LAURI -v- SHWE [2020] WASC 471 (16 December 2020)

(This decision was delivered extemporaneously on 7 December 2020 and has been edited from the transcript).

1. On 10 September 2020, I ordered that receivers and managers be appointed to the second defendant, the Table Tennis Western Australia Inc (the Association).
2. By letter dated 3 November 2020, the solicitors for the receivers requested that this matter be relisted for directions. The receivers seek certain directions ahead of the annual general meetings of the Association for the years ended 2019 and 2020, which are scheduled to be held on 20 December 2020.
3. The power of the court to appoint a receiver carries with it the implied power to give directions in relation to the receivers and managers discharging the functions for which they were appointed to enable them to carry out those functions without the real risk of litigation.[1] The function of the court on an application for directions by a court appointed receiver is analogous to its function with respect to a provisional liquidator.[2] It is appropriate for the court to give directions in order to provide guidance to the receiver, not only on matters of law, but also on the propriety or reasonableness of the contemplated exercise of discretion.[3]
4. Given that there have already been two sets of proceedings commenced this year in respect of the Association, and taking account of the correspondence that has passed between the plaintiff, other members and the receivers and managers in respect of the upcoming elections, I accept that there is a real risk of litigation concerning the elections.
5. I turn then to the subject matter of the dispute between the receivers and managers and the plaintiff, which concerns, in essence, who is entitled to vote in the upcoming elections and at the annual general meetings and the procedures to be adopted at the meetings. This turns on the proper construction of the Constitution of the Association in the statutory context of the Associations Incorporation Act 2015 (WA) (the Act).

1. Section 22 of the Act sets out the general requirements for the content of rules governing an incorporated association.
2. Section 22(3) of the Act specifically provides that:

(3) Subject to section 23, the rules of an incorporated association must at all times -

(a) address each of the matters set out in Schedule 1 Division 1; and

(b) comply with any applicable requirement under Schedule 1 Division 2; and

1. There are 19 items in sch 1 div 1 to the Act, which include:
   1. The qualifications (if any) for membership of the incorporated association and provision for when membership commences and when it ceases.

1. The name, constitution, membership and powers of the management committee or other body having the management of the incorporated association (in this clause referred to as the committee) and provision for the following -

(a) the election or appointment of members of the committee; and

(b) the terms of office of members of the committee;

1. The quorum and procedure at general meetings of members of the incorporated association.
2. The notification of members or classes of members of general meetings of the incorporated association and their rights to attend and vote at those meetings.
3. The time within which, and manner in which, notices of general meetings and notices of motion are to be given, published or circulated.

1. The intervals between general meetings of members of the incorporated association and the manner of calling general meetings.
2. Division 2 of sch 1 sets out particular requirements for certain rules. Relevantly, these include:
   1. Entitlement of members in respect of general meetings

The rules made as mentioned in Division 1 item 8 must provide for all members of the incorporated association to be entitled to receive notice of and to attend any general meeting of the association.

1. Section 201(2) of the Act provides that if, at the end of the transition period, the rules do not comply with s 22 of the Act, the model rules contained in sch 2 of the Act apply as the rules of the association to the extent that the association's rules do not address a matter referred to in sch 1 div 1 of the Act.

