Dachser v Waco

2. An order, for so long as the Executive Board of the WACO System has not approved an exception for exclusivity filed by the Defendant pursuant to the Resolution concerning the Plaintiff, restraining the Defendant by itself, its servants and agents or otherwise howsoever from dealing with Fracht FWO AG, or any other entity other than the Plaintiff, as its agent in the Federal Republic of Germany for air freight industry services.

3. An order that, for so long as the Plaintiff and the Defendant are members of the WACO System, the Defendant be required to continue to trade with the Plaintiff including, without limitation, by continuing to act as agent for the Plaintiff in relation to freight forwarded by the plaintiff to Australia.

Paragraph 1A was added by my granting leave to amend the Summons on 20 October 2000. 6 The essential issue is whether the plaintiff has the standing to bring these proceedings, it being submitted by the defendant that under Swiss law the remedy for any alleged breach of the obligations or duties imposed on the defendant should be brought by the Organisation conformably with the arbitration provisions in the Organisation's Articles of Association.

The WACO System Constituent Documents 7 Article 1 of the Articles of Association, ("the Articles"), provides, under the heading "Constitution, Name and Legal Form":- "Under the name THE WACO SYSTEM (hereafter referred to as 'the Organisation') a non-governmental, international, non-profit making organisation, is hereby organised and constituted in the form of an association within the meaning of Art. 60 seq of the Swiss Civil Code. The following Articles including the Organisation's Operations Marketing and Financial Resolutions, as from time to time passed or enacted by the General Meeting or the Executive Board, shall apply to the relationship between any Member and the Organisation, as well as, where applicable, to the relationship amongst the Members."

As the provisions of the Code are also called "Articles", I shall, in the hope of avoiding confusion, refer to them as "Section" or "Sections". 8 Article 2 provided that the registered seat of WACO is Zurich, and Article 3 dealt with aims and objectives, the first being to promote for the mutual benefit of the members "the carriage of goods by air between the Members of the Organisation". 9 Article 5 provided, under the heading "Membership":- "A) The Organisation shall consist of companies or corporations or other legal entities engaged in the airfreight industry who have been admitted to Full Membership or Associate Membership by the Executive Board and who shall accordingly have all the rights, privileges and duties connected with such Membership in accordance with these Articles and/or the Trading Rules and/or Regulations enacted by the Executive Board from time to time in accordance with Article 9. B) Not more than one applicant per country may be admitted to Full Membership and such applicant shall have no active airfreight forwarding office or its own Organisation in a country where another Full Member is situated. Any exception must be advised to the Chairman of the Executive Board and approved by the Executive Board. C) Associate Membership shall be subject to the limitation that no such Member shall maintain an active airfreight forwarding office or Organisation of its own in a country where a Full Member is situated." 10 Article 7 dealt with termination of membership and, relevantly for present purposes, Articles 7(A)(4) and (5) stated it should occur:- "(4) If effective board or shareholding control of any Member shall pass to any person, firm or corporation and that change has not previously received the approval of the Executive Board, or if any Member of the Organisation shall become a member of any substantially similar or competitive body or association. (5) If more than one quarter of the Members of the Organisation notify the Executive Board of their refusal to further co-operate with a Member, the Executive Board shall be deemed authorised to terminate such Member's Membership by giving six months' notice." 11 Article 8 is concerned with essentially financial duties of members, and Article 9 provided, under the heading "Specific Duties of Members":- "Within the scope of the aims and objectives of these Articles as from time to time amended and in implementation thereof, the Executive Board may place specific duties on Members or Categories of Members by enacting and appropriately promulgating rules and regulations." 12 Article 11 provided that the members in general meeting "are the supreme authority of the Organisation having inalienable competence" in relation to the amendment of the Articles and various other matters. 13 Article 12 provided that the Executive Board shall consist of a minimum of three and a maximum of five representatives of Full Members in certain areas, and for the Board's operation. Sub-article (D) stated that the Board has competence on all matters not reserved to the general meeting and that "Specifically the duties and responsibilities of the Executive Board shall include without limitation", inter alia:- "The determination of the strategies to be followed in pursuing the objectives of the Organisation and enactment of rules and regulations in implementation thereof; … The Management of the Organisation subject to the supervisory powers of the general meeting. … Decision on any disputes relating to infringement of the Articles of Association or of Resolutions of the Organisation and, the case being, exclusion of such Members." 14 Article 19 provided:- "The Organisation having been constituted under Swiss law, these Articles shall be interpreted and any dispute or disagreement between Members or any Member and the Organisation shall be determined in accordance with the laws of Switzerland." 15 Article 20 provided:- "Arbitration In the event of any serious dispute or disagreement between Members or any Member and the Organisation that cannot be resolved by the parties themselves either party shall refer the matter to the Executive Board, c/o the Secretary General's Office, for arbitration. In conducting the arbitration, the Executive Board shall establish its own rules of procedure and to the extent that it fails to do so, the rules on Arbitration of the Code of Civil Procedure of the Canton of Zurich shall be determining. The Chairman of the Executive Board and, if prevented, the Vice Chairman shall chair the Arbitration. In the event that the company of any Member of the Executive Board is involved in the Arbitration, such Board Member shall abstain and the remaining Members of the Executive Board shall appoint a Deputy who need not be a Member of the Organisation. The arbitrary award of the Executive Board shall be final and binding on all parties concerned." 16 In May 1994 a Manual of Resolutions was issued. The introduction stated that its purpose was to make members fully aware of their obligations and requirements towards other members when they commit themselves to membership of WACO. It stated that the resolutions "accepted are binding and are issued in accordance with the provisions contained in the 'Articles of Association of WACO'", and that the resolutions "can only be altered, changed or amended with the approval of the Executive Board". It continued:- "If any member is unable to comply fully with a Resolution, for whatever reason, a written statement giving the reason why must be submitted to the Secretary General. The statement will be released to the Executive Board for consideration and the member concerned will then be notified of the decision. If the reservation or exception is accepted it will be added to the Manual at the next reprint of the page to which it refers. However, notwithstanding any contractual or moral obligations, on the part of one member to another, it may be permitted for members to depart from the laid down procedures, provided it is bilaterally agreed to do so and providing it does not affect any other member. In such cases, no request for a reservation or exception is required but notification must be made to the Secretary General. Details will then be kept on file for record purposes and for reference in the event of any dispute which may subsequently arise." 17 A number of resolutions, including G.R.1.1, which is a General Resolution, are set out under the heading "Specific Duties of Members", It states:- "To the extent permitted by law Full Members shall trade with each other on an exclusive basis and the same shall apply to trade between Associate Members and Full Members. Requests for exceptions from exclusivity may be filed to the Chairman of the Executive Board for approval by the Board. Such request shall be filed in writing stating the grounds at least 60 days unless otherwise agreed in advance of the date as of which the member requesting exception wishes to be released from exclusivity." 18 On 2 June 1994 Mr P. Pluess, who was authorised by the defendant to do so, signed an acknowledgment of the receipt of the revised Articles of Association, Fifth Issue, approved by the General Assembly on 18 April 1994 at the Istanbul General Meeting and of an up-dated set of the Financial Resolutions and new General Resolutions G.R.1.1 and G.R.1.3 referring to "Specific Duties of Members". The acknowledgment continued:- "I declare herewith that our Company will with immediate effect, comply to the rules and conditions as stipulated in the Articles of Association and will strictly follow to the regulations as described in the Resolutions Manual, in particular to its General Section G.R.1.1 - G.R.1.3 referring to Specific Duties of Members, as well as the Financial Section F.R.1.1 - F.R.1.10 referring to Payment between Members, and F.R.5.1 - F.R.5.5 referring to the Payment of Subscriptions."

It was not in issue that all members signed a document in the same terms.

