Kumar v Satsang Hindu Maha Sabha of NSW Incorporated

Supreme Court of NSW|2019-02-18|Before: Kunc J

Summary

These proceedings concern a dispute over the control and management of a Hindu temple at Regents Park. The temple is owned and managed through the medium of the first defendant (the "Association"), which is an incorporated association. The plaintiffs and the other defendants are the former and purportedly current president and secretary of the committee of the Association.
The parties have conducted the proceedings on the basis that the second and third defendants control and may be referred to interchangeably with the current committee of the Association, although that committee comprises more than just those two defendants and no representative order has been. For the purposes of these reasons nothing turns on the distinction and I will refer to the second and third defendants as the "Current Committee".
At a court-annexed mediation held on 10 December 2018 the parties entered into terms of settlement (the "Settlement Agreement") that the Court subsequently noted "will probably resolve all issues between the parties". The Settlement Agreement includes fresh committee elections to be held on 31 March 2019 on an agreed basis (the "Election") to be followed by a further meeting of the members to approve a new constitution for the Association.
A dispute has arisen between the parties as to the appropriate membership fee to be paid by those wishing to join the Association and vote at the Election and the powers of the Current Committee pending the conduct of the Election and subsequent meeting.

The facts

Both parties had prepared a large amount of affidavit evidence which raised numerous disputed issues of fact. However, when the matter came on for hearing before me I indicated to the parties that, given the exigencies of the Duty List, it was neither appropriate nor practicable for the Court to determine those factual issues, particularly when it was not at all obvious what they had to do with the construction of the Settlement Agreement. The parties ultimately agreed that it was unnecessary to read the evidence because the Court's task was to construe the Settlement Agreement within the four corners of the document.
The parties also accepted that there were certain surrounding circumstances known to both parties which it was relevant for the Court to take into account in construing the settlement agreement: Cherry v Steele-Park [2017] NSWCA 295; (2017) 96 NSWLR 548. I will first set out those surrounding circumstances and record other background facts. There was no dispute about either category of facts.

