By their Further Amended Statement of Claim the Plaintiffs sought a declaration that an election purporting to be held by the First Defendant on 17 August 2019 was invalid by reason of what was identified as six alleged substantive defects in the manner in which the electoral process was conducted.
The matter was fixed for two days for hearing, 25 and 26 March 2021.
The Plaintiffs sought a fresh election and that it be conducted and supervised by a Court appointed receiver.
In total there were originally 15 Defendants, excluding the First Defendant. In the end submitting appearances in effect were received from the Fifth, Thirteenth and Fifteenth Defendants and I ordered substituted service against the Eight Defendant. The balance were represented at the hearing ultimately by senior and junior counsel.
On the eve of the trial I was informed that the issues were to be narrowed and what then emerged from submissions prepared by junior counsel for the participating Defendants was there was only going to be a contest on the question of whether or not a receiver should be appointed.
However, when the matter was commenced it became apparent that the issues sought to be canvassed by the Defendants were much wider. I was informed by senior counsel for the Defendants that although the declaration sought by the Plaintiffs was not opposed as such, it was opposed on the bases agitated by the Plaintiffs and that it was only recently discovered that since no member whether personal or corporate had paid any membership fees neither side had in effect (as I understood the argument) standing to bring the proceedings and that it was submitted that a declaration as sought should be granted.
Argument then ensued as to whether the Defendants should be allowed at that stage to put the issue of the Plaintiffs' standing (namely whether they were members) in issue. I ruled after argument that no such point should be allowed to be taken so late given the state of the pleadings where, for example, the Defendants had previously in effect admitted the Plaintiffs' membership in their defence.
After a short adjournment I was informed by senior counsel for the Defendants that of the six alleged substantive defects in the electoral process the Defendants no longer contested three of them (one, two and four as outlined in the Plaintiffs' written opening submissions) and that on that basis they did not oppose the making of the declaration sought, nor the consequential orders for a receiver.
The matter proceeded in this fashion and the Plaintiffs read their evidence. The Defendants read none. No objections were in the end pressed by the Defendants to the Plaintiffs' materials and there was no cross examination.
Having heard argument I gave a short ex tempore judgment in which I found the three defects as alleged as substantive and not merely procedural, and made orders accordingly. I was asked by counsel for the Plaintiffs to reduce my reasons to writing and these are they.
[2]
Jurisdictions:
The Court's jurisdiction to intervene in the affairs of a registered organisation, such as the First Defendant here, where necessary and appropriate is not in doubt so as to ensure proper governance: Ahmed v Chowdhury [2012] NSWSC 1452 at [26]-[29], [38], [41],[44],[47] and [50], per Lindsay J.
Equally, the Court has jurisdiction to appoint a receiver to facilitate an election and in other wide ranging circumstances where the interests of justice warrant it: Sengthong v Lao Buddhist Society of New South Wales [2016] NSWSC 1408 at [170]-[194] per Lindsay J.
However even where, as here, the declaration was not ultimately opposed the Court will usually not entertain a consent declaration and the basis and need for such relief should be carefully scrutinised. This is so because the making of a declaration is a judicial act determining and pronouncing a legal right: Williams v Powell [1894] 1 WN 141. It is not to be undertaken lightly.
Further, because a declaration may have effects beyond the immediate parties, for example here all the members of the First Defendant organisation, care should be taken in making the orders sought, even if not opposed.
Notwithstanding the concession made by the participating Defendants, it is incumbent therefore on a court to ensure that there is a proper evidentiary and legal basis for the making of a declaration of right.
[3]
The Facts:
There are a number of undisputed facts.
The Australian Shaanxi Chamber of Commerce (ASCC) was established on 27 June 2016 and is governed by the Constitution.
At the first annual general meeting of the ASCC on 10 July 2016, the first ASCC Committee and the first ASCC Council were formed.
Each of the Plaintiffs and the Second to Twelfth Defendants are and were at all material times members of the ASCC.
