Countouris v Kallos

Supreme Court of NSW|2024-05-20|Before: McGrath J, Black J

INTRODUCTION

This application has been brought by originating process filed in court on 17 May 2024 by seven plaintiffs, the first of whom is Peter Prilis, against the defendant, Old Newingtonians' Union Incorporated (ONU). The plaintiffs seek an order that the ONU, by its Council, be restrained from appointing members to the Council of the ONU pursuant to r 19.3 of the rules of the ONU (Rules).
The issue has arisen following a special general meeting of the ONU which was held on 27 March 2024. It is the outworkings of the resolutions said to have been passed at that meeting which form the subject of this application.
I note that the plaintiffs give the usual undertaking as to damages with respect to the interlocutory relief that they seek.
The application is supported by an affidavit of Peter Prilis sworn 17 May 2024, together with the documents which are exhibited to that affidavit.
I am satisfied from the affidavit of service of Brenden John Miller sworn 20 May 2024 that there has been service on the ONU in accordance with the orders that were made on 17 May 2024 by Black J, with that service taking place by email to particular email addresses. There has been no appearance on behalf of the ONU at the hearing today, including after the proceedings were called outside the court.

LEGAL PRINCIPLES

In May v Walker [2023] NSWSC 1628 at [130]-[142], I set out the longstanding and orthodox principles for the determination of whether an interlocutory injunction of the type sought in these proceedings should be granted: [130] The task of a court determining whether to exercise the power to grant an interlocutory injunction is to do so in a manner which achieves justice between the parties pending the final hearing of the proceedings. [131] This was expressed in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2009] HCA 63, Gleeson CJ at [12] stating: The justice and convenience of imposing interim restraint, pending the hearing of the final action, if it exists, lies in the need to prevent the practical destruction of that right before there has been an opportunity to have its existence finally established. [132] The principal inquiries to be made in deciding whether to grant an interlocutory injunction have been expressed in slightly different terms but to the same effect. [133] In Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148; [1968] HCA 58, Mason ACJ at [11] said: In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction. [134] In Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46, Gleeson CJ and Crennan J at [19], after repeating these inquiries, described them as: …the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed. [135] In O'Neill, Gummow and Hayne JJ (with whose reasoning Gleeson CJ and Crennan J agreed) at [65] expressed the first inquiry in this manner (footnotes omitted): The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued: The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted. By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal: How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks. [136] The inquiry involving the balance of convenience is determined by whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1, Kitto, Taylor, Menzies and Owen JJ at 622-623. The plaintiff bears the onus of establishing that the balance of convenience lies in favour of granting the interlocutory injunction: O'Neill, Gummow and Hayne JJ at [71]. [137] While the factors to be taken into account in determining where the balance of convenience lie will vary with the circumstances of each case, common ones include the strength of the plaintiff's case, the hardship to the parties and third parties, delay, the utility of the proposed orders and the sufficiency of the plaintiff's undertaking as to damages. [138] The strength of the party's case for final relief is an important consideration in determining where the balance of convenience lies, there being a connection between the inquiry about the serious question to be tried and the balance of convenience. In Warner-Lambert Company LLC v Apotex Pty Ltd (2014) 106 IPR 218; [2014] FCAFC 59, Allsop CJ, Jagot and Nicholas JJ at [70] said: Whether an applicant for an interlocutory injunction has made out a prima facie case and whether the balance of convenience favours the grant of such relief are related questions. It will often be necessary to give close attention to the strength of a party's case when assessing the risk of doing an injustice to either party by the granting or withholding of interlocutory relief especially if the outcome of the interlocutory application is likely to have the practical effect of determining the substance of the matter in issue or if other remedies, including an award of damages, or an award of compensation pursuant to the usual undertaking, are likely to be inadequate. [139] The stronger the case for final relief and therefore the likelihood of success, the less is needed for the balance of convenience in favour of the grant of the interlocutory injunction: BMW Australia Ltd v Brewster (2019) 269 CLR 574; [2019] HCA 45, Edelman at [216]. [140] The hardship to the parties and the nature of it is a central feature in the discretionary considerations to be addressed in the balance of convenience because it requires the court to assess the harm to the plaintiff if there is no injunction and the prejudice or harm to the defendant if the injunction is granted: Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156, Dowsett, Foster and Yates JJ at [62]. The question of whether damages would be an adequate remedy for the plaintiff must always be considered as part of this inquiry, which "involves an assessment by the court as to whether the plaintiff would, in all material respects, be in as good a position if he were confined to his damages remedy, as he would be in if an injunction were granted": Samsung at [62]. [141] The interests of third parties are also relevant to the