Surrounding circumstances

The fundamental dispute between the parties concerns what constitution governs the operation and management of the Association.
The plaintiffs' summons includes these prayers for relief: "1. A declaration that the affairs of the First Defendant are conducted subject to its Constitution dated 11 October 2002. 2. A declaration that the removal of the First Plaintiff as President of the First Defendant at the meeting held on 19 November 2017 was null and void. 3. A declaration that the First Plaintiff remains the President of the First Defendant. 4. A declaration that the purported suspension of the First Plaintiff as member of the First Defendant is null and avoid (sic) to the effect that the First Plaintiff is and remains a member of the First Defendant. 5. A declaration that the removal of the Second Plaintiff as Secretary for the First Defendant at the meeting held on 19 November 2017 was null and void. 6. A declaration that the First Plaintiff remains the Secretary of the First Defendant. 7. A declaration that the purported suspension of the Second Plaintiff as a member of the First Defendant is null and avoid (sic) to the effect that the Second Plaintiff is and remains a member of the First Defendant. 8. That the Defendants be restrained from holding nay meeting of the membership of the First Defendant pending further order of the Court."
On 1 August 2018 the defendants gave this undertaking to the Court: "The defendants undertake that until further order of the Court, there will be no meeting of the Association at which any resolution affecting either of the plaintiffs is considered."
On 15 October 2018 the parties consented to the proceedings being referred to a court-annexed mediation to take place on 10 December 2018.
The Settlement Agreement was made at the mediation on 10 December 2018: "TERMS OF SETTLEMENT SUPREME COURT OF NSW CASE NUMBER: 2018/205485 KUMAR & PRASAD V SATSANG HINDU MAHA SABHA OF NSW INC & ORS 1. The parties agree to abide by the current Model Constitution under the Association Incorporation Act 2009 until such time as the Committee elected in accordance with the following clauses has called an Annual General Meeting to consider the new Constitution of the Association. 2. The parties agree that all current members including life members of the Association may vote at the meeting referred to in Clause 6 Provided that they have paid their membership fees. 3. The Parties agree that new members may join the Association, but that in order to become a member of the Association, a new member must meet the following requirements: i. A person qualifies to become a member of the Association if he/she: a) Follows or intends to follow and respect the principles of the Sanatan Dharam; b) Is of 18 years of age and over; c) Has been nominated for membership of the Association by a valid member; and d) Has been approved for membership of the Association by the Committee referred to in Clause 4. 4. The parties agree that the following person shall constitute the Committee referred to in Clause 3 (i)(d) above and shall be responsible for vetting new members along the strict guidance of Clause 3(i) above. The members agreed by parties are: a. Mahen Singh; b. Pundit Prakash Maharaj; and c. Pundit Nitya Anand Maharaj 5. The Parties agree that once a member is approved for Membership referred to in Clause 4, the member will be eligible to vote in General Election referred to in Clause 6 provided that: a. They have applied for membership by 28 February 2019; and b. They have paid their membership by no later than 15 March 2019. 6. The 2nd and 3rd Defendants will cause an Annual General Meeting of the 1st Defendant to be called and held on 31 March 2019 and at which meeting the position of all office bearers of the first defendant shall be vacated and election to be held for each such position. 7. The parties agree that the election of members to be conducted by a returning officer who shall be one of following and subject to their consent: 1. Pundit Prakash Maharaj; or 2. Pundit Nitya Anand Maharaj 8. Following the meeting referred to in Clause 6 the Association is to call a further meeting to vote and approve a new constitution for the Association. 9. The Parties agree that the proceeding to be adjourned to a date in April 2019 and that the Order restraining the defendants from taking steps that will affect the interest of the Plaintiffs be varied to allow the parties to carry out the steps herein."
Clauses 8 and 10 of the 2009 Constitution provide: "8. Fees and Subscriptions (1) A member of the association must, on admission to membership, pay to the association a fee of $1 or, if some other amount is determined by the committee, that other amount. (2) In addition to any other amount payable by the member under subclause (1), a member of the association must pay to the association an annual membership fee of $2 or, if some other amount is determined by the committee, that other amount: (a) except as provided by paragraph (b), before 1 July in each calendar year, or (b) if the member becomes a member on or after 1 July in any calendar year - on becoming a member and before 1 July in each succeeding calendar year. … 10. Resolution of disputes (1) A dispute between a member and other member (in their capacity as members) of the association, or a dispute between a member or members and the association, are to be referred to a community justice centre for mediation under the Community Justice Centres Act 1983. (2) If a dispute is not resolved by mediation within 3 months of the referral to a community justice centre, the dispute is to be referred to arbitration. (3) The Commercial Arbitration Act 1984 applies to any such dispute referred to arbitration."

Other matters that are not surrounding circumstances for the purposes of construing the Settlement Agreement

On 2 December 2018 the Current Committee purported to resolve that the membership fee for new members be increased to $200.00. It had previously been $20.00.
On 20 December 2018 the plaintiffs became aware of the purported increase in membership fee.
The Current Committee have said that they propose to reconsider the question of membership fees at a meeting to be held on 24 February 2019.
On 7 February 2019 the plaintiffs were granted leave by Ward CJ in Equity sitting as Duty Judge to file a notice of motion and their affidavits in support. The motion was made returnable on 11 February 2019.
On 11 February 2019 the matter came before me as Duty Judge. The defendants appeared and I made directions to prepare the matter for hearing on 18 February 2019 in the Duty List.
At the hearing on 18 February 2019 the plaintiffs relied on an amended notice of motion dated 12 February 2019 which sought this substantive relief: "6. On the usual undertaking as to damages being provided by the Plaintiffs, an order that the First, Second and Third Defendants restrained from holding any meeting of: a) The membership of the First Defendant prior to the Annual General Meeting to be held on 31 March 2019. b) Any committee meeting of the First Defendant prior to 31 March 2019. 7. An order under section 73 of the Civil Procedure Act 2005 (NSW) that the annual membership fee payable by the new members should be $2.00 pursuant to the settlement reached between the parties on 10 December 2018 ("the Agreement") on the basis that the Committee Meeting held on 2 December 2018 was invalid, or alternatively, the Model Constitution under the Association Incorporation Act 2009 (NSW) adopted on 10 December 2018 superseded any decision made by the Committee on 2 December 2018 (the validity of which is denied)."

