Daphne Lowe v Australian Chinese Community Association of NSW

CASES CITED : The Bodalla Company Pty Limited v Registrar of Co-operative Societies, Supreme Court of NSW, 6 December 1988, (unreported) BC8801258

Plainitff- Ms Daphne Lowe PARTIES : Second Plainitff- Ms Maggie Wu Defendant- Australian Chinese Community Association of NSW

COUNSEL : Plaintiff- G. Ng Defendant- N. Confos

SOLICITORS : Plaintiff- Keith Robert Spencer, Adams Raves March & Co Defendant- Nicholas Prassas, Comino Prassas Solicitors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2010/305598 DAPHNE LOWE & ORS v AUSTRALIAN CHINESE COMMUNITY ASSOCIATION OF NSW INC. (NO. 3)

JUDGMENT 1 HIS HONOUR: This is my third judgment involving the internal affairs of the Australian Chinese Community Association of NSW Inc ("the Association"). My first judgment involved the grant of interlocutory relief on 10 September 2010 to restrain the holding of a Special General Meeting of the Association: Daphne Lowe v Australian Chinese Community Association of NSW [2010] NSWSC 1071. My second judgment on 1 December 2010 granted final relief in the proceedings restraining the defendant from holding the Special General Meeting on a permanent basis and declaring that the plaintiff was entitled to continue to discharge the duties of the secretary of the defendant Association: Daphne Lowe v Australian Chinese Community Association of NSW Inc (No. 2) [2010] NSWSC 1375. This third judgment results from a contest that occurred about the form of relief that should follow from my second judgment. The contest occurred because between my first and second judgments the defendant called an Annual General Meeting, proposed to be held on 12 December 2010. The plaintiffs argue in light of my judgments that the Meeting should be restrained. The defendant opposes that course. Through a range of sub issues, that is the principal matter now in dispute. Further background is required in order to evaluate the arguments advanced on either side of this dispute. 2 Three issues have been raised for present consideration: whether the Annual General Meeting scheduled for 12 December should proceed; whether the Executive Committee Meeting which took place on 4 December 2010 should be declared invalid; and, whether the membership of persons who have been enrolled for membership since the honorary secretary was invalidly suspended from her duties should be recognized as members. These issues are pressed upon the Court as urgent by the plaintiffs. The defendant says the Court should decline to interfere in the affairs of the Association because as Young J said in The Bodalla Company Pty Limited v Registrar of Co-operative Societies, Supreme Court of NSW, 6 December 1988, (unreported) BC8801258 "there is no utility in granting [an interlocutory injunction] because it is usually better and causes least inconvenience to permit the meeting to go ahead…it must always be remembered that declarations are only pronounced if the Court conceded there is some utility in granting the declarations". Young J's judgment in The Bodalla Company Pty Limited v Registrar of Co-operative Societies, Supreme Court of NSW, 6 December 1988, (unreported) BC8801258 emphasizes that it is part of Australian law that people who are joined together in societies may meet within those societies and discuss whatever matters happen to be of mutual interest. With this background I now consider these three questions. The Annual General Meeting on 12 December 2010 3 The plaintiffs ask the Court to restrain the holding of the Annual General Meeting proposed for this Sunday, 12 December 2010. The defendant seeks for it to go ahead, for the Financial Statements for the year ending 30 June 2009 and for the year ended 30 June 2010 to be approved, and for there to be an election of the office bearers and Executive Committee Members for 2011. 4 Each side referred to the Association's immediate statutory obligations under the Associations Incorporation Act 2009. The obligation to hold a General Meeting and other meetings is provided for in Associations Incorporation Act 2009, s 37: "(1) An association 's committee must ensure that the association 's first annual general meeting is held within 18 months after its registration under this Act. Maximum penalty: 1 penalty unit.

(2) An association 's committee must ensure that annual general meetings are held: (a) within 6 months after the close of the association 's financial year , or

(b) within such further time as may be allowed by the Director-General or prescribed by the regulations. Maximum penalty: 1 penalty unit.

(3) If the association 's constitution so provides, a general meeting may be held at 2 or more venues using any technology that gives each of the association 's members a reasonable opportunity to participate.

