Kabbara v Australian National Sports Club Incorporated

Supreme Court of NSW|2020-08-26|Before: Ward CJ

ineteenth Plaintiff) Australian National Sports Club Incorporated (Defendant) Representation: Counsel: NE Furlan (Plaintiffs) K Hooper (Defendant)

Solicitors: Babingtons Lawyers (Plaintiffs) WilliamsonBarwick (Defendant) File Number(s): 2018/00250659 Publication restriction: Nil

Background

The underlying dispute between the parties relates to the expulsion of the plaintiffs as general members of the defendant club, the Australian National Sports Club Incorporated (which is an incorporated association).
The procedural background to the matter is that there were initially proceedings commenced by the Club, as the plaintiff, against the plaintiffs (or at least some of them) relating to a dispute in respect of the dissolution of the Club's management committee. Those proceedings were discontinued (this Court making orders on 5 October granting leave for the Club to do so). At the time that those proceedings were discontinued, the present proceedings had already been commenced.
The expulsion of the plaintiffs from the Club occurred over the course of March and April 2018. The matter was referred to court-annexed mediation in 2019. As is obvious, unfortunately the matter did not resolve at mediation.
Relevantly, on 20 December 2019, orders were made by consent by Rein J pursuant to which the whole of the proceedings were to be decided by reference to the claims by particular test members. Specifically, order 6 of the short minutes of orders provided: 6. The whole of the proceedings will be decided according to the following: (a) The parties will be divided into three separate groups. Group One, Group Two and Group Three. (b) One member will be selected from each group (Test Member). (c) The Court will hear the claims of the Test Members only. (d) The outcome of the Test Member's claims will also determine the outcome of the proceedings for each member within that Test Member's group, such that: i. if the claim (of claims) of a Test Member are upheld and the Court grants relief sought by that Test Member in the Statement of Claim, then each and every other member of their group will also succeed to the same extent and will be granted the same relief; or ii. if the claim (or claims) of a Test Member fail and he or she is granted no relief, then each and every other member of their group will also fail entirely in their claims in the proceedings. (e) Group One will be the First, Second Third, Fourth, Fifth, Sixth, Seventh, Tenth, Eleventh and Twelfth Plaintiffs. (f) The Court will select the Test Member for Group One. (g) Group Two will be the Eighth, Fourteenth, Seventeenth and Eighteenth Plaintiffs. (h) Group Three will be the Ninth, Thirteenth, Sixteenth and Nineteenth Plaintiffs. (i) The Plaintiffs will select the Test Member for Group Two. The Plaintiffs will notify the Defendant in writing by 4pm on 24 December 2019 of their selection. (j) The Defendant will select the Test Member for Group Three. The Defendant will notify the Plaintiffs in writing by 4pm on 24 December 2019 of their selection.
Order 10 relevantly contained a notation by the Court that, solely on the condition that the defendant had consented to the determination of the proceedings in accordance with order 6 (as excerpted above), the plaintiffs without admission did not press particular paragraphs of their statement of claim.
Those paragraphs that the plaintiffs agreed not to press included paragraphs of the statement of claim that dealt with the dissolution of the management committee (see, for example, [35] and following of the statement of claim prior to the filing of the amended statement of claim on 10 June 2020).
In response to that allegation, the defendants in their defence had pleaded (see at [17]) that there was material evidence that the members of the management committee, as at 10 March 2017, had breached various duties owed to the Club, and the defendants then set out several paragraphs in relation to the alleged breaches.
The matter was listed for hearing before Rein J over a seven day period to commence earlier this year. However, in March of this year, the global pandemic (COVID-19) began to cause considerable disruption to the functioning of the Court. As I understand it, there were issues experienced in relation to the audio visual link, or the functioning of the audio visual facilities, prior to the commencement of the hearing.
It appears that what ultimately occurred was that his Honour proceeded to hear and to determine, as separate questions, the following questions. First, did the constitution of the defendant contain the term (as pleaded at [29] of the statement of claim) defined as the "fairness term"? Second, did the constitution of the defendant contain the term (as pleaded at [28] of the statement of claim) defined as the "expulsion term"?
His Honour heard argument in relation to those matters on 2 April 2020. His Honour published reasons on 1 May 2020 answering those questions, both in the affirmative. His Honour then caused the matter to be listed before the Equity Registrar to obtain a hearing date for the balance of the proceedings.
It is apparent from a review of the transcript of argument before his Honour on that occasion (on 2 April 2020) and from the communications by the parties with his Honour's associate leading up to that hearing, as well as the proposed short minutes of order leading up to the commencement of the hearing of the separate questions for determination, that his Honour was treating the matter at that stage as a hearing solely limited to the separate questions.
For that reason, it seems to me (and the parties here accept) that his Honour is not part heard in the substantive hearing, and that, in fact, the substantive hearing has not yet commenced.
The plaintiffs challenge their expulsion from the Club on three principal grounds.
The first (as pleaded at [30A] of the amended statement of claim) is that the constitution of the Club does not, and at all material times did not, empower an interim caretaker committee to expel general members from the Club.
The second (see [29] of the amended statement of claim) is that the expulsions were in breach of what his Honour has found to be an implied term in the constitution, namely the "fairness term".
Finally, the third (see [28] of the amended statement of claim) is that the expulsions were in breach of what his Honour has found to be a further implied term in the constitution, namely the "expulsion term".