The parties' submissions

The plaintiffs' submissions may be summarised as: 1. On the proper construction of the Settlement Agreement, clause 1 of that agreement applied in its terms so that all issues, including the membership fee, had been agreed to be dealt with in accordance with the 2009 Constitution. Whether or not the meeting held on 2 December 2018 which purported to increase the membership fees was a valid meeting was irrelevant because, even if it was a valid meeting, it was superseded by the obligation in the Settlement Agreement "to abide by" the 2009 Constitution. Because both subclauses of clause 8 of the 2009 Constitution set the fee "or, if some other amount is determined by the Committee" (emphasis added) it was clear that any valid determination of a new membership fee would have to be in the future i.e. a date after the parties had agreed to abide by the 2009 Constitution under the Settlement Agreement. 2. On the proper construction of the Settlement Agreement the Current Committee had agreed that all they would do would be to call the Election and otherwise take no steps in relation to the management of the Association's affairs. 3. Alternatively to the preceding submission, a term was to be implied to the effect that other than calling the annual general meeting for the Election referred to in clauses 1 and 6 of the Settlement Agreement, the Current Committee could only engage in conduct in the ordinary course of business of the Association. To increase the membership fee for new members from the combined amount of $3.00 provided by the 2009 Constitution to $200.00 was outside the ordinary course of business. The circumstances supporting that implication were the fact that the legitimacy of the Current Committee was in dispute and the defendants' undertaking given to the Court in August 2018 (see paragraph [13] above).
The defendants' submissions may be summarised as: 1. The dispute which the plaintiffs' notice of motion was seeking to resolve should not be before the Court at all. The parties having agreed to "abide by" the 2009 Constitution, the present dispute should be dealt with in accordance with clause 10 of that constitution and be referred to a community justice centre for mediation. 2. If that first submission is not accepted, then the Settlement Agreement does not prevent the Current Committee holding the foreshadowed meeting in relation to membership fees. The Settlement Agreement is, in its terms, entirely silent on the question of the ongoing management of the Association apart from the calling of the Election. The Current Committee can continue to manage the affairs of the Association, provided they do so in accordance with the 2009 Constitution and otherwise observe the terms of the Settlement Agreement in getting on with the business of calling the annual general meeting to be held on 30 March 2019. 3. There were two reasons why the term sought to be implied by the plaintiffs could not be implied. First, it was not so obvious that it went without saying. Second, to imply any term in the Settlement Agreement needed more facts than the parties had proven for the purposes of the present argument. 4. Even if the implied term alleged by the plaintiffs was found to exist, the same dearth of facts meant the Court was not in a position to determine whether or not an increase in the membership fee for new members to $200.00 was or was not in the ordinary course of business of the Association.

Resolution - the applicable principles

There was no dispute between the parties as to the principles of contractual interpretation which the Court was to apply. These are conveniently summarised in the judgment of the majority in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 (citations omitted): "35. Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties ... intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience"."
To the extent those principles had been identified in the cases as relating to the construction of commercial contracts, neither party suggested that principles to this effect did not apply to the construction of the Settlement Agreement.
In relation to the question of the implication of the term, the parties' arguments focused upon the third of the five factors identified in the majority opinion of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 that the proposed implied term must be so obvious that it "goes without saying".

Resolution - referral to mediation?

As a matter of logic, the first submission which the Court should consider is the defendants' submission that the present dispute falls to be determined in accordance with clause 10 of the 2009 Constitution and be referred to mediation. I do not agree.
The parties have determined to settle these proceedings in accordance with the Settlement Agreement. The extent of the application of the 2009 Constitution must therefore be considered by reference to the terms of the Settlement Agreement. For example, it is clear that the parties have, to the extent necessary, modified what would otherwise be required under the 2009 Constitution by making specific provision in the Settlement Agreement about how the eligibility of members to vote at the Election is to be determined and how that meeting itself is to be conducted. In other words, before one considers the applicability of the 2009 Constitution, one must ask the question whether the Settlement Agreement governs the issue in dispute. For the reasons which follow, the Court has concluded that the Settlement Agreement does govern the questions raised by the plaintiffs' amended notice of motion and the provisions of clause 10 are not engaged.

Resolution - what are the membership fees?

The next question relates to the membership fees. It is clear that the parties have agreed to abide by the 2009 Constitution pending the Election. As the amount of the membership fees is not dealt with in the Settlement Agreement, it follows that abiding by the 2009 Constitution means that the membership fees are to be in accordance with clause 8 of the 2009 Constitution: in effect $3.00 for new members or $2.00 for renewing members. The next question is therefore whether the Current Committee can hold its proposed meeting to reconsider the question of the membership fees.