(4) In any legal proceedings, a general meeting held in accordance with subsection (3), or part of such a meeting, is not to be declared invalid on the ground that one or more of the association 's members did not have a reasonable opportunity to participate unless the court is satisfied that: (a) substantial injustice has been, or may be, caused, and

(b) the injustice cannot be remedied by any other order available to the court ."

A maximum penalty of one penalty unit is prescribed for failure to comply with this obligation. 5 The Association's financial year ends on 30 June each year. Associations Incorporation Act 2009, s 37(2)(b) allows the Director General to extend the time within which an association can hold its Annual General Meeting. The plaintiffs say that if the Court restrained the Association from holding its Annual General Meeting then the Association could apply for an extension of time. If such an extension were not granted the plaintiffs say that on 10 December 2010 it would still be possible for the first plaintiff to issue a notice of an Annual General Meeting to be held on 31 December 2010. Were this latter course to follow, the plaintiffs say the Association would be able to comply with its obligations under statute whilst also adhering to its own rules, particularly Rule 25.1, that requires the Honorary Secretary to give 21 days notice in writing of all General Meetings of the Association. The plaintiffs' argument is that Ms Lowe and Ms Wu have been prevented from discharging the responsibilities of their respective roles between 3 July and 1 December 2010. Further it would require immense effort on their part to become familiar with the recent affairs of the Association and be able to meet the demands placed upon them by the holding of an Annual General Meeting on 12 December 2010. 6 As this issue has arisen at short notice, the plaintiffs argue that the balance of convenience suggests that the Association having permitted its own processes to miscarry and for Ms Lowe and Ms Wu to be suspended could, without much, if any, inconvenience to the Association apply to extend time or call an Annual General Meeting on 31 December 2010. 7 The plaintiffs' alternative argument is that if the Meeting is to proceed on 12 December 2010 that the business of the meeting should be confined to the financial reporting obligations set out in sections 44 and 48 of the Act which are as follows:-

At each annual general meeting of a Tier 1 association, the association's committee must cause: (a) the association's financial statements for the previous financial year, and (b) the auditor's report for those statements, to be submitted to the meeting.

8 Section 48 provides:- " 48 Submission of financial statements to AGM

At each annual general meeting of a Tier 2 association, the association's committee must cause the association's financial statements for the previous financial year to be submitted to the meeting.

Maximum penalty: 5 penalty units." 9 It seems unclear on the evidence whether the defendant is a Tier 1 or Tier 2 organisation. But it has a clear obligation, subject to extension, to put Financial Statements before its Annual General Meeting. 10 The issues joined between the parties on the current application engage a number of rules that have not have previously been referred to in my judgments. These are Rules 19, 20, 25 and 31 which Rules are set out below. The other Rules discussed in this judgment may be found in my earlier judgments. 11 Rule 19 provides:- "19.0 Proceedings of the Executive Committee

19.1 The Executive Committee shall meet at least once in each calendar month on (7) days written notice to dispatch the business of the Association.

19.2 At the request of any four (4) members of the Executive Committee, the President and the Honorary Secretary shall call on seven (7) days written notice a meeting of the Executive Committee, within four (4) days of receipt of the request." 12 Rule 20 provides:-

20.1 The Annual General Meeting of members shall be held during the month of August each year, when an annual report and audited financial statements of the Association shall be presented. … 20.4 A member desiring to bring any business before a General Meeting shall give notice in writing, at least thirty five (35) days prior to the date of the General Meeting, of that business to the Honorary Secretary who shall include that business in the next notice calling a General Meeting after receipt of the notice of the member, unless the Executive Committee resolves that the business is scandalous, frivolous or vexatious." 13 Rule 25 provides:-

25.1 The Honorary Secretary shall give at least twenty one (21) days notice in writing of all General Meetings to all members of the Association, if the time, date, venue and agenda of the meeting indicating the general nature of the business to be transacted.

25.2 Nominations for candidates for election of office-bearers of the Association, or committee members of the Executive Committee, or Councilors:- (a) shall be made in writing, dated and signed by a proposer and seconder for the nomination and accompanied by the written consent of the candidate, which may be endorsed on the form of the nomination; and (b) shall be delivered to the Honorable Secretary of the Association at least seven (7) days before the date fixed for the holding of the General Meeting at which the election is to take place." 14 Rule 31 provides:-

31.1 The statement of objects and rules may be altered, rescinded or added to only by a Special Resolution of the Association.

