- Cypjayne Pty Limited v Rodskog

Supreme Court of NSW|2024-08-12|Before: Black J

Solicitors: O'Loughlin Westhoff (Plaintiff) No appearance (Defendant) File Number(s): 2024/227605

Nature of the application

By Amended Originating Process filed, by leave, on 12 August 2024, the Plaintiff, Mr Kinnane seeks a declaration that he is a member of the Bulahdelah Tennis Club Inc ("Club") and an order under s 1322(4)(a) of the Corporations Act 2001 (Cth) ("Act") as applied by s 96 of the Associations Incorporation Act 2009 (NSW) that his admission to the membership of the Club is not invalid by reason of any contravention of the requirements of the Club's Constitution or a provision of the Associations Incorporation Act. An alternative declaration is sought, but will not be necessary to address it in the relevant circumstances. I should note that it is preferable to address the question of Mr Kinnane's admission to membership of the Club before any question of whether he remains a member of the Club.
I should also note that, notwithstanding that the Club has plainly been given notice of the application, it has not appeared, and the application falls to be determined on the basis that the Club has not sought to, and has not, identified any basis on which the position which it appears to have adopted can be sustained.

Affidavit evidence

Mr Kinnane reads his affidavit dated 18 June 2024 which refers to the somewhat informal circumstances in which he was admitted as a member of the Club, by a process which appears to have been extended to members generally, by which participants in a weeknight social competition who were not already members of the Club would be asked to pay membership dues by cash or bank transfer at the start of the relevant competition, and paper records of the membership and membership payments would be handwritten in an exercise book by the former President and Secretary of the Club. Mr Kinnane's evidence is that he paid his membership dues in that way, until the Club subsequently introduced a process for on-line membership, and that he became a member of the Club in January 2018 by paying his membership fee in cash to the then former President and Secretary of the Club. That evidence is not contradicted by the Club.
Mr Kinnane's evidence, also not controverted by the Club, is that he subsequently participated in members-only competitions and voted in annual general meetings, and made payments to the Club of annual membership dues, again by cash or bank transfer. He also refers to having been elected secretary of the Club for the 2021 - 2022 year and to his subsequently having become President of the Club for a period until his resignation when he and his family moved to Newcastle, in January 2023, and he resigned as President of the Club but not, it appears, as a member of the Club. Mr Kinnane also refers to the circumstances in which the Club set up a website to modernise its booking and membership systems, which commenced operating in about August 2022, and his evidence is that he paid annual membership dues using the membership form on the Club's website in that period, and a membership confirmation email for that period is in evidence.
Mr Kinnane also there addresses the circumstances in which he became President of the Club for the 2022 - 2023 year and resigned the presidency, when he and his family moved to Newcastle. His evidence, again not contested by the Club, is that he did not then resign his membership of the Club, where he continued to own property in the region and had many friends in the region, and is now in the process of relocating back to his property in the region. Mr Kinnane refers to a delay in payment of his membership fees for the 2023 - 2024 year, when the Club did not send reminder or renewal notices to members, and to his attempt to complete the on-line form to pay membership dues for the 2023 - 2024 year. He also refers to the circumstances in which he paid membership, at least for a half year period, from February 2024, where the website automatically set the fee for that half year period depending when the form was completed. He also refers to circumstances in which differences appear to have arisen between him and at least some members of the executive of the Club, concerning issues as to management of the Club, which I need not address, and to the reasons why he wishes to retain his membership of the Club. Mr Kinnane also refers to correspondence between his solicitors and a solicitor then retained for the Club in respect of the issues concerning his membership, but I have noted above that the Club has not sought to sustain any exclusion of Mr Kinnane from membership, by appearing and taking any active role in this application.
By a second affidavit dated 22 July 2024, Mr Kinnane refers to a lack of access to documents relating to the Club and to the Club's failure to respond to a notice to produce issued by the Court, and again addresses the question of payment of membership fees. He confirms that he has not been served with any notice of complaint to the committee about his conduct, and has not been the subject of an expulsion process as contemplated by the Club's constitution.
The exhibit to Mr Kinnane's first affidavit in turn includes the Model Rules for associations incorporated under the Associations Incorporation Act which it appears were adopted or substantially adopted by the Club. Those rules contain a procedure for admission of a person as a natural person, contemplating nomination for membership and approval for membership by the committee of the association, and provide a process for such a nomination to occur. Rule 4 provides for cessation of membership, relevantly, if a member resigns membership or is expelled from a club. As I have noted above, Mr Kinnane's uncontested evidence is that he did not resign his membership, and that no process to expel him from the membership has been undertaken. Rule 6 sets out the requirements for resignation for membership, which requires written notice of at least one month of the member's intention to resign, with the member ceasing to be a member on the expiration of that period. Mr Rogers, who appears for Mr Kinnane in this application, acknowledges that that provision may not be exhaustive, on the basis of the case law, but it is not necessary to address that question, where the Club does not appear and does not seek to contend that any matters have given rise to a resignation of Mr Kinnane's membership. Clause 8 in turn provides for the payment of fees and subscriptions, but again the Club does not contend that the matters to which Mr Kinnane refers amount to a failure to pay relevant fees on his part. Clauses 11 and 12 provide for a mechanism for the termination of membership, for disciplinary reasons, but Mr Kinnane's evidence is that the Club has not invoked that mechanism, and the Club again does not appear or contend to the contrary.
Mr Kinnane also reads the affidavit of his solicitor, Mr O'Loughlin dated 8 July 2024, which refers to service of the proceedings and to the prior correspondence with the solicitor then acting for the Club, and to his having sent copies of relevant documents both to that solicitor and to an email address apparently used by the President and Secretary of the Club. A second affidavit dated 8 August 2024 of Mr O'Loughlin in turn addresses further correspondence, including notice given to the Club of this hearing.