Resolution - what can the Current Committee do?

Consistently with the approach the Court has taken to the preceding two questions, the Current Committee can do whatever it is permitted to do under the 2009 Constitution unless the Settlement Agreement has something to say on the topic. This means that the proper construction of the Settlement Agreement must be determined. As far as that task is concerned, the defendants are correct to say that the Settlement Agreement does not make any express reference to the power of the Current Committee to do things other than bringing about the Election in accordance with clause 6 of the Settlement Agreement.
However, that is not a complete answer because the Settlement Agreement must be construed as a whole in accordance with the principles set out in paragraph [25] above. In construing the Settlement Agreement it is important to observe that the only positive obligation on the Current Committee to do something specific is set out in clause 6 of the Agreement (as opposed to what might be described as the passive obligation of abiding by the 2009 Constitution in clause 1). The Current Committee are not members of the membership approval committee created by clause 3(d) of the Settlement Agreement and neither of them is eligible to be a returning officer under clause 7 of the Settlement Agreement.
It follows from the preceding paragraph that the fundamental question of construction is whether, on the proper construction of clause 6 of the Settlement Agreement, performing their obligation under that clause is the only action the Current Committee can initiate pending the Election. This construction can be illustrated by the insertion of either or both of the bracketed words in clause 6: "6. The 2nd and 3rd Defendants will [only] cause an Annual General Meeting of the 1st Defendant to be called and held on 31 March 2019 [and otherwise do nothing else] and at which meeting the position of all office bearers of the first defendant shall be vacated and election to be held for each such position."
For the reasons which follow, the Court has concluded that is the proper construction of the Settlement Agreement, and clause 6 in particular.
Applying the principles of construction set out in paragraph [25] above, the genesis of the Settlement Agreement must be the dispute sought to be litigated in the proceedings. As is apparent from the summons (see paragraph [12] above) that dispute involves the validity of the removal of the first and second plaintiffs as respectively the president and secretary of the Association and the purported election of the second and third defendants to those positions. The issue of validity is itself a manifestation of the fundamental dispute between the parties as to what constitution governs the affairs of the Association. It is obvious from these matters that another thread of the dispute between the parties is the validity of anything done by the Current Committee because their appointments to their roles are under challenge.
To that background may be added the evident purpose of the Settlement Agreement, being to resolve the issues in dispute between the parties. It is clear when the Settlement Agreement is read as a whole that the intention of the parties is to resolve their dispute by "clearing the air" with the conduct of fresh elections to create what, by reason of the Settlement Agreement, the parties will accept as a validly constituted committee and for that committee then to conduct a meeting of the Association to approve a new constitution.
It would be quite inconsistent with the matters referred to in the preceding two paragraphs to construe the Settlement Agreement as permitting the Current Committee to do anything other than what they are expressly required to do under the Settlement Agreement. A reasonable observer apprised of the circumstances to which I have referred would resist a construction of the Settlement Agreement that the Current Committee could engage in any other conduct, because this would only add to the matters in dispute because the validity of that other conduct would necessarily be in issue between the parties. In short, the Court is satisfied that a reasonable observer would understand the terms of the Settlement Agreement, and in particular clauses 1 and 6, to be intended to mean that all the Current Committee can do pending the Election is what they are positively required to do under clause 6.
While not of itself determinative of my reasoning, I am fortified in the conclusion I have reached by the use of the expression "to abide by" in clause 1 of the Settlement Agreement. There can be no doubt that it is used in that clause in its legal meaning of "to accept and continue to observe" (Macquarie online dictionary). Nevertheless, read in the context of the entirety of the Settlement Agreement I think the use of the expression is also intended to connote another meaning, that of "waiting for" or "standing by" (notwithstanding the description of these meanings in a source like the Macquarie online dictionary as "archaic"). In other words, the parties have agreed to a standstill in the affairs of the Association until such time as the matters identified in clause 1 have occurred.
In reaching this conclusion I have taken into account two arguments which might be put that emphasise the expression "to abide by" in clause 1.
First, if the Settlement Agreement is in the nature of a standstill agreement, what work does that expression have to do if the Current Committee can only do what clause 6 requires? The answer to this objection is that the Election and subsequent meeting still need to be conducted under the 2009 Constitution to the extent that it is not modified by the Settlement Agreement.
Second, there is the defendants' argument that "to abide by" the 2009 Constitution without an express prohibition means that the Current Committee could still conduct the business of the Association provided it was in accordance with the terms of the 2009 Constitution to the extent not modified by the Settlement Agreement. The reason why I do not think that is correct is because the use of the expression "to abide by" invites the question of abiding by the 2009 Constitution for what purpose? The answer is the balance of the words in clause 1 and the Settlement Agreement's focus in its subsequent provisions on the mechanics associated with conducting the Election and calling the further meeting to approve whatever will be the new constitution for the Association. So understood, the "abiding by" the 2009 Constitution is for the purpose of fulfilling the terms of the Settlement Agreement and subject to the terms of the Settlement Agreement insofar as they might involve a departure from the 2009 Constitution. One example of such a departure is clauses 3 and 4 of the Settlement Agreement which go beyond, and are not consistent with, the provisions of the 2009 Constitution governing membership.
Having upheld the plaintiffs' submissions as to the proper construction of the Settlement Agreement, the Court can deal with the plaintiffs' alternative submission of an implied term more briefly.
The Court accepts the defendants' submissions as to why no term permitting the Current Committee otherwise to manage the affairs of the Association in the "ordinary course of business" would be implied. It is not so obvious that it "goes without saying". As I put to the parties in argument, disputes such as this one are reasonably familiar to the Court. Resolving a dispute in a voluntary association about the validity of an election is frequently, and sensibly, resolved by the conduct of fresh elections on a basis that the parties agree will produce a validly elected committee. However, without more, the experience of the Court and, in any event, the logic of the situation is that the interim role of a disputed committee can be resolved either by an agreement that the committee does nothing other than in the ordinary course of business or that the committee does nothing at all. There is nothing in the circumstances which have been proven to the Court on the present application that would enable the Court to conclude which of these two possibilities (if either) is so obvious that it "goes without saying".
Furthermore, for completeness, the Court also accepts the defendants' submission that even if the "the ordinary course of business" term were to be implied, the plaintiff (and, for that matter, the defendant) has not adduced sufficient evidence to enable the Court to determine whether or not an increase of the membership fee to $200.00 for new members could be said to be within "the ordinary course of business" of the Association. That question could only have been considered if the Court had received evidence which included the past activities and financial circumstances of the Association, its current and proposed activities and its current financial circumstances.

