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[2012] QSC 181
General information, not legal advice.
Supreme Court of Queensland
2012-06-22
Margaret Wilson J
Original judgment source is linked above.
The applicant has leave to amend his claim and statement of claim to substitute as the defendants, those persons referred to in paragraph 2 and (if the case may be) those persons referred to in paragraph 3 above.
On or before 19 December 2011, the solicitors for the defendants shall notify the solicitors for the plaintiff those persons referred to in paragraph 2 above for whom they hold instructions to accept service.
On or before 15 January 2012, the plaintiff shall file and serve an amended claim and an amended statement of claim.
On or before 22 February 2012, those persons who are on the record as defendants as at 15 January 2012 shall file and serve their respective defences.
The matter be listed for further directions on the caseflow management list on 24 February 2012.
[19] The plaintiff filed an amended claim and a second amended statement of claim on 13 January 2012. He now sues the persons who comprised the State Executive of the LNP as at 7 August 2008 ("the 2008 LNPSE"), 10 September 2010 ("the 2010 LNPSE"), 8 April 2011 ("the Apr 11 LNPSE"), 29 July 2011 ("the Jul 11 LNPSE"), 9 September 2011 ("the Sep 11 LNPSE") and 7 November 2011 ("the Nov 11 LNPSE").
[20] Two of the applicants, the first defendant (Mr McIver) and the twenty-seventh defendant (Mr Spence), were members of the State Executive on each of those six dates. The other two applicants, the twentieth defendant (Mr O'Sullivan) and the thirty-second defendant (Mr Ponting), were members of the State Executive on all but the first of those dates.
[22] The plaintiff's claims fall into three broad categories:
1. claims arising out of the 2008 LNPSE's breach of the Varied Contract;
2. claims that the 2010 LNPSE, the Apr 11 LNPSE, the Jul 11 LNPSE and the Sep 11 LNPSE induced the 2008 LNPSE to breach the Varied Contract or prevented or hindered it from performing that contract;
3. claims arising out of the First Suspension Decision, the First Expulsion Decision, the Second Suspension Decision and the Second Expulsion Decision.
[24] So far as presently relevant, the plaintiff alleges that by the Varied Contract the LNP:
(a) was to transfer a certain Honda motor vehicle to him, free from any encumbrance or charge (clause 2(c));
(b) was to provide him with a certificate of appreciation (clause 3(b)(i)), a letter endorsing his significant contribution to the formation of the LNP and the advancement of conservative politics in Queensland (clause 3(b)(ii)), and fully paid life membership for the employee of the National Liberal Party of Queensland [sic] (clause 3(b)(iii));
(c) acknowledged his exceptional service to the Liberal Party of Australia, recognised that he ought be recognised for that service by nomination for a Liberal Party of Australia Distinguished Service Award, and was to do and provide all things necessary for the grant of such an award (clause 4);
(d) was to attest to and acknowledge his outstanding contribution to the establishment of the LNP whenever and however possible (clause 5); and
(e) was liable for any fringe benefits tax or other tax payable on non-cash benefits it provided to him (clause 4.5).
[25] He alleges that the following terms were implied by law in the Varied Contract:
(a) that the 2008 LNPSE would do all things necessary to enable him to have the benefits provided by the Varied Contract;
(b) that the 2008 LNPSE would act in good faith and reasonably in discharging its obligations under the Varied Contract; and
(c) that the 2008 LNPSE would not engage in conduct which would prevent him from having the benefits provided for in the Varied Contract.
[26] The plaintiff alleges that the 2008 LNPSE has breached the Varied Contract:
(a) in its tax treatment of the Honda motor vehicle: second amended statement of claim paragraphs 33- 34, 45;
(b) in not providing him with a certificate of appreciation: second amended statement of claim paragraphs 35(a), 41;
(c) in not providing him with a letter of commendation: second amended statement of claim paragraphs 35(b), 42;
(d) in not providing him with fully paid life membership of the National Liberal Party of Queensland [sic]: second amended statement of claim paragraphs 35(c), 43;
(e) in not acknowledging his exceptional service to the Liberal Party of Australia and, in particular, his outstanding contribution to conservative politics including the electoral success of Coalition Federal Governments, and in not doing all things necessary to nominate him for a Liberal Party of Australia Distinguished Service award: second amended statement of claim paragraphs 35 - 36, 44;
(f) in not attesting to and acknowledging his outstanding contribution to the establishment of the LNP: second amended statement of claim paragraphs 35 - 40F, 46.