The Issues 19 It is convenient to consider the issues by reference to the plaintiff's Contentions and the defendant's response to them. 20 The incorporation of the plaintiff and the defendant and their entitlement to sue and be sued respectively are admitted, as are the facts that the plaintiff has been, since 25 November 1981, the Full Member for the Federal Republic of Germany, and the defendant has been, since about April 1988, the Full Member for Australia. It is not in issue that Fracht AG was the Full Member for Switzerland from at least 1973 until its membership was terminated with effect from 31 May 1999. 21 In paragraphs 3 and 4 the plaintiff asserts that WACO is an international association of entities involved in the business of air freight forwarding and that its members are bound by the WACO Articles. The defendant does not admit these facts and pleads that WACO is organised and constituted as a non-governmental, international, non-profit making organisation in the form of an association within the meaning of Section 60 et seq of the Code, and that by Article 19 "and otherwise according to the private international law of New South Wales" the legal effect of the Articles is to be determined according to the law of Switzerland. 22 The essential nature of the dispute is set forth in paragraph 4 of the Defence, which asserts that according to the law of Switzerland:- "(1) the WACO Articles, in so far as they give rise to rights, privileges and duties connected with membership of the WACO System, can be enforced only by the WACO System, and (2) neither the WACO Articles, nor any rights, privileges and duties connected with the membership of the WACO System to which they give rise, can be enforced against the defendant, whether at law or in equity, and whether by injunction, or in an action for damages, by a member of the WACO System such as the plaintiff …" 23 It is then asserted:- "further, and in the alternative, upon the proper construction of Article 5(A) of the WACO Articles, it does not give rise to an obligation that is enforceable against the defendant, whether at law or in equity, and whether by injunction or in an action for damages." 24 In paragraph 5 of its Defence the defendant denies the allegation in paragraph 6 of the plaintiff's Contentions that Article 5A obliges the members to comply with resolutions enacted by the Executive Board in accordance with Article 9, it being asserted in the Defence that Article 5A:- ".. relevantly provides that members of the WACO System shall have all of the rights, privileges and duties connected with membership of the WACO System in accordance with, inter alia, regulations enacted by the Executive Board from time to time in accordance with Article 9." 25 In paragraph 7 of its Contentions, the plaintiff asserts that on or about 18 April 1994, in accordance with Article 9, the Executive Board enacted a set of resolutions including G.R.1.1, the terms of which were then summarised. The defendant's response was that it did not admit those facts save to the extent that it admitted that in 1994 the Executive Board enacted G.R.1.1 in the terms I have quoted. 26 In paragraph 7 of its Defence, which is responsive to paragraph 8 of the plaintiff's Contentions, the defendant admitted that by a document dated 2 June 1994 and signed by Mr Pluess on its behalf, it confirmed receipt of Resolution G.R.1.1 and declared to WACO "that it would strictly follow, inter alia, Resolution G.R.1.1". 27 The defendant admitted that on 1 November 1999, at a meeting of its shareholders, Mr Pluess tabled a letter of that date recording its decision to file an exception against the plaintiff. Although the defendant did not admit that no request for an exception complying with the requirements of Resolution G.R.1.1 had been filed by it concerning the plaintiff with WACO, it was not in issue that this had not occurred and the defendant admitted that no such request had been approved by the Executive Board; that since 1 November 1999, despite protests from the plaintiff and advice from the Executive Board, no request for an exception had been lodged with the Chairman of WACO or approved by the Executive Board; that the plaintiff had maintained that it is free to deal with other entities in the Federal Republic of Germany on an exclusive basis from 15 February 2000; and that from about 16 February 2000 the defendant commenced trading with Fracht FWO AG, a company related to Fracht AG, which is not a member of WACO, and as its exclusive agent. The defendant did not admit that it had taken steps to divert business from the plaintiff Fracht FWO AG. 28 The defendant admitted that on 16 May 2000 it requested the plaintiff to discontinue using it as its exclusive Australian agent by no later than 30 June 2000; that from or about February 2000 it has not traded with the plaintiff on an exclusive basis; that the plaintiff has demanded that it comply with Resolution G.R.1.1; and that despite the demands made it continues to trade with Fracht FWO AG, although the defendant does not admit that it is doing so "in breach of its obligations under Resolution G.R.1.1". 29 In paragraph 19 the plaintiff pleads:- "Waco Australia threatens and intends, unless restrained by this Honourable Court from so doing, to continue to act in breach of Resolution G.R.1.1." 30 The defendant responded that it admitted, subject to an undertaking it gave to the Court on 13 June 2000 and to any other orders that may be made, that "it does not intend to trade with the plaintiff on an exclusive basis". 31 In paragraph 12 of its Defence, it continued:- "As to the whole of the plaintiff's claim, the defendant says as follows: (a) It repeats the facts and matters set out in sub-paragraph 4(b) hereof, and says that, by reason thereof, neither Resolution G.R.1.1 nor the WACO Articles give rise to any obligation that can be enforced against the defendant, whether at law or in equity, and whether by injunction or in an action for damages, either by the plaintiff or, in the alternative, at all, and, accordingly, the plaintiff is not entitled to commence or maintain its action herein. (b) Further, (i) by Article 20 of the WACO Articles any disagreement between members of the WACO System that cannot be resolved by the parties themselves shall be referred to the Executive Board for arbitration; (ii) the defendant is ready and willing to refer the disagreement which is the subject of the plaintiff's claim herein to arbitration in accordance with Article 20; and (iii) according to the law of Switzerland, the plaintiff is therefore not entitled to maintain its action herein." 32 On the hearing Mr Neil confirmed that the defendant remained prepared to refer the dispute to arbitration and, after taking instructions, he said that there are five members of the Executive Board to three of whom, namely Messrs Nogani, Bondelle and Hassler, the defendant would object on the basis that they were "involved in the Arbitration". He continued that his instructions were that the defendant would not object to the other two members, Messrs Aris and Chong, sitting as arbitrators and appointing deputies in place of the other three. Thus the contractually contemplated dispute resolution mechanism can operate. However, these statements did not lead to a resolution of the present dispute.

Whether The Plaintiff Lacks Standing To Bring These Proceedings 33 I have set out the terms of Article 1. Section 60 provides:- "Associations which have a political, religious, scientific, artistic, charitable, social or any other than an industrial object, acquire the status of a person as soon as they show by their constitution their intention to have a corporate existence. The constitution must be drawn up in writing and state the object, the capital and the organisation of the society."

I shall refer to the association as "the society" when using the term generally. 34 Section 64 states that the general meeting of members is the highest organisation of the society, which is summoned by the directors; and Section 65 provides:- "The general meeting decides on the admission and expulsion of members, appoints the directors and disposes of all matters not specifically assigned to any other organ of the society. The general meeting has the control of the other organs of the society and can at any time revoke the authority conferred upon them, without prejudice, however, to any rights which they may possess by special agreement. The power of revocation on material grounds is an absolute right granted to the general meeting by law." 35 Section 66 requires all resolutions affecting the organisation to be passed by the general meeting, and Section 67 gives all members equal votes at the general meeting and provides for resolutions to be passed by a majority of the members present. Section 68 prohibits a member from voting on motions that relate to any transactions or legal proceedings between the society, of the one part, and the member and certain people related to him, of the other. 36 Section 69 provides:- "The directors have the right and the duty to manage the affairs of the society and to represent it in accordance with the provisions of its constitution." 37 Section 72 states:- "The constitution can determine the grounds for the expulsion of a member. It can also sanction expulsion with non-disclosure of the grounds. In this case no right of action arises in regard to the grounds for the expulsion. Where, however, the constitution contains no provisions on this point, a member can be expelled only by a resolution passed at a general meeting and on material grounds." 38 Sections 74 and 75 provide:- "74. No change in the object of the society can be forced upon any of its members. 75. Every member of a society is absolutely entitled by law to apply to the court to avoid any resolutions passed by the society without its assent, which are contrary to law or the constitution of the society, provided the application is made within one month from the day on which he became cognizant of such resolutions."

The Applicable Law 39 Certain matters in relation to foreign law were not in issue. Firstly, it was agreed that an expert in foreign law may give evidence as to what the law is, as a matter of fact, but not as to the effect it may have in any given circumstances. Findings as to what constitutes the law and its consequences are for the trial Judge. Secondly, it is to be presumed that Swiss law is the same as New South Wales law except to the extent that a material difference is proved to exist: United States Surgical Corporation v Hospital Products International Pty Limited & Ors (1982) 2 NSWLR 766 at p.799. 40 In Exhibit 1, paragraph III.1, Dr C.E. Benz, the expert in Swiss law called on behalf of the defendant, said that Swiss Federal law on societies does not provide for a so-called "actio pro socio", so "that a member does not have standing against another member to legally enforce membership duties of whatever qualities". He continued that members of societies are neither contractually nor legally bound amongst themselves, and:- "Hence their rights and duties as members only exist towards the society as such. Thus if a member is in breach of the constitution or of the law it is up to the society to make sure/enforce that a member only carries out his duties." 41 In sub-paragraph 2, Dr Benz said:- "A direct legal relationship between members of a society amongst themselves and thus the possibility of a member to legally enforce the duties of another member could theoretically be established by the constitution of a society. However the constitution would have to contain a provision which would explicitly stipulate such a legal relationship (i.e. 'the members have the right to legally enforce membership duties against other members', or the like)." 42 Dr Benz said that even if a member did have standing to enforce a board resolution against another member "it would be questionable whether a resolution of the board would be a sufficient cause of action", because the legal basis of the rights and duties of members flow from Section 60 and the Organisation's constitution. He continued that resolutions of the Board have an executive function and are not meant to establish rights and duties of members:- "Thus if a claim against a member is simply based on a resolution of the board of the society this would not be the proper cause of action, even if the resolution is not in accordance with the law or the constitution. The claimant would need to base his claim on Art. 60 et seq CO or the constitution directly."

