Judgment - EX TEMPORE
Revised from transcript; issued 13 November 2020
This is an interlocutory application by way of notice of motion. The plaintiffs seek an interlocutory injunction against the third defendant in proceedings which are pending in the Court.
The proceedings concern the governance of the first defendant, The Australian Shaanxi Chamber of Commerce Incorporated, to which I will refer as "the Chamber". Shaanxi is a province of China, located in the north-east of the country.
The Chamber is incorporated under the Associations Incorporation Act 2009 (NSW). The plaintiffs are members of the Chamber.
In August last year, at the Chamber's annual general meeting, there was an election for the membership of its governing bodies and its office bearers. The plaintiffs allege that the election was invalid and that those who were purportedly elected are conducting the affairs of the Chamber without authority.
The defendants apart from the Chamber itself are purported members of its governing bodies or purported office bearers of the Chamber. The injunction which the plaintiffs seek is against the third defendant who was purportedly elected president of the Chamber at the annual general meeting.
The Chamber itself is not taking an active part in the proceedings. The defence of the proceedings has been conducted by a number of the individual defendants including the third defendant. They have been referred to as the active defendants.
The constitution in cl 3 deals with the nature of the Chamber. Clause 3 provides:
The chamber is a non-profit organisation, consisting of members with connections to Shaanxi and are businessmen in Australia or who intend to reside in Australia for business purposes and members who represent companies conducting business in Australia and China.
Clause 4 sets out the objectives of the Chamber. The first two objectives identified are:
(1) To promote Shaanxi entrepreneurs in Australia through joint efforts to identify and generate business opportunities for members and make representations to government agencies for the advancement of the interests of members.
(2) To establish and promote social and cultural exchanges for Shaanxi entrepreneurs in Australia and China.
The Chamber's third objective is to pursue what are described as its "Founding Priorities". They are set out in an appendix to the constitution. They spell out the first two stated objectives in more detail and make it clear that the Chamber's objectives require networking and lobbying at a government level in Australia, China and other countries in the Asia Pacific region.
It is not necessary for the purposes of these proceedings to describe the plaintiffs' complaints about the election process at last year's annual general meeting in any detail. Counsel for the active defendants accepted that there is a prima facie case that the election did not comply with the rules of the Chamber's constitution and the purported elections of the individual defendants were invalid. However, counsel pointed out that the Associations Incorporation Act provides that the acts of purported office bearers are not necessarily invalid simply by reason of a defect in their appointment.
The proceedings were commenced in February this year. The initial version of the Statement of Claim had its difficulties. They included in particular a failure to join relevant individual defendants. The plaintiffs are now up to the third version of the Statement of Claim which was filed on 8 September.
The proceedings are effectively being managed in the Expedition List, although no formal order for expedition has been made. No defence or cross-claim has been filed by the active defendants; this is because they have made an application to have the proceedings summarily dismissed on the grounds that they are an abuse of process. That application is currently fixed for hearing before the Expedition List Judge next week.
The trigger for the application before me was an agreement, purportedly made on behalf of the Chamber with a Chinese organisation called the Qinshang Bairen Association. The agreement is in writing and is dated 9 September 2020. It was signed purportedly on behalf of the Chamber by the third defendant as president.
The making of the agreement was notified to the Chamber's membership on 23 October. Two days earlier, on 21 October, the making of the agreement had been announced by the Qinshang Bairen Association. The present application was made by notice of motion filed on 2 November.
An English language translation of the agreement is in evidence. It describes itself as a "strategic co-operation agreement". It provides, in general terms, for the parties to establish a system of reciprocal visits and co-operation between the two organisations, and for mutual participation in significant events such as conferences and trade visits. The agreement also requires the parties to promote reciprocal co-operation between business entities which are members of the two organisations, including mechanisms for the exchange of technical information and the introduction of capital investment.
On 22 October, the day after the agreement was announced by the Qinshang Bairen Association, an invitation was issued by the local branch of the Communist Party to the Chamber to attend a business forum to be held in Xi'an (a major city in Shaanxi province) on 17 and 18 November. That is next week. The forum, according to the invitation, is sponsored by the local branch of the Chinese Communist Party and is hosted by a trade organisation of the Xi'an Municipal Government and the Qinshang Bairen Association.
The plaintiffs' concern appears to be that the third defendant has committed, or purported to commit, the Chamber to the strategic partnership with the Qinshang Bairen Association, and that that body is in some way associated with or controlled by the Chinese Communist Party. There is in fact, no evidence before me of the structure, membership and control of the Qinshang Bairen Association, but it easily could have close links with the Chinese Communist Party.