Strike out

I turn first to the strike out application in relation to [335.1.3A] of the further amended defence. That further amended defence was filed pursuant to an order made on 14 May 2020 by the Equity Registrar.
In that amended defence, [17] was struck out (I interpose to observe, not surprisingly) because it responded to [35] which was, as I have explained, by then no longer being pressed. However, inserted into the amended defence at that time was [335.1.3A]. That paragraph runs for almost five pages of the further amended defence and it is unedifying here to excerpt it.
It is sufficient to note that the chapeau to [335] commences with the words: "Further, or in the alternate, with respect to each claim made by each Plaintiff, the Defendant says…"; and the chapeau to [335.1.3A] commences: "There was material evidence that the members of the Management Committee as at 10 March 2017 had breached various duties owed to the ANSC…" ; and then [335.1.3A] effectively brings across several of the matters that had earlier been pleaded at [17].
The contention of the plaintiffs is that it is an abuse of process for the further amended defence effectively to replead those matters (previously pleaded at [17]) now pleaded at [335.1.3A].
More specifically, it is submitted that it is contrary to order 6 of the orders that were made on 20 December 2019 (it will be recalled, in effect that the proceedings be determined by reference to the claims of the three test members only) for the Club now to seek to reintroduce into the proceedings, and have the Court hear and determine as part of the Club's defence of the matter, allegations of serious wrongdoing against nine other plaintiffs whose claims against the Club will not be heard.
Pausing here, the defendant has said that the intention of the insertion of [335.1.3A] into the amended defence was not to introduce claims in respect of plaintiffs other than the three test member plaintiffs (see, for example, T 21.31). As I apprehend it, the defendant is prepared to amend further the pleading in order to make that clear. I will return in due course to why it is that I think that does not address the problem.
The defendant says that the impugned paragraph is properly within the scope of the leave granted to it on 14 May 2020 to amend its defence; that the paragraph pleads material facts relevant to the issue of whether the plaintiffs have demonstrated practical injustice occasioned to them by the alleged breaches of the "expulsion term" or "fairness term"; and that the paragraph remains relevant despite the plaintiffs not pressing their allegation that the defendant did not validly dissolve the management committee.
It is said that the paragraph serves to explain why it is said by the defendant that the relevant plaintiffs breached various duties they owed to the Club and provides particulars of those alleged breaches. It is thus said that the paragraph thereby assists the identification of the real issues in dispute.
The defendant also says that there is no prejudice to the plaintiffs, in the event that the paragraph is relied upon, in circumstances where it has always formed part of the defence to the plaintiffs' claim since 2018. Hence, it is said, there can be no costs thrown away by the plaintiffs by virtue of the amendment.
To the extent that the plaintiffs' objection to the paragraph is that they have not served evidence to meet it, the defendant says that the orders (made by consent) permitted them to serve any further affidavit evidence and, in fact, that they have served evidence because the paragraph has always been included in the defence.
In response to that, the plaintiffs say that, while it is strictly accurate to say that the allegations in [335.1.3A] have been in the defence since 2018, that submission ignores the notation that was included as part of the 20 December 2019 orders (see at [5]-[6] above).
The plaintiffs say that they agreed not to press the "dissolution" contention on the basis that the parties consented to the test member order, and thus submit (by reference to the pre-trial submissions served by the defendant which are in evidence on this application) that it is apparent that the specific allegations (made in answer to [35] and [41] of the statement of claim) by the defendant in [17] and [23] of their then defence were no longer issues in the proceedings.
It is also said, as a further argument on the abuse of process complaint, that it is an abuse of process for the defendant in large measure to repeat allegations made in an earlier proceeding in this Court (that was brought by the Club against certain of the plaintiffs in this matter) which the Club discontinued. It is said that this supports the plaintiffs' submission that the paragraph is an abuse of process, and reference was made to what was said by the High Court of Australia in UBS AG v Tyne (2018) 265 CLR 77; [2018] HCA 45 (UBS v Tyne) at [1], [39]-[41], [44]-[46], [55]-[56], [58] per Kiefel CJ, Bell and Keane JJ and [67] per Gageler J.