In 2016, the Second Defendant, Mr Zhong was nominated as President and Mr Lee and Mr Zhu were nominated as Vice-Presidents. Mr Li Ji was nominated as Secretary-General, Mr Kai Zhu was nominated as the Public Officer and Mr Xin Fan was nominated as Treasurer. Mr Tao Zhang was nominated as Chairman of the Council, Mr Ping Cao and Mr Jin Ma were nominated as advisors of ASCC.
In 2016, there were at least 68 members of the ASCC.
The ASCC has a WeChat Group but a number of the members of the ASCC were not relevantly members of the WeChat Group in August 2019.
On 31 July 2019, the ASCC Committee held a meeting. In that meeting, decisions were made to form a new election committee to organise the 2019 election of Committee members and to dismiss the existing 2016 Committee. There were no Committee and Council meetings after 31 July 2019.
On 1 August 2019, a notice was issued via WeChat to some of the members of the ASCC regarding the holding of an annual general meeting and an election.
On 7 August 2019, the ASCC received a letter from Herald Legal regarding the notice.
On 12 August 2019, a supplementary notice was issued via WeChat to some of the members of the ASCC regarding the holding of an annual general meeting and an election with a meeting venue.
On 16 August 2019, a further notice prepared by Brighton Lawyers was issued in relation to the agenda of the election and nominations with a nomination form for the first time distributed to members noting that the election was to be held the following day.
Some members of the ASCC did not receive the notices via WeChat or otherwise. Notices were not sent to members of the ASCC through any other means.
On 17 August 2019, 26 members attending Woodstock Community Centre, Burwood.
Twelve members responded to the notices by purporting to vote by email.
Various members complained about the notices and the election process. One member, Ms Annie Zhang, sought a two week adjournment of the annual general meeting believing there was insufficient notice.
It is unclear how voting took place on 17 August 2019.
[4]
Failure to identify the location of the proposed election
For present purposes I will only deal with those defects not as it were contested.
This is referred to as Defect No. 1 in the Further Amended Statement of Claim filed on 8 September 2020 at [13(a)].
Clause 43 of the Constitution required the following:
(1) Except if the nature of the business proposed to be dealt with at a general meeting requires a special resolution of the chamber, the secretary-general [sic] must, at least 14 days before the date fixed for the holding of the general meeting, give a notice to each member specifying the place, date and time of the meeting and the nature of the business proposed to be transacted at the meeting [Emphasis added].
The Notice provided the date and time for the election. However, in terms of location, the Notice simply stated, "Venue of the meeting will be determined later." Accordingly, the Notice failed to advise the members of the First Defendant of the location for the election.
This failure meant that members of the First Defendant were not provided with the location at which to attend for the purpose of participating in the election which was held on 17 August 2019 and therefore potentially valid votes were excluded. Such a defect is therefore substantive in nature.
The fact that a location was specified in the Revised Notice on 12 August 2019 doesn't alleviate these problems because members who in fact received the WeChat message had less than 5 days to consider whether they were able to attend at the specified location in circumstances where they may have had prior commitments.
I am satisfied this defect is made out.
[5]
Failure to serve the said notice in accordance with the Constitution
This is referred to as Defect No. 2 in the Further Amended Statement of Claim at [13(b)].
Clause 59 of the Constitution required the following:
(1) For the purpose of this constitution, a notice may be served on or given to a person:
(a) by delivering it to the person personally, or
(b) by sending it by pre-paid post to the address of the person, or
(c) by sending it by facsimile transmission or some other form of electronic transmission to an address specified by the person for giving or serving the notice.
The process of nominating and electing candidates for committee and council positions strikes at the heart of members' rights. Clause 12 of the Constitution provides that all members have the rights to "vote, elect, be elected, and withdraw their membership".
The Notice was sent to members of the First Defendant via a WeChat group. This is not a recognised or permitted method of service under the Constitution. There is no evidence that any members specified that WeChat as the method for service of notices, particularly notices of annual general meetings. Further, the uncontroverted evidence is that members of the WeChat group do not read their messages every day. It was set up for social communication.