[27] The plaintiff alleges that he has suffered the following loss and damage by reason of these breaches of the Varied Contract by the 2008 LNPSE:
Loss in relation to the Honda motor vehicle $ 10,395.00
Inducing breach of contract/ Interfering with contractual relations
[28] The plaintiff alleges that succeeding State Executives procured or caused the 2008 LNPSE to breach the Varied Contract or prevented or hindered it from performing that contract as follows:
(a) the 2010 LNPSE - by making the First Suspension Decision;
(b) the Apr 11 LNPSE - by making the First Expulsion Decision;
(c) the Jul 11 LNPSE - by making the Second Suspension Decision; and
(d) the Sep 11 LNPSE by making the Second Expulsion Decision.
[29] He alleges that he has suffered loss and damage by reason of this tortious conduct, being two of the heads of damages also claimed for breach of the Varied Contract, viz:
[30] The plaintiff alleges that he was denied natural justice and procedural fairness in the making of the Suspension and Expulsion Decisions, and that those decisions were not made in accordance with certain articles of the LNP constitution.
(a) that the constitution of the LNP operates as a contract as between the LNP and its members, as between its members, or as between its State Executive and its members ("the contractual obligations");
(b) that members of the party are entitled to natural justice and procedural fairness prior to suspension or expulsion because of -
(ii) the LNP's public status as a registered political party;
(c) that the decisions were made in breach of the process provided for in certain articles of the party's constitution.
[32] He alleges that he has suffered the following loss and damage by reason of the breaches of the constitution by the 2010 LNPSE, the Apr 11 LNPSE, the Jul 11 LNPSE and the Sep 11 LNPSE (one of the heads of damage being also claimed against the 2008 LNPSE for breach of the Varied Contract and against these four State Executives in tort):
(a) declaratory and injunctive relief in relation to the Suspension and Expulsion Decisions (prayer for relief paragraphs 1, 2, 3, 5, 6, 7);
(b) an order that the 2008 LNPSE specifically perform its obligations pursuant to the Varied Contract to provide the certificate of appreciation, the letter of commendation, and fully paid life membership, and to do all things necessary for the grant of a Liberal Party of Australia Distinguished Service Award (prayer for relief paragraph 9);
(c) an order that (all) the defendants take all reasonable steps within their power to cause the 2008 LNPSE to specifically perform those obligations and its obligation to attest to and acknowledge his outstanding contribution to the establishment of the LNP whenever and however possible (prayer for relief paragraph 10);
(d) an order that the Nov 11 LNPSE cause the total damages claimed to be paid to him out of moneys held or controlled by it for the benefit of the party (prayer for relief paragraph 12);
(e) an order that if the Nov 11 LNPSE fails to cause the damages to be paid to him, the other State Executives pay him those damages caused respectively by them (prayer for relief paragraph 12A);
(g) interest on the amount of $118,000 from 21 March 2009.
[34] Because the LNP is an unincorporated association, the plaintiff's claims have necessarily been brought against individuals. The use of shorthand expressions "the 2008 LNPSE", "the 2010 LNPSE", etc to refer to groups of individuals does not accord those groups any legal status as corporate entities.
[35] Courts are reluctant to intervene in the affairs of voluntary associations. In Cameron v Hogan Rich, Dixon, Evatt and McTiernan JJ said[2] -
"The policy of the law is against interference in the affairs of voluntary associations which do not confer upon members civil rights susceptible of private enjoyment."
**"**Has [the plaintiff], however, any redress in a Court of law for such unauthorized act? It may be unlawful in the sense that it is void (Graham v Sinclair[4]). But to give him a right of relief at law or in equity, [the plaintiff] must establish some breach of contract with him, or some interference with his proprietary rights or interests. As a general rule, the Courts do not interfere in the contentions or quarrels of political parties, or, indeed, in the internal affairs of any voluntary association, society or club."