Whether Mr Kinnane was validly admitted to membership of the Club

I have referred above to the somewhat informal process which the Club appears to have adopted for the admission of Mr Kinnane to membership. Mr Rogers relies on s 1322(4) of the Act in order to seek to validate Mr Kinnane's admission to membership, but fairly emphasises that the matters which he puts in that respect would apply equally to other members who were admitted in similar circumstances to those described in Mr Kinnane's evidence. Mr Rogers makes clear that Mr Kinnane does not contend that the position for which he contends has the consequence that he is the only member of the Club, where it is likely that other members are in the same situation as himself in respect of their informal admission to membership, by the process which he describes.
Before turning to s 1322(4) of the Act, I should first note that it seems to me that it is not necessary for Mr Kinnane, or other members in a similar position to rely on that section. Section 1322(2) of the Act provides that a proceeding under the Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid. It is plain enough that s 1322 of the Act applies to associations governed by the Associations Incorporation Act, by reason of ss 96 and 97 of the Associations Incorporation Act, and reg 18 of the Associations Incorporation Regulation 2016 (NSW), and the operation of those sections was described in my decision in Re Order of AHEPA NSW Inc [2018] NSWSC 458, which I adopt without repeating. I also there noted that the same conclusion had been reached in earlier decisions.
Here, it seems to me that the process for admission of Mr Kinnane and other members in similar circumstances to membership was a procedural matter, and the informality of that process is a "procedural irregularity" within the scope of s 1322(2) of the Act. The term "proceeding" in that provision refers to a proceeding which the Act requires to be undertaken or one that is required to achieve a particular legal consequence, relevantly, membership of the Club, and a "procedural irregularity" can arise where it departs from the prescribed manner of doing an act as distinct from involving a breach of the substance of the act. Here, it seems to me that the informal process adopted for the admission of membership would plainly have departed from the procedure specified in the Model Rules, to the extent they have been adopted by the Club, but did not alter the substance of the act which was undertaken. It seems to me that the admission of persons to membership in that informal way did not cause substantial injustice, and that no order of the Court would be required to remedy that injustice; to the contrary, in the context of a small community-based organisation, there is no injustice in admitting persons to membership in a somewhat informal way, or in meeting the expectations which would be created by their admission to membership in that way; to the contrary, any injustice would arise in not recognising the position which had been, albeit informally, created in that way. For these reasons, it seems to me that no order under s 1322(4) of the Act is strictly required in respect of either Mr Kinnane or those who were admitted to membership in a similar way to Mr Kinnane.
Nonetheless, an order under s 1322(4) of the Act can be made, in circumstances that s 1322(2) otherwise applies. I set out the requirements for the making of such an order at length in Order of AHEPA at [22]ff and I adopt, without repeating, that analysis. I am satisfied that, here, the requirements under s 1322(6)(a) of the Act for making an order under s 1322(4) of the Act are satisfied, because the informal admission of Mr Kinnane (and others in similar circumstances) to membership is essentially of a procedural nature; there is no suggestion that the persons concerned in any failure to comply with the requirements of the Model Rules in that respect acted other than honestly; and it would be just and equitable to make that order, so as to satisfy the expectations created by the informal admission to membership, rather than the reverse. It also seems to me, for the purposes of s 1322(6)(c) of the Act, that no substantial injustice has been or would likely be caused to any person by that somewhat informal process for the admission of persons to membership, again bearing in mind the community-based nature of the organisation and the apparently small scale on which it conducts its activities. For these reasons, I will make the second order sought by Mr Kinnane, so as to confirm his position as a member of the Club. While the same order would potentially be available to others in a similar situation, those other persons have not sought such an order, nor is it necessary for them to do so given the conclusion which I have reached above as to the application of s 1322(2) of the Act.
Mr Kinnane in turn seeks a declaration that he is a member of the Club. As a matter of substance, the basis for such a declaration is established, because I have found that he was admitted to membership of the Club; the Club does not contend that his delay in payment of the annual fee, in 2023/2024, amounts to a matter that would bring about a loss of his membership; and the Club does not contend, and the evidence does not suggest, that he either resigned his membership or that the process for his expulsion from membership was undertaken.
I have given consideration to whether, in these circumstances, it is appropriate to grant declaratory relief, which turns, in part, upon the consequences which would follow if the Club, having not appeared in the proceedings, also ignored any declaration that was made by the Court. I recognise that the Court will not grant a declaration, even if it has jurisdiction to do so, unless it is satisfied both that the declaration sought is appropriate and that it has sufficient practical utility: Neeta (Epping) Pty Limited v Phillips (1974) 131 CLR 286; [1974] ACA 18. However, it seems to me that this case, like the position in Cypjayne Pty Limited v Rodskog [2009] NSWSC 301 and that considered in my decision in JR Consulting & Drafting Pty Ltd v Cummings [2014] NSWSC 1700 at [10], is one where the declaration would resolve the position between the parties, as a matter of fact and as of law, extinguishing a current factual and legal dispute between them. This is not a position where a declaration is merely an anterior step to inevitable future litigation, although the possibility of further disputes cannot be excluded.
As Mr Rogers points out, the declaration sought does not lack practical utility where, first, the confirmation of Mr Kinnane's membership status will allow him to exercise his rights as a member, at least so far as the Club acts in accordance with the law as determined by the Court; if the Club does not do so, it may allow Mr Kinnane to seek the intervention of the Department of Fair Trading, in the affairs of the Club, although it is to be hoped that result would be avoided; and, if the Club responds to the application, by acknowledging Mr Kinnane's current membership, and invoking the expulsion process, then it will at least afford Mr Kinnane the rights to which he is entitled under the Rules, the benefit of procedural fairness, and a decision of the members of the Club in respect of that process.
For that reason, I have concluded that the matter is one in which the declaration sought can properly be made, where I am satisfied of its factual and legal basis.