As to the submission that it is an abuse of process for [335.1.3A] to be reintroduced into the pleading in the manner that I have described above, I do not regard the fact that it raises allegations that were the subject of the discontinued proceedings as amounting to an abuse of process. I consider that the facts in the present case are quite different from those in UBS v Tyne. In that connection, I specifically note that Kiefel CJ, Bell and Keane JJ observed (at [59]): 59. For the Federal Court to lend its procedures to the staged conduct of what is factually the one dispute prosecuted by related parties under common control with the attendant duplication of court resources, delay, expense and vexation, as Dowsett J found, is likely to give rise to the perception that the administration of justice is inefficient, careless of costs and profligate in its application of public moneys…
Furthermore, I note what was said by Gageler J (at [81]): 81. … What was not reasonable having regard to the totality of the private and public interests involved was for Mr Tyne to take it upon himself to hold the claims of the Trust in abeyance with a view to pursuing them in separate proceedings if it turned out that Telesto's claims were for some reason not successful.
The present case is not analogous to the above. I accept that there is no issue estoppel arising out of the fact that the proceedings have been discontinued.
However, where I am more troubled, is that it is clear that a forensic decision was made by the parties for the matter to proceed to hearing on the confined basis of the three test member claims. In that context, based on the pleading as it then stood, and based on that agreement, it was recognised that the plaintiffs would not press the allegations in relation (amongst others) to the dissolution of the management committee.
It is said by the plaintiffs that, if [335.1.3A] is permitted to remain in the pleading, the plaintiffs may wish to reinstate the allegations that were made in relation to the dissolution of the management committee (see T 37.4).
It seems to me that there is force in the argument that, if [335.1.3A] is permitted to remain (albeit as it would have to be in a re-pleaded form and even if limited to the three test members), it would not be fair then to hold the plaintiffs to their decision not to press the dissolution arguments, and that this would thereby cause the proceedings to move down a completely different - or, perhaps not completely different, but certainly a different - path to the path that was agreed back in December 2019.
I do not think that it is an answer to say, in effect, that it has always been alleged that no practical injustice (or perceived practical injustice) has been suffered (which argument I might add is based on authorities such as Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421; [2019] HCA 3, an authority dealing with alleged jurisdictional error as a result of a denial of procedural fairness by the relevant tribunal and not, as counsel for the plaintiffs points out (see T 38.28), an authority dealing with alleged breach of contract in the context of an association or an associated club).
In any event, insofar as the defendant says that practical injustice has been pleaded all along, it certainly has not been pleaded in a fashion that it is now sought to be pleaded. The allegations of no practical injustice that were made in [335] before the amendment are quite confined. Specifically, those allegations were as follows: 335. Further, or in the alternate, with respect to each claim made by each Plaintiff, the Defendant says: 335.1 Any failure to afford the Plaintiff(s) procedural fairness pursuant to the purported Fairness Term as defined at paragraph [29] of the Claim (which is not admitted by the Defendant), did not give rise to any practical injustice to the Plaintiff(s) because: 335.1.1 The allegation(s) put to each Plaintiff were clear, concise, confined to matters within a narrow compass and concerned facts objectively within the knowledge of the particular Plaintiff(s); … 335.1.2 The Defendant having given each Plaintiff an opportunity to respond to the allegations put against him or her, received from each Plaintiff (save for the Ninth, Seventeenth and Eighteenth Plaintiff) a written response; … 335.1.3 The factual matters put to each of the Plaintiff(s) were incontrovertible and there were no matters, facts or circumstances that could be put by the Plaintiff(s) to rebut the allegations in circumstances where the allegations were valid bases for expulsion from the Defendant…
Furthermore, I note that the particulars to these allegations were relatively confined.