[36] The scope of that decision has been explored in many cases since. It is now tolerably clear that Courts will intervene in the affairs of voluntary associations in some circumstances, including -
(c) where someone's livelihood or reputation is at stake.
[37] The plaintiff alleges that the Suspension and Expulsion Decisions were made in circumstances in which he was denied natural justice and procedural fairness, and that they were made in breach of the party's constitution, for which he claims declaratory and injunctive relief and damages.
[38] I did not understand counsel for the applicant defendants to impugn the pleading in so far as it is alleged that the plaintiff was entitled to natural justice and procedural fairness prior to suspension or expulsion because of the LNP's public status as a registered political party. Nor did I understand him to challenge the availability of declaratory and injunctive relief.
[39] Rather, his challenges were to (a) the allegation that the constitution operated as a contract, and (b) some of the components of the damages claimed.
Whether the LNP constitution operates as a contract
[40] In paragraph 49 of the second amended statement of claim the plaintiff pleads that the LNP's constitution operates as a contract in three respects:
"49. The constitution of the LNP operates as a contract as between the LNP and its members, as between members of the LNP or as between its State Executive and members of the LNP ..."
However, in subsequent paragraphs only one of those respects is relied on -that it operates as a contract between the State Executive and the members of the party. This was confirmed by senior counsel for the plaintiff during oral argument.[7]
[41] Counsel for the applicant defendants submitted that the constitution of a voluntary association like the LNP does not operate as a contract. He submitted that there is no case in which damages were awarded to a member of a political party (or any other voluntary association) for breach of its constitution (or indeed any procedural rule), and that there is no basis for doing so in the present case. He submitted that the claim for damages for breach of the constitution or breach of the rules of procedural fairness should be struck out.
[42] Counsel for the plaintiff submitted that whether the constitution of the LNP operates as a contract between the State Executive and members of the party is a question of fact [sic], which must be determined at trial.
[43] In Cameron v Hogan the plaintiff was expelled from membership of the "Australian Labor Party, State of Victoria", which was an unincorporated association. He brought an action against six officers and 18 members of the central executive, claiming damages and a declaration that his expulsion was void for want of natural justice. He based his claims (i) on a proprietary right or interest in the property of the association and (ii) on breach of the rules of the association which he contended operated as a contract between members, or between executive officers and members. In the High Court, his claims failed on both bases.
[44] The majority did not rule out the possibility of the rules of a voluntary association operating as a contract. They said -
"If a member of a voluntary association complains, not of an invalid expulsion, but of some failure to observe the rules on the part of the committee or other officers, it would be necessary for the member complaining to show that the rules were intended to confer upon him a contractual right to the performance of the particular duty upon which he insists. It can seldom be the true meaning of the rules of any large association of such a kind that those under-taking office thereby enter into a contract with each and every member that they will execute the office in strict conformity with the rules. If, however, it were determined that the committee or the officers of a voluntary association, in attempting to exclude the member complaining, or in some other respect, had committed a breach of contract, the remaining members of the association would not be responsible. The committee or officers may be agents for the members of the association. But if so, they are agents for all the members. If in the case of a member complaining they have violated the rules, they have exceeded their authority. Upon no doctrine of agency can one of the joint principals hold the others responsible. (See Kelly v National Society of Operative Printers.[8])"
Their Honours went on to analyse the rules of the association in question before concluding that in the circumstances of that case the rules were not intended to operate as a contract.
[45] In Galt v Flegg[9]the applicants sought declarations that the first respondent had not been endorsed as the Liberal Party of Australia (Queensland Division) candidate for a seat in the Queensland Parliament and that a preselection plebiscite selecting him as the candidate was void. Moynihan SJA observed -
"[8] The party ... is an unincorporated association. Its affairs are regulated by the constitution. The rules of such an association do not operate to create enforceable contractual rights and duties between members or between officers and members."