31.2 Where the statement of objects or these rules or both are proposed to be altered rescinded or added to, then the Executive Committee shall convene a consultative proposed alteration, rescission or addition to the statement of objects or these rules or both." 15 The plaintiffs' core argument is that Rule 25.1 should be regarded as essential to the validity of any notice for an Annual General Meeting of the Association. The plaintiffs say that the Rule 25.1 together with Rule 20.4, 21.1 and 25.2(b) make the Honorary Secretary the fulcrum around which the validity of much of the business transacted at General Meeting depends. 16 The defendant on the other hand says that the temporary absence of the Honorary Secretary or the refusal of the Honorary Secretary to convene an Annual General Meeting could not prevent a valid meeting being called if the meeting was otherwise authorised by the general management power in Rule 12. In my view clause 25.1 is a notice provision the essential purpose of which is to ensure that adequate advance notice of the subject matter of the meeting is given to the persons attending. Failure to comply with the notice period would result in invalidity in the meeting. I am not persuaded that the failure of the Honorary Secretary herself to give a notice which is otherwise within time invalidates the meeting. The circumstances in my view are somewhat different to the operation of Rule 21, the subject of my previous judgments. 17 Balance of convenience issues are also very important. The Court has had to consider this issue at very short notice. The Association has not yet approved the 2009 accounts. It is highly desirable that its 2009 and 2010 accounts be considered in General Meeting as soon as possible, as the Executive Committee currently proposes. It is true that a legal extension of time could be obtained for approval of the accounts and there appears to be no final obstacle to them being dealt with after 31 December 2010. It is highly desirable in the best interests of the Association that they be dealt with sooner rather than later. There does not appear to be demonstrable prejudice to the plaintiffs in the accounts being dealt with at this time. 18 As the Annual General Meeting should proceed to consider the 2009 and 2010 accounts it seems to me that it should also proceed to deal with the election of office bearers. I have not found that the meeting has been invalidly called. But any prejudice to Ms Lowe and Ms Wu from their not being involved in the decisions to formulate the notice of meeting and to nominate for positions for 2011 should be eliminated. This can be done in my view by taking the following steps. These can be formulated into Short Minutes of Order by Counsel this morning. (a) Allowing Ms Lowe and Ms Wu provide to the Annual General Meeting at the Association's expense a supplementary statement to the members of the Association in addition to the material already produced for the Meeting; and (b) Giving Ms Lowe and Ms Wu full access to the books and records of the Association to allow them to prepare such statement; and (c) Ensuring Ms Lowe and Ms Wu are able to nominate for positions for 2011 on the Executive and Council; and (d) Ensuring Ms Lowe and Ms Wu are presented to the Annual General Meeting in accordance with the Court's second judgment: Daphne Lowe v Australian Chinese Community Association of NSW Inc (No. 2) [2010] NSWSC 1375 The 4 December Executive Committee Meeting 19 The plaintiffs ask the Court to declare invalid a joint meeting of the Executive Committee Association with its Counsel which took place on 4 December 2010. The meeting proceeded as an informal and open forum at which no resolutions were passed in accordance with a consensus reached in Court before me on Friday 3 December 2010. The plaintiffs point to paragraph 11 of the defendant's further submissions and say that the defendant seeks to rely upon the 4 December meeting as a consultative joint meeting which would qualify as a meeting described in Rule 31.2. The plaintiffs' contention is that this meeting was not validly called because of the defendant's failure to comply with Rule 19.2 because the meeting was not one called at the request of "the President and the Honorary Secretary". 20 The defendant counters this argument by saying that the 4 December meeting may be called pursuant to the power provided for in Rule 12 which vests management of the Association in the Executive Committee subject to the Rules and any resolution passed in the Association's General Meeting. 21 The plaintiffs say in response that even if the defendant is right about the meeting being authorised by Rule 12.1 that the meeting of 4 December 2010 was so informal that it was not capable of having the legal consequence of engaging Rule 31.2 as being a pre-cursor to the amendment of the objects and rules of the Association. 22 In my view I do not have to decide this question immediately. There is no utility in making a declaration about the status of the 4 December meeting until some stage when the Association seeks to act upon it. That point has not yet been reached. Another meeting that might be thought to comply with Rule 31.2 may yet be called before there is a proposal to amend the constitution. Also it seems to me that the parties have not yet had a sufficient opportunity to contest on the facts what did happen at the meeting on 4 December 2010. I decline to grant any relief in respect of that meeting. The Members Since July 2010 23 The final argument relates to those persons who have become members of the Association at least in name since 3 July 2010 when Ms Lowe and Ms Wu were excluded from their respective positions as Honorary Secretary and Member of the Executive Committee, as I found in my second judgment. 24 The plaintiffs seek relief that any application for membership that was received and approved during this period be declared invalid and that those persons be removed from the registry as members. 25 Detailed arguments were put on both sides about this question. I hope I do no disservice to the skill of Counsel on both sides in advancing them to say that one point that is made by the defendant seems to me to be of overwhelming merit, which means I cannot grant the relief sought on this subject matter. 26 The declarations sought would, as the defendant says, effectively remove each of these persons from the registry of the defendant without giving them an opportunity to be heard in opposition to the relief the plaintiff seeks. These members have contractual rights against the Association. They may well be entitled to assume that the Association has validly admitted them to membership. They may wish to argue that notwithstanding the arguments advanced by the plaintiffs that as a matter of contract between those members and the Association they remain members. Those members have not had an opportunity to put such arguments in the proceedings as presently constituted. It would be quite wrong in my view to grant this relief without hearing from them and I decline to do so. Conclusions and Orders 27 Accordingly I direct the parties to bring in Short Minutes of Order to give effect to these reasons. 28 A short time later the parties provide the Court with Short Minutes of Order which provide:-

