports to deals with a category of persons who are Life Members, Financial Bowling Members and Financial Social Members with existing rights to stand for election to a position on the Board by purporting to further proscribe their eligibility as a consequence of them being part of a Single Interest Group in a manner that is in conflict and inconsistent with their existing rights under the Constitution. So too is the introduction for the first time of a temporal eligibility in respect of a Social Member's right to vote.
I am persuaded by the plaintiffs' submission that it was appropriate to seek urgent relief having regard to the impending election. This is not a case where the plaintiffs sat by and permitted the election to be convened and run its course without raising the invalidity of the Additional By-laws as an issue at an early time.
The Court has an inherent power to grant declaratory relief. It is a discretionary power that is directed to determining legal controversies: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-8; [1972-73] ALR 1303; [1972] HCA 61. The declaratory relief sought in this case was not hypothetical but was based on a live controversy between the parties and facts which have been found to exist from the evidence before the Court: Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; (1999) 161 ALR 399; [1999] HCA 9 at [45]-[48]. As the plaintiffs submitted, Mr Carabetta's right to nominate for election was directly affected by Additional By-law 18(c) and Mr French's right to vote by Additional By-law 10(f).
There is practical utility in granting declaratory relief because of the undertakings proffered by the Club. To my mind, there would also have been utility in granting declaratory relief even absent the undertaking as declarations that the Additional By-laws are inconsistent and invalid would have exposed the election and its results to invalidity and should have produced foreseeable consequences for the parties: National Australia Bank Ltd v Nautilus Insurance Pte Ltd (No 2) (2019) 377 ALR 627; [2019] FCA 1543 at [125]-[148].
In addition, the nature of the issues raised, which concerned the denial of rights of members to vote and stand for election, and the effect of the Additional By-laws as invalidating an election in the event of inconsistency, are matters which, in my view, weigh in favour of the exercise of the Court's discretion to grant declaratory relief.