Costs

The plaintiffs submitted that they should have their costs on the indemnity basis or, alternatively, on the ordinary basis. The application for indemnity costs was based on what I had said in Ken Tugrul v Tarrants Financial Consultants Pty Limited ACN 086 674 179 [No 5] [2014] NSWSC 437 at [62] to [77] concerning the obligations of parties to co-operate as far as possible to avoid or limit the scope of interlocutory motions. It was submitted that the plaintiffs' correspondence seeking to resolve the issues in the amended notice of motion had been met with no, or an inadequate response, by the defendants.
The plaintiffs' submission was not borne out by the evidence, such as it was. In particular, before the plaintiffs filed their notice of motion, their correspondence foreshadowing their arguments was responded to in a considered way (raising arguments similar to those put to me) by a letter of 7 February 2019 from the defendants' solicitor to the plaintiffs' solicitor.
The defendants submitted that there should be no order as to costs because much of the evidence and submissions of the plaintiffs were ultimately not pressed.
To the extent the plaintiffs had pressed their arguments on the day of the hearing, the result or "event" was a victory for the plaintiffs. On the other hand the parties had sensibly agreed to limit the evidence and issues to those which I have dealt with in this judgment. This agreement rendered superfluous much of the affidavit evidence and submissions that had been prepared.
The costs order which I made was intended to reflect the two matters referred to in the preceding paragraph. The plaintiff had been successful in the outcome of the day and was entitled to its costs of the day accordingly. While some of the costs incurred before that day would undoubtedly be related to the matters on which they had succeeded, having seen the submissions and evidence that had been prepared I was satisfied that the greater part of the parties' efforts before the hearing were expended on the matters ultimately not pressed. While not a final settlement of the issues, an agreement not to press them is sufficiently analogous to a settlement of a dispute without a hearing on the merits that there should be a similar outcome as to costs. That is for there to be no order as to costs with the intention that each party pay their own costs: Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia & Anor ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at [6] - [9] per McHugh J.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 February 2019

Association Incorporation Act 2009(NSW)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (11 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (8)

Cited By (2)