Thereafter, Dr Benz considered the arbitration clause which, for the moment, I shall leave aside. 43 In his affidavit of 25 August 2000, Dr Hoffet, the expert in Swiss law called by the plaintiff, dealt with the question whether that law permitted societies to create reciprocal rights and obligations between their members, which are enforceable at the suit of one member against the other, commencing at paragraph 28. He said that the Code does not deal with the question "explicitly" and that:- "If and to what extent the membership in an association does nevertheless create direct legal relationships between members is not answered by precedents of Swiss Courts at all while the academic analysis of the position is not uniform." 44 He commenced a consideration of the views of two academic writers, Professor Heini and Professor Riemer, both of whom, he said, "have published widely recognised treaties (sic) on Swiss law regarding Associations". He said that according to Professor Heini "membership only creates rights and obligation vis-à-vis the association" and that:- "This also applies to situations when articles of association create rights and obligations in the immediate interest of the members." 45 He continued that according to Professor Heini's view:- "If the articles contain provisions according to which the members should be placed under reciprocal obligations, they would be deemed to enter into a contract with other members when joining the association … The membership would only be the cause but not the legal reason of the immediate legal relationship between members .." 46 He also said that according to Professor Heini, decisions of the society's bodies would only have executive character, and without their specific establishment in the Articles of Association they are not liable to create membership rights and obligations. 47 Dr Hoffet said, paragraph 32, that according to Professor Riemer membership obligations in principle only arise vis-à-vis the society, (for which he relied on an unreported decision of the Swiss Federal Supreme Court), such that there was no direct relationship between members of a society pursuant to the substantive law. He continued:- "Therefore, it is a matter for the association to enforce the fulfilment of the membership obligations amongst members. If the association or its competent body are in default, there are legal means to take assertive action to cure such defaults (e.g. summoning a general assembly pursuant to Art. 64 para 3CC or, for instance, convening a meeting of the Executive Board in the sense of Art. 65 para 2 and 3CC). Thus, the individual member is, in principle, not entitled to sue for the fulfilment of the membership obligations of another member (Riemer, op. cit. Bd. 1/3, 2. Teilband, 659 ff)." 48 Dr Hoffet referred to Professor Riemer's opinion that direct legal relationships between members can be created by the Articles or other internal rules or obligations, and by members entering into agreements independent from the Articles. In paragraph 34 he said:- "Summarising the above, both based on Heini's and Riemer's views, it is possible for associations to create reciprocal obligations between members, enforceable at the suit of one member against the other, be it directly in the articles or internal regulations (Riemer) or indirectly by means of a second legal relationship, i.e. an agreement between the members resulting from the provisions of the articles (Heini)." 49 He was asked what circumstances created such rights and obligations and, in particular, whether the Articles of Association must contain a provision explicitly and generally creating direct legal relationships between its members as stated in Section III, paragraph 2 of Dr Benz's opinion, to which he replied, in paragraphs 35 and 36:- "35. Pursuant to Heini's theory, direct legal relationships between members are not created by the articles. If articles contain provisions according to which members are subject to immediate reciprocal obligations, members are deemed to enter into a contract with the other members by joining the association (cf. supra d.). 36. Pursuant to Riemer, however, it is possible that the articles state the direct creation of such rights. Therefore, the respective provisions need to be part of the articles of association and must be in writing (Art. 60 para 2CC; regarding the delegation of competencies to the Executive Board cf. infra (e)(iii))." 50 He concluded, in paragraph 37, that based on both views "the creation of direct relationships between members requires a respective provision in the articles of association". 51 He was nextly asked whether, in the absence of a provision in the Articles of Association explicitly and generally creating direct legal relationships between members, specific reciprocal rights and obligations could be created amongst them. He replied in the affirmative, continuing that:- ".. the members of an association are free to enter into contracts amongst each other on the basis of agreements directly between themselves (e.g. Art. 530 ss of the Swiss Code of Obligation …). Such agreements are, however, independent vis-à-vis the association and therefore irrelevant in connection with association penalties (Riemer op. cit., Bd. 1/3, 2 Teilband, 660)." 52 Dr Hoffet was nextly asked to consider whether, if members of a society are permitted by the Articles to create specific reciprocal rights and obligations between each other, this must be done by the Articles, or whether it could be done by resolution of the members or the Board of Directors, assuming the Articles permitted such resolutions. 53 He said that pursuant to Professor Riemer, the Articles may create direct legal relations between the members, and continued, in paragraph 39:- "The question whether the Executive Board is entitled as well to create such legal relations e.g. through the enactment of rules or regulations has to be answered in the affirmative provided that this competence is established in the articles of association. This results from Article 69" (of the Code), "pursuant to which the Executive Board has the right and the duty to manage the affairs of the association and to represent it in accordance with the provisions of its articles of association. Thus, the Executive Board has the right or the duty to pass resolutions within the scope of its delegated competences pursuant to the articles of association and within the scope of the association's purpose clause."

He said that, according to Professor Riemer, it is conceivable that, for example, obligations regarding financial contributions of certain members vis-à-vis the society are drafted in a manner that other members receive a direct right to claim such contributions in favour of the society. He also considered, according to Professor Riemer, that other duties such as support, delivery or purchase obligations could be created, and that a provision in the Articles regarding joint liability of all or certain members regarding contributions may create direct legal relations between the members also. 54 In paragraph 41, he referred to the fact that members are free to create legal relations through entering into separate agreements, and continued:- "However, due to the fact that such agreements are entered into between members independently from the articles, claims arising out of the obligation to perform a duty or to refrain from certain conduct cannot be sued for under the articles e.g. with an action for annulment within the meaning of Art. 75 CC … Such claims would rather have to be based on the direct contractual relationship created between members." 55 Dr Hoffet was next asked whether the fact that a member has explicitly and in writing confirmed its willingness to comply with a resolution by the members or the Board of Directors would affect his opinion. He answered that by reference to the views of Professors Riemer and Heini, the former stating that an explicit acceptance in writing is not necessary for a direct obligation to be created, because the legal relations between the members arise directly from the Articles of Association and are, therefore, binding on members upon their joining the society; and the latter asserting that joining a society may amount to simultaneously entering into a contractual relationship with existing members, such that an explicit confirmation in writing of the acceptance is not necessarily required. Professor Heini suggested that this was the case if a member complied with an obligation and thereby implicitly accepted to be bound; however, if the respective separate contractual relationship qualified as a contract for which the law required a special form, an explicit acceptance in writing might be mandatory. He was asked whether, if the Articles of Association or the resolution of the members of the Board of Directors stipulated certain direct and reciprocal rights and obligations between members, those articles or resolutions must also stipulate the enforceability of such rights and obligations at the suit of one member against another, or whether such enforceability followed or needed to be explicitly stipulated, by stating:- "The enforceability of such claims does not need to be explicitly stipulated. If resolutions of an association are accepted (explicitly through a written declaration or implicitly by joining the association), the individual members are placed under the obligation to respect the rights and duties in so far as they arise from the resolutions which are the basis of the direct legal relations between members."