Costs

Mr Kinnane seeks his costs of the application. Plainly, it would have been preferable if it were not necessary to make an order for costs against an apparently small incorporated association, providing desirable sporting facilities in a local community. However, it seems to me that Mr Kinnane is here entitled to an order for costs, where the Club could have conducted itself differently. It could, for example, have responded in a constructive way to the matters that Mr Kinnane's solicitor had raised with it; it could, if it wished, filed a submitting appearance, except as to costs, and have left Mr Kinnane in a position that he needed to establish the position for which he contended, but with clarity that the Club would comply with the position as determined by the Court. Here, the Club has not responded constructively to the application; it has not filed a submitting appearance; and it has put Mr Kinnane to the costs of bringing this application, notwithstanding that it did not actively participate in it. In these circumstances, it seems to me that this is a proper case in which to make an order that the Club pay Mr Kinnane's costs of the application, applying the usual approach that costs follow the event, while recognising that that is an unfortunate result which is a product of the Club's approach to the application. Mr Kinnane seeks and I will allow, the opportunity to apply for costs on a gross sum basis.

Orders

For these reasons, I make the following orders:
Declare that the Plaintiff is a member of the Defendant.
Order, under s 1322(4)(a) of the Corporations Act 2001 (Cth) (as applied by the Associations Incorporation Act 2009 (NSW) and Regulations) that the Plaintiff's admission to membership of the Defendant is not invalid by reason of any contravention of the requirements of its constitution or a provision of the Associations Incorporation Act.
The Defendant pay the Plaintiff's costs of the proceedings, as agreed or as assessed.
Liberty to apply, within 14 days, in respect of a gross sum costs order.

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: 29 August 2024

Associations Incorporation Regulation 2016(NSW)

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