What this Honour said was obiter: the applicants had not advanced any argument based on contract. I respectfully disagree with his Honour. While it may be rare for the necessary contractual intent to be found in the case of an unincorporated association,[10] the majority judgment in Cameron v Hogan left open the possibility of such a finding as a matter of principle.
[46] The constitution of the LNP is exhibited to an affidavit which counsel for the applicant defendants read on the hearing of this application. Nevertheless, counsel for neither party put forward any analysis of its provisions. In the circumstances, it would not be appropriate for me to express a view upon whether the constitution operates as a contract as alleged. Suffice it to say that as a matter of principle it might do so if, on its proper construction, there was an intention to create a contractual relationship between the members and the State Executive.
[47] Accordingly, the allegation in the second amended statement of claim that the constitution operated as a contract as between the members and the State Executive ought not to be struck out, but the allegations that it operated as a contract between the LNP (an unincorporated body) and its members and between the members inter se ought to be struck out. That is, the words "as between the LNP and its members, as between members of the LNP or" should be struck out of paragraph 49 of the second amended statement of claim.
[48] Apart from contract, there is no basis pleaded for the recovery of damages for the making of the Suspension and Expulsion Decisions, even if the process adopted was in breach of provisions of the constitution and/or amounted to a denial of natural justice and procedural fairness.[11]
[49] I will address the damages claims below, on the assumption damages are in principle recoverable.
[50] Counsel for the applicant defendants attacked the various claims for damages on the basis that the losses were sustained not by the plaintiff, but by the companies by which he is employed.
[51] The plaintiff's claims for damages for breach of the constitution are for loss of reputation (paragraph 59) and loss of income or loss of the chance to earn income (paragraph 60).
[52] I did not understand counsel for the applicant defendants to challenge the claim for damages for loss of reputation.
[53] In paragraph 1 the plaintiff pleads that he is presently employed by and derives his income from two companies of which he is director and principal employee - Greene Creative Pty Ltd and Entrée Vous Pty Ltd. In paragraph 60 the plaintiff pleads "damage by way of a loss of income or a loss of a chance to earn income as a campaign adviser and as a political lobbyist". In parts A and B of the particulars of the allegation he says -
"A. The suspension and expulsion of the plaintiff and the continuation of the plaintiff's suspension has deprived him of the opportunity to represent to persons, including the clients of his employer, or his own clients, that:
(ii) he has the confidence of the LNP, its Executive, its Council and its officers.
[54] Insofar as the business would have been conducted by companies rather than by him personally, he cannot recover damages for the income the companies would have earned, or for the companies' loss of the chance to earn such income.
[55] A shareholder may, in principle, recover against X damages for diminution in the value of his shareholding in a company where the diminution results from loss inflicted on the company by X.[12] He may also be able to recover loss of dividends he would have received from the company.
[56] In George Fischer (Great Britain) Ltd v Multi Construction Ltd[13] the English Court of Appeal observed that where the diminution in the value of the plaintiff's shareholding results from loss inflicted on the company by the defendant's breach of its contract with the plaintiff shareholder -[14]
"...in order to succeed, the shareholder must go on to prove that (i) it did suffer such a loss (ii) it can quantify the loss by evidence; (iii) the loss is not too remote, i.e. because on the facts known to the defendant at the time of the contract it was reasonably foreseeable that if the defendant was in breach of the contract the plaintiff would suffer such a loss."
[57] In the present case, there is no pleading as to the shareholding of either of the companies by which the plaintiff is employed, and so there is no basis for the recovery of damages for diminution in the value of shareholdings or for loss of dividends.
[58] Counsel for the plaintiff invoked the High Court's decision in Husher v Husher[15] in support of his client's claim for damages for income that would have been earned by the companies. In that case the plaintiff claimed damages for personal injuries sustained in a motor vehicle accident. At the time of the accident he was a block layer carrying on business in partnership with his wife. It was a partnership at will. Although his wife performed only minor bookkeeping and message taking tasks, they shared the profits equally. There were no employees. After the accident the plaintiff was unable to perform the work adequately and the partnership ceased. The majority said that his financial loss occasioned by impairment of his earning capacity was what he would have expected to have had under his control and at his disposal by exercising that capacity - in this case the whole of the fruits of his skill and labour. His capacity to terminate the partnership at will was of critical significance in measuring his earning capacity and his financial loss. No true comparison could be made between his case and that of a person expected to remain a member of a partnership not terminable at will or a partnership in which persons other than the plaintiff contributed significantly to the firm's business activity, either by capital contribution or by contribution of skill and labour.[16]
[59] This is a very different case from Husher. The companies by which the plaintiff is employed are separate legal entities. It does not follow from his being "director and principal employee" of each company that the companies' income was under his control and at his disposal.