He quoted from both Professors Riemer and Heini. 56 He considered that the arbitration clause, provided it is valid, established a direct legal relationship between members as to how to resolve disputes arising out of legal relationships based on the Articles of Association, and created a duty to submit eventual disputes between members, based on legal relationships, to an arbitral tribunal. He continued:- "An arbitration clause is enforceable in a broader sense only. A defendant party cannot be sued in a State Court to comply with its obligations under an arbitration clause to resolve a dispute by way of arbitration. Rather, according to Art. 186 para 1 IPRG, an arbitral tribunal shall at the outset of an arbitration proceeding decide on its own jurisdiction and if accepting such jurisdiction render an award even if the defendant party does not actively participate in the proceeding. In that case such award may be enforceable against the defendant provided that the rules regarding due process .. have been duly observed by the arbitrators." 57 He was not able to say with any certainty whether arbitration clauses are currently included in articles of Swiss societies, opining that as precedents and "the literature" dealt with "the phenomenon of arbitration clauses in articles of association" he had to assume that such clauses "are not unusual". 58 Dr Hoffet was nextly asked whether Resolution G.R.1.1 created direct legal rights and obligations between members of WACO which, if violated by a member, gave rise to a cause of action against that member by other members. He answered by saying that the resolution was based on Article 9 and that the Executive Board was enabled to enact binding rules for the members within the scope of the aims and objectives of the association. This was not an answer to the question he was asked, which was, of course, a critical one. He continued, in paragraph 48:- "Pursuant to Art. 5A of the articles (regarding Membership), Full and Associate Members have all the rights, privileges and duties connected with the membership 'in accordance with the articles and/or the Trading Rules and/or Regulations enacted by the Executive Board from time to time in accordance with Article 9'." 59 It will be observed that Dr Hoffet placed considerable reliance on the views expressed by Professors Heini and Riemer. 60 In his reply of 9 October 2000, Exhibit 2, Dr Benz posed the basic question as being whether, according to Swiss law, it is possible for a society to establish reciprocal rights and obligations between its members that one can enforce against another. If that be answered in the affirmative, it also is necessary to decide under what conditions such rights and obligations could be established within the system of a society. He expressed the views that all authors known to him, who have published their opinion:- ".. on the question at issue state unanimously that membership rights and obligations as a matter of general principle only exist between a member and the association"

and not between members. He cited a number of authorities and stated the general principle as being that:- ".. there are no reciprocal rights and obligations between the members of an association." 61 He conceded that Professors Heini and Riemer say "that theoretically there might be an exception to this general principle": (Dr Benz's emphasis). He said:- "According to Heini and Riemer reciprocal rights and obligations, in other words a direct legal relationship between members of an association, might theoretically be established by the constitution of an association/articles of association. However, these statements are merely theoretical. They are not based on any case law; as far as I am aware no such claim has ever been brought to a Swiss Court." (Dr Benz's emphasis.) 62 He stressed that Professor Heini's and Professor Riemer's theories on the question of reciprocal rights and obligations of members differed, Professor Riemer stating that they could be established by the Constitution/Articles of Association or by rules or regulations established by a Board of the society. He continued:- "Thus pursuant to Riemer it is generally possible to delegate the competence to establish such rights by rules or regulations from the general assembly (which has the competence to amend the constitution/articles of association) to e.g. the Executive Board. However, according to general principles of Swiss public law which has to be applied by analogy the specific stipulation in the articles of association delegating the competence to establish such mutually enforceable rights and obligations between members of an association to the board of the association must specify precisely the main features of the competence that has been delegated … Such a significant departure from general principle would need to be expressly granted to the Board." 63 In paragraph 4(d), Dr Benz re-stated the general rule and said:- "Therefore any authority established in the articles of association conferring to the board the right to establish reciprocal relations between the members (being an exception of the general principle) also needs to specify the element of enforceability of such mutual rights and obligations by explicitly giving the members a claim against the other members." 64 In paragraph 4(e), Dr Benz directed attention to Professor Riemer, saying that according to him it is only possible to establish reciprocal rights and obligations between members in the form of the "actio pro socio". He continued:- "An ' actio pro socio ' enables the claimant, i.e. a member of an association, to claim that the defendant (also a member) has to fulfil its duties towards the association. It can, however, not claim that the defending member has to fulfil duties towards the claiming member." 65 He agreed with Dr Hoffet that Professor Riemer had alleged "that it is conceivable that obligations regarding, for example, financial contributions of certain members vis-à-vis the society are stipulated in the Constitution/Articles of Association in a manner giving other members a direct right to claim such contributions from the debtor in favour of the association. Thus a member would e.g. have the right to claim that another member has to pay its financial contributions to the association, but never to the claiming member. The other example stated by Riemer (duties such as support, delivery or purchase obligations) have to be understood in the same manner, namely as duties to comply with towards the association". 66 Dr Benz then considered Professor Heini's theory of mutually enforceable direct legal relationships between members of a society being established in its constitution, i.e. the articles. He noted that Professor Heini compared the society with the constitutional state in which the freedom of citizens can only be limited by law, i.e. by the constitution. He referred to the fact that Professor Heini does not mention the possibility of delegating the power to establish mutually enforceable direct legal relationships between members to, for example, the Executive Board, and continued:- "In contrast to Riemer, Heini states that if the constitution/articles of association contain a provision pursuant to which members are given mutually enforceable rights and obligations members automatically enter into a contractual relationship with each other by joining the association. However, Heini does not elaborate on this assertion nor does he provide any reasoning to his theory. There are also no Swiss cases known to me which would confirm Heini's theory, or in which it has been considered." 67 He referred to the fact that Professor Heini says nothing about enforceability, according to his theory, of such contractual rights and obligations between members and:- "In the absence of such a statement I would assume that in conformity with Riemer, Heini would only allow for an ' actio pro socio ' in the sense that one member could only claim that another member would have to fulfil its obligations towards the association. In the absence of a clear statement of Heini on this question one cannot assume that he thought that the members could claim for 'contractual' fulfilment against one another in view of the general principle." 68 In paragraph 5 he drew attention to the fact that no author has spoken out in favour of the possibility of a member suing another member for damages based on their relationship as members of the same society. He said:- "Such a possibility is unheard of in Switzerland, there is also no case law concerning this issue." 69 His conclusions, in so far as they were admitted into evidence, were:- "1. As a matter of general principle there are no reciprocal rights and obligations between the members of an association (see paragraph 1.2 above). 2. Riemer and Heini assert that theoretically there might be an exception to the general principle (see paragraph 1.3 above). 3. Riemer's and Heini's theories are not identical (see paragraphs 1.4.a and 1.4.g above). 4. According to both Riemer and Heini valid reciprocal rights and obligations between members and an association could only be enforced by the means of an ' actio pro socio ' (see paragraphs 1.4.e and 1.4.j above). ….. 7. According to Swiss law and precedents there is no claim for damages arising out of the membership of an association (see paragraph 1.5 above). 8. In my view, the only legal basis for the claim at issue could be a contract between the claimant and the defendant, …" 70 Dr Benz then answered certain specific matters raised by Dr Hoffet, making the point that the opinions of authors, such as Professors Riemer and Heini, "are only academic discussions". He repeated that Professor Heini's views are not supported by authority and that he:- ".. does not make a single statement as to the question of enforceability of reciprocal rights and obligations between members (see paragraph 1.4.j above). It can, however, be assumed that such rights could only be enforced by the means of an ' actio pro socio ' .." 71 Dr Hoffet also expressed the view that whilst Professor Riemer said it was possible for societies to create reciprocal obligations between members, enforceable at the suit of one against another, such a claim could only ask for fulfilment of the obligation towards the society. 72 Dr Benz suggested that Professor Hieni does not make "a single statement" concerning the enforceability of reciprocal rights and obligations as between members, and that Dr Hoffet does not mention where he is supposed to make any such statement. He opined that it can be assumed that such rights could only be enforced by an "actio pro socio". He also suggested that whilst Professor Riemer says that it is possible for associations to create reciprocal obligations between members, enforceable at the suit of one against another, such a claim could only ask for fulfilment of obligations to the society. He expressed the opinion that direct legal relationships between members can only be based on either the Articles of Association or a sufficient delegation. 73 In paragraph 11 he considered the form of question III, which Dr Hoffet was asked to answer, and which is in the following terms:- "If members of an association are permitted by the articles to create specific reciprocal rights and obligation between each other, must this be done by the articles or may this be done by resolution of the members or the Board of Directors (assuming the articles of association permit such resolutions)?" 74 Dr Benz said that the wording is somewhat erroneous, and:- "According to Swiss law on associations the articles of association can never permit the members to create specific reciprocal rights and obligations between each other. If such rights could be established at all, the competence to do so would be with the general assembly or with the board of the association to which this competence has been duly delegated. Pursuant to Riemer articles of association may create direct legal relations between the members, which are, however, only enforceable in the special form of an ' actio pro socio ' (see paragraph 1.4.e above). I therefore do not agree to Hoffet's statement in these paragraphs": i.e. paragraphs 39 to 40. 75 In paragraph 14, Dr Benz expressed the view:- "Since an ' actio pro socio ' in the context of an association is an unusual, exceptional claim which is not covered by the general principles of the association, it has to be explicitly stipulated in the articles of association. If this is the case the enforceability as such does not have to be explicitly stipulated additionally. However, if it were possible to establish another kind of claim (apart from the ' actio pro socio ') by the articles of association or by resolution of a board of the association - which is not possible according to both Riemer's and Heini's theory - the mutual enforceability of such a claim, in my opinion, would have to be expressly stipulated."

