Practice and procedure - Application to be joined as a defendant - Whether interests of applicant directly affected by outcome of action - Turns on own facts

Associations Incorporation Act 1987 (WA)

Homestyle Pty Ltd v City of Belmont [1999] WASCA 59

News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410

1 MASTER NEWNES: This is an application by Level Holdings Pty Ltd ("Level Holdings") to be joined as a defendant to the proceedings.

2 It is necessary to go first to the matters in issue in the proceedings. I should say that the pleadings are not always easy to follow but I think the essential issues sufficiently emerge from them.

3 The second defendant (the "Association") is an association incorporated under the Associations Incorporation Act 1987 (WA) and is the registered proprietor of certain land (the "Land").

4 In the statement of claim, the plaintiff pleads that certain persons became "foundation members" of the Association, as defined in cl 6.5.4 of its constitution.

5 It is alleged that, pursuant to cl 6.1 of the constitution, the board of the Association has the sole right to approve or reject an application for membership. Only persons who attain the age of 18, are baptised at the Association's Centre and who pay a subscription fee are eligible to become members. An application for membership must be brought before the board, and the board has the sole right to place any applicant into one of several categories of membership.

6 The plaintiff pleads that no person has ever applied for membership pursuant to the constitution and no person has been admitted to membership. No meetings of the members or of the board of the Association have been held. It is alleged that, accordingly, the only members of the Association are the foundation members.

7 The plaintiff pleads that, on or about 11 May 2004, the first-named first defendant purported, on behalf of the Association, to sign a contract to sell the Land to Level Holdings, but neither the board of the Association nor its members had authorised him to do so.

8 It is alleged that, on or about 26 February 2005, the first defendants purported to hold a meeting of the members of the Association, or of the board of the Association, and at the meeting purported to pass resolutions to ratify all acts done by the defendants on behalf of the Association since its registration and to approve a project to be undertaken jointly with Level Holdings to develop a portion of the Land.

9 The plaintiff alleges that, contrary to the constitution, no notice of the general meeting was forwarded to members and neither the board nor the requisite number of 20 members of the Association ever requested such a meeting. It is alleged that the purported general meeting was not a meeting of the Association and that the resolutions are invalid and not binding on the Association.

10 The plaintiff seeks an injunction restraining the first defendants from proceeding with the contract for the sale of the Land to Level Holdings, a permanent injunction restraining the first defendants from representing that they are directors of the board of the Association, an order that the first defendants hand all bank accounts of the Association to the plaintiff, a declaration that the persons named in an annexure to the statement of claim are the only members of the Association, and a declaration that all resolutions at the meeting on 26 February 2005 are invalid and not binding on the Association.

11 In their defence, the first defendants say that in February 2005 applications for membership of the Association were received by the first-named first defendant and, on 26 February 2005, the board of the Association approved those applications.

12 The defendants deny that the first-named first defendant was not authorised on behalf of the Association to enter into the contract for the sale of the Land and, alternatively, say that if he was not so authorised, then his actions in entering into the contract were ratified at a special general meeting of the Association held on 26 February 2005, which was a valid meeting of the Association.

13 In his reply, the plaintiff says that none of the requirements of the constitution of the Association were complied with for the purported meetings of the Association and that any purported ratification at the meeting on 26 February 2005 is void or ineffective.

14 Level Holdings says that it has a relevant interest in the action as the outcome will determine whether the contract for the sale of the Land is enforceable. Since entering into the contract it has expended considerable money on the subdivision and development of the Land.

15 Counsel for Level Holdings says that it anticipates that its role in the proceedings will be "very minimal". That role will essentially be to observe the proceedings and to make such submissions as it considers necessary to ensure that relevant issues regarding the membership of the Association are adequately dealt with and in relation to the relief sought. Level Holdings does not intend to call any evidence and it does not seek to raise any issues that are not currently raised on the pleadings. It is accepted that no relief is claimed against Level Holdings and Level Holdings does not intend to seek any relief. No question of the conduct of Level Holdings, or of its knowledge or state of mind, is in issue in the proceedings and Level Holdings does not seek to put any of those in issue.

16 Counsel for Level Holdings acknowledged that the subject matter of the action relates to matters internal to the Association and Level Holdings could not contribute anything in respect of those issues. The issues relate to the Association's constitution and procedures, and questions relating to the authority of the first-named first defendant to act on behalf of the Association and the validity of what was done at the meeting on 26 February 2005.

17 The principles to be applied on an application of this sort were not in issue. They were stated by the Full Court of this Court in Homestyle Pty Ltd v City of Belmont [1999] WASCA 59 where Templeman J, with whom Malcolm CJ and Owen J agreed, referred to and adopted a passage from the judgment of the Full Federal Court in News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410. In that case the Full Court of the Federal Court said at 525:

"The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of the court are likely to affect other people to a greater or lesser extent. This is particularly so with remedies in the nature of an injunction ... The requirement of a direct effect on rights or liabilities differentiate the case where a person ought to be joined from other cases where the effect of the order on nonparties can be characterised as only indirect or consequential."

18 It is also, of course, a relevant consideration that the application is brought very late in the proceedings. The action has been entered for trial. Level Holdings has been aware of the action for a considerable time. It was submitted on behalf of Level Holdings that, as nothing more is involved than its formal joinder and its limited participation at the trial, no adverse consequences follow from the lateness of the application.

19 In my view, Level Holdings has not established a sufficient basis for its joinder at this stage. The essential issues between the parties, as the action is currently constituted, relate to the membership of the Association, the control of its affairs (including its financial affairs) and the validity of any acts of the first defendants done (or purported to be done) on its behalf. Those issues fall to be determined solely by reference to the constitution of the Association and its internal procedures.

20 Level Holdings seeks, as I understand it, essentially to be represented at the trial so its counsel may do anything that may be necessary to assist the first defendants make good the proposition either that the first defendants are, and were, duly authorised to act on behalf of the Association, or that the resolutions of 26 February 2005 were valid resolutions of the Association, one of the consequences of making good one or other of those propositions being that the contract for the sale of the Land would be enforceable against the Association.

21 It is clearly the case that findings as to the authority of the first-named first defendant to act on behalf of the Association, or the validity of the resolutions passed at the meeting on 26 February 2005, may have a consequential effect upon Level Holdings by reason of its dealings with the first defendants in connection with the Land, as indeed it may affect other contracts or activities undertaken by the defendants in the name of the Association. But in the circumstances I do not consider it is sufficient simply that Level Holdings is a person which has entered into a contract with the first-named first defendant acting, or purporting to act, on behalf of the Association. It seems to me that, having regard to the overall nature of the matters in issue in the action, the effect of the litigation on the rights of Level Holdings is properly to be regarded in this case as an indirect or consequential effect.

22 On balance, therefore, I am not persuaded at the present stage that it is appropriate that Level Holdings be joined as a defendant. I would not, however, dismiss the application. It may be that matters will emerge or circumstances change, or for other reason there appears a basis upon which Level Holdings should be joined or that it should participate in the trial of the action, either generally or on some limited basis. That is an application that can be renewed before the trial Judge.

23 In that connection I should say that witness statements have not yet been exchanged and the other immediate pre-trial procedures have not been completed. It may also be that matters will arise prior to, or in the course of, the hearing, which casts a different complexion on the matter.

24 In those circumstances it is appropriate that the door be left open for Level Holdings to renew the application prior to or at the commencement of the trial, or during the trial, if it appears that that is warranted.

25 In the circumstances, I would not accede to the application at this stage. I would simply adjourn it sine die.