[60] In principle there can be no challenge to the plaintiff's claims to recover damages for loss of income or loss of the chance to earn income in his individual capacity.
[61] Paragraph 60 should be struck out, and the plaintiff should have leave to replead only loss which he has personally suffered.
[62] Paragraphs 37 - 40F of the pleading relate to the making of the Suspension and Expulsion Decisions. Those decisions were not made by the 2008 LNPSE, and even though there may be a temporal connection between those decisions and the plaintiff's continuing to be denied entitlements under the Varied Contract, logically the plea in paragraph 46 that the 2008 LNPSE breached the Varied Contract by the conduct alleged in paragraphs 37 - 40F cannot stand.
[63] Accordingly, in paragraph 46, should be amended by the deletion of "paragraphs 35 - 40F" and the substitution of "paragraphs 35 - 36".
[64] The plaintiff seeks an order that the 2008 LNPSE specifically perform some of its obligations under the Varied Contract (such as to provide a letter of commendation) and an order that all the defendants take all reasonable steps to cause it to do so.
[65] Counsel for the applicant defendants submitted that, because the 2008 LNPSE no longer has control of the party, the Court would not make such orders. He submitted that the plaintiff's remedy lies in a claim against the 2008 LNPSE for damages. He submitted that paragraphs 9 and 10 of the prayer for relief should be struck out.
[66] The orders sought are discretionary. As senior counsel for the plaintiff submitted, lack of utility is a matter which should be pleaded and determined on the facts at trial.
[67] Accordingly, paragraphs 9 and 10 of the prayer for relief should not be struck out.
[68] The plaintiff's claims against the 2008 LNPSE for damages for breach of the Varied Contract contain the same flaw as his claim for damages for breach of the constitution.
[69] In paragraph 61 he pleads "a loss of income or a loss of a chance to earn income as a campaign adviser". In parts A and B of the particulars of that allegation he says -
"A. ... the plaintiff would have been able to represent to persons, including the clients of his employer, or his own clients that
[70] In paragraph 62 he pleads loss and damage "by failing to earn income as a campaign adviser ...(being income that the plaintiff would earn but for the said breaches)". In parts A, B and C of the particulars of that allegation he says -
"A. The plaintiff's political campaign advisory business will fail to gain at least a similar number of accounts ...
[71] In paragraph 63 he pleads "the loss of a chance to attract new clients to his lobbying business". In parts B and D of the particulars of that allegation he says -
"B. ... the plaintiff would be able to represent to persons, including the clients of his employer, or his own clients, that ...
Schedule 2 is headed "Losses relating to Entrée Vous, the plaintiff's political lobbying business". He says -
"A. The plaintiff's lobbying business, Entrée Vous Pty Ltd made approximately $208,000 during the last financial year. The plaintiff earns his income from the lobbying business.
[72] Paragraphs 61, 62 and 63 and Schedule 2 should be struck out, and the plaintiff should have leave to replead only losses which he has personally suffered.
Inducing breach of contract/Interfering with contractual relations
[73] The plaintiff alleges that the 2008 LNPSE is liable for breach of the Varied Contract, and that the intermediate State Executives (ie the State Executives which made the Suspension and Expulsion Decisions) are liable in tort for procuring or causing the 2008 LNPSE to breach the contract or for preventing or hindering it from performing its contractual obligations to the plaintiff. See paragraphs 48A - 48D.
[74] In principle, this claim is proper. The damages claimed are particularised in paragraphs 62 and 63. For the reasons I have already given, those paragraphs should be struck out, with limited leave to replead.