This statement was made in answer to paragraph 44 of Dr Hoffet's affidavit. 76 Mr Neil accepted that on the issue with which I have been dealing thus far, his client carried the onus of proof. Accordingly, Dr Benz was cross-examined first, his cross-examination and that of Dr Hoffet being taken by video link transmission. 77 In cross-examination Mr Jackman explored, firstly, Dr Benz's qualifications. At Tp.6 he said that company law and the law of associations "has been a very important area of it, but it is not the main area because those areas, they are always interconnected with other areas". He then agreed that he did not claim to have special expertise in those areas of law. None-the-less, I found his evidence convincing. 78 Dr Benz said that Swiss law did not provide for an actio pro socio, but that one was available if the articles and resolutions were expressed appropriately. 79 He agreed, Tp.6, that in his second report he recognised that reciprocal rights and obligations could be established by rules and regulations of a board of the society, and he was referred to a statement he made on p.7 of Exhibit 1 that resolutions of the board have an executive function only, and are not meant to establish rights and duties of members. He agreed that if the resolutions were expressed appropriately, they could create reciprocal rights and obligations between members and:- "Q. You now recognise that, appropriately expressed, resolutions of the board of a society can establish reciprocal rights and obligations between members. My question is, do you agree that you need to qualify what you said at the foot of page 7 of your first report in the light of that fact? A. If you mean by qualify that reference must be made to the articles of association, meaning that such resolutions need a basis in the articles of association, then you are right." 80 Dr Benz agreed that societies that have an industrial object are governed by the rule of company law and that relating to co-operative societies. 81 At Tp.8, Dr Benz was referred to the top of page 3 of his second report, Exhibit 2, and his attention was directed to the sentence commencing:- "However, according to general principles of Swiss public law ..".

He was asked whether he knew of any statute, case or author providing some authority for that proposition. He answered that he thought that either Professor Riemer or Professor Heini "in our situation compare it with the association representative of Articles of Association to the institute of a State". He referred to page 6 of Exhibit 2, in sub-paragraph (g) of which he said that Professor Heini compared the society with an institutional state in which the freedom of citizens could only be limited by law, i.e. by the institution. However, he agreed that Professor Heini did not suggest that the articles must specify precisely the main feature of the competence that had been delegated. 82 Nextly, Tp.9, Dr Benz was directed to the sentence commencing:- "Therefore any authority established in the articles of association .."

on page 4 of Exhibit 2, and he was asked whether he knew of any statute, case or author which or who said that the articles or the resolution must explicitly give the members a claim against the other members. He replied:- "That opinion is derived from general principles of Swiss law and, in particular, from the structure of the Association, which we have outlined elsewhere, as the character of the membership relations is basically vertical and horizontal relations which are an absolute and unusual exception. And if within a vertical system you try to create something horizontal, then, according to general principles, it is, so to speak, evident that such an exception must be stated clearly. You will find even the reference in Heini, and this is the reason why Heini says the reciprocal between the members must have the contractual nature, because he says in one of his books, that due to the vertical nature of the membership relation, it is impossible that a horizontal effect can be derived from the Articles. If such effects are provided for in the Articles, for him, the basis can only be contractual."

Dr Benz agreed that Professor Riemer had a different view and that he was not able to say which view is correct. 83 In re-examination, Tp.10, Dr Benz was asked whether he was able to say, based on any statute, case or text of which he was aware, whether the theory of Professor Heini or of Professor Riemer on the nature of any obligations that might arise between members of a society was correct. He replied:- "There is no precedent, nor statute, nor case. But the issue of what nature a possible bi-lateral relation between the members is, in this context, is not an important issue. It must also be said that Heini's theory is extremely vague and he does not elaborate on it. He just uses one or two sentences, that is it." 84 Dr Hoffet, in chief, was asked about a passage at the top of page 3 of Exhibit 2 in which Dr Benz referred to an analogy with principles of Swiss public law being applied to the question about members of a society having enforceable rights against each other. He was asked his opinion as to the validity of the analogy, and replied:- "A. I would disagree with Dr Benz on this particular issue. The reason for this is that, to the best of my knowledge, the Swiss law on associations gives very broad freedom and leeway indeed to the founders and the members of an association to create a system for actually running and managing the association. And there are only very few binding principles that are outlined in the section of the Swiss Civil Code Associations, which is Article 60 and the following articles." 85 In cross-examination, Dr Hoffet was taken firstly to page 6 of his affidavit and asked various questions about his evidence in relation to arbitration, which I shall pass over for the moment. 86 He was then taken to paragraph 30 on page 10 and asked to turn to the page to which he referred in Professor Heini's text in the first line of paragraph 30. He said he believed it was the passage commencing on page 45 of Section II, commencing with the sentence:- "However, this does not affect the basic statement that the membership relationship as such only ever exists between the member and the association."

He was asked whether he agreed that in that passage Professor Heini said nothing about the enforcement of the obligation postulated as existing in certain circumstances between members of a society. He said he agreed there was no "explicit" mention of that "in that passage". He continued:- "There is, however, quite a clear statement that to the extent that the Articles contain provisions which create direct obligations between the parties, then by adhering to the association a contractual relationship is created and it is common amongst us for contractual relationships to be enforceable."

He continued:- "Q. You agree, do you not, that Professor Heini disagrees with that aspect of Professor Riemer's theory, do you not? A. I do not know whether there is any explicit statement of disagreement. I do know, however, that Professor Riemer has a theory about direct obligations and rights between members which is quite different from that of Professor Heini. Q. Do you agree that Professor Riemer says nothing in his texts about the way in which the obligations between members that might arise, according to his theory, should be enforced? A. I agree that there is no explicit statement in Professor Riemer's text book regarding direct enforcement of obligations, but they have been in the articles, that was in his report." 87 I have amended the first question just quoted, although the transcript was not corrected. As transcribed it read:- "Q. You agree, do you not. That Professor Heini disagrees .."

The amendment I have made is obvious and I think it is one which should be made to give sense to the question, which Dr Hoffet obviously enough understood. 88 At Tp.14, Dr Hoffet agreed that Professor Heini does not agree with the views held by Professor Riemer, with which he dealt in paragraph 39, and, in relation to Professor Riemer's "theory", as Dr Hoffet referred to it, in paragraph 40 of his affidavit, he said:- "A. I am not sure now that there is an explicit statement by Heini where he refers to Riemer's theory and rejects it directly. But one can draw the conclusion from Heini's theory that he would be in disagreement with Riemer's theory." 89 At Tp.15, Dr Hoffet said it was his opinion that there does not need to be a specific stipulation of the enforceability of such claims, being those set out in the first sentence of paragraph 42 of his affidavit, but there is no case law or statute that deals with the subject matter of that opinion. 90 At Tp.16, Dr Hoffet was cross-examined about whether either Professor Riemer or Professor Heini, in the passages to which he referred at the end of paragraph 44, said anything about the enforceability of claims that might arise according to either one of their theories. He replied:- "I do not believe that there is any inconsistency. What I am referring to in the second sentence of para 44 is the fact that individual members are placed under an obligation to respect certain rights and duties. I believe that the passages to which I have referred at the end would confirm this. Q. The passages that you have quoted at the end of para 44 are authority for the proposition that individual members are placed under an obligation to respect rights and duties in so far as they arise from resolution, is that right? A. Yes. Q. And you do not rely on those passages for any of the other opinions that you express in paragraph 44, is that right? A. That is right."