balance of convenience, including any detriment caused to them if an injunction were refused, and whilst the weight of those matters depends on the circumstances of the case, they will rarely be decisive: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1; [1998] HCA 30, Brennan CJ and McHugh, Gummow, Kirby and Hayne JJ at [65]-[66]. [142] The giving of an undertaking as to damages by the plaintiff is generally an essential condition to the grant of an interlocutory injunction, unless there are exceptional circumstances: First Netcom Pty Ltd v Telstra Corp Ltd (2000) 101 FCR 77; [2000] FCA 1269, Beaumont, Burchett and Emmett JJ at [22]; Goater v Commonwealth Bank of Australia [2014] NSWCA 265, Ward JA (as her Honour was then) at [92]. If it is demonstrated that the plaintiff has no assets, the undertaking offered may be of no assistance, although there is no inflexible rule that plaintiff should be denied interlocutory relief unless a meaningful undertaking is given: Organic Marketing Australia Pty Ltd v Woolworths Ltd [2011] FCA 279, Katzman J at [69], citing Caravelle Investments Ltd v Martaban Ltd (1999) 95 FCR 85; [1999] FCA 1505 Finkelstein J at [25]. If it is known that a plaintiff does not have sufficient resources to satisfy an undertaking as to damages, it may provide a basis on which to refuse an interlocutory injunction: Bond v Gray [2013] NSWSC 1793 at [29]-[30].
Those principles are well known and the essence of them was recently repeated in JC Jewels Pty Limited [2024] NSWSC 532 by Pike J at [41]: Whether the Court should grant the interlocutory relief sought in the present case involves application of the well understood test of: (a) Whether the plaintiff has established a prima facie case/serious question to be tried; and (b) Whether the balance of convenience favours the grant of relief. (see, generally, ABC v O'Neill (2006) 227 CLR 57 at [65]ff per Gummow and Hayne JJ; Samsung v Apple (2011) 217 FCR 238 at [52]).
They were also stated in Nature's Care Holdings Pty Ltd v Chen [2024] NSWSC 14 by Rees J at [41]: The test in Australian law as to whether an interlocutory injunction should be granted is set out in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 by Gummow and Hayne JJ (with whom Gleeson CJ and Crennan J agreed) at 81 [65] (quoting with approval Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1): The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.
In addition, in terms of the serious question to be tried test, Richmond J in Jaken Properties Australia Pty Limited v Anthony Naaman [2024] NSWSC 216 at [46] observed: By "serious question to be tried" is meant that the caveator must make out a prima facie case in the sense that, if the evidence remains as it is, there is a probability that at the trial of the action, the plaintiff will be entitled to relief: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at [620]. This does not mean that the Court must conclude that there is greater than an even chance of the plaintiff succeeding at trial; rather the degree or probability of success required is simply that which the Court thinks sufficient, in the particular case, to warrant preservation of the status quo: Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 at 737; Australian Broadcasting Corporation v Neill (2006) 227 CLR 57; [2006] HCA 46 at [65]. In my view, that test is satisfied in the present case for the same reasons that lead to the conclusion that Mr Naaman still has a good arguable case in respect of both his claim for equitable compensation based on breach of fiduciary duty and his claim based on s 37A of the Conveyancing Act.

Serious question to be tried

Turning first to the question of whether there is a serious question to be tried in this case, I direct my attention to the way in which the Council appears to be pursuing the filling of vacancies on the Council by reference to the casual vacancy provision in r 19.3 of the Rules. In my consideration, there is a seriously arguable case that the Council cannot proceed pursuant to r 19.3 in light of the terms of resolution 2 which was passed at the special general meeting on 27 March 2024 and which requires an election to be held.
There is a seriously arguable case that the terms of resolution 2 as carried at the special general meeting requires there to be an election of the elected positions on the ONU Council immediately, and at the special general meeting. But this election did not take place because the Chair of that meeting determined that such an election would not be able to be completed at the meeting because of the lack of time, and instead directed, as contemplated by r 31(3), that a poll should be taken as the Chair directed, which was to be by the holding of an election within four weeks.
In my consideration, there is a seriously arguable case that the Chair in fact made such a direction at that meeting and therefore, the manner and time at which that poll was to take place is as contemplated by what was directed by the Chair.
Argument was put to me in relation to the operation of r 20 of the Rules. Unfortunately, r 20 is unhappily drafted, replete with several important drafting errors which make it difficult to read. However, it would appear that what is contemplated by r 20, should those drafting errors be overlooked and on a proper construction that gives it meaning, is that what should have in fact taken place at the special general meeting was that there should have been a further resolution that was required to appoint a person to hold office until the expiration of the term of the office holder of the Council member(s) who had been removed.
In other words, whilst there was provision in resolution 2 for the removal of Council members by resolution, there was not in resolution 2 or in any other resolution, the provision for the appointment of nominated persons to immediately fill the vacancy. For that reason, whilst resolution 2 was carried, it did not resolve who in fact was to be appointed in place of those who were to be removed.