The plaintiffs have pointed to tweets which have been published since the strategic partnership became publicly known, which they say are critical of the Chamber developing a relationship with the Qinshang Bairen Association. The suggestion is that in some way, entry into the agreement will bring the Chamber into disrepute.
The orders sought in the Notice of Motion are:
1. That the 3rd Defendant be restricted from signing any further agreements with any other parties on behalf of the 1st Defendant.
2. That the 3rd Defendant be restricted from implementing any further actions associated with any agreements signed after 17 August 2019, the date of the impugned election.
These orders would apply only to the third defendant, even though on the plaintiffs' case, none of the purported office bearers and members of the governing bodies of the Chamber validly hold office. Curiously, the orders would prevent the third defendant from signing any agreements or taking steps to implement any signed agreements, but would not prevent him from entering into, or giving effect to, oral agreements. Furthermore, the orders would prevent the third defendant from entering into any further agreement (in writing) or implementing any existing agreement (in writing) whatever its subject matter.
In the course of argument, counsel for the plaintiffs flirted with the idea that the orders could be limited so as to prevent the third defendant from attending next week's forum or, perhaps, making any purported commitments at that forum (the exact phraseology never became clear). In the end however, it was not possible to reach any agreement and counsel invited me to deal with the application in the form in which it had been filed.
I have decided that the application must be refused. There are two main reasons for this.
The first is that the evidence does not establish a sufficiently substantial reason for granting the injunction. On the evidence before me, the strategic alliance appears to be essentially of symbolic value. It does not give the Qinshang Bairen Association any say in the conduct of the Chamber's affairs and it does not give the Qinshang Bairen Association any interest in the Chamber's property (if it has any; there was no evidence on this question).
The evidence before me of public criticism of the Chamber for entering into the agreement is generalised and comes from a handful of individuals only. It hardly seems likely that an organisation such as the Chamber would be able to pursue its objectives without having contacts with, and indeed dealing with, the Chinese Communist Party, which controls both national and local Governments in China.
On the face of it there is nothing in the agreement contrary to the objectives of the Chamber as defined in its constitution. In these circumstances, I think that assertions that entry into the agreement will bring the Chamber into disrepute, lack content or at least, on the evidence before me, lack any real specificity.
In any event, I do think it is necessary to take these criticisms further for present purposes. For better or worse the agreement has been signed by the third defendant purportedly on behalf of the Chamber. If the plaintiffs succeed in this litigation the agreement may or may not turn out to be invalid. If the plaintiffs are right then no further action the third defendant might take can have any legal effect.
On the evidence before me (which consists essentially of the invitation) there is no reason to think that next week's forum will result in any purported commitments on behalf of the Chamber. It is not even clear whether representatives of the Chamber intend to attend the forum in person or otherwise. Certainly there is no reason to think that anything that happens at the forum will have any effect on the Chamber's ability to govern itself or to manage its property (if any) in accordance with the terms of its constitution.
The second problem with the application is there has been substantial delay. On the plaintiffs' case, the active defendants have been conducting the affairs of the Chamber without any authority to do so for over a year. The plaintiffs' statement of claim contains prayers for relief which include the appointment of a receiver to the Chamber. That is an interlocutory remedy which could have been sought at any time after the proceedings had begun; but no such application has been pursued.
It may be that the plaintiffs have only recently become aware of the Qinshang Bairen Association agreement, but the making of such an agreement is the very sort of thing which one would expect to happen if the individual defendants were left in undisputed practical control of the Chamber. The plaintiffs cannot reasonably expect, having made allegations of invalidity of appointment which are disputed, to insist upon the defendants meekly conducting themselves as caretakers. If it was not sufficiently important to the plaintiffs to seek the appointment of a receiver, then I do think that entry into the agreement with the Qinshang Bairen Association is of sufficient importance to justify a change of course.
Before parting the case, I should mention that at the beginning of the hearing counsel for the active defendants put forward a proposal under which the parties would agree on terms for the conduct of a fresh election. The plaintiffs' agreement is necessary for this purpose as otherwise there may be an argument that the steps taken for such a fresh election by the active defendants are themselves invalid.
Although a fresh election would not resolve disputes about the validity of actions that have been taken between the disputed election in August last year and now, it would be an obviously sensible way of ensuring that the Chamber's governance is put on a proper footing for the future. But I was informed by counsel for the plaintiffs that he had no instructions to agree with, or seemingly even to enter into negotiations about, the proposal and instead that the plaintiffs insisted upon the determination of their application.
Accordingly, for the reasons I have given the application will be dismissed.
The orders of the Court on the notice of motion dated 2 November 2020 are:
Order that the motion be dismissed.
Order that the plaintiffs/applicants pay the costs of the defendants/respondents.
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Decision last updated: 13 November 2020