Submissions On Behalf Of The Parties 91 Mr Neil submitted that there is no incidence of the plaintiff's and defendant's membership, which gives rise to a legal right in the plaintiff to compel the defendant to trade exclusively with it, so that an essential element of the plaintiff's cause of action, namely the entitlement to bring the proceedings, is missing. He noted that members, by Article 5A, have all the rights, privileges and duties connected with such membership in accordance with the Articles of Association, the trading rules and/or regulations enacted by the Executive Board from time to time in accordance with Article 9. He referred to the duties, as expressed in Article 8, which related to the obligation to pay an entrance and an annual subscription fee; the limitation of personal liability of members for the debts of the organisation being limited to the extent of their unpaid fees, levies and dues; measures for the timely payment by members of fees, levies and dues; and the organisation and administration by the Organisation of a Mutual Indemnity Fund to indemnify members against losses suffered in air freight transactions with fellow members in the event of insolvency. 92 He submitted that these various duties pointed to duties the members had to the society, rather than to other members, and made particular reference to Sub-Article (D), which contemplates the taking of action by a member against the indemnity fund, rather than against the insolvent member. 93 Mr Neil conceded that it is not now open to the defendant to put in issue the validity of G.R.1.1 on the basis that it exceeded the aims and objectives of the articles. However, his submission was that the validity question only extended to the obligations of the defendant to all other members, and not to any obligations of the defendant to another enforceable by that other member. The submission continued that G.R.1.1 imposed duties on members to trade on an exclusive basis "to the extent permitted by law", and that if it is lawful to have exclusive dealing, that is to the extent "permitted by law". 94 I think some assistance in construing G.R.1.1 is to be obtained from considering G.R.1.2 and G.R.1.3. G.R.1.2 provides that if any member becomes subjected to force majeure or government stipulation "in respect of his dealings with other members of the organisation" the member shall immediately advise the chairman of the Executive Board of the circumstances and of the other members involved. 95 G.R.1.3 provides that for the purpose of "the foregoing, trade on an exclusive basis shall involve ..". Sub-clause (1) provides for the development of all types of air traffic, consolidated and non-consolidated, between members. Sub-clause (2) provides for the sending of all consolidated and back-to-back consignments exclusively to other members. Sub-paragraphs (3), (4) and (5) provide obligations which, in my opinion, are concerned with the relationship between all members and, sub-paragraph (6) states:- "That each Full Member and each Full and Associate Member shall be active in marketing on an exclusive basis and, in particular, in generating and answering routing orders and sales leads in accordance to rules and regulations as stipulated in The WACO Resolutions Manual." 96 It was Mr Neil's submission that when one has regard to the whole of G.R.1.1, .2 and .3, it leads to the conclusion that the resolutions were intended to regulate the position as between all members, rather than as between individual members, although it also had the latter effect as all such resolutions would. However, that was a by-product of the need to have obligations imposed on all members for the benefit of one in pursuance of the aims and objectives of the society, and was consistent with the aims and objectives of promoting for the members' mutual benefit the carriage of goods by air between members of the organisation in the ways set out in the subsequent Aims and Objectives. 97 In the way in which the submissions proceeded the issue became not so much the ascertainment of the terms of the duties, but rather the nature and consequences, legal or otherwise, that attended their imposition. The nature of the duty, Mr Neil submitted, was that each Full Member owes to the Organisation and not to another Full Member the obligations imposed by the duty, such that the other Full Member does not have a legal right to bring proceedings to enforce the duty as the plaintiff has sought to do in the present case, although the Organisation does. This submission is consistent with the uncontroversial requirements of Swiss law. The submission continued that the consequence was that a Full Member, which failed to comply with the duty, may be liable to be dealt with by the Organisation, in accordance with the Articles and, hence, liable, inter alia, to expulsion: Articles 7A(3) and (5). 98 Mr Neil submitted that upon a proper construction of the law of Switzerland, the duty which G.R.1.1 imposed on Full Members is not an "empty" one, but one which can be enforced by the Organisation, (every member of it having an interest in its enforcement), as the entity to which it is owed, acting through its responsible organs, so that if it was a matter within the exclusive competence of the Executive Board it would be the body to enforce the duty; and if it was not within the exclusive competence of the Executive Board then it was a matter within the competence of the Organisation in general meeting. 99 Mr Jackman submitted that the duty was directly enforceable by the plaintiff either pursuant to the Swiss Law of Associations or to New South Wales Contract Law. He referred to paragraph 34 of Dr Hoffet's affidavit in which he said:- "Summarising the above, both based on Heini's and Riemer's views, it is possible for associations to create reciprocal obligations between members, enforceable at the suit of one member against the other, be it directly in the articles or internal regulations (Riemer) or indirectly by means of a second legal relationship, i.e. an agreement between the members resulting from the provisions in the articles (Heini)." 100 The difficulty I have with reliance on this passage is that it is the concluding paragraph to Dr Hoffet's answer to the question: "Does Swiss law permit associations to create reciprocal rights and obligations between its members, enforceable at the suit of one member against the other?" 101 In paragraph 28 of his affidavit, Dr Hoffet said, as I have noted, that the Code does not deal with the question explicitly, and that the questions whether and to what extent the membership of a society does "never-the-less" create direct legal relationships between members is not answered by precedents of Swiss Courts "at all" and the academic analysis is "not uniform". Thereafter, Dr Hoffet relied upon the views put forward by Professor Riemer and Professor Heini, the latter stating that membership only creates rights and obligations vis-à-vis the society in situations when the Articles of Association create rights and obligations in the immediate interest of the members. He noted, in paragraph 30, that those rights and obligations would turn out to be indirect effects of the membership, but that Professor Heini's view was that if the articles contained provisions according to which the members should be placed under reciprocal obligations, they would be deemed to enter into a contract with other members when joining the society. 102 In paragraph 32, Dr Hoffet noted that according to Professor Riemer membership obligations in principle only arise vis-à-vis the society, there being no direct legal relationships between members of a society pursuant to substantive law. Therefore, according to Professor Riemer, "it is a matter for the association to enforce the fulfilment of membership obligations amongst members". He continued that Professor Riemer was of the view that the individual member is, in principle, not entitled to sue for the fulfilment of the membership obligations of another member, and that direct relationships between members can be created by the articles or other internal rules or obligations and, by agreements independent from the articles. 103 The basic principle is, accordingly, well understood and was accepted, as I understood it, by the parties. It is that membership, in itself, only creates rights and obligations vis-à-vis the society. The academic writers hypothesised how rights may be created as between member and member but could not point to any case or statute supportive of this view. 104 Mr Jackman relied on four specific articles to seek to show that the present situation can fall within one of the suggested exceptions. He noted, in Article 1, that the articles apply not only to the relationship between any Member and the Organisation and "as well as, where applicable, to the relationship amongst the Members": (my emphasis). Therefore, he submitted that there was a contemplation within the articles that not only they, but also the Organisation's Operations, Marketing and Financial Resolutions would similarly apply "where applicable, to the relationship amongst the Members". 105 But there is no explicit provision making rights and duties enforceable by a member against another. The words on which Mr Jackman relied would accommodate the requirement for "absolute political, national and religious neutrality": Article 4; the pursuit of the indemnity fund: Article 8(D); the imposition of specific duties, consistent with the aims and objectives, on "Members or Categories of Members": Article 9; and the provisions of Article 14, all by way of example. Whilst these apply to individual members and their relationship with other members, there is no suggestion that they are enforceable other than by the Organisation. Some further support is obtained from the provisions of Section 68, which preclude direct involvement of members. 106 Nextly, Mr Jackman referred to Articles 3(1) and 5(A) to which I have referred and which it is convenient to consider together. It does not seem to me, with respect, that the former goes beyond providing for the promotion of the carriage of goods by air for the mutual benefit of the members, which is a general obligation more amenable to enforcement by the Organisation than by individual members against other members. In respect of the latter, I do not read that as going beyond a statement of the rights, privileges and duties members have by virtue of their being members of the Organisation. I do not consider that the words in that Article provide for rights and obligations as between members, as such, but rather for rights and obligations of members to the Organisation. 107 Fourthly, Mr Jackman relied upon Article 20 and, in particular, on the words "between Members or any Member and the Organisation". He submitted that these words meant that if there was a serious dispute or disagreement between members, i.e. one member on the one hand and another on the other; or if there was such a dispute or disagreement between any member and the Organisation that, in the circumstances of Article 20, each of those disputes was amenable to arbitration. Accordingly, Article 20 contemplated that there could be a dispute or disagreement between two members, which dispute or disagreement was not one also with the Organisation, and that the members agreed to refer that to arbitration. 108 I do not consider that is the proper construction of the first sentence of Article 20. The words "between Members or any Member and the Organisation" mean, in my opinion, either between more than one member and the Organisation, i.e. between Members and the Organisation, or between one member and the Organisation, i.e. "or between any Member and the Organisation", so that the arbitration provision applies to any serious dispute or disagreement between more than one member, on the one hand, i.e. Members and the Organisation, or one Member and the Organisation. The draftsman of the Article has been careful to distinguish between "or" and "and". In doing so he has ensured that disputes with the Organisation between either a single member or more than one member, on the one hand, and the Organisation, on the other, will be subject to arbitration. It seems to me that this construction not only flows from the words used, but more easily accommodates the nature of the Organisation that the members set up and joined. It is hardly likely that the Organisation, set up for the purpose of advancing the interests of members, would wish to become involved in any dispute or disagreement between members inter se, particularly as such a dispute could arise out of a matter having little or no connection with the aims and objections of the Organisation. 109 Article 19 provides some support for this interpretation by the use of the same words "between Members or any Member and the Organisation", in circumstances strongly suggestive of disputes between Members and the Organisation or between a Member and the Organisation, not between a member and another member and/or members. 110 Mr Jackman nextly relied upon the Manual. He noted that its purpose was stated to be:- ".. to make members fully aware of their obligations and requirements towards other members when they commit themselves to membership of .." the Organisation.