Meanwhile, [335.1.3A] relates back to allegations ranging across a variety of matters, including, for example, failing to attend to arrange for the repair of the timber floor that was lifting at the Club premises, failing to attend to rectifying defects identified following a fire inspection or that the electrical equipment of the Club was properly tagged, and the like.
Again, it seems to me that there was clearly a forensic decision made to limit the scope of the allegations in relation to the dissolution of the management committee, and the reintroduction of the allegations (in this manner as particulars of a claim that there has been no practical injustice) should not be permitted at this stage having regard to the balancing exercise that is required to be undertaken by reference to what was said by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27.
For example, as noted by French CJ (at [5]): 5. In the proper exercise of the primary judge's discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs … [there is a need to take] into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system… [Emphasis added]
Similarly, as was said by Gummow, Hayne, Crennan, Kiefel and Bell JJ (at [95]): 95. The statement of Waller LJ identifies a fundamental premise of case management. What may be just, when amendment is sought, requires account to be taken of other litigants, not just the parties to the proceedings in question. The statement is consistent with what was said in Sali v SPC, which reflected a proper understanding of case management. The statements in JL Holdings do not reflect such an understanding and are not consistent with what was said in Sali v SPC. To say that case management principles should only be applied 'in extreme circumstances' to refuse an amendment implies that considerations such as delay and costs can never be as important as the raising of an arguable case; and it denies the wider effects of delay upon others.
It should be noted that this is a dispute amongst club members of an incorporated sports club. There has already been evidence before me as to the costs of the proceedings to date. It may be well be inferred that emotions are high as between the parties. Nevertheless, I do not consider that it is in the interests of the administration of justice to permit the case, having been narrowed and confined in a particular way, now to be expanded in the fashion that will be inevitable if [335.1.3A] were permitted to remain in the pleading.
I say that noting (and being conscious of the caution that I am required to exercise before striking out a pleading or part of a pleading) the principles articulated in cases such as General Steel Industries v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69, as to the exercise of that power only being carried out in obvious cases and the need to be sparing in such an exercise.
The alternative basis on which the plaintiffs seek to strike out the paragraph, and which is strictly not necessary now to deal with in view of the conclusion I have reached as to the preceding, is that the paragraph has a clear tendency to cause prejudice, embarrassment or delaying the proceedings (reference being made to r 14.28(1)(b)).
It is said that the paragraph is embarrassing and that it is ambiguous and imprecise in its identification of material factual allegations so as to deprive the plaintiffs of proper notice of the real substance of the claim (reference being made to what was said in Nanevski Developments Pty Ltd v Slaveski [2020] NSWSC 617 at [219]).
It is said that there are a number of specific problems with the allegation. The first is that it makes allegations against twelve individuals collectively. To that, it is conceded by the defendant that there would need to be a re-pleading of [335] to make it clear that it is only seeking to raise allegations against the test member plaintiffs (see T 27.29). However, in any event, it would still be necessary to identify in relation to each of those persons precisely what is alleged to have been done or not done, and it is difficult to see from the way in which it is pleaded how that would be achieved without extensive re-pleading.
The paragraph also contains a broad allegation of breach of various duties owed to the Club. It is accepted by the defendant that a number of the duties are not correctly sourced, insofar as reference is made to particular clauses of the constitution of the Club, namely cll 28.6, 22.1(b) and 33, some of which it is conceded do not impose duties at all and one of which, cl 28.6, speaks of a duty of the President of the Club only (see, for example, T 27.16).
There is next also a dispute as between the parties as to whether or not [335.1.3A] raises allegations that give rise to a reasonably arguable case.
I would not have been prepared to strike it out on the basis that it did not do so but, had I not otherwise determined to strike it out, I would have required it to be re-pleaded with specificity.