1. The Annual General Meeting ("AGM") to proceed on the date and at the time and place notified in the Notice of Annual General Meeting dated 9 November 2010, such meeting to consider only the following business, and in the following order: (a) to confirm the minutes of the last preceding Annual General Meeting and of any Special General Meeting held since that meeting; to consider, and to approve, the accounts of the defendant for the financial years ending 30 June 2009 and 30 June 2010 respectively; to receive from the Executive Committee and Sub-Committee (if any) reports on the activities of the defendant during the preceding year; to receive any statements and to hear any addresses from the first and third plaintiffs, as provided for in order 2 to 4 below; and to elect the President, Honorary Treasurer and Honorary Secretary of the defendant and other members of the Executive Committee.

2.                    (a) Each of the first and third plaintiffs be entitled to prepare a supplementary statement concerning the affairs of the defendant, including any annexures or attachments thereto ("the Supplementary Statements");
                      (b) The Supplementary Statements may be translated by the first and third plaintiffs into English or Chinese and the plaintiffs will be indemnified for the reasonable cost of such translation by the defendant.
                      (c) Each of the first and third plaintiffs may circulate such statements by email to the members of the defendant by 12 noon on 11 December 2010;
                      (d) To facilitate the circulation of the statements in accordance with 2(c), the defendant will provide to the plaintiffs by 12.00 noon on 9 December 2010 a list of the postal and email addresses of the current members of the defendant Association in a form that is within the defendants current office capacity and most likely to facilitate the rapid distribution of the Supplementary Statements; and
                      (e) The defendant will indemnify the plaintiffs in respect of their reasonable costs of printing and distribution of the Supplementary Statements to members.
   

(a) the first plaintiff to attend the AGM in her capacity as Honorary Secretary of the defendant; (b) the third plaintiff to attend the AGM in her capacity as a member of the Executive Committee of the defendant; and (c) in accordance with order 1(d) above, the first and third plaintiffs to address the AGM on the Supplementary Statements.

4. During all business hours (between 9am and 5pm), on 8, 9, 10 and 11 December 2010, the defendant to give the first and third plaintiffs full access to all books and records of the defendant to allow them to prepare the Supplementary Statements.

10/12/2010 - typographical errors - Paragraph(s) 4, 5, 12 20/12/2010 - Typographical error on coversheet - Paragraph(s) No.3 amended to No. 2 21/12/2010 - typographical error - Paragraph(s) coer sheet- No. 2 to No. 3

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.