I do not consider that that sentence, in itself, goes beyond a statement as to the obligations and requirements undertaken to the other members as a society, such that failure to comply with them is enforceable by the competent body of the Organisation. 111 This construction is consistent with other provisions on the same page giving the Executive Board the right to approve any alterations, changes or amendments to the resolutions. Further, if any member is not able to comply fully with the resolutions for any reason, it is required to give a written statement of the reason to the Secretary General, whereupon the statement is to be released to the Executive Board for its consideration "and the member concerned will then be notified of the decision". In the event of the reservation or exception being accepted it is added to the Manual. Then there is a proviso:- "However, notwithstanding any contractual or moral obligations, on the part of one member to another, it may be permitted for members to depart from the laid down procedures, provided it is bilaterally agreed to do so and providing it does not affect any other member. In such cases, no request for a reservation or exception is required but notification must be made to the Secretary General. Details will then be kept on file for record purposes and for reference in the event of any dispute which may subsequently arise." 112 As I understand the first paragraph just quoted, it presupposes that there may be existing contractual or moral obligations or duties between members, such that members may depart from the procedures provided by the resolutions, if they agree to do so, and providing such departure does not affect any other member. These words, in my opinion, accept that there may be contractual relations between members, which the members to those arrangements may meet, even though it means departing from the procedures laid down, provided they agree to do so and provided their doing so does not affect any other member. I consider that this supports the view that the aims and objectives are directed to the position of a Member and Members vis-à-vis the Organisation. Where such relations are created apart from membership it has been necessary to lay down specific procedures, which procedures may not impinge on the position of any other member. 113 Rather than assisting the plaintiff, it seems to me that these words tend to indicate that arrangements between the parties are recognised as being entered into beyond the terms of the constituent documents of the Organisation, in which case those terms do not apply to the enforcement of such arrangements. 114 Mr Jackman nextly referred to G.R.1.3, which he submitted sets up rights as between the members. In general terms I think that is correct, but, in my opinion, these are general provisions intended to be applicable to all members in furtherance of G.R.1.1 and the aims and objectives of the Organisation. They are not provisions which aid dispute resolution between members inter se.- 115 Mr Jackman then considered the conflicts in the evidence between Dr Benz and Dr Hoffet. He noted that in paragraph III(2) of Exhibit 1, Dr Benz had required that the constitution of the society would need a provision, which would explicitly stipulate for legal relationships between members. He compared this statement with Dr Hoffet's disagreement in paragraph 44, which bears repetition:- "The enforceability of such claims does not need to be explicitly stipulated. If resolutions of an association are accepted (explicitly through a written declaration or implicitly by joining the association), the individual members are placed under the obligation to respect the rights and duties insofar as they arise from the resolutions which are the basis of the direct legal relations between members."

He cited Professor Riemer and Professor Heini. In cross-examination he said, Tp.15, that it was his opinion that there did not need to be a specific stipulation of the enforceability of claims between members. He agreed there was no case law nor statute that dealt with the subject of the opinion he expressed in paragraph 44. 116 The difficulty I have with that opinion is that if it be correct it erodes completely the general principle that was accepted by the parties, namely that the membership only creates rights and obligations vis-à-vis the society, save, perhaps, in certain circumstances. Further, the words do not do the work Mr Jackman requires of them. Obviously enough there must be an obligation to respect such rights. But that, in my opinion, is more consistent with respecting the rights owed to the Organisation, which is the source of their creation. Whilst the individual members are placed under the obligation to respect the rights and duties arising from those resolutions, that does not mean, in my opinion, that if they do not they may be sued by other members, rather than by the members acting as the Organisation or by the Organisation's competent board. 117 Further, whilst it is probably correct to say that by becoming a member of the Organisation "direct legal relations" are created between the members, that does not assist in determining what those relations are and, more importantly having regard to the general principle, by whom the duties and obligations arising from those legal relations can be enforced. 118 Mr Jackman then turned to paragraph 1.4(b) of Dr Benz's second report, Exhibit 2. It is to be remembered that paragraph 4 commenced with his emphasising that Professor Heini's and Professor Riemer's theory on the question of reciprocal rights and obligations of members differed. In sub-paragraph (b), Dr Benz was considering Professor Riemer's theory and, having done so, he considered that general principles of Swiss public law had to be applied by analogy to the specific stipulation in the Articles of Association delegating the competence to establish such mutually enforceable rights and obligations between members of a society, and must specify precisely the main features of the competence that has been delegated. 119 At Tp.11, Dr Hoffet, in chief, disagreed with Dr Benz on the bases that to his knowledge the Swiss law on societies gave very broad freedom and leeway to the founders and members to create a system for running and managing them, and there are only few binding principles that are outlined in Section 60 of the Code and the following sections, which relate to that. However, this did not overcome the problem that there is no law of Switzerland in which an individual member of the society may sue another in respect of duties and obligations owed to the society. To some extent that only has to be stated to demonstrate why it is so. 120 Mr Jackman nextly turned to an actio pro socio and submitted that Professor Riemer had a constitutional theory, whereas Professor Heini said there was a contractual basis. He submitted there was no basis for a positive finding that the action be in the form of an actio pro socio, but that that did not matter because the injunctions were available in such an action. He noted, in this context, that in paragraph I(4)(e) Dr Benz had stated that an actio pro socio enabled the claimant to claim that the defendant had to fulfil its duties towards the association. However, Dr Benz continued that the claimant could not claim that the defending member had to fulfil duties towards the claiming member. This, in my opinion, far from assisting the plaintiff's claim shows that the general principle covers the field. 121 Nextly, Mr Jackman submitted that as Dr Benz had said in paragraph 8 on page 8 of Exhibit 2 that the only legal basis for the claim could be a contract between the plaintiff and the defendant, one applied the New South Wales law of contract. However, if I may say so with respect, this seems to me to be reading Dr Benz's opinion out of context. He was hypothesising that situation as providing the legal basis for the claim. He was not, and it could not seriously be suggested that he was, derogating from the view he had earlier expressed as to the circumstances in which there may be an action at the suit of the plaintiff. Mr Jackman's submission continued that there was no evidence of Swiss law of contract and, in the absence of any such evidence, it is to be presumed that the law is the same as that of New South Wales, save to the extent that a significant difference is shown. He submitted that the contract could be established by the consent, which had been signed on behalf of the defendant and by the Manual together with the consent. He then looked at various cases, which enable a contract to be established in these or similar circumstances: Clarke v The Earl of Dunraven and Mount-Earl [1897] AC 59 (The "Satanita"); In Re Recher's Will Trusts [1972] 1 Ch 526; and Finlayson v Carr [1978] 1 NSWLR 657. 122 I think it can be accepted that in certain circumstances contractual relationships may be entered into. The difficulty I have with this submission is that to erect a contractual situation, where no such specific one has, in my opinion, been established, is contrary to the general principle of Swiss law, which both Dr Benz and Dr Hoffet accepted as to the enforceability of rights between members of the Organisation. 123 The situation is that the general principle to which I have referred constitutes Swiss law. Whilst there are academic writings, which suggest there may be exceptions, I have not been referred to any legal authority, whether in the form of the Code or case law in Switzerland, which has recognised a modification of the general principle. Certainly, Professors Heini and Riemer have suggested there may be circumstances in which there may be a modification. However, their views as to how that may happen are not consistent and none of them has been shown to have been embodied in the Swiss law. Accordingly, I find that the Swiss law is represented by the general principle. 124 Mr Neil submitted in reply that the Organisation, or perhaps more precisely its constituent documents, constitutes the "well spring" of the plaintiff's claim and the source of any rights and duties. He submitted that Article 1 and Section 60 of the Code make it clear that the objects could not be of an economic or commercial nature and he referred to the evidence of Dr Benz in paragraph I.3 of Exhibit 1. 125 He submitted that the Organisation was a voluntary association of members, who subscribed to a common ideal, which the Organisation promotes. He referred, in support of this submission, to Articles 3, 6 and 7, and noted that it was common ground that G.R.1.1 must be grounded in Article 9 of the Articles, which requires the Executive Board, within the scope of the aims and objectives of the Articles and in implementation of them, to place specific duties on Members or Categories of Members. This, so the submission ran, is consistent with and required by Section 69 of the Code, which gives the directors the right and the duty to manage the affairs of the society and to represent it in accordance with the provisions of its constitution. 126 Against this background, Mr Neil submitted that G.R.1.1 should be seen to further and protect the Organisation's interests by protecting those of its members. He continued that the objects of the Organisation did not include the promotion of the economic position of its members inter se. In this context he pointed to the words "for their mutual benefit" in Article 3.1; "to create common systems" in Article 3.2; "to promote efficient systems" in Article 3.3; "to study any problem" in Article 3.4; "to represent the views of all members and on their behalf to enter into discussions and negotiations with official bodies and other organisations" in Article 3.5; "to work together .. for the above purposes" in Article 3.6; and "to make Membership in the Organisation synonymous with the highest possible ideals of service and conduct" in Article 3.7. I consider that this is the better approach to G.R.1.1. Mr Neil also noted, in this context, that General Resolutions, unlike other specified types of resolution, were not included in Article 1. 127 Mr Neil nextly submitted, as he had in chief, that the duties are owed to the Organisation. He considered the writings of Professors Heini and Riemer. Professor Heini's work is entitled "Swiss Association Law" and Mr Neil pointed out that in the Table of Contents, in dealing with "Membership in General", it is stated beside "Membership Rights as Subjective Rights page 45": "No legal relationship between members arising from membership page 45". Mr Neil referred to the text, which states:- "Membership rights are true subjective rights and not only reflective rights arising from the association relationship. These rights, as the duties, only exist towards the association; membership thus does not constitute an immediate legal relationship between the individual members . This applies even where the constitution sets out rights and duties in the immediate interest of the individual members, as, for instance, in the case of professional rules among professionals. In contrast, both von Tuhr and Flume are of the opinion that immediate legal relationships between the parties could be established by the constitution. Flume relies on the constitutional autonomy, while von Tuhr refers to an 'analogy to the contract of performance to third parties'. In my view, these interpretations are not correct or accurate respectively. If the constitution contains provisions according to which members are to have an immediate mutual responsibility, then a contractual relationship is created when they join the association. Membership then merely initiates the immediate legal relationship between the members, but does not provide the legal basis for it. However, this does not affect the basic statement that the membership relationship as such only ever exists between the member and the association . Rights and duties set out in the association's constitution in the member's interests thus turn out to be merely (but at least that) reflective effects of the membership relationship." (My emphasis.)