Prayer for relief - order that Nov 11 LNPSE cause the total damages to be paid...
[75] By paragraph 12 of the prayer for relief the plaintiff seeks an order that the Nov 11 LNPSE cause the total amount of damages claimed to be paid out of moneys held or controlled by it for the benefit of the party.
[76] In principle persons who hold funds on behalf of an unincorporated body who are joined as parties may be ordered to pay damages payable by the association out of those funds.[17] There are two problems with the claim as formulated in paragraph 12 of the prayer for relief - the joinder of the Nov 11 LNPSE and some of the components of the damages claimed.
[77] The composition of the State Executive has changed a number of times since the Varied Contract was executed on 7 August 2008, and it is likely to change again before this matter goes to trial and judgment. The Nov 11 LNPSE was the State Executive when Atkinson J made the orders set out in paragraph [18] of these reasons. If the plaintiff wishes to have an order of this type made at trial, he will need to ensure the then current State Executive is joined for this purpose.
[78] I have already said that some of the damages claims should be struck out with limited leave to replead.
[79] In the circumstances, paragraph 12 of the prayer for relief should be struck out, with leave to make another (reformulated) claim in its stead.
[80] In paragraph 12A of the prayer for relief the plaintiff claims an order that if the Nov 11 LNPSE fails to cause the damages in paragraph 12 to be paid to him, the intermediate State Executives pay those damages caused by them respectively. Because this paragraph is linked to paragraph 12A, it, too, should be struck out, with leave to make another (reformulated) claim in its stead.
That, as against the first, twentieth, twenty-seventh and thirty-second defendants,
(i) paragraph 46 of the second amended statement of claim be amended by the deletion of "paragraphs 35 - 40F" and the substitution of "paragraphs 35 - 36";
(ii) the words "as between the LNP and its members, as between members of the LNP or" be struck out of paragraph 49 of the second amended statement of claim;
(iii) paragraphs 60, 61, 62 and 63 and Schedule 2 of the second amended statement of claim be struck out, and the plaintiff have leave to replead only losses which he has personally suffered;
(iv) paragraphs 12 and 12A of the prayer for relief in the second amended statement of claim be struck out and the plaintiff have leave to insert reformulated claims.
[1] (1949) 78 CLR 62 at 91 per Dixon J.
[2] [1934] HCA 24; (1934) 51 CLR 358 at 378.
[5] [1916] HCA 70; (1916) 23 CLR 29 at 43 - 44; [1916] HCA 70.
[6] [1993] 1 Qd R 10 at 20
[7] Transcript 27 March 2012, page 1-28.
[8] (1916) 113 L.T. 1055, per Swinfen Eady LJ, at p. 1058; per Phillimore LJ, at p. 1060; per Bankes LJ, at p. 1062.
[10] Contrast incorporated associations, where relevant legislation expressly provides for a contractual relationship: for example, Rose v Boxing NSW Inc [2007] NSWSC 20; Islamic Council of South Australia Inc v Australian Federation of Islamic Councils Inc [2009] NSWSC 211; Kovacic v Australian Karting Association (Qld) Inc [2008] QSC 344.
[11] See Fagan v National Coursing Association of SA Inc (1974) 8 SASR 546 at 563.
[12] Johnson v Gore Wood & Co [2002] 2 AC 1; Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204; Thomas v D'Arcy [2005] QCA 68; [2005] 1 Qd R 666.
[16] At 147 - 148. See also per Callinan J at 158 - 159.
[17] Ideal Films Limited v Richards [1927] 1 KB 374.
Greene
McIver & Ors [2012] QSC 181
Cameron v Hogan [1934] HCA 24; (1934) 51 CLR 358, cited.
Edgar and Walker v Meade (1916) 23 CLR 29; [1916] HCA 70, cited.
Galt v Flegg [2003] QSC 290, not followed.
Husher v Husher (1999) 197 CLR 138; [1999] HCA 47, discussed
(1934) 51 CLR 358
(1949) 78 CLR 62
(1916) 23 CLR 29
(1999) 197 CLR 138
(1974) 8 SASR 546