Balance of convenience

Turning to the question of the balance of convenience, the evidence indicates that the nominations which have been sought by the Committee of Past Presidents of the Council close at the end of today. There is obviously in train a process pursuant to which people are nominating for the vacant positions on the Council, but it seems to me that to allow that process to continue where it is seriously arguably not in accordance with the Rules will cause significant prejudice by allowing people to be appointed rather than elected to the Council.
As matters presently stand, it appears that no appointments of any new members to the Council have occurred. The status quo which should be preserved is that there should be no appointments of such persons pursuant to r 19.3.
There has been no delay on the part of the plaintiffs in bringing this matter to court. It has only been in the past three weeks that it has become clear exactly how the Council proposed to proceed after the resolutions passed at the special general meeting.
Whilst the making of any interlocutory order of the sort for which application is made by the plaintiffs does not mandate the procedure by which the vacancies on the Council will be filled, at least the interlocutory injunction would restrain the Council from proceeding in a way in which I consider it is seriously arguable they are not permitted to do.
One of the matters to which I need to give consideration in the balance of convenience is the strength of the case that is made for final relief. I do not consider the plaintiffs' case to be overwhelmingly strong, but it does seem to me that it is sufficiently strong that the balance of convenience lies in favour of the grant of the interlocutory injunction.
The matter which is of primary concern to me is that resolution 2 was passed by a vote of the members at the special general meeting, but what appears to have taken place subsequent to that is not in keeping with what one would expect resolution 2 permits.
I am also guided by the fact that the members of the Council who were removed by resolution 2 do not comprise the whole of the Council. From my understanding of the position, when all of the members of the Council are present, there is something in the order of 30 plus members of the Council. It appears that the vacancy has been created in respect of 15 of those positions, which means that the Council can still continue to operate, as under r 21(5) there is a required quorum of 10 Council members pending the holding of and the declaration of any election which might be held in due course to fill the vacancies.
It does not seem to me that there are any significant adverse practical consequences to the ONU if the interlocutory injunction is granted.
On the other hand, if the interlocutory injunction is not granted and the vacancies on the Council are filled by way of the process that the Council appears to have in mind, the effect of resolution 2 that was passed by the members would be rendered nugatory, and the wish of the majority of the members of the ONU would effectively be ignored. The courts have been reticent to become involved in the affairs of organisations where it would have the effect of subverting the will of the members in matters such as election processes: see Countouris v Kallos (2008) 67 ACSR 543; [2008] NSWSC 840, Young CJ in Eq at [14]; Cox v The Animal Welfare League of New South Wales [2017] NSWSC 374, Ward CJ in Eq (as the President then was) at [30]-[31]; In the matter of Sri Guru Singh Sabah, Sydney Inc (The Sikh Association of Sydney) [2017] NSWSC 1092, Brereton J at [37]. But in my view, the obverse is true: the court should become involved in election processes where what is envisaged is not in keeping with the will of the members.
Taking all these matters into account, it appears to me that the balance of convenience lies in favour of the grant of the interlocutory injunction sought.

ORDERS

For the reasons expressed above, I propose to order: 1. Upon the plaintiffs giving the usual undertaking as to damages, until 20 June 2024 or further order, order that the defendant, by its Council, be restrained from appointing members to the Council of the defendant pursuant to r 19.3 of the Rules of the defendant. 2. Reserve all question of costs. 3. Order that the plaintiffs file and serve any further evidence in support of the originating process filed on 17 May 2024 on or before 4pm on 10 June 2024. 4. Order that the matter be listed for further directions in the Corporations' Directions List on 17 June 2024. 5. Order that these orders be entered forthwith.

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