Thus, Professor Heini makes the basic position clear. 128 Professor Riemer's book is entitled "Law of Natural and Legal Persons". 129 In paragraph 132 he states that there is no actio pro socio in societies, so that individual society members are not authorised to demand that another member comply with his membership duties or bring relevant action. He continues:- "Members of associations (and other entities) have as a matter of principle, no contractual relationship (or other legal relationship) between themselves from the time the association is incorporated … Their membership rights and duties only exist towards the association … and for this reason it is primarily the association's task to demand that membership duties be complied with." 130 He stated that if the society or the competent body failed to do so, certain avenues of redress were available and, in paragraph 134, he continued:- "Such direct legal relationships among members, however, could be created by or provided for in, the constitution (or other internal association regulations) (in such cases they are also relevant in the context of handing out association penalties; in my opinion - and in contrast to Heini II.45 and Lampert/Widmer/Scherrer No 63 s2 - it cannot be said that such constitutional legal relationships between association members constitute 'an additional contractual relationship'). In analogy to a contract for the benefit of a third person (Art. 112 OR), membership fees of certain members of the association could be designed to give certain other members a direct claim; correspondingly, direct assistance, supply or purchasing obligations could also be created. The constitutional provision concerning joint liability (Art. 143 et seq OR) of all or certain members for membership fees (Art. 71, para 1, Art. 71, para 2, ZGB, Art.99 HRV) creates a direct legal relationship among the members concerned (Art. 148/149 OR); the same applies correspondingly to joint guarantees provided for by the association's constitution … The possibility of joint membership .. also creates legal relationships among the members concerned .., as does, under certain circumstances, membership in a special working group of association members provided for by the association's constitution. The association's constitution can also create special duties of information among members (for instance in relation to circulars).

Mr Neil referred to these statements to show that they were "nothing more than theories advanced by academic commentators" and are not consistent. 131 In Scruples Imports Pty Limited v Crabtree & Evelyn Pty Limited [1983] 1 IPR 315, at p.325, Powell J, after considering passages from the judgments of Sugerman JA in Temilkovski v Australian Iron and Steel Pty Limited (1966) 67 SR (NSW) 211 and Subbotovsky v Waung (1968) 72 SR (NSW) 242 at p.250, said, at p.325:- "It seems to me that the cumulative effect of these passages is, first, that the task of identifying what is the relevant law and of expounding what, in general terms, is its meaning and effect is, primarily, the task of the expert witness; second, if, in a case in which the relevant law is reduced to writing, which writing becomes part of the evidence, the expert witness fails to demonstrate how the law has been interpreted and applied, or essays an exposition which provides no assistance as to its interpretation … or which produces results which might be regarded as bizarre, the Court is free to interpret the law for itself according to the rules of statutory construction normally applied in this Court; and, the third, that when expert witnesses have given conflicting views on the question, the Court must resolve the question for itself, if need be by undertaking a like exercise." 132 In the present case I am confronted with the conflicting views of the experts other than as to the general basic or fundamental principle, who, in turn, can revert to other sources, such as the writings of Professor Riemer and Professor Heini which, in themselves, diverge. 133 In these circumstances, Mr Neil submitted that none of the experts have found a recorded instance in which any member of a society has brought proceedings in Switzerland of the type here being brought and, the academic writing being inconclusive, the fundamental principle covers the field and establishes that society rights are between members and the society only, such that there is no need to have recourse to New South Wales law. 134 In further support of this view Mr Neil refers to the mechanism for the enforcement of the rules. He points to the fact that Articles 7A(3) and 12(D) provide that where there is a failure to comply with the requirements of the Organisation, the main consequence is expulsion from it. And, accordingly, he submitted that that showed that the fundamental principle applied, because the remedy of expulsion was far more akin to the right being one owed to the Organisation which would not wish to retain members, who did not comply with its requirements, than to other individual members, in which circumstances one would expect to find a mechanism for the adjustment of the rights. I think this view is correct. 135 Thereafter Mr Neil made detailed submissions as to the differences between Professors Riemer and Heini which, to some extent, gave rise to the differences between Dr Benz and Dr Hoffet. 136 In my opinion it has been established that the fundamental principle is that rights of members to a society of the type here under consideration are rights which can be exercised only between a member or members on the one hand, and the society, on the other, and that absent some exception to this rule membership does not create rights between members inter se. Mr Neil has established both the fundamental principles and, in my opinion, that none of the exceptions to it, which have been suggested, apply. It may be that his establishing the first proposition is sufficient, because, whilst the onus was on him, having done that an onus then shifted to the defendant to show that an exception existed. If that is so Mr Jackman failed to discharge that onus. However, I am satisfied that Mr Neil has discharged the onus on both points. 137 In response Mr Jackman said that there is no evidence that anyone says that the general principle is an absolute rule, and that whilst Professors Heini and Riemer disagree on the theoretical basis, they do not disagree on the result that there may be an exception. I think it is correct to say, as Mr Neil has, that the views put forward by Professors Heini and Riemer are theoretical and have not been established as constituting the law of Switzerland. They are, furthermore, inherently inconsistent in approach. Therefore, absent any exception to the fundamental principle, it is determinative.

Conclusion 138 My conclusion is that the law of Switzerland is that the membership of a society, such as the Organisation, only creates rights as between the members, on the one hand, and it, on the other. It does not create legally enforceable rights as between the members. Accordingly, I do not consider that the plaintiff has any standing to maintain this action.

The Arbitration Clause 139 I can deal with this matter quite quickly. Mr Neil has pointed out that in its defence the defendant has agreed to submit to arbitration. It was made clear by Mr Neil that the defendant would not seek to abort the arbitration by asserting that all the members of the Executive Board were unable to sit. The defendant expressly agreed that there would be no objection to two Board members sitting and to their appointing deputies to represent the other three. Therefore, if there is a dispute of the type contemplated by the arbitration clause between the Organisation, on the one hand, and the defendant, on the other, the defendant is content to have that resolved by the arbitration for which Article 19 provides. This is clearly a recognised procedure in Swiss law. 140 I appreciate that no application has been made for a stay of the proceedings based on the arbitration clause, but, as the proceedings are presently constituted, it would have been totally inappropriate for it to be made because, of necessity, that would have accepted that the proceedings as presently constituted are valid, which, in my opinion, they are not.

Result 141 In the result I do not consider that the plaintiff is entitled to any of the relief it seeks in paragraphs 1, 1A, 2 and 3 of its Summons. Accordingly, it seems to me that the consequence is that the proceedings should be dismissed with costs and the undertakings given by the defendant should be dissolved. 142 I stand the matter over to Friday, 17 November 2000 for the parties to bring in Short Minutes of Order to give effect to these reasons.

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