Constitution

1. Part II of the Constitution concerns the membership of the Association. There are three categories of individual members, being a full member, a social member and a life member. Full members and social members may be either adult members or junior members.
2. Clause 14 and cl 15 concern the process for an application of full membership or social membership. An application must be made in writing in the form prescribed and lodged with the CEO, accompanied by the relevant subscription fee.
3. Provided the application is properly completed, subscription has been paid and the applicant has not been previously expelled or currently subject to suspension, the board 'shall' accept the application for membership unless the board is reasonably satisfied that the admission of the applicant 'is likely to be detrimental to the promotion of the objects of the Association'.
4. Membership of the association is deemed to commence on acceptance of a membership application by the board. As soon as practicable after acceptance of the membership application, the registrar 'shall' amend the register.
5. The term of a membership expires on 31 December of each calendar year, unless the board determines that the membership commenced sufficiently close to 31 December, in which case it expires on 31 December of the following year.
6. Renewals are to be completed by 28 February of each year, following which membership lapses.
7. The voting rights of members are set out in cl 40 and cl 41. Specifically, every adult member 'shall' be entitled to vote and shall have one vote and no more, either in person or by proxy, on each resolution at a general meeting and in an election.
8. Eligibility for board membership is set out in cl 42 to cl 46. Every adult member 'shall' be entitled to be elected or appointed to the board.
9. Voting by proxy is governed by cl 104 to cl 106 of the Constitution. These clauses provide that every adult member is entitled to vote by proxy, provided that a proxy form has been duly completed, executed and lodged not less than 24 hours before the time appointed for the commencement of the meeting (cl 104) and the proxy is an adult member (cl 106).
10. The Constitution prescribes a somewhat complex procedure for the election of board members in cl 122 to cl 130. The election does not occur at the annual general meeting; rather, the results are announced at that meeting (cl 130).
11. In essence, the election is held on a date determined by the board in the seven‑day period immediately prior to the annual general meeting (cl 122). Notice of the date of the election must be given at least 56 days and not more than 70 days prior to the election (cl 123). Nominations must be received at least 42 days prior to the election (cl 124). An adult member can nominate for more than one position and must specify their order of preference for election to the positions (cl 125).
12. At least 30 days prior to the date of the election, the CEO shall send by post or email to each adult member a ballot paper which contains particulars of the positions to be filled and the candidates for each position (cl 129). Ballot papers must be returned no later than two days before the election (cl 129(b)). Two returning officers, who are not nominees for any position, count the votes in order of seniority of the position. Clause 129(f) sets out how the votes are to be counted.

1. In this case, the receivers have approached the conduct of the election on the basis of a comparison of the Association's Constitution with the model rules. If the Constitution is silent on a particular matter or does not specifically address it, they contend that the model rules apply.

1. The plaintiff submits that this position is flawed for two reasons. First, the plaintiff says that the receivers and managers are required to comply with the orders of Tottle J in Masel & Ors v Table Tennis Western Australia Inc (CIV 1110 of 2020) and that the procedures the receivers and managers have proposed are not in accordance with those orders.
2. Second, the plaintiff contends that if the Constitution addresses the matters set out in s 22 and items 1 to 19 of sch 1 div 1 of the Act, the model rules have no application.

1. Turning first to the second of the issues raised by the plaintiff, this turns on the proper construction of s 22 and s 201 of the Act and, in particular, what is meant by the requirement that if the rules do not comply with s 22 of the Act, the model rules contained in sch 2 of the Act apply as the rules of the association to the extent that the association's rules do not address a matter referred to in sch 1 div 1 of the Act.
2. The starting point in considering the meaning of the Act is to consider the ordinary and grammatical sense of the statutory words to be interpreted having regard to their context and legislative purpose.[4] Extrinsic materials can be considered to confirm the ordinary meaning conveyed by the text of the provision, or to determine the meaning of a provision where the provision is ambiguous or obscure, or where the ordinary meaning gives rise to a result that is manifestly absurd or unreasonable.[5]
3. Section 22 of the Act requires certain matters to be addressed in an association's rules. Under the express terms of the Act, as long as an association's constitution provides for the matters set out in sch 1, whether by adoption of the model rules or by its own constitution, s 201(2) is not enlivened. The underlying policy of the legislation is to ensure that certain matters which are fundamental to good corporate governance are part of every association's constitution; however, the Act otherwise allows an association to have its own idiosyncratic rules if it wishes to do so. That is, s 22 of the Act does not remove an association's right to draft its own constitution. As a consequence, a failure to adopt each of the terms of the model rules does not result in the model rules applying.
4. In determining whether s 201(2) of the Act applies, it is necessary to consider the matters set out in sch 1 div 1 of the Act and not the proposed rules for those matters under the model rules.
5. The receivers did not assert that the Constitution did not address matters set out in sch 1 div 1 of the Act, but contended that the Constitution was silent on matters that were otherwise addressed in the model rules. It is apparent that in considering the issues raised, the receivers and managers have compared the Association's Constitution with the model rules. In my view, this is not the appropriate test or comparison or what is required under the express terms of s 22 of the Act.
6. On a consideration of the Constitution against the matters set out in sch 1 div 1, it is apparent that the Constitution addresses each of these matters. For this reason, the model rules have no work to do. I turn then to consider the specific issues raised by the receivers and managers.

1. This is governed by cl 40 of the Constitution. Clause 40 provides that every adult member shall be entitled to vote on each resolution at a general meeting or in each election for a position of an elected board member.
2. The ordinary and natural meaning of this clause is that the time for considering an entitlement to vote is at the date of the general meeting or an election. If a person is an adult member at that time, they are entitled to vote.