Separate determination of questions

That brings me to the second aspect of the notice of motion, and that is the application for separate questions. It is submitted that the separate questions raise the same point as to whether the three individuals to which the questions refer had power to expel general members of the Club, and that this raises a pure question of construction.
Pausing here, it was conceded, in the course of argument, that the questions might more effectively perhaps be framed not by reference to whether each of the individual members had power to expel the first plaintiff; but as to whether or not, as a matter of construction, an interim caretaker committee, howsoever that committee might be constituted, would have power to do so (see T 33.37).
It is submitted for the plaintiff that this is a paradigm example of a matter that is appropriate for separate determination on the basis that there could be little, if any, evidence called in relation to this issue. The defendant, on the other hand, says that, albeit that the evidence might only be limited, there would be evidence that it may seek to rely upon in relation to this issue, that being evidence of meetings and/or correspondence between the Club and the members at the time or after their expulsion.
In the course of debate in relation to that issue, it appears that what is being put is that there would be some form of conventional estoppel or conventional basis of dealings from which it could be argued that, whatever the position in relation to power as a matter of construction, there was not a basis for the plaintiffs to complain as to lack of exercise of power in the present case.
(The plaintiffs point out that no conventional estoppel has been pleaded and I accept that this is the case (see, for example, T 34.4). However, that of itself is not necessarily dispositive because, if there is to be a re-pleading of the defence, then a conventional estoppel might be able to be raised.)
The defendant maintains, and I agree, that an order for the separate determination of questions is an exceptional course. The defendant refers to authorities such as Tepko Pty Ltd v Water Board (2001) 206 CLR 1; [2001] HCA 19 (Tepko) where Kirby and Callinan JJ indicated (at [170]) that the determination of a separate question should be ordered only if the utility, economy and fairness to the parties of a separate hearing is beyond doubt; and to Tyrrell v Owners Corporation Strata Scheme 40022 [2007] NSWCA 8 where Spigelman CJ said (at [16]) that it will be inappropriate where the basis upon which the matter is put before the Court leaves much too much open for disputation and does not allow the Court to resolve either way the matter in a final and determinative manner.
I interpose to note that, as in Tepko (see at [170]), in Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 1215, for example, Einstein J observed that, more often than not, raising issues as separate questions or separate questions for determination gives rise to more costs than it saves, not least because of the possibility of appeal points in that regard.
Reference is made by the plaintiffs to what was said by Brereton J (as his Honour then was) in Integral Home Loans v Interstar Wholesale Finance [2006] NSWSC 1464, his Honour there advocating the Court taking a more interventionist role in identifying and separating important issues which can resolve significant parts of the litigation expeditiously (see at [6]), and to other authorities such as Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103 at [96], Nichols Constructions Pty Ltd v Elphick [2015] NSWSC 1732 at [40] per McCallum J (as her Honour then was), Johnson v Trustees of the Roman Catholic Church [2009] NSWSC 309 at [20] per Hoeben J (as his Honour then was), Robbins v Royal Bank of Scotland plc [2010] NSWSC 39 at [13] per Barrett J (as his Honour then was) and In the Matter of 1stt Fleet Pty Ltd (in liquidation) [2017] NSWSC 506 at [38] per Black J.
I also bear in mind the caution that needs to be exercised in this context, having regard to what was said by the High Court in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; [1999] HCA 9 (see at [51]-[53] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ).
In the circumstances, ultimately I am not persuaded that there should be an order for separate question(s) to be determined. The parties have already had one opportunity to have heard as separate questions two questions in the proceedings.
I make no criticism of the way in which the matter has ended up at this point, but it seems to me that it is in the interests of the administration of justice, and the statutory mandate for the just, quick and cheap resolution of the real issues in dispute (see s 56 of the Civil Procedure Act 2005 (NSW)), that this matter proceed to a hearing as expeditiously as possible. I am not sufficiently persuaded that that mandate will be satisfied by ordering the separate questions.

Orders

Accordingly, for those reasons, I make the following orders: 1. Pursuant to r 14.28 of the Uniform Civil Procedure Rules and the Court's inherent power, strike out [335.1.3A] of the defendant's further amended defence, filed 24 June 2020, with no liberty to replead. 2. Otherwise dismiss the notice of motion filed 23 July 2020. 3. List the matter for directions as to the further conduct of the proceedings at 8.30am on Monday 31 August 2020, at which time I note that the Court will be expecting to make directions for the matter to proceed to a final hearing.

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