Critically, not all members of the First Defendant were included in, or were otherwise removed from, this WeChat group. It is clear that each of the Plaintiffs, including the First Plaintiff, were members of the ASCC at all relevant times - there is no requirement that members re-register their membership under the Constitution. However, the Defendants concede that Ms Chen, the First Plaintiff, was removed from the WeChat Group in September 2017 and that some other members "quit the ASCC WeChat Group voluntarily" which made it impossible for Ms Chen and non-WeChat members to receive the Notice and Revised Notice in 2019.
Accordingly, a number of members of the First Defendant were denied the opportunity to participate in the election which was held on 17 August 2019 and therefore potentially valid votes were excluded. Such a defect is therefore substantive in nature.
If members are unaware of a pending annual general meeting, they have no means of participating in key decisions concerning committee members and office-holders of the ASCC.
The First Plaintiff, Ms Chen, attests that she did not receive the Notice, was deprived of the opportunity to nominate and vote for her preferred candidates at the 2019 AGM and that had she been aware of the upcoming election, she would have requested other members to nominate her and compete with other candidates.
I am also satisfied this defect is made out.
[6]
Failure to limit voting to the annual general meeting
This is referred to as Defect No. 4 in the Further Amended Statement of Claim at [13(h)].
Clause 20 of the Constitution limited the election of committee members to be conducted at the annual general meeting:
(6) The ballot for the election of office-bearers and ordinary committee members of the committee is to be conducted at the annual general meeting in such usual and proper manner as the committee may direct [Emphasis added].
Similarly, clause 33 of the Constitution limited the election of council members to be conducted at the annual general meeting:
(6) The ballot for the election of office-bearers and ordinary council members of the council is to be conducted at the annual general meeting in such usual and proper manner as the council may direct [Emphasis added].
Further, clause 47 of the Constitution provides for questions at a general meeting to be determined by a show of hands or by written ballot and that if questions are determined by a show of hands, minutes recording that fact is conclusive evidence that a particular number or proportion voted in favour or against a particular resolution. Proxy votes are not permitted and postal ballots are not relevant here.
In breach of the Constitution, the Notice allowed members of the ASCC to vote from 10 August 2019 to 17 August 2019 and to vote on-line.
The minutes of meeting on 17 August 2019 records that voting commenced at 3 pm but that voting could be conducted "by way of a postal ballot or [a]s per previous arrangements by way of email". There is no detail as to how voting was conducted and how votes were counted. There is no evidence that the Chairman or a requisite number of members called for a poll to be conducted as opposed to a show of hands. The unilateral decision to proceed by secret ballot in lieu of a show of hands was found in Re Ryde Ex-Services Memorial & Community Club Limited (Administrator appointed) [2015] NSWSC 226 to constitute a substantial deprivation of a member's right to vote.
These defects were substantive in nature given that members who believed they could vote through an alternate process were deprived of properly participating in a meeting before voting took place.
The purpose of physical voting at an annual general meeting (and in particular through a show of hands) is to enable members to make informed decisions on candidates by considering the strengths and weaknesses of each candidate and properly disclosed interests before voting for a particular candidate.
This purpose is clearly not achieved through on-line or email voting (or a secret ballot for that matter) particularly in circumstances where neither the Notice nor the Revised Notice made any mention of the background or credentials of each pre-nominated candidate and where other nominees were not yet known. The only information provided in the Notice and Revised Notice through WeChat was the names of recommended candidates. Further, there is no evidence that any background information concerning each candidate was provided at or before the 2019 AGM.
Equally, I am satisfied on the evidence this defect is made out.
[7]
Consideration
I am satisfied that it was appropriate for the Defendants to concede the nominated defects as I am satisfied they are made out and further they are substantive in nature because they did not properly provide for participation of eligible members in the democratic process. They were not merely procedural and could not have been saved as such by section 1332 of the Corporations Act 2001 (Cth). Those defects by their very nature caused, I consider. substantial injustice to members. It was not suggested otherwise.
Given the nature and scope of just those defects I was of the view that it was clearly in the interests of the First Defendant for a receiver to be appointed and appropriately directed as the short minutes provide to facilitate a fresh election.
[8]
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Decision last updated: 09 April 2021