1. This is governed by cl 104 of the Constitution. The Constitution allows every adult member to vote by proxy. No limit is imposed under the Constitution on how many proxies a member can hold. There is no reason to depart from the ordinary and natural meaning of this clause, which enables an adult member to hold an unlimited number of proxies.

1. The manner in which the election process is required to be done is set out in cl 122 to cl 130 of the Constitution. This provides for preferential voting and for the ballot papers to be returned in such a manner as the board may prescribe to ensure the authenticity and anonymity of the ballot paper.
2. Under the Constitution, the board can prescribe what procedures should be put in place to ensure authenticity and anonymity. In this case, the receivers and managers have been appointed in place of the board and for that reason can prescribe the procedures which address these matters.
3. I consider that the matters set out under 'Formal Voting' and 'Informal Voting' in annexure J of the notice of meeting (which is annexure PS1 of the affidavit of Ms Smith filed 2 November 2020) are procedures which address these matters.

1. In my view, this is tied to issue 1. The constitution provides that every adult member can vote at the election or annual general meeting. It does not impose any temporal limit on this right. For that reason, if a person is a current adult member as at the date of the election, they can vote.
2. In this case, it means that a person who is a current adult member at the time of the 2019 election and 2020 election can vote in those elections. Similarly, if a person is a current adult member at the time of the 2019 and 2020 annual general meetings, they can vote at those meetings. If they are not a current member of the association, the person is not entitled to vote in either of the elections or at the annual general meetings.

1. The final issue is in relation to eligibility to stand in elections. This is governed by cl 42 to cl 44 of the Constitution, which provide that if a person is an adult member, they are entitled to be elected to a position. Clause 124 of the Constitution provides that any adult member who wishes to nominate shall submit his or her written nomination at least 42 days before the date of any election.
2. On a proper construction of the Constitution as a whole, if a person was an adult member at the time of their nomination and continues to be an adult member at the election, they can be elected for a position at either the 2019 or 2020 annual general meeting. The person did not have to be a member in 2019 to stand for one of the positions at the 2019 election, but must be a 2020 member to stand for and vote at the 2019 and 2020 elections.

1. For these reasons, I decline to make the declarations sought in par 1 of the receivers and managers' minute of proposed orders.
2. Turning then to the remaining orders sought by the receivers and managers, the receivers and managers seek orders in pars 2 and 3 of the minute of orders in relation to the scope of their appointment.
3. It is open for a receiver and manager to seek the direction of the court if there is any doubt about his or her powers and duties and the court can declare what proposed acts are within his or her power.[6] In the circumstances of this matter, where the receivers and managers hold office only until the annual general meetings which are scheduled to be held on 20 December 2020, I consider that it is appropriate to limit the scope of the appointment of the receivers and managers in the form proposed by the receivers and managers, subject to the following amendment.
4. Order 2(a) of the minute that has been filed refers to the applicable sections of the model rules. Given the reasons that I have already delivered, those words should be struck out and order (a) should be:

conduct the elections for the appointment of all required positions on the Board of Table Tennis Western Australia Inc (TTWA) prior to the 2019 and 2020 annual general meetings pursuant to the procedures and matters required under clauses 122 - 129 of the Constitution of TTWA;

1. I also consider that it is appropriate to make an order in terms of order 4 of the minute of proposed orders. These matters, essentially, are to reflect the fact that the 2019 annual general meeting is going to be held immediately prior to the 2020 annual general meeting and that, otherwise, it would not be possible to comply with the terms of the Constitution.
2. I will, otherwise, hear from the parties in relation to costs and also in relation to whether an order should be made requiring the receivers and managers to make a corrective statement, and if so, the form of that statement.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

CITATION : LAURI -v- SHWE [2020] WASC 471 (S)

PAULA SMITH AND JACK JAMES as joint and several receivers and managers of TABLE TENNIS WESTERN AUSTRALIA INC

Costs - Application by plaintiff for costs - Application by receivers and managers for costs of application to be costs in the receivership and management - Whether receivers and managers were unreasonable in bringing application for directions - Turns on own facts

Supreme Court Act 1935 (WA), s 37

Order for second defendant to pay plaintiff's costs of the application fixed at $2,500

Order that the receivers and managers' costs of the application be costs in the receivership and management

Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (in liq) (No 4) [2008] FCA 858; (2008) 169 FCR 497

Lauri v Shwe [2020] WASC 471

1. On 7 December 2020, at the conclusion of the hearing, I delivered reasons for my decision on the receivers and managers' application for directions dated 3 November 2020.
2. The parties agree that the plaintiff should be entitled to his costs of the application fixed in the sum of $2,500.[7]
3. The receivers and managers (receivers) also seek an order for their costs of the application to be costs in the receivership and management of Table Tennis Western Australia Inc (Association) and paid from the assets of the Association. The plaintiff opposes this order and contends that the receivers should not be entitled to their costs or an indemnity for these costs from the assets of the Association.
4. At the conclusion of the hearing, I made orders for the parties to file submissions in relation to costs. The receivers and the plaintiff filed submissions together with affidavits in support of their positions.[8]

1. The starting point is s 37 of the Supreme Court Act 1935 (WA) which confers a broad discretion on the court in respect of orders as to costs.
2. Where a party is a trustee, beneficiary or personal representative who brings an action in relation to the construction of the trust instrument, and where issues arise in the administration of the trust or in respect of the propriety of any action taken or to be taken, the usual order is that costs are paid out of the fund on an indemnity basis.[9] Provided the party has acted reasonably, this general rule applies even if the party loses the application.[10]
3. This general principle extends to the costs of receivers, liquidators and administrators.[11]

1. The receivers submitted that the general principle should apply to the costs of the application.
2. The receivers contended they acted reasonably in bringing the application. In support of this submission, they relied upon the threat of litigation from the plaintiff, the recent history of litigation between members of the Association and that their request for conferral by way of an in-person meeting had been rejected.[12]

1. The plaintiff submitted that the receivers should not be entitled to their costs or any indemnity from the assets of the Association as the receivers had acted unreasonably. This was said to be for three main reasons.[13] First, the receivers failed to obey the orders of Tottle J of 6 February 2020. Second, they had adopted an 'untenable and baseless position' on the Constitution and model rules. Third, the receivers' conduct has caused the extension of the receivership and the incurring of significant unnecessary additional costs.

1. For the following reasons, I consider that the appropriate order is that the costs of the receivers be costs in the receivership and management of the Association and paid from the assets of the Association.
2. First, while the receivers were ultimately unsuccessful in obtaining orders in terms of order one of their minute of proposed orders, I am not satisfied that the receivers' position was unreasonable. It is appropriate for the court to give directions to a receiver not only on matters of law but also on the propriety or reasonableness of their proposed action.[14]
3. Second, orders were made in terms of the remaining paragraphs of the receivers' minute of proposed orders. These orders included orders limiting the scope of the receivers' appointment, which were opposed by the plaintiff.
4. Third, in my earlier reasons for decision, I accepted that there was a real risk of litigation concerning the elections.[15] For this reason, I consider that it was not unreasonable for the receivers to seek directions from the court prior to the holding of the elections in order to minimise the risk of further proceedings.
5. Finally, I do not consider that the application was run in a manner which unreasonably inflated the costs of the plaintiff or the receivers.

1. For these reasons, the appropriate costs orders on the receivers' application are:

(1) The plaintiff's costs of the application be fixed in the amount of $2,500 and paid as costs in the receivership and management of Table Tennis Western Australia Inc (Association) and paid from the assets of the Association.

(2) The second defendant's costs of the application be costs in the receivership and management of the Association and paid from the assets of the Association.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Mariconte v Batiste [2000] NSWSC 288; (2000) 48 NSWLR 724 [75].

[4] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 [4].

[5] Interpretation Act 1984 (WA), s 19(1).

[6] Attorney-General v Schonfeld [1980] 3 All ER 1; [1980] 1 WLR 1182, 1187 - 1188.

[7] Receivers' submissions filed 9 December 2020 [1]; ts 38.

[8] Receivers' submissions filed 9 December 2020, affidavit of Kelly Parker filed 9 December 2020; plaintiff's submissions filed 10 December 2020, affidavit of Andrew John Mason filed 10 December 2020.

[9] Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (in liq) (No 4) [2008] FCA 858; (2008) 169 FCR 497 [8].

[10] Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (in liq) (No 4) [8].

[11] Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (in liq) (No 4) [10].

[12] Receivers' submissions filed 9 December 2020 [4].

[13] Plaintiff's submissions filed 10 December 2020 [2].

[14] Lauri v Shwe [2020] WASC 471 [3].